Jordan, Edmiston Group’s Tolman Geffs On Bidded Display Ecosystem

ad techFollowing 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

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1 Comment

  1. As I mentioned immediately after this question was posed at the IAB conference — we at the Rubicon Project are profitable.

    While I can understand and appreciate the point that is being made here, I feel it’s unfair to lump our “profits” in with a group of other companies (all which are very different than our business) that are at different stages of growth and make such a broad general statement.

    I’m proud to say that our team has worked hard to prove our model and take the company to profitability, particularly with the rate of growth that we have sustained along the way and the risks that we have taken to achieve such growth.

    We were profitable before we acquired FAN over a year ago. We doubled the size of the company with the acquisition by bringing on 100 people in tech development (no sales/revenue from the acquisition), quadrupled our revenue run rate, invested tens of millions of dollars into a massive real time trading infrastructure, and brought all 5 countries that we operate in back to profitability in just one year’s time. I might add, this was the third acquisition that we have done in the almost 5 years since we started the Rubicon Project.

    From the start, we have taken a long-term view on the market opportunity, always trying to do what’s best for long term growth of the market. Having said that, we take a short-term view on the fiscal management of the company. We have never had a down quarter and have a very strong balance sheet that’s growing.

    I have taken this approach with all five of the companies that I started prior to the Rubicon Project and it’s resulted in over $1 billion in combined market value, 2 acquisitions and 1 IPO — I’m happy to say I’ve never lost money for an investor.

    I’m from the midwest (Chicago). I didn’t grow up in the land of venture capital. I was trained from an early age to build businesses on profitable business models. It’s the only way I know how to do it. Call me old fashioned…