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Rocket Fuel Explains Its MO, Plans To Release Anti-Fraud Product

Rocket Fuel TorranceRocket Fuel intends to release a free anti-fraud product in June called Bot Or Not – available to advertisers regardless of whether they’re clients. (Update 5/27: The company has settled on the name Botfinder.)

CTO Mark Torrance announced the product’s existence at the Rocket Fuel Summit in New York City on Tuesday and shined a little light into Rocket Fuel’s black box to provide some high-level insight into how its technology works.

Evil Bots

Fraud is increasingly in the limelight and tech companies are doing more than talking. Consider Google’s purchase of and Integral Ad Science’s purchase of Simplytics.

While Rocket Fuel works with fraud-detection partners, Bot Or Not is being developed in-house. “It almost works now,” Torrance said. “This is a very hard problem to solve. We need to ensure the quality of inventory we deliver to a marketer’s campaign is as clean as possible.”


Rocket Fuel Q1: Customers Double, Media Margins Top 60%

George John, CEO, RocketfuelRocket Fuel, one of a growing pack of public ad tech companies, reported 95% growth in revenues and 107% margin acceleration during the first quarter. But it wasn't enough for Wall Street, which punished the company's stock after hours  perhaps in light of decelerating top-line revenues.

Rocket Fuel's active customers more than doubled year over year to 1,251, and the company now wants to grow its share of budget with some of its largest advertisers. It has seen some modest success in this area, according to CEO George John.

One advertiser spent $150,000 in March, $250,000 in April, and is on track to spend $350,000 in May. The total investment for the year for this client will clear $1 million in 2014, but John said he is not yet satisfied. "We have a few advertisers above $5 million but none at  the $10 million to $20 million we'd like to see," he said on the company's earnings call Thursday.

Analysts on the call seemed concerned about whether Rocket Fuel will suffer disintermediation as brands and agencies gain prowess with programmatic buying methods. Or, as one put it on the call, is the company seeing increased competitiveness from agency trading desks like Xaxis (WPP Group), Vivaki AOD (Publicis Groupe), Accuen (Omnicom Group), Affiperf (Havas), Amnet (Dentsu) and Magna Global (Interpublic Group)?

The answer, apparently: Ask again later.

"We've seen significant growth in one of the holding companies by coming up with a more win-win approach with their trading desk. We'll see how it unfolds," John said, somewhat  mysteriously.


Being Public Counts In Ad Tech, Criteo Shows

criteoq1Since going public in Q4 2013, Criteo has had an easier time signing new advertisers – especially in Europe, where the business environment is more cautious overall and advertisers carefully examine credentials when making vendor selections.

In the first quarter of this year, the French ad tech company's business wins in the EMEA region included IKEA, Visa and Walbusch.

"New doors are opening (for us) as a public company," CEO and co-founder Jean-Baptiste Rudelle told investors on the company's Q1 earnings call Tuesday morning. "There are strong winds in Germany and the UK with new clients that were closed to us and now they're opening the door. Europe tends to be more conservative and working with an established company is more important than in other regions."

In the United States, Criteo has seen significant, if smaller-caliber, business wins such as Crocs, and Talbots. And in the APAC region it nabbed NTT Docomo Travel. In all it now serves more than 5,500 advertisers.


Rocket Fuel Stock Hits All-Time Low In Wake Of Insider Trades

rocketfuel-stockslumpRocket Fuel's stock closed at $31.04 Friday, near its lowest point since the ad tech company went public six months ago. The sell-off comes after a group of more than seven investors and senior executives cashed out to the tune of more than $150 million, as reported by InsiderTradingWire. Those transactions, which earned more than $14 million each for the company's top two executives, CEO George John and President Richard Frankel, took place between February 3 and February 7.

Rocket Fuel's market cap is now just north of $1 billion, about half of the $2 billion where it made its NASDAQ debut last September.

Here are the largest of the insider stock sales from early February, according to InsiderTradingWire:

  • George John, CEO, sold $17,935,375
  • Abhinav Gupta, VP Engineering, sold $10,293,038
  • Richard Frankel, President, sold $14,627,030
  • J. Bardwick Peter, CFO, sold $1,000,738
  • John Gardner, investor at Nokia Growth Partners, sold $23,750,156
  • William Ericson, investor at MDV Ninth Partners, sold $101,063,336


Matomy Pulls IPO, Citing 'Technicality'

ofer-druker-matomyIsrael-based performance network Matomy has scrapped plans to raise about $100 million in a London Stock Exchange public offering that would have valued the company at around $400 million.

The withdrawal was motivated in part by a "technicality" of London IPOs that requires at least a quarter of shares to be claimed by investors in the European Economic Area, a zone that includes 30 states in the European Union and  European Free Trade Association.

Additionally, Matomy's decision was influenced by what it called "volatility" in ad tech share value, as evidenced by post-IPO performance of Tremor Media, Blinkx, Rocket Fuel and others.

Here's a statement from the company:

"Despite a well-received bookbuild, in which Matomy obtained sufficient demand from high quality investors to cover the deal size, the Board has decided not to proceed with the IPO at this time.

The requirements of the UK Listing Rules for a Premium Listing are that 25 per cent of shares in issue must be held by investors within the European Economic Area. This requirement could not be met given the international profile of investor demand.

The negative share price performance and volatility in the ad tech sector over recent weeks was an additional factor.

The Board is considering appropriate options."


The Next Ad Tech IPO: Questions For Matomy CEO Ofer Druker

ofer-druker-matomyIsrael-based performance network Matomy on Monday signaled its intent to go public in a letter filed with the London Stock Exchange.

