The ad-tech market, also known as the mobile ad market, is one of the fastest-growing industries in the United States. A recent report by Siemer & Associates has Google (GOOG) with the largest market share in the United States coming in at 23.8%, followed by Millennial Media (MM) 16.7% and Apple (AAPL) a close third at 15.1%.
With the growing market comes growing competition. Not only are new companies starting up, but other established companies continue to build out their networks for this young industry. While they develop the networks, this means that profitability is often "down the road."
When exploring the ad-tech industry what should an investor look for?
When looking how to invest in an "ad-tech" company, there are three important things that investors should take note of:
- A company may not be profitable while it builds out its network
- Competition is fierce, so look for a "unique" company
- The market potential is $8 billion and continues to grow
Take A Look At Rocket Fuel
A good example of this would be the company that goes by the name of Rocket Fuel (FUEL). The company increased its IPO offering to $29 per share from the initial range of $24-$27. The price then jumped to $59.95 per share and has consistently traded just above the $60 range at the writing of this article.
The interest in the ad-tech company is not based on profitability, but upon potential. Did you know Rocket Fuel's revenue topped $106 million in 2012 which was an increase of over 130% from 2011? Through the first six months of this year, the company raised $92.6 million, which is an increase of 134% from the same period a year earlier. Yet- at the time of its IPO, the company had yet to make a profit. In 2013 it recorded a loss of $11.9 million through the first six months of the year which is an increase compared to 2012 when it lost $10.3 million for the whole year.
There were two other ad-tech companies, Tremor Video (TRMR) and YuMe (YUME) that went public not long ago but did not do as well as Rocket Fuel. I believe the reason Rocket Fuel did so much better is because it's a company that is centered around technological growth and not having to hire lots of staff like the former two. TRMR and YUME are both video ad companies that have sizable sales teams with larger overhead. Rocket Fuel's growth will continue to center on its ability to tweak its technology, not add to a larger staff.
Investors know that the ad-tech sector is fast growing, highly competitive and still has incredible potential. They are looking for companies that have growth potential but also centered on technology and not dependent upon staff that could cause bulging overhead.
Take A Look At Mobiquity Technologies
Another example besides Rocket Fuel is a smaller less known company known as Mobiquity Technologies, Inc. (OTCQB:MOBQ).
The company recently went through an identity change, transitioning from a "integrated marketing company" to an "ad-tech company." With the transition came a name change. The company was formerly known as Ace Marketing & Promotions.
Financial figures are in the thousands and come from Yahoo Finance.
This is a company with similar qualities to Rocket Fuel in its potential for growth. If we look at the company's recent financials from the last four quarters, this shows me the company has yet to make a profit, but also reveals to me its potential. If we look at the difference in "Sales/Admin Costs," we will see a 127% increase between the last four quarters, yet sales do not reflect that. In the company's identity transition, it is also building out its network, developing another 250 MOBI-units from its nationwide contract that it recently expanded to.
The company has quickly become the nation's largest "location-based mobile marketing network" with exclusive rights to the "common area" of over 75 malls nationwide. This exclusive agreement runs through December 2017 and increases this ad-tech company's reach by 33%.
Not only is a company building out its network, but it is also tech-based, not employee heavy with overhead pressures. The company is unique because it uses Bluetooth technology combined with Wi-Fi and NFC/Beacon technology.
While shoppers stroll through common places in the mall, Mobiquity has what it calls "interactive zones" positioned throughout the mall that engage shoppers with opt in content delivered to their phones using Bluetooth, Wi-Fi and soon-to-be Beacon technologies. Messages are highly targeted and designed to "push" mall traffic from the common areas into the retail stores.
The "unique" characteristic of this company is the company has no direct competition for its Bluetooth marketing in the common spaces of the mall. No one else can do what they're doing which gives them an exclusive revenue base.
Not only does the company have an exclusive geographical market, but its Bluetooth technology allows it to market to people that don't have smartphones either. Even though competition in the ad-tech market continues to grow, Mobiquity has the advantage of being able to guide shoppers to retail stores without having customers to load down smartphones with apps. If an average mall has 200 stores, no shopper wants to download all the apps from that mall on their phone. The company can guide them to the store without consumers having to download apps on their phone.
With Apple selecting Bluetooth technology as its choice for content delivery in its new service called AirDrop, smartphone users will become more educated and familiar with the use of Bluetooth as a "message to media." This should be a big win for mobile marketing in general as well as Mobiquity, which has embraced the technology.
Like Rocket Fuel, Mobiquity Technologies continues to build out its network with a unique and cost-effective marketing approach that also claims margins up to 65% according to CEO Michael Trepeta. The company is investing in its future and the revenue potential will just continue to grow.
These are the types of companies investors are looking at in a fast-growing and fiercely competitive market.