In the words of Amy Grant, “It takes a little time sometimes.” She might have been singing about video ad network YuMe’s programmatic push.
While competing platforms like LiveRail and TubeMogul have either been acquired or pivoted into automation, some industry insiders say that YuMe is in survival mode. Consider that TubeMogul’s market cap of $425 million is double that of both YuMe’s ($173 million) and Tremor’s ($120 million).
YuMe’s revenue for 2014 was $178.1 million, an 18% increase from 2013. YuMe’s gross profit went up $15 million in 2014, but its operating expenses also went up $25 million, most of which was spent on sales and marketing. Last quarter, its revenue was up 6% year over year, compared to TubeMogul, which saw its revenue shoot up 64% in the quarter.
In a less-than-stable-stock climate for ad tech, companies with recurring platform revenue have higher margins, while those who still make money buying media are trying to prove they’re a software play.
“The way we’ve been looking at the business has been met with a little bit of skepticism, both by media and investors – that we’re Borders bookstore and the world is moving to Amazon,” Jayant Kadambi, YuMe’s co-founder and CEO, told AdExchanger in a recent interview. The struggle for early video ad networks is partially in building “a complete end-to-end environment, and that is hard.”
That includes data and platforms for both demand and sell sides. BrightRoll has also said the key to longevity is offering both buy- and sell-side tools, as well as a marketplace in which both sides can transact, while the brand-focused TubeMogul insists one can’t serve two masters.
Some industry insiders question YuMe’s ability to serve either side programmatically, particularly in the wake of its latest quarterly earnings call.
It’s been more than a year since YuMe brought audience-targeting platform Video Reach to market, yet the company has not seen material revenue accretive to programmatic. Kadambi projected to analysts that programmatic will start contributing to top-line growth in the second half of the year.
It is extremely unclear what platform capabilities YuMe has developed to date. Some observers describe it as a black box with a couple of spiffy overlays promising proprietary audience insights and advanced algorithms. Those who have worked with YuMe indicate its platform technology is vaporware.
“If YuMe has a DSP in Video Reach, I haven’t heard of it,” said one partner who asked to remain anonymous due to its relationship with the company.
YuMe, however, argued that it has already generated revenue through five new trading desk integrations it forged both in the US and in Europe in Q4, though it did not specify how much or with whom.
Jim Caruso, VP of product strategy for MDC Partners trading desk Varick Media, said he has worked with YuMe, though its lack of a self-serve user interface made it tough to integrate with. His sense was that YuMe’s self-serve platform was still in “closed beta.”
In order for the trading desk to fully take advantage of a platform, “We have to get our hands on the keyboards and get that log-level data into our data-management platform,” he said.
YuMe is also contending with inventory quality issues, partners say.
“For about six months, they sent us automated emails with a list of all of their publishers, including information on revenue and CPMs, and let’s just say there were not a lot of premium publishers on there,” said another source who asked to remain anonymous because of its partnership with the company. “YuMe has not had a platform and hasn’t changed their underlying tech in eight years. Neither has Tremor, although they’re talking about a supply-side platform with some premium publishers.”
YuMe hopes to expand into programmatic partially through private marketplace offerings, which ideally will help it deal with quality concerns that its brand advertisers are concerned about.
“You can build a private marketplace, and we can give you audiences across multiple platforms,” Kadambi said. “You’re always rolling the dice when you’re out in the marketplaces or exchanges, and we want to make sure it’s quality.”
“People are talking about us and saying we don’t want to be programmatic, but that’s not the case – if the advertiser wants to buy programmatic or directly, that’s fine,” Kadambi added.
But YuMe’s ambitions to roll out tech facilitating direct deals for both supply and demand sides requires end-to-end technology. And this continues to be a point of struggle.
“It’s hard as a business to build audience technology or software – we just need to execute it and really get it out in front of the customer,” Kadambi said.
The goal, he added, is to push the internal platform to publishers and add marketplace features, enabling clients to apply data – both their own and YuMe’s – to fill demand. He said the marketplace should expect YuMe to take some of its internal IP and to translate it to a more “visible-to-you, end-to-end platform.”
Overlooking its capacity to build a programmatic platform, it’s still facing steep competition.
Fellow video ad networks like Tremor are also trying to re-gear for programmatic by ramping up publisher partnerships and introducing viewability measures. Meanwhile, the big consumer-facing platforms like Facebook and Google are investing in video ad tech and have the first-party data advantage in audience addressability.
Facebook built a mobile exchange off LiveRail, and its access to data across logged-in users appeals to TV buyers. Google is playing up its “Preferred” premium video inventory access.
“It will be hard enough to compete with just Google and [DoubleClick Bid Manager], let alone guys like Facebook getting into video,” said the YuMe partner. “If you’re coming out with almost no revenue in programmatic at this point, it will just be too hard to compete. They’re in trouble.”
