The company’s gross margins, at 42%, were also disappointing – and Kadambi attributed this to “an unusual spike in traffic acquisition costs.”
Here’s what happened, as per Kadambi: YuMe has what’s called a Placement Quality Index (PQI), designed to ensure it places video ads alongside the best audiences. In Q2, YuMe basically bought inventory that didn’t use PQI.
Why did it do this? Because client inventory guarantees – such as those around viewability and whatnot – were becoming onerous. With the addition of these “multiple requirements,” Kadambi said, “we made bad decisions on how we pick inventory.”
Ultimately, YuMe – which is now giving guidance on a quarterly basis – anticipates a Q3 revenue between $36 million to $40 million, a sequential loss. That doesn’t factor in revenue from new products, which presumably means its programmatic ad stack.
Kadambi did not specify how many advertisers or agencies have bought into its stack, though he said there was “early customer momentum” for its demand-side product (which is apparently way more mature than its SSP), and he believes it “can unseat existing DSPs.”
YuMe is banking on a flexible deployment model as a key differentiator: Kadambi said it can be configured for use by agency trading desks, as a managed service where buyers can add their own data in a private marketplace configuration and as a “customizable” video DSP that “will, over time, support fixed CPM and other pricing models.”
Regarding customer growth as a whole, 90% of YuMe’s revenue comes from clients spending at least $100,000. From June last year to June this year, that set of clients increased 17%, from 244 to 286. However, average revenue per customer during that timeframe decreased 6%, from $596,000 to $559,000.