Commentary

Rubicon Prospect

With the news this week that Rubicon Project filed for an IPO worth up to $100 million, one has to wonder how their story will play out in the public marketplace.

What's Rubicon's course? Rocket Fuel dominated out of the gate, but cooled off almost immediately (though the company has not lost the gains it saw in those first few days -- it's still trading at 78% above its initial IPO price). However, we're only talking about a couple of month's worth of action from other public ad tech companies, so there's no real trends to go off yet.

But what would a major ad tech company filing for an IPO be without a little bit of speculation?

Rubicon's first project might be to define themselves to the public -- that's what the "P" in IPO stands for, after all.

In the ad industry, Rubicon can afford to pitch itself as a technology firm and a neutral player while others call it a sell-side platform (SSP), ad exchange, marketplace and publisher service. But that won't make sense to the public. (Hell, it doesn't really make sense here.)

One source said they would describe Rubicon to a public person as such: "They help publishers make money off their content."

That's a simple and straightforward way to put it. But the source noted that "helping publishers make money" may not sound "sexy or forward-looking enough" to investors -- something Rubicon appears aware of.

In its S-1 filing, the company seems to address this potential problem by referring to itself as a "cloud" software platform, a tech-y but publicly accepted phrase.

One industry veteran referred to Rubicon as "inside baseball" -- a sentiment I've heard shared about Rocket Fuel. The feeling is this: that what Rocket Fuel does is so behind the scenes that nobody knows what's truly going on. Like the "cloud," the mystique of "artificial intelligence" carries some weight.

But not everyone feels that way about Rubicon. Another industry expert said, "I don't hear the same 'behind the scenes' stuff about them as about Rocket Fuel."

The source continued, "Rubicon has not been a 'black box' and has been transparent with publishers and partners. As long as they keep growing and providing value, they have a good chance."

There's also the question of how long-lasting the sell-side model is; that the buy-side is riding a demand-powered gondola to the top while the sell-side walks up the mountain with skis on.

"The industry is certainly interested to see how a supply-side platform performs in the market," an industry source commented. "Sticking to the supply-side has potential as they won't run into the conflict of interests faced by companies that represent both the supply- and buy-sides."

It was apparent that something was brewing at Rubicon, but the company had been reaching the point of no return in terms of finding a buyer. The most logical buyer would have been News Corp., which could lay claim to 21.3% of Rubicon's business (that's the percentage of shares News Corp. beneficially owned prior to the offering).

In an overview of the filing, Pivotal Research Group analyst Brian Wieser noted that he thinks having Rubicon in the public market "should foster a deeper understanding of programmatic trading and digital media and lead to more nuanced assessments of business models among ad tech companies."

More importantly, all eyes will be on Rubicon. Wieser believes if the "offering is successful, it may encourage other companies we think are positioned well strategically - such as Mediamath, Turn, AppNexus, Pubmatic and Brightroll among others - to file their own public offerings, fostering a more comprehensive sub-sector of ad tech companies to complement those which are already trading," including Rocket Fuel, Criteo, Tremor Video, YuMe, Marin Software and Millennial Media

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