Like last quarter, Millennial Media’s revenue is up – and profits are down. The mobile ad tech platform, which has been vocal about it’s desire to expand its programmatic capabilities, is clearly still in a period of transition.
Though Millennial Media clocked a 24.4% YoY increase in revenue in Q3 2014 to $69.8 million, the company also posted a $109.4 million net loss this quarter, as compared with the $4.6 million net loss it saw in Q3 of last year. (It is, however, relevant to note that this quarter's loss is due in large part to a $93.5 million non-cash/non-operational write-off charge.)
But Millennial CEO Michael Barrett is looking to the proposed acquisition of mobile exchange and SSP Nexage, set to close at the beginning of Q4, as the missing piece to “complete our vision of creating an end-to-end full stack” in combination with Millennial’s existing DSP, as well as its DMP capabilities, gained through its 2013 acquisition of Jumptap.
Barrett has high hopes for the expected Nexage purchase, first announced in September.
“This is a big step that immediately expands our mobile exchange capabilities while strengthening our traditional full-service business,” Barrett said in an earnings call with investors Thursday. “As an end-to-end platform, Millennial can participate in multiple revenue streams, including as an SSP, where we will mediate supply to other networks; an exchange, where we will connect buyers and sellers in an RTB auction; and through our full-service managed media."
Speaking of managed media, Barrett admitted that “required improvements to our managed media business are frankly taking longer than expected.” In the coming quarters, Barrett said Millennial plans to split out revenue reporting between its full-service managed network and programmatic offerings.
For the moment, Millennials’ managed media business, which includes both brands and performance advertisers, accounts for the majority of the company’s revenue. The company brought on former Sociomantic CEO and Admeld exec Jason Kelly to head its managed media division at the beginning of October.
“We are seeing some positive results in our managed media business, but more work is required and we feel we are still several quarters away from returning the managed media business to the growth rate and path to profitability that we believe we should achieve,” Barrett said. “We are making changes aimed at delivering against the strategy we’ve been discussing for the past several quarters, namely, re-accelerating revenue growth in our full-service business while developing new capabilities to enable publishers and advertisers to transact programmatically.”
That, of course, is what the soon to be completed Nexage deal is all about.
“Our platform business is built around technology that allows advertisers and publishers to connect on an automated, transactional basis [and] the Nexage acquisition will bring critical components in-house and should accelerate growth in this part of the business,” Barrett said. “There will always be a role for our full-service capabilities, but clearly high revenue streams are shifting to programmatic buying and selling, and as an integrated marketplace, Millennial is poised to capture both.”
In answer to an investor’s question on how Millennial achieves cross-device attribution, a topic getting lots of play recently with everyone from Lotame to Criteo to AOL announcing new tools to handle that need, Barrett said, “we’re very much a deterministic cross-screen company,” pointing to Jumptap’s DMP as a critical component in Millennial’s ability to do cross-screen targeting and tracking.
“It’s almost the equivalent of what you would look at as a logged in user,” Barrett said. “We are able to see deterministically across media types, identify that individual and serve them the same or a different ad and then be able to track conversions like you normally would on a desktop PC. As far as offline conversion, that’s a quandary for everyone to do.”
For the moment, Millennial is focused on getting its programmatic ducks in a row. As Barrett said, “the pieces are coming together.”
“When I joined Millennial earlier this year, I knew [we] would have to move more aggressively into the programmatic platform business,” he said. “Although it’s been a very challenging year, we will exit the year with a very solid foundation.”