It ain’t easy being a standalone mobile ad network/exchange these days, especially with Facebook, Google and Twitter breathing down your neck — and Millennial Media is feeling the burn.
While Millennial reported $67.3 million in revenue in Q2, up 18% from the same time last year, the number needs to be taken with a grain of salt. Millennial also posted a net loss of $15.1 million in Q2, compared to its $3.1 million loss in Q2 2013. The Q3 2014 outlook is also less than stellar, with revenue forecasts of between $65 million and $70 million, a projected loss of around $7 million or $8 million.
It’s been an uphill battle for Millennial Media. Company stock has fallen precipitously since the company’s IPO in March 2012.
But really, fair enough — Q2 is only CEO Michael Barrett’s first full quarter at Millennial, and he’s more than aware that he has his work cut out for him.
“To say the least, these are exciting, dynamic and challenging times in the mobile media space and we’re hitting our share of challenges along the way,” Barrett said. “But this much is clear to me: We are still in the early stages of a great opportunity in mobile advertising, and I believe Millennial Media has an excellent foundation of great data, great tech, great products and a great team to address this opportunity with increasing success.”
It was an optimistic opener to an earnings call in which Barrett didn’t have the most optimistic news to share.
For example, Millennial’s brand business grew 24% this quarter and it currently does business with 90 of Advertising Age’s top 100 top brands. But that growth is 6% less than the 30% rise Millennial expected. The weakness is most likely attributable to the dropoff of a small number of large performance advertiser clients, as well as to general competitive pressures.
But programmatic is the white knight that Millennial is banking on to save the day. Barrett said Millennial plans to focus on four core areas of growth in the coming quarters, including expanding Millennial’s programmatic platform presence, investing in new products and features for its brand business, reassesing and fixing its performance business and, finally, expanding into international markets.
“Our brand business is still largely a full-service network business at the moment, but we are also well-positioned to capture brand dollars as they ultimately shift to programmatic,” said Barrett, who acknowledged that Millennial’s current “high-touch, high-service insertion order-driven brand business has limitations in its ability to scale and grow.”
Brands and their agencies are increasingly signaling their desire to move larger volumes of their business to programmatic platforms, and Millennial wants to be their go-to, said Barrett, who noted that Millennial had reached agreements with several large agency holding company trading desks during the first half to 2014 to provide them with preferred access to its inventory both programmatically and on an insertion order network basis. MMX, Millennial’s exchange, is currently plugged in to more than 350 DSPs and agency trading desks.
“The near term goal is to move smaller dollar transactions to high-volume automation via exchange while allowing longer term highly creative large dollar campaigns to have more personal attention,” Barrett said.
In terms of data points, Millennial’s numbers remained just about the same as last quarter, with roughly 650 million monthly unique user profiles globally, including about 170 million unique users just in the US, as well as approximately 60,000 apps and mobile sites operating on its platform. There might not have been any significant growth in user profiles this quarter, but Millennial is thinking about other monetization opportunities, including potentially licensing its data.
"We are certainly looking at how to better monetize the data that we have," he said. "Primarily we use that data to enrich our ad efforts with advertising clients. In Q3 we’re going to start unlocking some of that data so that on a transactional basis any third-party that’s buying from MMX that is looking to enhance their campaigns or their targeting can hit the database and pay us on a transaction basis."
As to whether Millennial will be a profitable company again, Barrett asked investors to be patient.
“Listen, I’m not happy where we are, and the second quarter and guidance are weaker than I anticipated…[but] I’m convinced we have many of the component pieces here to have a great mobile advertising business. This won’t happen overnight,” Barrett said. "It won’t take three years, but it won’t happen in a quarter or two either.”