Rubicon SEC Filing: Chango’s 2014 Revenues Were $43M, But Retargeting Firm Wasn’t Profitable

rubicon-changoChango recorded 2014 revenues of $43 million prior to its acquisition by Rubicon Project, according to a new US Securities and Exchange Commission (SEC) filing.

But the company was not profitable, despite being an early player in the lucrative retargeting niche. It reported a loss of just under $1 million for the year. Read the 8-K.

Chango offers website and search retargeting capabilities to a customer list that includes 60 marketers in the Fortune 500. In Q2 it sold to Rubicon for $122 million in cash and stock, representing a roughly 3x multiple on the 2014 revenue figure reported Friday.

The lack of profitability for 7-year-old Chango shows just how tough it can be to make a late-stage ad tech startup succeed at a time when venture capital is hard to come by for firms focused on display ad tech. (Startups focused on TV/video, commerce and mobile appear to be having an easier time, as evidenced by new rounds for firms like, Purch and Altitude Digital.)

Rubicon’s filing gets to the heart of the challenge for late-stage DSPs and ad networks. Chango’s cost of revenue, including data and media costs, totaled $25 million in 2014, or more than half of total revenue. Meanwhile sales and marketing costs were $13 million, and technology and development costs were $3 million.

If that were all of the company’s expenses, Chango might have squeezed out a slight $1 million profit, but the smallest line item of them all – $3 million worth of general and administrative costs – put the company into the red for the year.

Its acquisition brought Rubicon more firmly into the buy-side arena with offerings geared to the agency and marketer buyer. While Rubicon already had a fully featured demand-side platform, Chango brought considerable customer scale along with about 150 employees to serve those clients.

The deal followed Rubicon’s acquisition of iSocket and ShinyAds, two platforms for deal automation that cost less than $30 million cumulatively. The tiny deal price suggested that the programmatic “orders” business was more nascent than some had thought, but Rubicon is making some progress.

In Q1 2015, CEO Frank Addante said this part of Rubicon’s business was 15% of overall managed revenue, up from 13% in the fourth quarter.

Corrected: An earlier version incorrectly presumed Chango’s numbers were in US currency. Story has been updated. 

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  1. Can we all agree with that the difference in how adtech companies report gross and net revenue to just use gross profit as the valuation metric? For those who skipped finance class; Rev – Cost of Sales = Gross Profit. Gross Profit is the money available to pay the bills. So in this case the deal was done around 6.2x Gross Profit.

    For reference: Adnetworks (like Chango, Millennial Media, Tremor, Criteo etc) typically have around 50% Gross Profit. Programmatic Companies (Rubicon prior to acquisition, Appnexus, OpenX, MediaMath, Pubmatic) typically have 85-90% Gross Profit (similar to ordinary enterprise software). If you pick up any decent wall street research report on the space, this is what they use to normalize across companies.

  2. Anonymous Coward

    Chango’s Financials are in Canadian Dollars, not USD. The USD -> CAD exchange rate in December 2014 was 0.866.

    If Rubicon paid $122M USD in December 2014, that would represent a 3x revenue multiple based on a common currency ($47.7M CAD to $41.3M USD), no?

  3. “Chango recorded 2014 revenues of $37 million prior to its acquisition by Rubicon Project, according to a new US Securities and Exchange Commission (SEC) filing” – Where do you see that? Filing says they did $43.048mm in fiscal year 2014 in USD. Any idea how fast they were growing vs 2013?

    • Thanks anonymous and Noah, I updated the story — going with Rubicon’s $43 million reported revenue figure. My earlier number was based on a more recent exchange rate.