Today, Brightcove entered into a definitive agreement to acquire Zencoder. Zencoder will continue to operate as an independent service, but we will do so as a part of Brightcove.
We are really excited about this, and hope you will be too, for the reasons outlined below. In summary, Brightcove is a complementary company in the video space who believes in our developer focus, is committed to standalone API-based services, and will keep Zencoder operating largely as you see it today - only better, and with more resources behind us.
What kind of acquisition is this?
These days, it often seems that acquisitions are good for the merging companies but bad for customers. An acquisition can result in the death of a product, either immediately or over time.
This is not one of those deals. Brightcove has acquired Zencoder as a business, to operate as an independent product line, and is committed to continuing the mission of Zencoder: creating the best suite of API-based media services in the cloud.
Technology acquisitions generally fall into three categories: talent acquisitions, technology acquisitions, and business acquisitions. In a talent acquisition, the buyer doesn’t especially care about the product; they just want the team and expertise. In a technology acquisition, the buyer wants the product, technology, or IP of the acquired company, but doesn’t care about the business as a whole - customers, revenue, brand and the like. Products rarely survive a talent acquisition or a technology acquisition. In a business acquisition, on the other hand, the buyer is interested in the whole package: revenue, customers, market position, technology, and team. Brightcove is buying Zencoder as a business acquisition.
This is important. It means that Brightcove wants us to keep growing, innovating, and executing on our mission to deliver great cloud-based APIs for developers.
So if you're a Zencoder customer, you will see minimal change to your service. The name on your invoice might change, but our APIs, features, pricing, and terms of service will stay the same. Obviously, things will change over time, but that's true whether we're a standalone company or a product line within another company. We can honestly say that we have no changes planned that will impair our service in any way.
On the contrary - we're going to keep growing. We're hiring as we speak. We plan to launch some great new capabilities and products this year, and more in the years to come.
We're also getting a huge boost in our ability to execute at scale. Zencoder has done well as a small team, but we're resource-constrained. We have a sales team of one, a very lean marketing team, and an engineering team operating at max capacity. Despite these constraints, we have significant market share and over a thousand paying customers, including some big names like Yammer, PBS, Scripps Networks Interactive, SmugMug, and IGN. Now, thanks to Brightcove, we will have a global sales force equipped to sell our products, a big marketing group, and a 24/7 ops team. Together we can do big things.
Brightcove, if you're not familiar with them, is the creator of Video Cloud, the market-leading online video platform (OVP). In many ways, Brightcove pioneered the whole OVP space. While the industry has experienced consolidation and fierce competition, Brightcove has done well - the company IPO'd in February of this year, and grew revenue by 45% last year. They’ve since created App Cloud, a mobile app platform for building and operating iOS and Android apps using HTML5, and the core developer technology in App Cloud was recently made free and open source.
The leadership team behind Brightcove is top-notch, with an impressive lineage. Brightcove was founded by Jeremy Allaire, co-founder of Allaire Software, and its executive team includes senior execs from Macromedia (which purchased Allaire in 2001) and Adobe (which purchased Macromedia in 2005). The company is headquartered in Boston and has about 320 employees.
Brightcove has a reputation for succeeding in the enterprise, but they also have deep roots in developer platforms. Allaire, Macromedia, and Adobe all have significant developer-facing offerings, and the Brightcove executive team was behind many of these, including ColdFusion, Flash, Flex, and others. And of course, App Cloud is a developer platform for mobile app developers. Developer tools are in the Brightcove DNA, which is part of the reason that Brightcove is excited about Zencoder.
Some additional details can be found in the press release. We won't reproduce everything here. Instead, we'll try to add some honest color to the deal by answering some of the most important questions for our customers, prospects, friends, and well-wishers.
Will Zencoder customers have to become Brightcove Video Cloud customers?
No. Brightcove offers a full-stack online video platform, but Zencoder customers will in no way have to switch over. Transcoding will remain a standalone service. Over time, don't be surprised if you see more standalone services from Brightcove.
What are Brightcove's plans for Video.js?
Video.js will remain an open-source HTML5 video player. Brightcove will be investing even more in Video.js than we have been able to at Zencoder, and we want to drive continued mass adoption of Video.js. You can read more on the Video.js blog post.
Why does Brightcove want Zencoder?
Brightcove is interested in the whole package: technology, team, revenue, market momentum, and more. What Zencoder does fits squarely into Brightcove’s long-term mission.
Are you thrilled to announce that Brightcove is acquiring Zencoder in order to accelerate its vision by leveraging each other's leadership positions in an exploding market? Are there synergies here?
What about Brightcove's competitors? Don't you power some of them?
Zencoder provides encoding services to several of Brightcove’s Video Cloud competitors. But the Zencoder service isn't changing - it will remain the same high-performance transcoding that it was yesterday, for every customer. We plan to continue to offer our services to anyone who wants high performance encoding in the cloud.
We also believe that as cloud services continue to grow and mature, this will become more and more common. Amazon Web Services powers a number of services that compete with AWS: Heroku’s database-as-a-service competes with Amazon RDB, and Cloudera competes with Amazon Elastic Map Reduce. Heroku and Cloudera are fine with this, because their underlying infrastructure is a commodity, and in many cases is hidden from their customers. They could replace EC2 with Google Compute Engine or even colo servers if they ever needed to. But Amazon performs better for their needs, and competitive factors don't really come into play.
Where will you be based?
San Francisco. Same office. Same team. Zencoder's HQ will become Brightcove's Bay Area R&D Center, and as we grow, much of our growth will happen here.
Why are you selling?
When we looked at the industry and possible outcomes for Zencoder, two of the most important questions we asked were: "Where will our customers be well served?" and "Where will our team be happy?" There are a lot of companies who could acquire Zencoder - and indeed, we've had conversations with a good half-dozen. But many of these companies don’t share our vision in the same way that Brightcove does, and many of them would have shut us down. We didn't spend the last two years building Zencoder in order to have it summarily executed. At Brightcove, our products will flourish and we’ll be able to grow faster than ever.
But why sell at all? This is a hard question, and it was an extremely hard decision. Selling a company is bittersweet. We can honestly say that when Brightcove approached us, we weren't looking to sell. But the fit was really compelling. We could have stayed independent for a long time, and we know we would have done well. But we're not convinced we would have found a better fit for our shareholders (especially factoring in time), our products, our team, and our customers.
We’ve seen Zencoder grow from nothing to a booming business that our users love. Along the way, we’ve given up salaries and scraped by on savings; we’ve launched a minimal product and iterated to market fit; we’ve built a dedicated team of brilliant people; and we’ve seen our products make hundreds of customers happy. We believe in our mission and want it to continue. Brightcove is a place where this will happen, and that is exciting.