Commentary

The Shorting Of Online Video

A lot of eyes will be on Tremor Video’s quarterly results when it releases them on Thursday. They will be the first earnings the company has reported since going public June 27th, and the results will likely impact investor confidence in the company, as well as its competitors, and possibly even the ad technology sector overall. Tremor’s IPO was the first significant one in ad tech industry this year, and it hasn’t exactly sparked a rally among public investors since it began trading on the New York Stock Exchange under the symbol TRMR.

The company initially filed to take its stock public at between $11 and $13 a share, but ultimately listed its IPO at $10. It closed its first day of trading around $9. And is currently trading around $8 a share, down around 25% from its IPO.

Likewise, when YuMe announced plans for its IPO in July, indications were it would seek $12-$14 a share. When it opens today, it has priced itself at $9 a share.

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“They’re probably going to be viewed a little more attractively than Tremor,”  Dan Chen, managing director of Siemer and Associates predicted recently. “YuMe at least saw profitability in 2012,” Chen noted. “They dipped back into a lack of profitability in Q1.”

He noted that Tremor reported an operating loss of about $16 million last year.” With that as its base, Chen said, “It was amazing that they were able to get out on those numbers, frankly.”

The problem, Chen recenlty told attendees at the OMMA DDM conference, July 24th in Los Angeles, is that investors -- both the private and the public kind -- seem to be down on ad technology stocks in general, and online video ones in particular.

That may be true for YuMe. But that didn't deter AOL from snapping AdapTV, another player in the space, for $405 million prior to today's opening bell.

“It’s a space that is very crowded, as we all know -- they’re going to find it challenging,” Chen said of the video ad network IPOs, which he believes is a part of broader exodus of “impatient” early round investors. Chen says that the IPOs are a “classic example of what many in the industry view as a desperation move.”

Keep in mind, Chen’s point-of-view is from the vantage point of the investor community, not advertisers and media buyers who generally view online video networks as promising opportunities to generate scale and efficiency in reaching viewers online. That said, they may be too early in their “monetization” curve to justify public investor confidence.

1 comment about "The Shorting Of Online Video".
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  1. Brian Allen from Altitude Digital Partners, August 7, 2013 at 1:33 p.m.

    Joe, as usual you are right on point. I love the slug line.
    I hope we do not see something like that here. The industry as a whole, and the video segment specifically is in a growth phase, it is very volatile, and is ripe for consolidation. We are just starting to see the dollar shift from Traditional TV to Digital video. I could not imagine putting my company in the hands of the public as it starts to clear the primordial fog. I think they are going at this backwards. IMHO, they should consolidate to grow, not seek the fickle public, where they open the door to be shorted.

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