- After lowering revenue guidance due to customer loss, BCOV fell 50% and trades at a now cheap 1.4x EV/sales with Q2 margins over 66% and steadily rising.
- BCOV loses customer Rovio, which was a high volume but low margin non-premium user of BCOV content delivery services. Not a long-term fundamental negative for the business.
- Attractive acquisition target as a fully integrated SaaS offering without its own low margin CDN. For instance, Amazon’s AWS could purchase BCOV as a bolt-on suite to compete with Akamai.
- BCOV is the strategic leader in the fast growing online video platform market. Technologically inferior competitor Ooyala was recently bought for 5x sales by Telstra.
I’ve written a number of times recently about the rapid secular growth in online video, but always from an ad tech standpoint. That is, the strong trend of TV brand advertising dollars inevitably moving to online video. Most recently, I wrote about my favorite play to take advantage of this fundamental shift in advertising spending. That being an online video advertising company called YuMe (NYSE:YUME). Now one of YuMe’s key technology partners is Brightcove (NASDAQ:BCOV) – the leading cloud based solution for delivering and monetizing video across connected devices. In layman’s terms, Brightcove is an online video platform (OVP), not much different than YouTube, but focused on the enterprise market. With the Q1 acquisition of ad-sticher Unicorn Media, Brightcove has accentuated its focus more on the more lucrative and higher margin business of cloud video monetization rather than low margin commoditized business of content delivery and streaming.
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