Rubicon Project Executes On Turnaround Plan In Q2

Rubicon Project beat its Q2 revenue expectations, sending the stock up 15% in after-hours trading Wednesday.

Rubicon Project is still in the middle of steering a huge ship out of danger: It’s burning cash faster than it can increase ad spend on its platform, the result of cutting buyer fees from the platform in November.

The move left it with a take rate below 15%, requiring it to use its cash to fund the lower fees. Rubicon Project’s coffers shrunk by $15 million last quarter, leaving it with $104 million in cash.

Though advertising spend rose 16% to $238 million for the quarter, revenue declined 33% to $29 million. The take rate for the quarter stood at 12.1%, compared to 21% in the same period last year.

But Rubicon said its take rate has stabilized and increased 30 basis points due to the company increasing the take rates it now charges publishers since removing the buyer fees.

The company also said its EMR (estimated market rate) product has proven to be a bigger success than originally anticipated. Rubicon designed the product to help buyers bid appropriately as the exchange shifted from second-price to first-price auctions.

Rubicon Project thought only smaller DSPs would use the product while larger ones would build their own pricing algorithms. But platforms using EMR saw CPMs decrease by 20% for the quarter, while win rates decreased by less than 100 basis points – which is keeping DSPs of all sizes and their buyers happy.

The exchange also said its acquisition of nToggle a year ago is bearing fruit. The product shapes traffic for buyers, reducing the burden of looking at a huge amount of inventory. One buyer accessed 10 times as many impressions for the same cost.

Rubicon continues to grow the number of header bidding connections. “Most of what you are seeing is catch-up to our rightful position,” Rubicon CEO Michael Barrett said.

The exchange’s access to inventory doubled year over year. More than 1,000 header bidding connections with publishers generated more than 77% of Rubicon’s revenue.

“Results suggest Rubicon’s position with publishers continues to improve,” said Jason Kreyer, senior analyst at Craig-Hallum Capital Group. “As the industry continues to consolidate and publishers move toward server-side header bidding adoption, it appears the company remains in great shape to gain share as an independent exchange.”

Barrett also anticipates Rubicon will benefit from consolidation in the industry as buyers pare down the number of exchanges they work with.

“We haven’t seen any benefits of the consolidation” yet, Barrett said. “Tertiary players will get affected first, and it will work its way up. That will be another wave of momentum we will see.”

As Rubicon Project grows total ad spend flowing through the platform, it’s seeing the mix of advertising change.

Video ad spend grew 50% last quarter, and audio programmatic ads tripled. But the company didn’t break down how much those channels contributed overall.

Mobile is overtaking desktop. Fifty-two percent of revenue came from mobile, which grew 40% year over year because of a rise in app spending. Desktop revenue was flat.

Barrett shared yet another sign of optimism: He said he was “glad” to see AT&T acquire AppNexus. The acquisition “demonstrated the valuable role exchanges play in the ecosystem,” he said – especially for exchanges, like Rubicon Project, that are scaled players.

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