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Marin Software Inc. (NYSE:MRIN)

Q2 2013 Earnings Conference Call

August 07, 2013, 05:00 PM, ET

Executives

Greg Kleiner - ICR Investor Relations

Chris Lien - Founder & CEO

John Kaelle - EVP & CFO

Analysts

Stan Zlotsky - Deutsche Bank

Brent Thill - UBS

Jason Maynard - Wells Fargo

Operator

Greetings and welcome to the Marin Software Second Quarter 2013 Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Greg Kleiner, Senior Vice President, Technology Software for ICR. Thank you, Mr. Kleiner. You may begin.

Greg Kleiner

Thank you. Good afternoon everyone and welcome to Marin Software’s 2013 second quarter earnings conference call.

Joining me today are Chris Lien, Marin’s Founder and CEO and John Kaelle, Marin’s EVP and Chief Financial Officer.

By now you should have received a copy of our press release, which crossed the wire approximately one hour ago. If you need a copy of the press release you can go to investor.marinsoftware.com to find an electronic version. All participants are advised that the audio of this conference call is being recorded for playback purposes and that a recording of this call will be made available on our website within a few hours. You can access these recordings through the Investor Relations section of our website.

Before we begin I’d like to note that our discussion today will include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements include statements about our business outlook and strategy and statements about historical results that may suggest trends for our business. We make these statements as of August 7, 2013 and disclaim any duty to update them.

For more information regarding these and other risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements as well as risks relating to our business in general, we refer you to the section entitled Risk Factors in our more recent report on Form 10-Q and our other filings with the SEC.

I’d also like to note that any forward-looking statements made on this call reflect information and analysis as of today. This presentation contains certain financial performance measures that are different from the financial measures calculated in accordance with GAAP and maybe different from calculations or measures made by other companies.

A quantitative reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available on our second quarter 2013 earnings press release.

And with that let me turn the call over to Chris.

Chris Lien

Thank you and welcome to everyone joining us on the call today. I am pleased to report that Marin had another strong quarter in Q2 with revenue growth of 30% over the same period last year and exceeded our guidance across the board.

As the $100 billion global digital advertising landscape continues to both shift and grow at a rapid pace digital marketers are struggling to address the complexity, fragmentation and scale challenges of online advertising.

Marin’s SaaS based platform enables marketers to measure manage and optimize their advertising spend across search, display, social and mobile channels. We continue to lead the way in the revenue acquisition management or RAM market, providing a next generation solution to digital marketers that enables them to capitalize on this rapidly changing environment, driving better financial performance, time savings and better business insights.

With the June quarter Marin has now delivered 17 straight quarters of sequential quarterly revenue growth with $18.2 million in revenue exceeding the high end of our guidance. In addition lower than expected expenses also contributed to bottom line results that were better than our guidance.

We served 584 active advertisers during Q2, an increase of 42 from 542 that we served in Q1 of this year and up 20% from 487 active advertisers in Q2 of last year. Some example of the new deals we signed this quarter in the U.S. included Microsoft, [ILI Track] Technologies, Palo Alto Networks and Sykes Cottages. We also added Ford Retail Group, Brandos and Web Guide Partner in EMEA and NIM Digital, Bohemia, Shiseido in the APAC region.

I’d like to share some additional details about a few deals in the quarter. We are very happy to announce that the U.S. advertising division of Microsoft Windows selected the Marin platform to power their digital advertising initiatives. The Microsoft team chose Marin largely due to the strong integration offered by our platform into the Atlas ad serving and tracking platform. Atlas which was recently acquired by Facebook helps convert tracking data into actionable insights and automated data optimization.

As we’ve mentioned in the past our ability to seamlessly integrate third party data from a variety of sources is a key differentiator in competitive situations. In addition Marin demonstrated the ability for Microsoft to glean insights across products, markets and business divisions with reporting flexibility not available through competing solutions.

