Facebook’s imbroglio concerning fake news and the misrepresentation of metrics is having an impact on ad-tech stocks like Rubicon Project. Richard Tullo, research analyst with Albert Fried & Co. issued a research note that sounded some alarm bells about these factors and a post-election ad spending slump.
While Tullo said Rubicon “is a good actor in this entire post-election media finger-pointing,” ad buyers are pulling back as ad inventory declines post-election. Rubicon recently reported Q3 earnings and announced plans to cut about 19% of its workforce. Rubicon “is not the first mover in a first-mover ad tech market,” the note said.
In addition, Tullo’s note suggested that Rubicon has a weakness in desktop inventory. In Q3, 8% increases in mobile ad spend “which we assume is weighted to video ads, barely offset a decline in PC [desktop] ad spending,” the note said. The company needs to ramp up mobile and video offerings quickly.
Tulio suggested that following the election, digital advertising will decline sharply. Layoffs across digital publishers won’t help the ad-tech landscape and Google, Facebook, and Twitter’s announcements that they’re blocking right-wing bloggers for posting “fake news” are of concern.
“Thus, in general, we think publishers selling ads on Rubicon’s platform have seen business contract sharply following the election. We think the decline in digital ad spending is transmitted through Rubicon’s business model in more than half of Rubicon’s Q16 days of business operations,” the note said.
Due to these concerns and header bidding issues that “seem more focused on Rubicon than other peers, we suspect Rubicon is not currently well positioned to navigate a [post]-election cycle digital ad contraction,” Tulio wrote.
While Rubicon works its way through these issues, other ad-tech firms may also be affected by the post-election ad contraction. Rubicon has experienced challenges in monetizing desktop inventory and getting to scale in video and mobile. With a steep fall-off of political advertising, it remains to be seen how the company and other ad tech firms will fare in Q4 earnings. Holiday advertising may offset the drop-off.