Millennial
Media, Inc. MM $9.00-$11.00 10.2 million shares Underwriters: Morgan Stanley, Goldman Sachs & Co, Barclays Capital Co-Managers: Allen & Company LLC, Stifel Nicolaus
Weisel Proposed trade date of 3/29 They are the leading
independent mobile advertising platform company.
Millennial Media. Inc.
MM
Click here
to view the prospectus.
http://www.sec.gov/Archives/edgar/data/1372375/000104746912002673/a2208141zs-1a.htm
Company Overview
They are the leading independent mobile advertising platform company. Their technology, tools and services help
developers maximize their advertising revenue, acquire users for their apps and
gain insight about their users. To advertisers, they offer significant audience
reach, sophisticated targeting capabilities and the opportunity to deliver
interactive and engaging ad experiences to consumers on their mobile connected
devices. Their proprietary technology and data platform, known as MYDAS®,
determines in real-time which ad to deliver, as well as to whom and when, with
the goal of optimizing the effectiveness of advertising campaigns
regardless of device type or operating system. In February 2012, their
platform reached over 300 million unique users worldwide, including
approximately 140 million unique users in the
As
smartphones, tablets and other mobile connected devices become increasingly
powerful and affordable, and mobile internet access becomes more widespread and
faster, users are consuming more content on their mobile devices. Apps in
particular are becoming a popular way for consumers to engage with and consume
personalized digital content on their mobile connected devices. Gartner Inc.,
an industry research firm, or Gartner, forecasts that the total number of
downloads from mobile application stores worldwide will increase from
8.2 billion in 2010 to 108.8 billion in 2015, representing a compound
annual growth rate of 68%. As the number of apps has proliferated, however,
it has become increasingly difficult for developers to differentiate their apps
from those of competitors in overcrowded app stores. As a result, large and
small developers are competing for advertising budgets and visibility among
users in order to realize their business objectives.
With growth
in this mobile app-based economy, mobile advertising creates new opportunities
for advertisers to reach and engage audiences of potential consumers. Mobile
devices are inherently personal in nature, facilitate anytime-anywhere access
to their users, allow for engaging app-enabled experiences and offer
location-targeting capabilities. They believe that the combination of these
features creates a powerful opportunity for delivering highly targeted,
interactive advertising through mobile connected devices. However, a number
of factors, including device and operating system diversity, as well as
technological challenges, make it difficult and complex to deliver mobile
advertising effectively.
They help
developers and advertisers remove complexity from mobile advertising. By
working with them, developers gain access to their tools and services that
allow their apps to display banner ads, interactive rich media ads and video
ads from their platform. In return, developers supply them with space on
their apps to deliver ads for their advertiser clients and also provide them
with access to anonymous data associated with their apps and users. They
analyze this data to build sophisticated user profiles and audience groups
that, in combination with the real-time decisioning, optimization and targeting
capabilities of their technology platform, enable them to deliver highly
targeted advertising campaigns for their advertiser clients. Advertisers pay
them to deliver their ads to mobile connected device users, and they pay
developers a fee for the use of their ad space. As they deliver more ads,
they are able to collect additional anonymous data about users, audiences and
the effectiveness of particular ad campaigns, which in turn enhances their
targeting capabilities and allows them to deliver better performance for
advertisers and better opportunities for developers to increase their revenue
streams. Their use of data for interest-based targeting, including location
data, is based on consumer consent, and they offer consumers the ability to opt
out of such targeting.
They have
built relationships with developers and advertisers of all sizes. Their
developer base includes large mobile web publishers, such as CBS Interactive
and The New York Times, and large app developers, such as Zynga, Rovio and
Pandora, as well as other developers, such as UberMedia and Gogii. Their
advertiser clients include leading advertising agencies and brands, including
23 of the top 25 national advertisers as ranked by Advertising Age magazine,
or Ad Age, based upon U.S. ad spending in 2010, as well as smaller
advertisers and often the developers themselves.
During the year
ended December 31, 2011, approximately 10% of their revenue was derived
from outside of the
Mobile advertising provides significant benefits
both to developers and to advertisers. For developers, mobile advertising
allows them to make money, acquire users and gain insight into app usage. For
advertisers, the combination of the inherently personal nature of mobile
devices, their enhanced functionality and the proliferation of app-enabled
experiences creates a powerful opportunity for highly targeted and effective
advertising. They believe mobile advertising enjoys a number of benefits over
traditional advertising and PC-based online digital advertising, including:
·
anytime, anywhere access to
users;
·
personalization of the
advertising experience;
·
location-based
targeting;
·
more complete user
engagement;
·
enhanced audience targeting based
on location, behavioral and demographic data; and
·
superior monetization
opportunities for developers.
