The 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."