By Kim-Mai Cutler
Brightcove (NASDAQ:BCOV) may not have had the sexiest IPO in the recent wave of offerings, but the company’s return so far definitely beats Zynga and Groupon’s performances since their debuts. After launching its video platform six years ago, Brightcove went public just a few weeks ago on the NASDAQ by raising $55 million. The company’s shares have climbed 80 percent since the offering to $19.86, giving the company a market capitalization of $523.8 million.
We caught up with chief executive Jeremy Allaire, who is now positioning Brightcove as more than a video services provider. While the company has been known for powering video players for premium brands like The New York Times, Conde Nast and Macy’s, Brightcove is trying to find a broader base of customers with a new suite of app development services.
Called App Cloud, it’s a set of tools that helps brands and media companies build apps, track engagement and layer in advertising. It means that Brightcove is now competing with a ton of app service providers like Urban Airship, which handles in-app notifications, analytics providers Flurry and Apsalar, or tools provider Appcelerator.
It is a cut-throat market, but what Brightcove does have are existing relationships with premium brands and lots of experience in the software-as-a-service model. Allaire said that thousands of companies are in the developer trial for App Cloud, including organizations like the U.S. State Department and cable channel Lifetime.
“We saw that this problem of content apps on devices was going to be a major problem so we built a second leg of our business on that,” he said. ”Now we’re seeing customers like broadcasters, government agencies and financial services companies.” There’s a free version for a single user. Then there’s a paid enterprise version that starts at around $15,000.
Brightcove will need those extra clients to move outside of its core base of media companies, all of whom are grappling with the new economic realities of the web. The company hasn’t turned an annual profit since its inception in 2004, as it spent on marketing and research and development to grow customers. The company lost $17.3 million on $63.6 million in revenue last year.
“In the last couple of years, we’ve been investing for growth and we’re a recurring revenue business,” Allaire said, pointing out that revenue grew 46 percent year-over-year in 2011. (The company’s net loss also narrowed slightly in the same time period.)
Virtually all of Brightcove’s revenue comes from the video product. Allaire said the decline of Flash and the rise of HTML5 have paradoxically helped the company. (Fun point to note: Allaire helped create the Macromedia MX (Flash) platform while he was chief technology officer at Macromedia.) The problem is that with many different browser standards, it’s hard to make sure there’s good video playback across different devices.
“People thought HTML5 was going to be a panacea. But the reality is that HTML5 creates a whole new level of complexity for publishers that want to work across many platforms,” he said. “It’s been one of the greatest sources of new business for us.”
Facebook (NASDAQ:FB) is also dealing with this issue, and recently released a browser test suite called Ringmark a few weeks ago to help mobile web developers check if their HTML5-based apps work on many different mobile browsers.
Now with the extra capital, Brightcove plans to grow the side of its business targeting app makers and is eyeing acquisitions. ”One of the benefits of being a public company is access to capital, and we’ve raised about $60 million so it certainly should be easier to do M&A.” Allaire didn’t want to say what kinds of companies he’s targeting though.
He said that filing amid a wave very high-profile IPOs wasn’t too challenging for a company of his size.
“Instead of retail investors that were interested in Groupon or Yelp, we targeted mutual funds and firms that were interested in small cap software companies. We were looking for a high-quality investor base. It’s been a good process and overall, we’re happy with it.”
Brightcove had raised funding from Accel Partners, General Catalyst Partners, Allen & Company, AOL, The New York Times, Maverick Capital, IAC and Hearst Ventures. Accel and General Catalyst each owned 26.4 percent of the company before the IPO.