Rubicon Project RUBI

  • Top-knotch ad tech senior management team has been-there-done-that; ad tech start-up, IPO, M&A, and exits to big tech. Well-rounded tech knowledge: video, search, buy-side and sell-side, exchange, large-scale publishers, programmatic and brand adversiting.
  • Unique alternative to big ad tech players; Google for search, FB for social, and RUBI for “everything else”. No conflict of interest.
  • Recent acquisitions solidify their leadership in premium ad space.
  • Problem solving technology, much of the process is still manual.
  • Increases profits for publishers, increases efficiencies for demand side.
  • Focused on high-dollar/high-profit, premium buyers and sellers.
  • Mobile acquisition is paying off after only two years. Growth is strong.
  • Plan to sell all advertising programmatically, not just digital. New areas: TV and billboard.
  • Competition is close and trying to differentiate itself through acquisitions. Currnetly, much of the differentiation lies in what publishers the company works with.
  • PubMatic, competitor, rumored to IPO
  • Majority of video is currently done direct.

In 2007, SSPs (supply-side platforms) helped large publishers optimize their advertising yields for their second channel, the “left over” demand of their lower 20% of revenue. When Google purchased AdMeld, an SSP at the time, in 2011 there was an industry shift due to Google now having all the elements of an ad exchange. The buy-side moved toward optimization, just like the sell-side already had, as real-time bidding (RTB) hit the scene. SSPs emerged as ad exchanges. Rubicon is an ad exchange, prior to 2011 it is listed as an SSP.

Rubicon Management:
Frank Addante CEO and Chief Product Architect (Founder)
…CTO and Technology Founder of L90, an Internet advertising company, where he pioneered one of the Internet’s first ad serving platforms, adMonitor. L90 was acquired by DoubleClick (now part of Google).
…started his Internet career with the creation of Starting Point, a search engine.

Gregory Raifman President:
…Executive Chairman of video ad exchange and real time bidding company LiveRail, Inc, online video advertising, bought by FB in 2014.
…began his career as an attorney, specializing in M&A and corporate financings
…Quote made by Addante on why Raifman was brought in: Some more horsepower. And in terms of specific skills, Greg [Raifman] is someone I’ve known for 14 years, and he has a deep understanding of the buy-side of the market. Thirteen years ago, he and his team [at Mediaplex] developed a technology called adXML to enable what we would probably call RTB today. That was 13 years ago.

Todd Tappin COO and CFO
…served as the Chief Executive Officer of SocialVibe, Inc. a leader in engagement and value exchange advertising, running SocialVibe, a video real-time buying startup
…founding Chief Financial Officer of Overture, the pioneer of paid search, which competes with Google paid (sponsored) search. Overture was sold to Yahoo.
…spent six years as a senior executive at News Corporation, a global media conglomerate. [Note: at IPO, News Corp owned 19.3% of RUBI]
…Quote made by Addante regarding acquisitions: We’re going to continue to be aggressive in [mergers and acquisitions]. We already have been, but we plan to be even more aggressive, and Todd [Tappin], in particular, has a lot of M&A experience from Overture. He’s also been in private equity and has a lot of experience managing M&As. M&A is both art and science. It’s not just doing the deal, it’s making them work. At Overture, he grew them from zero to over $1 billion in revenues. Todd brings us that experience.

Rubicon Project IPO:
…IPOed April 2, 2014, market capitalization of $556 million at a price range midpoint of $16. First day’s activity: $17.12 - $21.20. 20% of the IPO went to shareholders.
…RUBI’s Advertising Automation Cloud platform is an advertising marketplace that optimizes real time trading of digital advertising between buyers and sellers.
…At the time of IPO, RUBI had direct relationships built on technical integration with over 700 sellers of digital advertising, including approximately 40% of the U.S. comScore 100.
…RUBI had three active U.S. patents. Additionally, RUBI has one pending provisional application and six pending non-provisional applications in the United States and three pending non-U.S. applications.
…The display, mobile and video digital advertising market is projected to grow to $90 billion by 2017, and the need for automation in this market is growing commensurately, with real time bidding alone projected to grow at a compounded annual growth rate of 57% from $1.4 billion in 2011 to $20.8 billion in 2017.
…The typical order process involves close to a dozen manual steps to match an advertiser with a seller. According to NextMark, it can cost an advertiser up to $40,000 and 480 man-hours to plan and execute a $500,000 advertising campaign.
…Rubicon’s technology puts more money in the publishers pocket.

…Acquired MobSmith, mobile ad platform, in 2012.
…In January 2013, Addante stated. We will probably not organically get into video. Video is probably something we will do via M&A.

In 2014……
“With iSocket they acquire legitimacy, marquee relationships, and buy-in from big time NY publishers, like Condé Nast and IAC. That publisher buy-in has a domino effect,” said Dina Srinivasan, managing director, emerging media for Kantar Media SRDS. “With Shiny Ads, Rubicon is able to quickly increase their foothold in the marketplace. It helps both with optics and marketshare in their efforts against Google.”
Post-acquisition, Rubicon should now have pipes in place for 1,000 to 1,500 of the top 2,000 publishers that agencies are most interested in buying direct from, a source familiar with the deal estimated. Another source put iSocket’s publisher count at 300, Shiny Ads’ at 30 and Rubicon’s private marketplace publisher connections at over a thousand – though the latter isn’t strictly automatic guaranteed.
“The existing programmatic platform companies are competing for their share of the roughly one-third digital ad spend that’s already been automated, cannibalizing the inventory that used to go to ad networks,” Trenda said. “This deal gives Rubicon a huge lead in going after the other two-thirds, the part still being done with paper contracts.”

