France Télécom - Orange is reportedly considering selling up to 75% of its popular online video platform, Dailymotion , to US-based online search company Yahoo! . As part of an initiative to expose Dailymotion to a wider, global audience, France Télécom said it would seek one or more industry partners to help realise its ambitions. Meanwhile, Yahoo!'s new CEO, Marissa Mayer, has promoted expansion into the European and Asian online video markets as part of its turnaround strategy. With the French government turning increasing ly hostile towards Google , the decision to work with the smaller online search provider is not unexpected.
Terms of the putative deal are not known, but the Wall Street Journal values the business in its present form at US$300mn. With its global content delivery network (CDN), Yahoo! clearly possesses the scale and reach that France Télécom - with its primary focus being on Europe and Africa - does not and, in any case, is keen to build an online video business that will compete with Google's YouTube . The relatively low valuation of the company is linked to the fact that it has a limited geographic reach and serves 116mn unique users, making it the 12 th largest platform in the world according to January 2013 data from ComScore .
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Yahoo! is generally considered to have lost its way in recent years and has struggled to stem the tide of online search requests flowing to Google and to local/regional players such as China's Baidu and Russia's Yandex . The company relies heavily on advertising to fund its expansion but, as users desert Yahoo!, the company has experienced cooling enthusiasm from advertisers. Dailymotion's popularity in France and Turkey and the pote ntial for the platform to do well in major European broadband markets such as the UK and Germany will be appealing to Yahoo!, which has identified Western Europe as a key area for expansion.
The two companies already work together, with a syndication deal struck in 2012 enabling Dailymotion content to be embedded into key search results on Yahoo! . France Télécom has been unable to enter the US market directly through the traditional tel e co ms market and views Dailymotion as a useful tool for establishing a US bridgehead for a host of value-added services, of which video would be just one.
When France Télécom took control of Dailymotion in 2012, BMI observed that securing high-profile investment partners would be key to broadening its delivery channel, content creation, content sourcing, advertising and product cross-selling capabilities to full y exploit international markets. We believe the French government would be more receptive to France Télécom selling a major stake in Dailymotion to Yahoo! than to partnering with Google, with which it is currently locking horns over complex issues such as tax payments.
The outlook for the global market for consumption of short-form video content, in which Dailymotion specialises, is buoyant. Cisco Systems forecasts mobile-related consumer internet video traffic to grow at CAGR of 90% between 2011 and 2016, reaching 7,615 petabytes (PB) a month by the end of the forecast period. Short-form content (user-generated video and other video clips generally less than seven minutes in length) will account for 6,625PB of traffic a month by 2016, although fixed networks will bear much of this load. Globally, consumer video internet traffic over fixed and mobile networks will grow by 34% annually during 2011- 20 16, reaching 44,247PB a month by the end of the period. Western Europe - where France Télécom has a considerable presence - will lead the way in terms of overall traffic volumes. However, Africa and the Middle East - where France Télécom is hoping to see significant expansion over the next five years - is set to see the fastest growth, of 88% a year, through to 2016.