Q3: Rich Media Declines Drag Down Sizmek

sizmek 02Sizmek had another disappointing quarter, with Q3 revenues increasing only 3% YoY to $39.5 million – results that “were lower than we had expected,” according to company CEO Neil Nguyen.

The decline was driven by the company’s faltering rich media business, which decreased 35% YoY.

The ad management company found a silver lining in its core business, which increased 30% YoY. That business includes mobile revenues (97% YoY increase), in-stream video revenues (90% YoY increase) and revenues from data products that include programmatic decisioning and viewability and verification (73% YoY growth).

Unfortunately, Sizmek was hit hard by declines in traditional rich media – which are high-impact ads that use Flash and are being made increasingly obsolescent due to the advent of HTML5.

Rich media was a bugbear last quarter as well, particularly in North America, as clients upped investment in mobile and video – both growth areas for Sizmek this quarter. (Interestingly, the company is introducing products that blend mobile and rich media, having released a tool for rich media ads in social and mobile in early November.)

In its previous earnings call, the company said it would attempt to respond to the rich media downturn by enabling transactions in an RTB environment by the end of the year.

“There’s been some progress in testing out the programmatic rich media capabilities of the platform,” Nguyen said. “I think we’re still on track.” He said he expects Sizmek to realize the benefit of this platform by the first half of 2015.

Although demand for rich media ads didn’t take Sizmek entirely by surprise, the drag on company revenues is notable given its stated goal of returning to double-digit growth. The second half of 2014, after all, was supposed to be a time when the company onboarded half of the $10 million business won during Sizmek’s Q2.

It was a tumultuous Q3 for Sizmek’s executive suite as well. In early October, the company made management changes, which placed Nguyen in charge of its sales organization as its former EVP of global sales, Andy Ellenthal, left. The company is searching for a new sales chief as well as a COO. Additionally, Ken Saunders became CFO during the quarter.

In product news, Nguyen said Sizmek is building a data-management platform, which it intends to release in Q1 2015, that it is upgrading its ad server and creative SDKs for mobile and video and that it has improved the scale and “modularity” of MDX, a platform consolidates different tech, like ad serving from MediaMind, programmatic data solutions from Peer39, rich media from Unicast and EyeWonder and social media activation through Republic Project.

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