In EMEA Marin was selected by Ford Retail Group in the UK this past quarter. Posting annual revenues of more than EUR1 billion Ford Retail is the world's largest Ford dealer group operating over 54 dealerships. In an effort to enhance profit Ford Retail's goal is to continuously optimize their cost per lead model. With Marin Ford Retail is now able to align lead generation outcomes to specific digital marketing activities. The improved program measurement and visibility will allow Ford Retail to optimize our campaigns with the goal of ultimately improving the profitability of their online advertising investments.

In addition to the direct customers I just mentioned, I also want to highlight an important new agency relationship that we added during the past quarter in Japan which is the third largest online advertising market in the world. During Q2 we signed a deal with the Opt Inc., one of the largest digital marketing agencies in Japan. Opt is now implementing the Marin platform as a standard service offering within Opt's digital marketing support system which they call ADPLAN LS.

Opt chose to leverage our platform due to advanced optimization technology, intuitive workflow and our ability to integrate third party data. Opt also joined the Marin Software’s certified agency program and plans to develop a team of over 100 Marin certified specialists. As you can imagine this was a highly sought after relationship by many companies. We are very proud of our wins her and the further validation it provides for our people, technology and domain expertise.

We also made great progress with our clients as we help them to migrate their digital advertising campaigns to take advantage of both Google’s enhanced campaigns and Yahoo! Japan’s unified campaigns. These new offerings help advertisers to optimize ad performance by desktop, tablet or mobile. More so than other vendors Marin delivers this capability regardless of the tracking technology used.

Also this past quarter we’ve built or rebuilt more than 1 billion URLs with a good portion of those migrations handled automatically by our platform. This required a great deal of effort by our teams worldwide and demonstrates the ability of our platform to operate at scale as well as our commitment to customer success. From an innovation perspective in the social arena we launched a new version of our Facebook offering Campaign Wizard in the second quarter.

This offering automates the campaign creation process, allowing clients to scale their Facebook programs quickly and efficiently. The initial reception for these Facebook enhancements have been strong as we are seeing an increasing number of clients taking advantage of this offering. Leading advertisers using Marin’s Facebook advertising management functionality include Macy's.com and Disney.

As you saw this past quarter with both Google and Facebook’s results the mobile space is increasing in importance. On the mobile side we launched additional functionality to help advertisers maximize their mobile performance. In particular our platform now helps to automatically calculate and recommend optimal campaign level mobile bid adjustments saving advertisers considerable time and efforts along with improving outcomes.

During Q2 in a represented sample of Marin customers smartphones grew share of impressions clicks and ad spend at the expense of desktop and laptop computers. Smartphones also showed higher ad spend per thousand impressions. Given these trends thoughtful mobile ad management presents a growth opportunity for Marin and an opportunity for Marin’s advertisers to save time and drive better revenue outcomes.

In addition to our product innovation and support of our customers, I am happy to note that we continue to add to our management team in support of our global growth plans. I am pleased to say that we recently added Matt Ackley as Chief Marketing Officer. Matt has over 15 years of leadership experience at eBay, Google and the other start-up companies. Matt has experienced as an advertiser from his time at eBay where he was VP of Advertising and Internet Marketing. In that role Matt was directly responsible for some of the largest online advertising budgets as well as leading the use of advanced online advertising technologies at scale.

Matt also has strong relevant product experience from his time at Google where he was VP of Media Platforms Market Development responsible for all product and industry marketing activities for the Google Display Network, DoubleClick platform, Google Analytics and others.

We are also pleased to report that we hired industry veteran Brian Kaminski as Senior Vice President of Customer Success. Brian joins our leadership team after nearly 15 years at one of the industry's largest digital marketing agencies iProspect. Most recently Brian served as the President of Business Performance where he was responsible for only business development. At Marin Brian will bring his expertise and knowledge to our customer facing groups overseeing our top manager and online marketing manager teams focused on our direct advertisers. We are very excited about both Matt's and Brian’s addition to our executive team at Marin and look forward to their contributions going forward.