IPO Detail
This is the initial public offering of Millennial Media, Inc. and no
public market currently exists for its common stock. Millennial Media is
offering 10,200,000 shares of common stock as described in the prospectus. The
company expects the initial public offering price of its common stock to be
between $9.00 and $11.00 per share. The company has applied to list its common
stock on the New York Stock Exchange under the symbol “MM.”
|
Common
stock offered by the company |
9,200,000 shares |
|
Common
stock offered by the selling shareholder |
1,000,000 shares |
|
Common
stock to be outstanding immediately after this offering |
74.890,038 shares |
Use of Proceeds
They estimate that the net proceeds from
their issuance and sale of 9,200,000 shares of their common stock in this
offering will be approximately $81.8 million. They will not receive any of the proceeds from the sale of shares by the
selling stockholders, although they will bear the costs, other than
underwriting discounts and commissions, associated with those sales. The
principal purposes of this offering are to create a public market for their common
stock and to facilitate their future access to the public equity markets, as
well as to obtain additional capital. They intend to use the net proceeds from
this offering for working capital and general corporate purposes, including
further expansion of their international operations and product development.
In
addition, they may use a portion of the net proceeds from this offering to
acquire, invest in or license complementary products, technologies or
businesses, but they currently have no agreements or commitments with respect
to any potential acquisition, investment or in-license. They may allocate funds
from other sources to fund some or all of these activities.
Competition
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AAPL |
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24/7 Real Media, Inc.(a subsidiary of WPP plc) |
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WPP |
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NASDAQ |
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AOL Inc. |
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AOL |
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NYSE |
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Market
The convergence of several key trends is
driving the growth of the mobile app economy and fundamentally changing the way
that users consume content on their mobile connected devices. They believe
these trends will continue to create a significant opportunity for mobile
advertising. These trends include:
Adoption of faster and more
functional mobile connected devices. Driven
by intuitive user interfaces, increased functionality, faster processing
speeds, better graphics processors and advanced display technologies with touch
capabilities, it has become possible to deliver innovative, interactive and
engaging consumer media experiences on a wide variety of mobile connected
devices.
Widespread access to faster
wireless networks facilitates consumer consumption of content. With the growth of mobile connected devices, consumers
increasingly expect to have a high-quality online experience everywhere. Expansion
of worldwide 3G network penetration, the rise of next-generation networks, such
as 4G, and the prevalence of Wi-Fi access are facilitating the consumption of
content on mobile connected devices. The combination of increased network
access and faster network technologies is enabling the development of rich
media content, presenting new opportunities in the mobile ecosystem.
Mobile usage has disrupted how
content is consumed. Consumers are
increasingly using their mobile devices instead of personal computers or other
traditional media to access content. Mobile devices have become an
increasingly important part of daily life, with users relying on mobile
connectivity to read newspapers, magazines and blogs, watch movies, play games,
check sports scores, shop, monitor weather forecasts, conduct banking
transactions, find maps and directions and listen to online radio stations.
According to eMarketer, Inc., a market research firm, the amount of
time spent by consumers with their mobile devices is rising at a faster rate
than is time spent viewing other kinds of media.
Growth of the mobile app
economy. Developers have
created apps as an easy, intuitive and interactive way to instantly deliver
content on mobile devices. Emerging technologies, such as improvements in
computer programming languages for structuring and presenting web-based
content, have allowed app developers to harness the increasing processing power
and functionality of mobile devices and faster networks to deliver more
engaging media to users. Gartner forecasts that the total number of free and
charged-for downloads from mobile application stores worldwide will increase
from 8.2 billion in 2010 to over 108 billion in 2015.
Advertising industry is being
disrupted by mobile advertising. Traditional advertising media, such as billboards,
newspapers, magazines, radio and television, often suffer from a number of
inherent limitations, including limited ability to target specific audiences,
limited ability to measure audience reach and, in some cases, limited
geographic range. As consumers spend more time online with personal
computers, or PCs, digital advertising has proven to be more effective because
it allows for user interaction, provides better measurement and achieves
expanded audience reach. However, even PC-based digital advertising suffers
from a number of significant limitations with respect to personalization,
accessibility and location-based targeting, all of which can be provided
through mobile advertising.
