TiVo's acquisition of Digitalsmiths for $135 million, announced yesterday, is further evidence of the cloud's increasingly important role in powering video discovery on TVs and devices. According to Jeff Klugman, TiVo's EVP/GM of Products/Revenue, who shared background on the deal with me, Digitalsmiths' leading cloud-based content discovery and recommendations technology will give TiVo greater flexibility to serve pay-TV operators with branded and white label solutions independent of TiVo's hardware.

In particular, Jeff said there were 3 key things about Digitalsmiths that impressed TiVo: (1) its extensive experience with cloud delivery, using the most up-to-date technologies, (2) its metadata creation/management, which allows improved content discovery, a capability TiVo thinks will become increasingly strategic and (3) a range of solid APIs that enable pay-TV operators to quickly deploy their own cloud-based branded discovery services. All of this will help TiVo further build on its existing cloud-based recommendations and search.  

Importantly, because Digitalsmiths doesn't have a consumer-facing brand, TiVo will be positioned to serve pay-TV operators more flexibly, depending on their strategies. For example, Digitalsmiths' CEO and co-founder Ben Weinberger told me that Digitalsmiths typically gains a foothold with operators when they're launching iOS and other mobile/connected device apps and need discovery features. Subsequently, this often leads to powering discovery in operators' core video service.

Digitalsmiths' technology is now used by 46 pay-TV operators globally, including 7 of the top 10 in the U.S. Digitalsmiths handled 150 search/recommendation transactions for these customers in December, 2013.  A big bonus for TiVo is that it doesn't currently have relationships with most of them.

TiVo itself has been moving beyond the TV for a while now, with deals to power TV Everywhere portals for U.S. operators like RCN and Atlantic Broadband plus Com Hem in Sweden and out-of-home streaming with its new Roamio devices. The Digitalsmiths white label technology now gives TiVo a broader portfolio of solutions to address operators who want to invest more significantly in their own branded video services. Jeff stressed that TiVo likes Digitalsmiths' business model a lot as is and he sees plenty of room for the company (which will retain its offices) to deepen its deployments with operators aside from the TiVo-related integrations.

Jeff added that Digitalsmiths also creates a lot of usage data, which customers are only beginning to tap into. With content relevancy, targeting and personalization becoming ever more important, Jeff sees significant data-driven opportunities down the road.

For now though, the deal seems like a nice win for TiVo - adding complementary cloud technology that helps pay-TV operators build new services to compete better with OTT competitors.