So to sum up as I look at our performance this quarter, we are pleased to deliver strong revenue growth and financial performance that exceeded our guidance. Marin continues to make good progress solidifying our leadership position in this new category of online advertising management that we call revenue acquisition management or RAM.

Marin's software-as-a-service platform continues to be adopted by leading advertisers and agencies worldwide as they seek to leverage technology to better measure, manage and optimize their digital advertising investments across search, display, social and mobile channels. Leading marketers are leveraging Marin’s platform to turn this dynamic online advertising market to their advantage driving superior revenue outcomes, time savings and better business insights.

We are in the early innings of the multi-billion dollar market opportunity and we see bright future for Marin as more and more marketers choose our solution. And with that let me turn it over to John to run through the financials in more detail.

John Kaelle

Thanks, Chris. As Chris mentioned a moment ago, our Q2 results were strong with revenues coming in at $18.2 million, up 6% sequentially and 30% year-over-year. This success was driven by strength across both our direct and agency clients, with revenues from our direct advertisers representing 51% of total revenues and our agency advertisers contributing 49%, a mix consistent with recent periods.

Geographically our international advertisers represented 31% of total quarterly revenues, up four percentage points from the 26% contribution in Q2 of last year highlighting that our international investments are delivering strong results. We served 584 active advertisers in Q2 up 42 sequentially from Q1. In addition to our healthy number of new advertisers added to the platform in Q2 the increase compared to Q1 was also due in part to a number of advertisers moving above the $2,000 revenue threshold using our active advertiser definition.

As we discussed last quarter there will be a certain degree of quarter-to-quarter variability in our active advertiser metric due to advertisers that may move above and below the $2,000 revenue threshold in any given period. What is most important from our view is the long-term trends in this metric.

During the quarter we saw continued progress at both extending the length of our contracts and collecting more of the contractual minimum fee payments upfront. Regarding the length of our contract we had success in some customer opportunities with two year deal structures. And we had one large customer renew for three years during the quarter. Overall we are finding that the average contract lengths are increasing. We believe this is a strong indication of the value that our customers are receiving from the Marin platform.

As for the trend in upfront minimum fee payments this is more prevalent in renewals at the moment. But we are seeing growing acceptance of this approach in new business as well. Improvement on these fronts will likely continue to take time but the contract guidelines we put in place are generating increasingly positive results. For the quarter our revenue retention metric was in the high 90s. This metric tends to vary from quarter-to-quarter due to a number of factors and though it’s typically been above 100% it has dipped below 100% in the past.

As a reminder revenue retention tracks revenue from all advertisers in the corresponding prior year period that remained the advertisers in the current period and includes growth in spend from retained advertisers net of churn. For the balance of the year we expect this revenue retention metric to remain relatively consistent with recent results, ranking from the high 90s to around 100%.

So before moving on to profit and loss items I would like to point out that I will be discussing non-GAAP results going forward. Unless otherwise stated which for the second quarter of 2013 exclude the total $1.3 million in stock based compensation $73,000 in non-cash expenses from the issuance of warrants and $256,000 of amortization of capitalized research and development costs while adding back $916,000 of capitalized R&D costs. A detailed reconciliation of our GAAP results to the non-GAAP result can be found in our earnings release.

For the quarter non-GAAP gross profit was $11 million, up 33% when compared to $8.3 million in the year-ago period. Our non-GAAP gross profit margin came in at 61% up from 59% in the year-ago period and 60% in Q1 of this year. Our investments in both infrastructure and international expansion should continue in the short-term which impact the margin.

Though we plan to make annual progress towards our long term target non-GAAP gross profit margins in the 70% to 72% range second quarter Non-GAAP sales and marketing expenses was $10 million compared to $7.9 million in Q2 of last year driven by expansion in both sales capacity and our marketing efforts. Our sales and marketing spend was down slightly on a sequential basis reflecting some incremental marketing expenditure surrounding the IPO during the first quarter that did not reoccur into Q2, along with the pause in some hiring and expenditures ahead of or new CMO Matt Ackley's arrival.

