Contact: Scott Denne Tejas Venkatesh
Adtech company Rocket Fuel created fireworks on the public markets today, first debuting at the high end of an already upwardly revised range and doubling shortly thereafter. The offering creates $1.8bn in market value, and highlights investors’ hunger for a combination of growth and technology differentiation.
Rocket Fuel generated $160m in revenue for the year ended June 30, up roughly 135% from the same period last year, valuing the company at a handsome 11.6x trailing sales. In its filings, the company emphasized its use of artificial intelligence and complete automation of ad buying. That makes it unique from other demand-side platforms, which work more like a Bloomberg terminal for ad buying, and that seems to appeal to investors seeking an adtech business that’s based on technology, rather than an arbitrage of buying ad inventory and reselling it at a higher price.
That growth and tech combination is resulting in the superior valuation compared to recent adtech IPOs like Tremor Video, Marin Software and Millennial Media, all of which trade at less than 6x trailing sales. For instance, Millennial, which is comparable to Rocket Fuel in revenue run rate, trades at just 3x trailing sales.
Rocket Fuel’s offering is good news for larger rival Turn, which is planning its own IPO. We believe the nine-year-old startup is generating roughly $250m in revenue and is likely to file its paperwork early next year.
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