Ad Tech Startup Rocket Fuel’s Revenues Take Off

Display-LUMAscape

Illustration: Luma Partners

From my Forbes.com blog The New Persuaders:

There’s a gazillion little ad tech companies out there, as you can see in the well-traveled chart called the Display Lumascape on the right. Conventional (and probably correct) wisdom is that eventually many of them will get snapped up by bigger fish, whether that’s giants like Google, Oracle, and Facebook or rivals that just did a better job.

Since that process has happened a little more slowly than many people expected, though, a few of those fish are getting pretty big. One of them is Rocket Fuel, a Redwood City (Calif.)-based startup that despite its name has flown under the radar of the general public. While it started out as an ad network, it might be better seen today as a so-called demand-side platform, or DSP. It buys ad space for marketers and uses its rocket-science technology to target ads precisely in real time to the most receptive prospects, a process that goes by the industry shorthand “programmatic buying.”

Today, Rocket Fuel is announcing with unusual candor for a startup that its gross revenues rose 238% last year to $107 million. Notice I said gross revenues; a good chunk of that goes back to publishers from which it bought ad inventory. The company won’t reveal net revenues.

But the growth is real. And that includes growth in customers, nearly a doubling of new advertisers. On their behalf, Rocket Fuel’s system deals with more than 26 billion ad impressions a day. Not least, the company has more than doubled its staff, to 289 employees, including a new chief marketing officer and a couple of VPs.

CEO George John says the company isn’t profitable yet, though he says it’s close. “The playbook is to invest,” he says, so plans are not for near-term profits.

You might wonder, as I did, whether revealing revenues is an indication that the company aims to go public soon. Actually, it has been just as forthcoming previously, and John won’t say what his plans are.

But given that it had made noises back in 2011 about an IPO in 2012, instead raising a huge $50 million round last June, it’s not out of the realm of possibility this year, market gods willing. Or, to mix a metaphor, it might continue to swim around the Lumascape and try to figure out whether to eat or be eaten.

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5 Reasons Why Facebook Shares Have Soared Past $30

Mark Zuckerberg, founder and CEO, shows off th...

Facebook CEO Mark Zuckerberg (Photo: Wikipedia)

From my Forbes.com blog The New Persuaders:

After languishing ever since Facebook’s mostly botched initial public offering last May, the social network’s shares are up more than 5% today, moving past $30 a share for the first time since July. Why the sudden investor interest in what was one of last year’s biggest disappointments in the business world?

* Something new is coming: I and a crowd of other journalists have been invited to a press event on Jan. 15 to “come see what we are building.” That could be anything, from new kinds of ads (though that’s not the usual thing Facebook engineers mean when they talk about what they’re building) or a mobile phone (very unlikely, since CEO Mark Zuckerberg put the kibosh on the idea awhile ago) to a search engine, a music service, or an expanded e-commerce initiative.

Or, the most likely of all, something entirely different–possibly several things, to read probably too much into the invitation’s wording. In any case, it’s enough of an event that investors are likely intrigued and want to get in ahead of an announcement that at the least will get a lot of coverage.

* Ad revenue growth is accelerating again. In its third quarter, Facebook surprised investors with a 36% jump in ad revenues, sending its shares up 20% the next day. Although mobile ad revenues are a big part, a new ad exchange and an ad targeting program called Custom Audiences also appear to be getting traction.

* In particular, Facebook appears to have a good start on solving a key issue during the IPO: mobile advertising. The big kicker in that third quarter was mobile ad revenues, which hit $150 million, or 14% of revenues, from almost zero just six months earlier. As Zuckerberg said during the third-quarter earnings call, “I want to dispel this myth that Facebook can’t make money on mobile.” In particular, ads in mobile news feeds are working for advertisers because they look more like a natural part of what people are already looking at. …

Read the complete post at The New Persuaders.

How Did I Do On My 2012 Predictions?

