Millennial Media (MM) announced the pricing of its initial price offering Wednesday night. The mobile advertising company sold 10.2 million shares at a price of $13. The price is at the top end of an already raised pricing of $11-$13. The pricing gives the company a near billion dollar market value ($973.5 million to be exact). Let's take a closer look at the company that will begin trading as MM Thursday morning.
Millennial Media is the second largest mobile advertising company in the United States. The company, with a 16.7% market share, trails only Google (GOOG), which maintains the lead with its 23.8% share of the growing market. Millennial passed Apple (AAPL) to take the number two position. In third place, Apple controls 15.1% of the mobile advertising market. Together, the three leaders control 55.6% of the mobile advertising market.
Millennial operates on 7,000 different devices ranging from iPhones, iPads, Windows phones, Blackberrys and Android phones.
Over 100 million monthly users see ads from Millennial Media. Seventy three of the top 100 advertisers in the United States use Millennial technology to show 40 billion impressions per month (December 2011).
From 2009 to 2010, Millennial's revenue increased from 16.2 million to 47.8 million. The company has had a gross margin range of 29-34%, but recently hit 39% for the nine month period ending September of 2011. For that same nine month period Millennial earned 69.1 million and had a net loss of $417,000. Those figures are both improvements from the $29.1 million and a loss of $5.4 million the previous year.
Revenue from the company breaks down as:
- 2008 - $6.3 million
- 2009 - $16.2 million
- 2010 - $47.8 million
- 2011 (9 months) - $69.1 million
For 2011, the three reported quarters have had revenue of:
- Q1 - $21.5 million
- Q2 - $22.4 million
- Q3 - $25.2 million
The MYDAS proprietary technology used by Millennial Media helps companies connect to consumers using real time to target demographics. The MYDAS technology targets ad placement based on the following questions:
- Where is the user?
- What site or app is the user currently using?
- What is the nature of the content on the site or app that is being used?
- What type of device is the request coming from?
- What wireless network is the request coming through?
Unlike Internet advertisements that use ISPs to target ads, mobile ads can use GPS and a wide range of tools to target audiences closer and make sure company's advertising money is being well spent. As more companies shift to mobile advertising, Millennial Media benefits by being able to show off its amazing technology.
Opportunity and Growth
Research by Gartner says that mobile app downloads will reach 108.8 billion in the year 2015, up from last year's 17.7 billion. Gartner has also said that mobile advertising revenue is set to rise from $1.8 billion in 2011 to $13.5 billion in 2015.
Cisco (CSCO) reports that the number of smart phones used will increase from 305 million to 1 billion in 2015. Tablets will increase from 63 million in 2011 to 135 million in 2015, according to the IDC.
Facebook (FB) offers a great opportunity for Millennial Media and its rivals. Facebook has only begun to scratch the surface in monetizing advertising across mobile phones. Venture firm Kleiner Perkins Caufield & Byers reports that 33% of Facebook's 2011 traffic came from mobile phones, compared to a mere 1% in 2008.
Revenue from international regions grew to 10% for the first nine months of 2011, compared to 3% the prior year. Millennial recently launched operations in Singapore and is growing into the Asian market. As the smart phone market grows in emerging markets, Millennial Media is just the company to help companies grow their international presences.
Millennial Media counts on small and large customers who spend millions of dollars to specifically target audiences on mobile phones. Here are several recent examples of companies who used Millennial's technology.
Activision Blizzard (ATVI) used Millennial Media to strengthen pre-orders of its massive Modern Warfare 3 game. When an advertisement was clicked, a trailer video was played. The advertisement also allowed users to enter a zip code to see nearby video game stores including directions. The ad also allowed users to directly pre-order the game from Amazon.
Pandora Jewelry opted to use Millennial Media for a Super Bowl promotion rather than spend $3.5 million for a 30 second advertisement on television during the game. The ad campaign targeted websites that men would be drawn to on Super Bowl Sunday during the game. Men made up the target market as they were most likely to buy a Pandora bracelet for the upcoming Valentine's Day holiday and were able to directly target their market with Millennial Media.
Those examples only briefly show what Millennial is capable of. The company also has advertisements in social games operated by Zynga (ZNGA) and other gaming companies. I know as an active Pandora listener and Draw Something player that the advertisements are getting closer at identifying companies close by or items I am actually likely to purchase.
I don't usually follow the IPO market very closely but found two offerings from Annie's (BNNY) and Millennial Media as great opportunities for investors to get in on growing companies. I wrote an article about Annie's IPO, which nearly doubled in its public debut.
Millennial Media is a company that has huge opportunities in front of them with growing smart phone markets and tablets numbers being forecast. The amount of money being spent on mobile advertising continues to expand as companies see the benefit of directly targeting customers opposed to placing a billboard on a highway or buying a 30 second commercial during a television show that more men watch.
Shares sold for $13 during Wednesday's offering. I think shares will immediately trade up during their opening on the market. I would love to buy shares of the company this week as I think the Facebook IPO and other items help them this year. Millennial is a fast growing technology company that should be bought at under $20.
Additional disclosure: I own shares of Activision Blizzard (ATVI).