Analysts Stumped By YuMe's Decision To Go Public

While analysts speak well of YuMe and its management team, many were left scratching their heads over the video ad network’s decision to go public, this week. YuMe filed for a $65 million IPO on Tuesday.

“If you’re making $100 million and growing at 30% a year, there’s no point in being a public company,” Pivotal Research Group analyst Brian Wieser said.

There are reasons why companies in such positions go public, but they’re not good ones, Wieser clarified.

“When companies like this go public, it’s usually because the investors need liquidity,” he said. “And, because growth is slowing, which appears to be the case with YuMe … Those are not optimal circumstances to go public.”


That is likely why YuMe rival Tremor went public and has since failed to excite investors, Wieser added. Tremor made its market debut at $10 a share, and, as of Wednesday, was trading under $8 a share.

“This just adds to the mystery of why these companies see IPOs as a suitable exit,” Gartner analyst Andrew Frank said of YuMe’s announcement on Tuesday.

That said, YuMe is not Tremor, according Susan Bidel, a senior analyst at Forrester Research. “YuMe seems to have managed its business more effectively,” Bidel noted. (YuMe did close 2012 with a $6.3 million profit, per reports.) “Tremor’s underwhelming IPO may [have] had more to do with market turbulence than with a fair evaluation of the company, though it appears to have been consistently trending downward,” said Bidel.

Perhaps acting in their favor, “Both [Tremor and YuMe] are working in a market where supply is short, CPMs are relatively high and interest is keen,” Bidel added.

“They have an upside that is more compelling than other channels,” Frank said of any company competing in the video advertising space.

In its defense, Wieser said YuMe has “wonderful management.” That, however, doesn’t change the fact that the company seems to lack a “special sauce,” which could translate into consistently high growth going forward.
 
In its S-1 filing, YuMe said it attracted 257 million monthly unique viewers in May, and delivered over 8 billion video advertising impressions in 2012. Since its launch in 2004, YuMe has raised $74.4 million in funding.

Citing SEC rules, Scott Lahde, director of corporate marketing at YuMe, said the company was unable to offer comment at press time.
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1 comment about "Analysts Stumped By YuMe's Decision To Go Public".
  1. Mark Mclaughlin from McLaughlin Strategy , July 5, 2013 at 8:34 a.m.
    Whatever their motivations, the decisions by Tremor and YuMe are bringing a lot of transparency into the business of online video advertising. That's a good thing. In a world of "Lumascapes" filled with privately held companies that leave marketers confused about who creates real value, public company transparency is refreshing. The insights that might underwhelm investors in the short term could also be the insights that motivate blue chip advertisers over the long term.