Competition 2014:
… Forrester’s report suggests a fragmented market in which all the players are generally proficient according to a base level of service. Tier 1: Forrester calls PubMatic, DoubleClick, and Rubicon “Leaders” in the space, saying those three companies “offer publishers the richest combination of sales protocol options, technology, and integrations, supported by service.” Tier 2: AppNexus, OpenX, and AOL Platforms are highlighted as companies that provide “competitive options” and are considered “Strong Performers,” one step below “Leaders.”
… PubMatic leads the way. Forrester calls the company “the last of the purebred SSPs,” meaning it’s the last SSP “fully focused on the needs of publishers.” Forrester says PubMatic is “ahead of the curve” with regard to mobile and video integrations, which are both hot topics on the buy-and-sell sides.
…Forrester says Google’s acquisition of Admeld – which was deemed a “Leader” in Forrester’s last Wave report featuring SSPs – helped “substantially improve its current offering.” Forrester calls DoubleClick’s mobile offering “less than complete."
…Rubicon Project is knocked for its lack of a video solution, but Forrester considers it a “Leader” because of its work supporting private exchanges and premium programmatic selling.
Note: In the 2012 report, ,Yahoo!’s Right Media nearly fell of the cliff into the “Risky Bets” category due to its low marks in current offering (2.45 out of 5) and a lackluster strategy rank. [Yahoo was rumored to be looking to acquire Rubicon prior to IPO. They are now rumored to be acquiring True and a others in ad tech.]

…$200 billion and growing market opportunity
…recent cc growth details: 20 % increase in RTB paid impressions YOY, 49% increase in revenue, GAAP eps .04 positive from .70 negative.
For the full year 2015, we expect revenue to be between 175 million and 178 million which represents approximately 40% year-over-year growth in the midpoint of the range. Adjusted EBITDA to be between 19 million and 22 million and non-GAAP earnings per share to be between $0.20 and $0.25 based on approximately 41 million to 42 million weighted average shares.
As a component of our core infrastructure, we are again uniquely position to capitalize on massive growth opportunity ahead such as bringing the same efficiencies to traditional advertising including TV and digital billboards.
Two year ago desktop advertising was nearly our entire business and in a short period of time we’ve leverage our core technology infrastructure to extend into mobile. Today we have integrations with 50 of the top 200 comps square mobile sellers which is drive a further increase in buying/spending demonstrating that our dual network effects are taking hold in mobile, just they did for us in desktop advertising.
we focused on a premium part of the market because those customers are the same customers that are transacting in cost display, mobile, video, TV, magazines, billboards. [From most recent cc transcript]



Thanks a bunch for sharing your notes. Looks like they have a very capable management team who have been there and done that before.

Based on what you shared and my quick look around, it looks like Rubicon is essentially running an ad exchange matching buyers to sellers. It wasn’t clear how many high-end and mid-market buyers and sellers participate in their market. I probably have to look into their 10K in detail to figure out how they differentiate themselves from whole heap of competition … It could be that I haven’t read Rubicon’s 10K and hence I 'm not able to grasp the value proposition here and understand how they compare with CRTO.

I had a quick look at their latest earnings release and also had a quick glance at the conference call:……

The valuation seems to be really high. FY 14 non-GAAP EPS was $0.20. At $18.8 share price, that’s a trailing PE of 91. Their FY 15 guidance suggests a year of investments. Revenue is projected to grow about 45%, but there’s little growth in non-GAAP earnings. At mid-point, we are buying RUBI for a forward PE of 83. That’s pretty steep IMO.

The other thing I sort of didn’t like is how management tries to sell the total market opportunity. They threw around $200B or something like that as the opportunity. The market is large but there are many competitors. Right now, their earnings release doesn’t really breakdown much for us investors. What’s the revenue from various geographies? What’s the client/publisher pool look like? How is it growing? May be these sorts of fine-grained detailed are there in the 10K, so may be I should look there.

Thanks again for sharing. I will report back when I find something more to report.


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As an aside, I often have a problem with TMFSA picks wherein the majority reason for investing is management, talent or culture (TCS comes to mind). Acquisitions (pre-ipo and post-ipo), competition (public and private) and growth strategy take a lot of digging and much of that info isn’t easily available, like in a 10K or on seekingalpha - I focused on harder-to-find info here, for that reason. Also, I see this as more of an RB stock, though SA may some day rec it, probably when it is fully profitable like CRTO was, as the service tends to “go horizontal” once they understand a concept and trend. I mention this as I think the two types, RB or SA, should be evaluated using different means.

Incidently, I don’t think RUBI compares with CRTO. Other than the fact that they are both in the ad tech industry, they are different animals - one a re-targeter and the other an ad exchange/ad optimizer.
If you haven’t already seen this chart, it’s useful. Note: 1) It’s only for display advertising. There are separate ones for mobile, etc. 2) CRTO is bordered in green, noting its alignment with demand-side and RUBI is bordered in blue, noting its alignment with supply-side (publishers).…

If you ever make it to the 10K, I’ll look forward to your thoughts.


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