The Rubicon Project filed its S-1 with the Securities and Exchange Commission. The firm, which operates an adtech platform, plans to issue its shares on the NYSE under the symbol of “RUBI.” The lead underwriters include Morgan Stanley (MS), Goldman Sachs (GS) and RBC Capital Markets. Yet the deal will be far from easy to get done.
The Rubicon Project is the mastermind of Frank Addante, who is a veteran of the dot-com industry. Some of his other startups include StrongMail Systems and L90 (which was a pioneer of the adtech space).
As for the Rubicon Project, the focus is on using high-speed data analytics and algorithms to optimize the ad-buying process. The network is deep, with more than 550 million Internet users across the globe. Since inception, the platform has helped more than 100,000 brands.
The core engine is a workhorse. According to the S-1:
“We analyze billions of data points in real time to enable our solution to make approximately 300 data-driven decisions per transaction in milliseconds, and to execute up to 2.1 million peak queries per second, approximately 25 billion transactions per week and 3 trillion bid requests per month.”
However, the company has to compete in a crowded field. In the past year, the following rivals have gone public — and the results have been generally sour:
Tremor Video (TRMR)
Tremor operates an ad network that targets online video for diverse platforms like desktops, tablets, smartphones and connected TVs. Its customers include the top-10 automakers and nine of the top 10 consumer packaged goods companies. Then again, Tremor’s technology, called VideoHub, is focused on the kinds of things that major brands want, such as high-quality content and strong analytics.
Marin Software (MRIN)
Marin has a system that helps to measure the performance of online ad campaigns using Big Data and strong analytics. Marin also claims that its user interface is much easier to work with. And unlike many other ad networks — which charge on a transactional basis — the company’s business model is based on subscriptions. In other words, it is more like a cloud operator.
YuMe is similar to Tremor, in that it’s focused on video ads. YuMe says its solutions is geared for the needs of major brands. Consider that 70 of the top 100 US advertisers (as of the 2012 Advertising Age rankings) have used the platform during the past year. It certainly helps that YuMe has a large network, which reaches more than 278 million monthly unique viewers.
Criteo has a different twist than a typical ad network. That is, it helps companies to convert traffic into customers. After all, that’s the main point of advertising, right? For the 12 months ended June 30, Criteo generated more than $6.5 billion in post-click sales. The company has more than 4,000 clients and the retention rate is about 90%.
Rocket Fuel (FUEL)
When reading through the S-1, you’ll see Rocket Fuel company is focused on cutting-edge technologies for Big Data and Artificial Intelligence. Like Criteo, the company has also built systems to help improve the ultimate sales effectiveness from ad campaigns. According to the IPO filing: “Our computational infrastructure supports over 25,000 CPU cores in eight data centers and houses 15 petabytes of data.”
OK, all this sounds great. But then why has Wall Street been generally downbeat on the industry? Well, first of all, it’s tough to differentiate the players. After all, many of these companies leverage Big Data and analytics — as well as have broad platforms. Oh, and they also tout mobile.
Next, the competitive environment is brutal. And it is not just from startups. Mega players like Apple (AAPL), Facebook (FB) and Google (GOOG) are major factors in the industry and will likely eat away at the market share.
Now it’s true that the Rubicon Project has been growing at a nice pace. For the first nine months of 2013, revenues jumped by 48% to $55.7 million. Yet this pales in comparison to FUEL, which posted a staggering 133% increase to $155 million during this same period. In light of this, is it any wonder that FUEL had a successful IPO?
By contrast, Rubicon looks like the other subpar players, like TRMR or YuMe — at least in terms of growth rates. And that does not bode well for the Rubicon IPO.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.