As we noted earlier, the company aims to raise $100 million at a valuation of around $400 million. The filing also revealed Matomy has 388 employees, and more than 1,500 clients.

Matomy's business is a three-legged stool consisting of a publisher network, an affiliate channel and a programmatic sales channel supported by a global partnership with AppNexus. Within these buckets, it supports multiple formats including desktop display, mobile and email. It hopes to become the world's largest company focused on performance-based digital ads.

The company has made four acquisitions since 2011 (Adotomi, Mediawhiz, Adperio and MobAff), and has raised $17 million in venture funding from Viola Private Equity.

Druker spoke with AdExchanger.

Note: This conversation took place before Monday's filing. It has been edited for length and clarity.

AdExchanger: What is Matomy?

OFER DRUKER: The idea behind the company was to offer a risk-free way for advertisers to reach a digital audience wherever they are, and to work with publishers on a rev share – not to pay them for the impression. All the targets are aligned through the advertiser through us and through the publishers. All of us want to generate results, otherwise nobody gets paid.


Must Ad Tech Margins Fall? One Analyst Says No

pivotal-brianThe conventional wisdom on ad tech margins is that lucrative markups naturally compress over time due to a variety of factors, including competition for media impressions, which drives up the cost of impressions.

But some companies, most notably Rocket Fuel, seem to have defied that logic.

The programmatic ad platform, which went public last fall, has enjoyed steady margin growth for at least the last five quarters. In Q3 2012 its revenue ex-media cost margins were 54%, and rose to 58% by Q4 2013.

By comparison, digital ad platform Criteo's margins were around 40% for the first half of 2013. That's down from around 42% for full-year 2012.

Does this foreshadow the younger Rocket Fuel’s future? In a Friday research note, Pivotal Research analyst Brian Wieser said he doesn’t believe margins inevitably fall.

"Interestingly, lighter competitor margins [e.g. Criteo] amplify concerns among investors that margins must inevitably fall at Rocket Fuel, which is not necessarily the case at all," Wieser wrote. "Any given ad network can find pockets of inventory that are under-appreciated by other networks, including those with more data (such as Google's GDN) for many different reasons."


How Mobile Ad Net Orange Advertising Built A Programmatic Channel

orange-liquidmHundreds of mobile ad networks are working on a transition to programmatic trading.

One of them is Orange Advertising, a unit of European wireless carrier Orange. Last year, the company realized it needed an answer to the impression-buying trend, and began evaluating ad tech partners to support a nascent trading desk. It ultimately settled on an vendor-neutral approach that included buying through companies like LiquidM, AppNexus, StrikeAd, and AdMarvel.

"We wanted to be technology agnostic. We didn't want to build just one platform," said Giuliano Stiglitz, CEO of Orange Advertising Americas. The company is focused on developing a programmatic strategy focused on Latin America, and in Stiglitz words, is "building a state-of-the-art trading desk in Colombia using the best U.S. technologies."

According to Stiglitz, there are three areas where mobile buying and optimization platforms can set themselves apart. First is inventory. ("Most have overlap; that 10 to 20% that don't overlap can really make a difference.") Second is optimization functionality. Third is revenue model.

One of Orange Advertising's partners, LiquidM, has sought to differentiate on the latter. The company charges a flat software licensing fee, starting at $12,000 a month and capped for most customers at $69,000, and takes no percentage on total media transacted. It offers a pilot program allowing would-be customers to test the platform before committing. Twelve customers are in pilot mode; six are full-fledged subscribers.


Millennial Media Has Strong Q4 But Warns Of ‘Turbulence’ Ahead

michael-barrettIn its Q4 earnings call Wednesday, mobile ad network Millennial Media revealed it had netted $109.5 million in the fourth quarter, up from $75.9 million in Q4 2012 (a 44% increase).

Total revenue for 2013 increased 41.6% from $241.3 million in 2012 to $341.8 million last year. Despite a strong end to the year, however, the company also warned investors to expect some “turbulence” in following quarters.

The company notably reported a loss of $3.7 million, or 4 cents a share, for Q4, compared with a prior year profit of $2.6 million, or 3 cents a share. Millennial provided a lowered outlook for Q1, with revenue forecasts ranging between $72 million and $76 million, which it attributed to reduced spending from brand advertisers and other seasonal factors.

Newly appointed CEO Michael Barrett said the company is betting big on programmatic buying, an increasingly prominent part of Millennial’s offerings. “The rise of programmatic buying is happening at a fast pace in the mobile ad industry and the company sits in a premium position to bring that demand to its platform,” he said during the earnings call. (more…)

Conversant (Formerly ValueClick) On The Uptick For Now

conversantFollowing a rough year, Conversant – the ad-tech company formerly known as ad network ValueClick – had what CEO John Giuliani described in the company’s quarterly call as a “solid Q4 to close out the year.” Read the release.

The company on Tuesday announced 2013 Q4 revenue of $176.4 million, a 6% increase from the same period last year ($166.6 million). This brings its 2013 annual earnings to $573.1 million, a recovery of sorts.

“We didn’t expect to go backwards last year,” Giuliani said. “We did, but we pulled out of that and we continue to perform better and better. Clearly our work isn’t done yet, but our goal is to produce a unified, differentiated offering and we believe we are well on our way.”

The company’s down period occurred largely because of declines in its once-core display ad business (which Conversant calls “insertion order-driven display business"). This area continues to decrease. However to stabilize itself, Conversant changed the way it segments its lines of business, distinguishing affiliate marketing revenue (from its Commission Junction unit) from media revenue. Media revenue lumps together the company’s various CRM, mobile, video and cross-channel technologies business along with its traditional display business.