2012: The Year Ahead

Photo: Mike Licht, NotionsCapital.com

From my Forbes.com blog The New Persuaders:

It’s that time of year: time to reflect on the past year, time to get wasted and watch a glass ball smash into the ground, time for people like me who foolishly offered predictions for the past year to face the music. So here’s how I did on my 2012 predictions:

* Facebook goes public, but won’t start an IPO landslide: Bingo! Indeed, Facebook’s ill-received IPO led to a months-long drought in IPOs as investors realized they were not a sure route to riches. The situation may be improving, but mostly for enterprise more than consumer companies.

* Facebook’s ad business booms–but not at Google’s expense: Bingo! While Facebook’s revenues slowed even before its IPO as it continued to experiment with new ad formats and scrambled to provide mobile ad units, ad revenues have since accelerated, up 36% in the third quarter over last year. At the same time, while Google’s revenue growth disappointed investors in the third quarter, it was mostly thanks to the impact of its Motorola acquisition, not a shortfall in its core ad business.

* Image ads finally find a home on the Web: Half-right. YouTube proved there’s a real market for TV-like video ads if you give viewers the choice to view them or not, as its revenues were expected to hit $3.6 billion in 2012, according to Citibank. But Facebook’s struggles to attract brand advertising despite a TV-scale audience, while partially successful, show that no one has yet come up with brand ad formats that work consistently and at large scale online. Or at least brands, which still spend most of their money on TV ads, don’t believe it yet. And they write the checks.

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Here’s A New Way You’ll Soon Get Targeted For Ads: Your Hashtags

Screen shot 2012-12-11 at 8.17.52 PMFrom my Forbes.com blog The New Persuaders:

Facebook has Sponsored Stories. Twitter has Promoted Tweets. Buzzfeed has Promoted Posts. They’re all based on social gestures and activities, each targeted to people, whether friends or birds of a feather, who might share similar interests. Now, a company has come up with a new way of targeting people using one of the most common social gestures of our time: the hashtag.

If you’re bothering to read this, you probably already know hashtags are those short subject labels, starting with a # or hash sign, that describe the topic a tweet or other shared item is about. They didn’t start with Twitter, but they became popular thanks to their common use in tweets. That use has spread to other social networks, from Pinterest to Instagram (though not very often on Facebook, for some reason).

Today, social ad firm RadiumOne announced it’s making hashtag targeting available to advertisers so they can reach like-minded consumers in real-time across the Web based on the hashtags they’re using. So, for example, says RadiumOne founder and CEO Gurbaksh Chahal, Nike can reach consumers who use the hashtag #nike, or #olympics, or #fitness with ads for running shoes. Or McDonald’s could target people who tag their tweet or Instagram photo #burgers or even #hungry. …

Read the complete post at The New Persuaders.

 

Here’s Why Facebook Likes Microsoft’s Atlas Ad Server

fbthumbsupFrom my Forbes.com blog The New Persuaders:

After spending years trying to dump its Atlas online ad-serving business, Microsoft reportedly is in talks with Facebook to sell the unit that helps advertisers and ad agencies place ads on websites and track their impact.

The news comes five months after Microsoft wrote down nearly the entire value of its $6.3 billion acquisition of aQuantive, of which Atlas was a part. Following its recent move to de-emphasize its own ad tech, Microsoft has been shopping the unit around, most recently to AppNexus. Business Insider reports that before Facebook talks began, the highest bid Atlas got was $30 million.

There’s no guarantee the deal will happen. But why is Facebook interested? Some speculate that it’s a way for Facebook to close the final technology gap on a plan for an ad network, similar to Google’s AdSense, that would place Facebook ads on other websites. Could be. But I tend to agree with one AppNexus Senior VP that there’s an even bigger goal that goes along with that: proving Facebook ads work.

That has been the No. 1 social network’s overriding task for the past year, especially since its underwhelming IPO. It has released vollies of case studies showing how its ads actually do spur sales down the line. But for whatever reason, most likely the difficulty of applying success by one company or industry with its social ads to others, many advertisers and agencies remain skeptical.

