Marin Software CEO Chris Lien will take the company public on the New York Stock Exchange Friday by ringing the opening bell. The San Francisco-based company will become the latest search and social marketing advertising management and technology firm to go through an initial public offering.
Estimates value the stock price per share between $11 and $13, putting the valuation range between $334 million and $395 million. Marin competes with Adobe Efficient Frontier and Google DoubleClick.
Pivotal Analyst Brian Wieser believes Marin's IPO could prompt investors to focus on the search engine marketing companies. I believe this is true because of the increase in use by enterprise companies.
Interestingly, Wieser also believes Marin will become more of an acquisition target if valuations rise on the company's focus toward enterprise clients. He estimates the global SEM market drove around $4 billion in outsourced spending by marketers during 2012, with the possibility of doubling in the next several years along with the overall paid-search market. "Bid management software probably accounts for one-tenth of total SEM spending, or around $450 million, and Marin Software is one of the leaders in the field," he writes in a research note.
Success will depend on share gains or product bundles, according to Wieser -- specifically bid management software, a critical part of search marketing. Still, near-term profitability could become a problem for Marin.
Given Marin's lack of profitability at current levels -- its operating loss was $25 million in 2012, worse than $17 million in 2011, and $8 million in 2010 -- it presumably will need substantially more scale and growth in market share against which to spread its fixed and semi-fixed costs for senior management and R&D, Wieser wrote.
During the next four years, if the underlying market only doubles, Marin would need to grow market share by 50% to 100% -- from 13% in 2012 and up toward 20% to 26% -- for this IPO to play out favorably.