Can Rocket Fuel return to growth following 2016, which was characterized as a “transitional year” by CFO Stephen Snyder during the company’s Q4 and FY 2016 earnings call Tuesday? Read the release.
Rocket Fuel’s nascent platform solutions business has expanded nicely in recent quarters and helped the company end Q4 on a decent note. Its platform biz grew 165% year over year (YoY) and now makes up about 22% of Rocket Fuel’s total revenue, CEO Randy Wootton told AdExchanger. That compares to 11% this time last year and 19% of total company revenue last quarter.
Rocket Fuel was also cash-flow positive through 2016 – a trend it hopes to maintain through 2017.
Media services is a bit more of a mystery, as Rocket Fuel didn’t detail this line of business as thoroughly as it did its growing platform solutions. But Wootton said on the call that he hopes to increase its legacy media services business by focusing on the top 250 advertisers, particularly the top 50.
“This will really fuel the growth of the Rocket Fuel media services business going forward,” he said. “Our primary capability is our big data and moment scoring. The largest advertisers in the world need that help.”
Q4 GAAP revenue growth was flat YoY, at $124.8 million in Q4 2016 compared to $125.4 million during the same period last year. Over the full year, revenue declined 1%, from $461.6 million in 2015 to $456.3 million in 2016.
“Top-line, we don’t have the total revenue growth we want, but you can see the revenue being driven to platform sales,” Wootton told AdExchanger.
This year, he expects Rocket Fuel’s margins to decrease one to two percentage points per quarter, as platform solutions revenue share increases versus the media services that once supported the company.
Wootton said he is happy with a roughly 70%-30% split between media services to platform revenue, and hopes to work toward 60%-40% soon thereafter. At that point, he said, it’ll be much easier to affect the conversation around who Rocket Fuel is as a company (meaning, it’s not an ad network).
Rocket Fuel had been banking big on three holding company contracts – one of which it already won. It is in the process of making inroads with its new partner’s various media buyers and operating agencies.
“So I would not say we’ve fully penetrated every media opportunity there,” Wootton told AdExchanger, noting that in North America, holding company revenue increased 25% YoY. “I think we’ve started changing those headwinds into tailwinds.”
However, of the other two holding companies that were pending last quarter, one didn’t come through. “We’ve not landed the long-term contract,” Wootton said, “but we’ve seen the spend increase.”
