Rocket Fuel Hopes to Buck the Ad-Tech Blues

Despite a number of disappointing ad-tech IPOs this year — including Tremor Video (TRMR), YuMe (YUME) and Marin Software (MRIN) — Rocket Fuel thinks it can find financial liftoff.

The company has filed for an IPO, and the lead underwriters include Credit Suisse (CS) and Citigroup (C).

Rocket describes itself as “a technology company that has developed an Artificial Intelligence (AI) and Big Data-driven predictive modeling and automated decision-making platform.” As you can see, no mention of “ad network”! Instead, the key phrase in the company’s pitch is Big Data — a term that appears 15 times in the S-1.

Rocket’s process pretty straightforward. It buys huge amounts of impressions from ad networks and then applies in-depth Big Data/AI analysis on them to juice-up the conversion rates. Then the company sells the impressions at a premium.

The good news is that Big Data and AI are starting to have practical applications. Just look at IBM’s (IBM) Watson supercomputer; after demolishing top human champions on “Jeopardy!” the technology has been adapted to be used for diagnostics in healthcare . Then there’s Google’s (GOOG) driverless car, which has the potential to transform the transportation industry.

So far, Rocket is leveraging this technology quite effectively.  From 2010 to 2012, revenues soared from $16.5 million to $106.6 million. Although, as the company continues to invest in its growth, the losses have been significant — totaling $10.3 million last year.

But of course, Big Data has been a big deal for IPO investors. For example, the shares of Splunk (SPLK) are up almost 200% since its offering back in April 2012. And Tableau Software (DATA), which pulled off its deal in May, is up about 115%.

So when Rocket goes on its roadshow to pitch its deal, expect management to talk up Big Data — and say little about the ad-tech part.

If it can do this convincingly, the deal could be a hot one.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll 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.

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