Q2 non-GAAP restructuring development expenses grew to $5.5 million in the period up to $3.5 million in the second quarter of last year. As we’ve indicated in the past we will plan to continue to invest aggressively in R&D in the short term to further our product differentiation in the market.

Non-GAAP G&A expenses were $3.6 million in the period compared to $2.4 million in the prior year's Q2 driven largely by the cost of being the public company along with our continued global footprint expansion and the international office growth in London, Paris, Hamburg, Sydney, Tokyo, Dublin and most recently Shanghai.

On the operating line we produced a non-GAAP operating loss of $8.1 million compared to the $5.5 million non-GAAP operating loss we posted in Q2 of last year. This is favorable to our guidance range driven by revenue website and the hiring and expenditure timing I mentioned earlier.

As we’ve previously discussed we remain in investment mode currently as we seek to further our leadership position in our large markets. Our non-GAAP net loss for Q2 was $8.4 million which led to a non-GAAP loss per share of $0.26 at the final weighted average share count of 32.2 million. This compares to the Q2, 2012 non-GAAP net loss of $5.7 million and a non-GAAP per share of $0.26 based on a weighted average share count of 21.5 million shares last year. Our adjusted EBITDA was a loss of $7 million in Q2 compared to a loss of $4.8 million in same period last year.

We ended the quarter with $120.6 million of cash and cash equivalents on our balance sheet up from a $115.5 million at the end of Q1. This figure includes the benefits of an incremental $14.6 million in net proceeds from the Q2 exercise of the overallotment option from our initial public offerings.

Our differed revenue balance increased again in Q2 with the balance of $3.8 million at quarter's end compared to $1.4 million at the end of Q1. While the sequential increase did include one large pre-payment that trends overall is reflective of our provability and intent to collect our contractual minimum payment upfront.

However as mentioned previously a majority of our customer base still pay us monthly arrears based upon their spend. As such the quarterly trend in this deferred revenue figure will likely remain volatile and not act as a good proxy for the overall health of our business in any given period.

Now let me turn the guidance for our September quarter and the 2013 year as a whole. For the quarter ending September 30th we set revenues to range from $19.6 million to $20 million a growth of 26% to 29% Year-over-year. And non-GAAP loss from operations should range from $8.5 million to $8.1 million. This should lead to a non-GAAP net loss per share in the range of $0.28 to $0.26 based upon a weighted share count of 32.4 million.

For the 2013 calendar year we now expect revenues to range from $76 million to $76.8 million or growth of 28% to 29% year over year, an increase over our prior guidance of $75 million to $76.2 million. And non-GAAP loss from operations should range from $33 million to $32.2 million, an improvement compared to our prior guidance of a loss of $34.5million to $33.5 million. This should lead to a non-GAAP net loss per share in the range of a $1.15 to a $1.12 based upon our weighted average share count of 30.5 million, an improvement compared to our prior guidance of a net loss per share of a $1.19 to $1.16.

So in summary we were pleased with our results in the quarter and are encouraged by our momentum heading into the remainder of 2013. As we look ahead we plan to continue investing in our growth initiatives. We are highly focused on further solidifying our leadership position in this large and growing market helping digital marketers, at the world’s leading advertisers and agencies to measure, manage and optimize their spend across search, display, social and mobile channels.

With that I want to thank you all for your time. And I’ll turn it back over to the operator to open it up for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question comes from Greg Dunham of Goldman Sachs. Please go ahead.

Unidentified Analyst

Hi, this is Jamieson in for Greg. Could speak a little bit more about the lower operating expenses than you expected in the quarter? And then also you’ve grown sales capacity pretty significantly over the past year. How do you look at that going forward with the growth and sales capacity? Thanks.

John Kaelle

Sure, it’s John. The first part of your question was just the operating expense. I’ve touched on it a bit on my script. One, just in terms of the beat for the EPS guide revenue came above the top end of the guidance. So we are pleased with that. And then in terms of the operating expenses we did hold back a little bit and pause as we were finishing up the recruiting process and bringing Matt Ackley on board. So that was a delay, a little bit hiring delay related to that but that trend should continue going forward.

