A So-So Q2 For Millennial Media As A Buy-Out Seems More And More Likely

MillennialearningsThe Millennial Media train needs more steam.

Revenue for Q2 was up just a smidgen from Q1, increasing from $63.2 million to $65.8 million quarter over quarter. But the same was not true for year over year revenue, which declined from $67.3 million.

The majority of that revenue came courtesy of managed media, which represented $57.1 million in earnings as compared to the platform business, which accounted for $8.7 million.

Millennial CEO Michael Barrett has been bullish on the opportunity around the company’s platform business. During its Q4 2014 earnings call, Barrett said, “Supported by the foundation of our managed media business, we expect to accelerate our programmatic platform capabilities and revenue production during 2015.” So far, that’s not been the case.

Platform revenue was down quarter over quarter from $9.4 million. Gross billing for the platform side of the business was up slightly, increasing from $21.6 million in Q1 to $23.8 million this quarter.

Barrett acknowledged that Millennial has some work to do.

“Revenue is ramping more slowly than we had hoped,” Barrett said, noting that the company is “evaluating strategic opportunities to maximize the value of our capabilities in this rapidly evolving ecosystem.”

One of those “strategic opportunities” might logically come in the form of an acquisition. The scuttlebutt in early July was that AOL might spend around $350 million to acquire Millennial Media, a rumor that Barrett neither confirmed nor denied.

“This is a fast-moving industry, and it is becoming increasingly more challenging to compete as an independent public company,” he said. “The reality is that it is taking longer than originally expected to grow revenues, and this is going to require Millennial to compete differently. While we are not going to comment on any specific rumors, we can acknowledge that, as you’d expect, we’ve had a number of discussions with a variety of companies about potential strategic alternatives, including the potential acquisition of Millennial Media.”

Speaking of the competition, it’s fierce, with particularly strong competitive pressure coming from the larger players with owned and operated inventory. (Read: Facebook, Google and the rest.)

Because Millennial only works with third-party publishers and buyers, that creates a “certain economic disadvantage when it relates to monetization,” Barrett said, noting that the O&O folks, with their proprietary ad units and proprietary data, “seem to be getting more of the market share.”

This makes an acquisition, whether by AOL or another player, seem like an inevitability.

“Exploring all kinds of strategic alternatives and partnerships makes a lot of sense for us at the juncture where we find ourselves,” Barrett said.

In the meantime, Millennial is also attempting to shore up its mobile programmatic capabilities with a grab bag of offerings, including access to native and video units, a 100% mobile viewability guarantee and a software development kit that combines the Millennial SDK with the Nexage SDK into a single package.

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