Given the benefits of mobile advertising as
compared to traditional offline advertising and PC-based online advertising,
they expect that marketers will continue to shift their advertising budgets to
mobile. Gartner estimates that worldwide mobile advertising revenue,
excluding advertising delivered in connection with search requests and maps,
will grow from $1.8 billion in 2011 to approximately $13.5 billion in
2015, reflecting a compounded annual growth rate of 65%. They believe that
they are well-positioned to capture a significant portion of this growing
mobile advertising market.
|
|
Year Ended
December 31, |
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|
|
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
|||||
|
|
|
(in thousands, except
share and per share data) |
|
|||||||||||||
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Consolidated Statement
of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
1,503 |
|
$ |
6,281 |
|
$ |
16,220 |
|
$ |
47,828 |
|
$ |
103,678 |
|
|
Cost of revenue |
|
|
1,245 |
|
|
4,992 |
|
|
11,596 |
|
|
31,602 |
|
|
63,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Gross profit |
|
|
258 |
|
|
1,289 |
|
|
4,624 |
|
|
16,226 |
|
|
40,083 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
1,668 |
|
|
3,463 |
|
|
4,609 |
|
|
8,508 |
|
|
14,255 |
|
|
Technology and
development |
|
|
545 |
|
|
663 |
|
|
1,095 |
|
|
2,175 |
|
|
5,181 |
|
|
General and
administrative |
|
|
3,512 |
|
|
5,682 |
|
|
6,326 |
|
|
12,535 |
|
|
21,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Total operating expenses |
|
|
5,725 |
|
|
9,808 |
|
|
12,030 |
|
|
23,218 |
|
|
40,757 |
|
|
|
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|||||
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Loss from operations |
|
|
(5,467 |
) |
|
(8,519 |
) |
|
(7,406 |
) |
|
(6,992 |
) |
|
(674 |
) |
|
Total other income
(expense) |
|
|
270 |
|
|
160 |
|
|
(144 |
) |
|
(107 |
) |
|
(99 |
) |
|
|
|
|
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|||||
|
Loss before income taxes |
|
|
(5,197 |
) |
|
(8,359 |
) |
|
(7,550 |
) |
|
(7,099 |
) |
|
(773 |
) |
|
Income tax (expense)
benefit |
|
|
— |
|
|
— |
|
|
— |
|
|
(22 |
) |
|
486 |
|
|
|
|
|
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|||||
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Net loss |
|
$ |
(5,197 |
) |
$ |
(8,359 |
) |
$ |
(7,550 |
) |
$ |
(7,121 |
) |
$ |
(287 |
) |
|
Accretion of dividends
on redeemable convertible preferred stock |
|
|
(619 |
) |
|
(1,542 |
) |
|
(1,793 |
) |
|
(2,933 |
) |
|
(5,022 |
) |
|
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|||||
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Net loss attributable to
common stockholders |
|
$ |
(5,816 |
) |
$ |
(9,901 |
) |
$ |
(9,343 |
) |
$ |
(10,054 |
) |
$ |
(5,309 |
) |
|
|
|
|
|
|
|
|
|
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|
|
|
|||||
|
Net loss per share
attributable to common stockholders—basic and diluted |
|
$ |
(0.36 |
) |
$ |
(0.60 |
) |
$ |
(0.56 |
) |
$ |
(0.56 |
) |
$ |
(0.32 |
) |
|
|
|
|
|
|
|
|
|
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|
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|
|||||
|
Pro forma net loss per
share—basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
of common stock outstanding used in computing net loss per share attributable
to common stockholders |
|
|
16,258,835 |
|
|
16,377,394 |
|
|
16,783,411 |
|
|
17,965,893 |
|
|
16,362,810 |
|
|
|
|
|
|
|
|
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|
|
|
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|
|||||
|
Weighted average shares
of common stock outstanding used in computing pro forma net loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,041,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
(5,325 |
) |
$ |
(8,284 |
) |
$ |
(7,048 |
) |
$ |
(6,436 |
) |
$ |
1,839 |
|
|
|
As of December 31, |
|
||||||||||||||
|
|
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
|||||
|
|
|
(in thousands) |
|
|||||||||||||
|
Consolidated Balance
Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
15,921 |
|
$ |
10,200 |
|
$ |
19,171 |
|
$ |
27,803 |
|
$ |
16,707 |
|
|
Accounts receivable, net
of allowances |
|
|
774 |
|
|
2,280 |
|
|
6,485 |
|
|
19,978 |
|
|
34,986 |
|
|
Total assets |
|
|
17,315 |
|
|
13,042 |
|
|
26,136 |
|
|
49,115 |
|
|
61,885 |
|
|
Long-term debt,
including current portion |
|
|
— |
|
|
2,975 |
|
|
2,238 |
|
|
— |
|
|
— |
|
|
Total liabilities |
|
|
1,789 |
|
|
5,731 |
|
|
10,190 |
|
|
17,807 |
|
|
29,638 |
|
|
Total redeemable
