Contact: Scott Denne
TubeMogul has had a tough time finding reception on Wall Street. The company, which sells software and services to enable brands to advertise in online videos, cut the expected range of its IPO to $7-8 per share from $11-13, and its existing investors have informally committed to buy more than half of the $47m offering.
Some of the difficulty stems from the performance on its closest peers – Tremor Video and YuMe. Those video ad networks went public last summer and have seen their value drop 57% and 34%, respectively. TubeMogul is transitioning itself to a provider of software (41% of revenue last quarter), not just services (58%, down from 76% a year ago), giving it higher gross margins and potentially a higher valuation – at the midpoint of its range it would have a pro forma enterprise value of about 2.3x trailing revenue, double what YuMe and Tremor command.
Despite the potential for TV ad dollars – which currently account for about half of all ad spending – to move online, the transition is in its early days and while TubeMogul has managed to capture a chunk of the first phase (desktop video accounted for 95% of its revenue in each of the past two years), Wall Street may be wondering if it will be able to post the same growth (more than 2x YoY last quarter) selling ads into mobile devices, connected TVs and other emerging forms of video consumption.
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