Following up his question for 5 ad tech, platform panelists during the Tuesday session of the Internet Advertising Bureau's (IAB) Annual Leadership Meeting (see the panel's coverage), Tolman Geffs, Co-President of investment banking firm Jordan, Edmiston Group (JEGI) expands on his thinking for the AdExchanger audience.
A question hit me hard during the IAB Summit in Miami. The CEOs of AppNexus, MediaMath, Pubmatic, Rubicon Project and MediaBank were on stage together answering questions about their businesses. I posed the question of "when will you guys make money." MediaBank is a bit different, but take the first four and add in AdMeld and Turn and you have the bulk of the bidded display market. Yet as a group, their combined 2011 profits were negative and 2012 won’t be a huge profit either.
While any one company can - and often should - invest in losses for new growth, it's a bit worrying that the entire bidded display ecosystem has reached decent scale but still does not make money (ex Google). Taken as a whole, this bidded exchange market machine needs to get to the point where it runs on its own, funding growth with retained earnings instead of VC. Maybe not yet, but soon.
Furthermore, the flip side is that the large likely strategic buyers want to see volume, revenue and margin structures that produce profitable companies before they seriously buy into the sector. They are all circling, waiting for the soufflé to rise. In other words, the oven buzzer for them to come into the kitchen is the emergence of profitable scaled businesses.
By Tolman Geffs