I’d just also point out that as we’re still in investment mode so we’ll continue to invest in the business but we are keeping an eye on our profitability goals in the next couple of years. And then I think the second part of your question remind me again.

Again we are not discussing or disclosing the number of – but we continue to add the team. We’re pleased with their productivity, pleased with how the team is doing and continue to invest in that part of the business.

Unidentified Analyst

Okay. Thank you.

Operator

Thank you. The next question is from Nandan Amladi of Deutsche Bank. Please go ahead.

Stan Zlotsky - Deutsche Bank

Hey guys good afternoon it’s actually Stan Zlotsky sitting in for Nandan. Thank you for taking my question. So I’ll start with the first one. So the quarter-on-quarter growth in new customer additions you rebounded to 7.7%. Help us a little bit understand how much of that came from your actual new customer adds versus, customers coming back above the $2,000 a month threshold.

John Kaelle

Sure, yeah so how I would characterize it is we had a really healthy set of new adds in the quarter. In fact it was obviously by the metric a sequential increase. What I would say is last quarter we talked about how that threshold that $2,000 threshold and again just make sure you understand the metric and the definition we come to as an advertiser if we’ve earned at least $2,000 of revenue with you in a particular quarter.

So last quarter we had a set of advertisers or an aggregate who were still on the platform but they fell underneath from the fourth quarter in the first quarter. They fell underneath that $2,000 threshold so they were not counted as an advertiser. So that was a net beat up from the quarter in this quarter those advertisers, or group of advertisers were actually a net add to the metric in the quarter and we are not going to go into the details and provide the specifics of the actual numbers other than to say that we are pleased with the adds for the quarter consulted with a very health

Stan Zlotsky - Deutsche Bank

Okay. Sounds good. And then on the just overall spend environment that you saw in the quarter now they were, half way through the year, how is that trending and have you seen any hold up in customer ad spend as a result of migration to Google ad campaign?

Chris Lien

Yeah it’s Chris here. Spend continues to be healthy we don’t disclose that on a quarterly basis on the platform but when we look at the trends through the course of this year to where we are in August the spend trend has been a healthy one and then in particular we haven’t seen a decrease in advertising spend due to the migration to enhanced campaigns with Google or unified campaigns in Yahoo Japan.

Just to be clear of that migration with Google occurred on July 22nd so any impact from that would have been quite modest in the second quarter. But as we look out over the rest of the year we see enhanced campaigns as a neutral to positive for the business. In general advertisers are looking forward to leveraging this new functionality to further drive revenue outcome through their mobile advertising.

Stan Zlotsky - Deutsche Bank

Okay thanks and then just last one, just to follow up from the first question from Goldman analyst what help us characterize the productivity I know you are happy with the productivity but has the productivity been trending up? I mean I would presume so but would you help us characterize a little bit more?

Chris Lien

Yeah so at high level the sales team productivity has been consistent with prior periods and by that both tenured reps were fully ramped and carrying quota have been producing consistent with historical levels and then we have been very pleased with the new reps who are ramping or taking quota are also producing at a level consistent with existing reps. So we are seeing a fall-off in quota achievement as we add the new capacity.

Stan Zlotsky - Deutsche Bank

Okay perfect. Thank you very much guys.

Operator

Thank you. The next question is from Brent Thill of UBS. Please go ahead.

Brent Thill - UBS

Good afternoon. Chris beyond search can you just help us understand the revenue impact to the model overtime and you specifically called out mobile for Facebook when do you start to see these new initiatives show up in the business?

Chris Lien

Sure. So end of the second quarter about 23% of the spend on the platform is due to mobile. So it’s important for investors in the company to understand that the largest global ad unit is mobile search. So as mobile becomes more widely adopted both by consumers and by advertisers Marin currently benefits from that.

With regard to social or non-search channels that still is at a level that’s less than 10% of our revenue although the overall dollars that are in social that are in performance display continue to grow quarter-over-quarter for us. At the same time obviously our quarter-over-quarter revenues due to paid search also continue to show growth rates above the industry average.