convertible preferred stock |
|
|
21,924 |
|
|
23,476 |
|
|
41,202 |
|
|
71,622 |
|
|
76,668 |
|
|
Total stockholders'
deficit |
|
|
(6,398 |
) |
|
(16,165 |
) |
|
(25,256 |
) |
|
(40,314 |
) |
|
(44,421 |
) |
Target Markets
They seek to become the strategic independent
platform partner of choice for developers and advertisers wanting to capitalize
on the large and growing mobile advertising opportunity. The key elements of
their strategy are to:
·
innovate through continued investments in
technology and data;
·
deepen their relationship with
developers;
·
increase their share of advertising budgets
from existing advertisers;
·
acquire new developers and advertisers;
·
increase their global market penetration;
·
expand their network of third-party providers
of tools and services;
·
pursue strategic acquisitions; and
·
provide further insight into the mobile app economy.
Company's Unique Strengths
Differentiated technology platform. Their
MYDAS technology platform is specifically architected to deliver mobile
advertising at scale, rather than applying traditional online advertising
technology or focusing on particular mobile operating systems. They
designed their technology platform for the mobile environment, where the
delivery and targeting of ads must allow for a much larger number of variables
than in traditional online advertising. Their platform is capable of accounting
for, and efficiently analyzing, variables such as wireless connection strength,
device operating system and audience profile in real-time in order to decide
which ad to send in response to a specific ad request from an app.
Trusted partner for developers. They
help developers focus on their core business of developing apps. Their
extensive experience and data asset give them valuable industry insights and
knowledge of successful developer business practices, which they share
across their developer community. They believe that this partnership approach
with developers helps to solidify their developer relationships and the
strategic role they play in their businesses, providing them with increased
access to advertising opportunities.
Trusted partner for brand advertisers. They have built relationships with leading advertising
agencies and brands, including 23 of the top 25 Ad Age advertisers.
They offer advertisers access to their mobile advertising specialists, who
supervise and support advertising campaigns through all stages of planning and
execution. As an independent advertising platform not focused on any
particular device or operating system, they believe that they are able to
effectively educate their advertiser clients on the latest mobile trends
and help them plan and deliver engaging and effective advertising campaigns
that deliver sustainable and measurable results.
Significant scale and reach. According to IDC, they are the second largest mobile
display advertising platform in the
Powerful network effects that
connect their developers and advertisers. They believe that developers and advertisers both benefit
from the use of their advertising platform. As the targeting capability of
their advertising campaigns increases, they believe advertisers will be willing
to pay more for their services, which in turn will attract developers to their
platform since they can help them more effectively generate revenue through
the advertising space within their apps.
Company's Unique Risks
They have incurred significant
net losses since inception, and they expect their operating expenses to
increase significantly in the foreseeable future. Accordingly, they may never
achieve profitability. They incurred net losses
of $287,000 and $7.1 million in 2011 and 2010, respectively, and they had an
accumulated deficit of $44.4 million as of December 31, 2011.
They do not know when or if they will ever achieve profitability. Although
their revenue has increased substantially in recent periods, it is likely that
they will not be able to maintain this rate of revenue growth
If mobile connected devices,
their operating systems or content distribution channels, including those
controlled by their primary competitors, develop in ways that prevent their
advertising from being delivered to their users, their ability to grow their
business will be impaired. In some cases, the parties
that control the development of mobile connected devices and operating systems
include companies that they regard as their most significant competitors.
They do not control the mobile
networks over which they provide their advertising services.
