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The Rubicon Project: Taking A Closer Look At Its Demand Manager Initiative

Jul. 05, 2019 12:13 PM ETMagnite, Inc. (MGNI)7 Comments


  • The Rubicon Project is an independent global exchange for advertising headquartered in Los Angeles.
  • The introduction of header bidding increased exchange transparency which had a negative impact on Rubicon’s revenues.
  • In May 2019, Rubicon announced the private beta release of Demand Manager, a prebid as a service offering.
  • This article takes a look at the impact header bidding has had on Rubicon and its recent Demand Manager initiative.

The Rubicon Project (RUBI) has come a long way over the last few years under the leadership of its CEO Michael Barrett who was appointed in March 2017. In this article, I am going to focus on one of Rubicon’s newer initiatives which it announced on May 9, 2019, Demand Manager for publishers. Given the muted market response to the announcement, this seems to be a development that has yet to gain traction. But based on the publisher need it is designed to fill and % fee based pricing (that is yet to be fully disclosed) this effort could help Rubicon to monetize a greater share of successful ad auctions. This is an example of a company who is willing to invest into adjacencies presented by its two sided exchange network, in this case to meet a need on the supply side e.g. the publishers.

The initial upside of header bidding for publishers and downside for Rubicon

Header bidding is a relatively recent development coming onto the scene around 2015/2016. It is a way of monetizing advertising inventory by conducting a unified auction, rather than using a waterfall methodology, where all interested buyers are able to bid simultaneously. To do this publishers exposed inventory to multiple auction houses/exchanges like Rubicon. Publishers initially benefited from this as they were able to get better bid density, pricing and higher revenues generated for each additional exchange they added to the auction. Header bidding also enabled demand-side platforms (DSPs), like those from The Trade Desk (TTD), Alphabet (GOOG), Amazon (AMZN) and MediaMath, to pressure supply-side platforms (SSPs) to improve inventory quality and stop gaming the second-price auction. DSPs could now reroute buys to other exchanges because no single exchange had exclusive access to valued publishers like ESPN or The New York Times. This added

This article was written by

The professionals at Eight Diamonds Advisors have on average more than 20 years of experience working in the financial markets. Their backgrounds cover a broad swath of disciplines including M&A, restructuring, forensic accounting, investment management and research analysis.

Analyst’s Disclosure: I am/we are long RUBI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

hummingbird228 profile picture
@Eight Diamonds Advisors Thank you for this article. Can you share your thoughts on the TLRA+RUBI merger?
Eight Diamonds Advisors profile picture
Hi hummingbird228, my initial thoughts are that it is a very good deal and largely agree with Shareholders Unite's article on the merger dated Dec 26, 2019.
hummingbird228 profile picture
@Eight Diamonds Advisors Thank you.

At a high level adtech trend is not hard to picture. But when one drills down, it quickly becomes very complicated (for those who don't work in the industry).

The combined company should do $300m in 2020 w/ 25% of that coming from CTV. Probably about 115m shares outstanding after the deal closes. No debt with $150m cash.

I read Michael Barrett, RUBI CEO, has been in adtech for a long time. Do you know his background? If so, how is his reputation? Also of Mark Z., TLRA's current CEO.
Great article and articles on Rubi are rare so thanks. Could this be a buyout target? Now the ship has stabilised and there are catalysts moving forward. You mentioned AT&T acquired AppNexus, could a similar thing happen for RUBI? If so, who could be interested? Maybe an interesting acquisition target with no debt.
Eight Diamonds Advisors profile picture
Thanks for the feedback. Yes, I think it could be an acquisition target. CEO Barratt has some experience with this when he was CEO of AdMeld, a programmatic SSP acquired by Google in 2011. One of RUBI's main attractions for publishers is it is independent so a merger with an another independent may make sense. A financial buyer may be interested as it returns to cash generation. Given AT&T acquired AppNexus there could be another large entity who views this as a cheap entry point into the programmatic advertising market.
Thank you very much for this perspective! Since I'd rather be lucky than good, it seems, I sold my RUBI shares at $7.25 on May 3rd (before the May 9th Demand Manager launch), then bough them back at $5.55 on May 29th. You make me want to add to my position before the next earnings report on July 31st.
Eight Diamonds Advisors profile picture
Thanks for your comment. Sounds like you made some good trading decisions even if lucky. I think Demand Manager has good potential but given it is in closed beta testing and the % fee remains unknown it is probably a longer-term incremental value creator. July 31 earnings will also confirm if the underlying business momentum continues.
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