Brent Thill - UBS

Okay. And if you take just as a customer number if you take the first half of this year versus last year you are down about 45% on net new customer adds and you mentioned some pretty high caliber customers. So I am just curious if you could can you characterize the decline in net new adds that you are starting to see healthier mix of large enterprise clients as you shift your sales process in many ways those clients could actually be a lot better than just looking at your net new customer add number?

Chris Lien

Yeah I think your observation is a fair one. I mean we are adding, continue to add very large advertisers to the platform again in a way that this metric is put together we count an advertiser like Microsoft as one advertiser and clearly there can be significant amount of additional business there as we land and then expand with that account. But you are correct the rate of net new adds has declined although we did add a healthy number of active advertisers in this past quarter probably wining new agencies where we will expand our business overtime such as with Opt and then wining direct advertisers as well.

Brent Thill - UBS

Okay. And then for John, just a quick follow-up. The contract length what is the average now you mentioned it is increasing what is the average now?

John Kaelle

Hey Brent I don’t have the exact math in front of me I believe it is right around a year markup.

Brent Thill - UBS

Great. Thank you.

Operator

Thank you. (Operator Instructions). The next question comes from Jason Maynard of Wells Fargo. Please go ahead. Mr. Maynard your line is live.

John Kaelle

Mannie why don’t we go to the next caller.

Operator

And the next question is from Jason Maynard. Please go ahead. Mr. Maynard your line is live.

Jason Maynard - Wells Fargo

Can you guys hear me now?

John Kaelle

Yes.

Jason Maynard - Wells Fargo

Oh there we go. All right awesome. I had a couple of questions I wanted to follow up Chris little bit with some of your -- what do you think the drivers are either externally in the markets or perhaps internally in your go to market efforts to increase the deal absorption around mobile and social. Hope to maybe get some color commentary there.

And two let me get a little bit more granularity on some of the [inaudible] on the international market. And where do you think the evolution of penetrating those different regions such as the [society] in Japan. And then the last piece with the new CMO coming on how much of the focus has been in terms of pushing with revenue acquisition management place. And how do you think that just roughly as together throughout and where do you suggest the various products is in the platform in sort of the larger accounts. Thanks.

Chris Lien

Sure thanks Jason. So the first question was or first part of question with regard to driving mobile and social, I mean that will come over time. Generally we are landing customers based on our paid search offering and then over time they are adding or cashing social.

I again would highlight that, we kicked up mobile limits by defaults in that mobile it’s, the largest category in mobile is mobile search. So there isn’t something separate that we do there and then Google’s activities with enhanced campaigns further making mandatory the use of mobiles advertising with search.

For social we are seeing growing adoption of the Facebook platform again that’s principally in our install based where customers who already know and see value in the Marin platform from a search of an adding social.

On international we began selling overseas in 2009. We are most likely viewed in terms of media managed on our platform in Europe although we still have very low penetration in much of Continental Europe and also in the UK despite having many leading advertisers in Europe and many leading agencies.

So we count MoneySupermarket which is the largest direct online advertiser in the UK as a customer and yes there are many other direct advertisers and agencies that we are still seeking to sign up be it in the UK or across Continental Europe.

When we look over to Asia, in particular Japan and Australia we only began selling there in the last two years and we are seeing strong uptick in both of those markets. In Australia two of the larger direct advertisers in that market also use our platform which are Telstra and Howard Insurance. And then in Japan we are seeing strong adoption across agencies and also from large advertisers such as Recruit which is one of the five largest online advertisers in the Japan market as customers of Marin.

So it’s early days for us internationally even though international is over 30% of our revenue this quarter and we are seeing those growth rates higher than in our more established markets just because we are newer in those markets.

And then the final comments or touching your question on the revenue acquisition management positioning and our new CMO, we’ll continue to pursue a dual strategy which is our higher level marketing and positioning will speak to our evangelism of this new category which is revenue acquisition management and the idea that the [inaudible] for revenue as moved online and that as consumers are spending more time online adds budgets following them and that marketers need a platform to measure, manage and optimize these digital advertising investments.