Their business depends on
their ability to collect and use data to deliver ads, and any limitation on the
collection and use of this data could significantly diminish the value of their
services and cause them to lose clients and revenue. When they deliver an ad to a mobile device, they are often able to
collect anonymous information about the placement of the ad and the interaction
of the mobile device user with the ad, such as whether the user visited a
landing page or watched a video. They may also be able to collect information
about the user's mobile location. As they collect and aggregate this data
provided by billions of ad impressions, they analyze it in order to optimize
the placement and scheduling of ads across the advertising inventory provided
to them by developers.
Their business practices with
respect to data could give rise to liabilities or reputational harm as a result
of governmental regulation, legal requirements or industry standards relating
to consumer privacy and data protection.
Their sales efforts with both
advertisers and developers require significant time and expense.
If they fail to detect
click fraud or other invalid clicks on ads, they could lose the confidence of
their advertiser clients, which would cause their business to suffer. Their business relies on delivering positive results to their advertiser
clients. They are exposed to the risk of fraudulent and other invalid clicks
or conversions that advertisers may perceive as undesirable. Because of
their smaller sizes as compared to personal computers, mobile device usage
could result in a higher rate of accidental or otherwise inadvertent clicks by
a user. Invalid clicks could also result from click fraud, where a mobile
device user intentionally clicks on ads for reasons other than to access the
underlying content of the ads.
Their increasing international
operations subject them to increased challenges and risks.
Activities of their advertiser
clients could damage their reputation or give rise to legal claims against them. Their advertiser clients' promotion of their products and services may
not comply with federal, state and local laws, including, but not limited to,
laws and regulations relating to mobile communications. Failure of their
clients to comply with federal, state or local laws or their policies could
damage their reputation and expose them to liability under these laws.
Concentration of ownership of
their common stock among their existing executive officers, directors and
principal stockholders may prevent new investors from influencing significant
corporate decisions. Upon completion of this
offering, their executive officers, directors and current beneficial owners of
5% or more of their common stock and their respective affiliates will, in
aggregate, beneficially own approximately 83% of their outstanding common
stock. These persons, acting together, would be able to significantly influence
all matters requiring stockholder approval, including the election and removal
of directors and any merger or other significant corporate transactions.
Bottom
Line
They
have achieved significant growth as their platform has scaled and as they have
expanded their product and service offerings. From 2009 to 2010, their revenue
increased from $16.2 million to $47.8 million, or 195%, their gross
margin improved from 29% to 34%, their net loss improved from $7.6 million
to $7.1 million and their adjusted EBITDA improved from a loss of
$7.0 million to a loss of $6.4 million. From 2010 to 2011, their
revenue increased from $47.8 million to $103.7 million, or 117%,
their gross margin improved from 34% to 39%, their net loss improved from
$7.1 million to $287,000 and their adjusted EBITDA improved from a loss of
$6.4 million to earnings of $1.8 million.
Millennial
Media is the second largest mobile display advertising platform in the
As
smartphones, tablets and other mobile connected devices become increasingly
powerful and affordable, and mobile internet access becomes more widespread and
faster, users are consuming more content on their mobile devices. It is
projected that the total number of downloads from mobile application stores
worldwide will increase from 8.2 billion in 2010 to 108.8 billion in
2015, representing a compound annual growth rate of 68%. To increase their
visibility to consumers, large and small developers are competing for
advertising budgets and visibility among users in order to realize their
business objectives. Developers working with the company gain access to tools
and services that allow their apps to display ads and, in return, supply the
company with space on their apps to deliver ads for Millennial Media’s
advertiser clients and access to anonymous data associated with the apps and
users. Advertisers pay them to deliver their ads to mobile connected device
users, and they pay developers a fee for the use of their ad space. Their use
of data for interest-based targeting, including location data, is based on
consumer consent, and they offer consumers the ability to opt out of such
targeting.
In 2011,
approximately 10% of their revenue was derived from outside of the
As an
independent advertising platform not focused on any particular device or
operating system, they believe that they are able to effectively educate their
advertiser clients on the latest mobile trends. They are the second largest
mobile display advertising platform in the
Their
platform runs on the operating systems of mobile connected devices, some of
which are controlled by their primary competitors. In the future, the systems
may develop in ways that prevent their advertising from being delivered to
their users. Additionally, users may opt out of data sharing for targeted ads
on their mobile devices, which would decrease the value of their service to
developers and advertisers. New governmental regulation with respect to data
collection could harm their results of operation, as could undetected click
fraud or other invalid clicks on ads and illegal activities of their advertiser
clients. Rating = 3