Atlas would enable Facebook to track the impact of its ads, which it’s already quantifying through a deal with Datalogix, which tracks in-store sales, not just on Facebook but on other websites as well. Privacy advocates are not happy about the Datalogix deal, and adding an Atlas-powered ad network won’t make them any happier.

But Facebook may finally be on the verge of closing the elusive loop between its ads and ultimate sales that result from them in a way that to date no one but Google has done really well and on a huge scale.

No Brand Shakedown, Says Facebook–Here’s How Page Posts Reach Fans (Or Don’t)

From my Forbes.com blog The New Persuaders:

A lot of businesses with Facebook pages are up in arms about their posts showing up in their fans’ news feeds way less often lately. They and their ad agencies think Facebook did it deliberately to force them to buy ads to promote those posts, and they’re not shy about telling the world about it.

Facebook says it did change its EdgeRank algorithm, which decides based on various criteria which posts individual Facebook users see in their news feeds, in September, chiefly to help reduce spam messages. But the No. 1 social network, which has been intensifying its efforts to boost ad sales following a disappointing IPO last May and a swoon in its share price, categorically denies that it’s essentially blackmailing brands into buying ads by reducing their reach with fans. In fact, it says posts are showing up overall at about the same 16% they’ve been for awhile now.

Indeed, it has just opened up a new news feed option that runs only posts from pages you’ve “liked.” The move won the approval of Mark Cuban, whose anger in one tweet catapulted the issue into the public eye. But lots of questions remain.

Today, the company is trying to get the word out about how its system works with a “whiteboard lunch” for the press, with the aim of explaining how page posts find their way into news feeds. I’ll cover the highlights here starting about noon Pacific time, so refresh until about 1:15 p.m. for the latest. It’s pretty casual, not a formal presentation, so most of this will be a little scattered, but potentially useful to marketers.

Will Cathcart, product manager for news feed, comes on first to tell how Facebook thinks about the news feed. On an actual whiteboard! He says Facebook tries to figure out how interested you will be (Yoda, in his example) in each page post. If he comments on or shares or likes (or “hides”), say, posts from the Rebel Alliance, those will show up more often. But if he reacts in a significant way to a post by, say, Vader, that will inform future visibility of Vader’s posts. If he often complains that posts from, say, the Empire, those posts may drop out of his news feed entirely. …

Read the complete post at The New Persuaders.

Why Do Obama Supporters Appear In Facebook Ads As Romney Fans?

From my Forbes.com blog The New Persuaders:

Recently, I’ve been seeing a Sponsored Story ad on Facebook pages indicating that several friends “like” Republican presidential candidate Mitt Romney. No surprise there. Sponsored Stories are those personalized ads the social network allows advertisers to run that show friends have “liked” a brand, and they’re increasingly common as Facebook doubles down on social advertising.

But what on Earth was the name of a friend, who I know is a vocal Obama supporter, doing on a Romney ad? The answer raises questions about how effective, or at least how accurate, these ads are–not necessarily due to a particular fault by Facebook but thanks to the byzantine rules and privacy features that have developed over years of user outrage and resulting Facebook accommodations.

Anyway, I asked my friend if he knew he was shilling for Romney. His response:

“Lol…..I liked him so I could see his FB feed. You should read my comments.” [Hint: They're not complimentary.]

To be clear, you can see Romney’s posts on his page without “liking” him, but to see them in your own news feed, you need to “like” him. And once you do, like it or not, you become potential fodder for an ad that will appear to your friends.

Another friend of a friend who’s an Obama supporter also was surprised to see his name on a Romney ad. He told his friend:

“I never liked his page. I commented on one of their crazy lies.. gave them a serious piece of my mind ya know!!!!! All kinds of people have been telling me why do u like Mitt???? I’m pissed!!!” …

Read the complete post at The New Persuaders.

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