And that is in an umbrella positioning that we can build off of our leadership in search and ad display, social and mobile and obviously grow those components of our business. But we also continue to have a strong marketing message of leadership in helping the marketer with his or her day to day task. So how do you perform campaign management more quickly, perform better reporting and analytics and drive better financial performance.

So it will still be a dual message if you will at the high level led by Matt Ackley our new CMO talking about revenue acquisition management. And then a more day-to-day or day and the like message of how can we enable the digital marketer to have greater productivity and better financial performance.

The final comments that I would say is you will see greater efforts from us in the coming quarters. To-date the industry has been largely silo driven by channels. So the channels we think that our search display social and mobile and marketers that largely manage these channels separately. And you will see efforts from us in the coming quarters building on initiatives that we already have underway to highlight attribution and pass the conversion and leveraging marketer’s own data to bring together these channels.

So that we get a full picture of the journey of content online ultimately driving that person to a conversion event. So you will see more of that in our revenue acquisition management positioning led by Matt Ackley our new CMO. So Jason I hope that covers it I have answered you with that multi part question. Again thank you for asking that.

Jason Maynard - Wells Fargo

Yeah, no you covered them all thank you very much.

Operator

Thank you. The next question is from Tom Roderick of Stifel. Please go ahead.

Unidentified Analyst

Hey guys it’s Tony [inaudible] on for Tom. So my first question I was hoping to dig in a little bit on the renewal rate. Historically feels like a 2012 -- couple of quarters you are putting 110, 110 plus renewal rates and there is a drop there. Maybe you could talk about kind of the dynamic of what’s happening there and whether you think that guys will get back to a greater than 100% renewal rate? Thank you.

John Kaelle

Sure, it’s John. Let me make sure first that you understand the metric or make sure understand metric the retention rate this is the year-over-year growth in revenues from advertisers from a year ago in the current period during this quarter net of churn. So this particular metric in the previous quarterly metrics were that year-over-year revenue growth from those advertisers from Q2 into this Q2 less any churn.

And when we look to unpack this particular metric in this quarter what we found is in 2012 so last year for this group of advertisers the spending growth was very strong compared to the 2011. So as we start to context here in 2013 the growth of this advertiser group was still very strong and well above our, the industry digital advertising growth rate. So it's on that trough that the churn get below that 100%.

Going forward and I talked about this in the script we see over the next couple of quarters probably at these levels to slightly up. But I would point out that we have been below 100% before but we feel good about what the metric is right now.

Unidentified Analyst

Got it. That’s helpful. Thank you. And then Chris maybe you could some commentary on the other recent announcements being Publicis and Omnicom depend on and what the merger might mean for our business?

Chris Lien

Sure to make everyone aware on the call as we’ve disclosed before we do meaningful business with both Omnicom and Publicis worldwide. We do that across dozens of agencies within each one of those holding companies and we see the entities together as creating opportunities for us to do even more business with the combined entity, because they are likely to consolidate one or more of their service provider relationship.

And we are widely adopted across Publicis and also heavily adopted across Omnicom globally. The deal is I was rereading the investor deck last night, it's slated to occur either end of this year or early last year and I would highlight that prior to the merger Publicis and Omnicom used multiple platforms out of Marin as larger market share at both when you look across the agencies compared to many of the other participants in our market. And I would envision that even after the merger the entity will continue to use more than one platform.

So we’re excited about the merger, it’s an opportunity for is to likely displace some of the other participants in the market given our early leadership with both of those entities.

Unidentified Analyst

Thank you very much I appreciate the color.

Operator

Thank you. We have no further question in queue at this time. I would like to turn the floor back over to management for any closing remarks.

Chris Lien

I just want to again thank everyone for participating in the investor call and we look forward to talking to you in the coming weeks. Thank you.

Operator

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. We thank you for your participation.

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