DAVE MORGAN: First, I don't have any connection to the company, and I don't know anything anybody else doesn't know. But, I see the IPO as quite successful, despite the fact it might have traded down in the first week.
What's going to matter here for the industry and sector is, how does Tremor do over the next couple of quarters and where does Tremor price in a year?
All we need to do is see performance of companies like Zynga where the market got really excited and priced them, obviously, a little too high early, and when the business didn't show up, it wasn't in a good spot a year later. I'm hopeful that a company like Tremor will do well. There are some other strong companies out there, too -- at least (from) what I know anecdotally of the four or five more significant players, they've all got nice revenue, growth, margins and some strong technology.
It's certainly a sector with a lot of venture investment, of course. And, venture-backed companies can go three places. They can fail, they can have a trade sale or they can go public -- and that third path hasn't been that available until lately. It's a bit of a self-fulfilling prophecy. If you don't have public-selling companies in the sector, you don't have informed investors and you don't have financial comparables. It's a bit of a "chicken and the egg."
Now that Tremor is public, what can it do now that it couldn't do before?
First, it probably can do less.
One of the real advantages Tremor is going to have, though, is it has a senior team. CEO Bill Day has been there before. The first thing it's got to do is perform well, since it's the leading the parade for this sector. I certainly expect it will. Now, over time, it has the ability to use its stock as currency. It's hard to make private-to-private transactions. Obviously, it was able to in combining with ScanScout (in 2010), but those were hard deals to get done. You don't have to look at the ad-tech landscape very much to realize that there is going to be either consolidation or dissolution of a lot of companies.
Even with a public currency, though, public investors are probably not going to want to see a company like Tremor make a bunch of acquisitions in the first couple quarters. They want to see how that company does and performs. But, over time, they’’ll have a chance to be able to make acquisitions and build a business -- and also build visibility. Omniture did a great job of just putting up a lot of great quarters, quarter after quarter, and building the whole Web-analytic sector up and a lot of value. Ultimately, it ended up in its own strong transaction later [by selling to Adobe in 2009].
What do you think the signal is here for marketers, the buy side and people who are potentially buying in the video-ad space?
There's a message that there's going to be some strength and longevity in this sector. You wouldn't have seen the bankers underwrite this transaction and funds buying into this transaction if there wasn't some belief in the sector.
We're going to see significant areas of development in video advertising. We're going to see more growth in the pure-play digital web-video sector, for example. Most people expect -- I think analyst Mary Meeker at Kleiner Perkins put the number at $20 billion that she thinks is going to go from print to online display in the US over the next five years, and a vast amount of that into video because of video's stronger pricing. It's probably holding stronger pricing because it holds a user's attention -- it's not one of 13 ads cluttered on a page. It's got sight, sound and motion.
Marketers can take from this that the video space is going to be big, and be here for some time. I think, obviously, just given positioning of our business, Simulmedia, we think that there is going to be significant transformation within the TV advertising space as well. It's going to happen probably around consolidation, too.
If you think about it, probably the biggest thing that's happening right now in video is we have news reports that a majority of all the companies that are distributing TV video content are up for sale or consolidating.
Are you a believer in convergence? Will a company that's working in a linear TV space, like Simulmedia, end up providing the same sort of services that a Tremor does?
I don't think we are going to see companies straddling both video in the linear world and video in the Web world for a while -- certainly not in the ad-tech and ad-network space -- and primarily that's because the money is coming from two different places. The TV video spend, which is tied to the channel bundle and is healthy and growing, is in a relatively bulletproof silo. It's not like newspapers, magazines or Yellow Pages, where they leaked all the money out because it wasn't healthy. We're going to see companies that provide infrastructure into them.
I would look for companies like Freewheel and others that work with the traditional linear companies, but provide digital services, to become some of the companies where we'll see some of this convergence. Clearly the content owners want to link their linear TV in with their Web audiences and content. That's why in the Web-video space, the absolute highest pricing today is achieved by the linear-content owners for the extended content they provide on the Web. Our perspective at Simulmedia is yes, maybe in five years we're going to see a lot more convergence in this area. We're placing our bets on the $72 billion market in the US as it grows to $80 billion in that time and its transformation, rather than the $3 billion or $4 billion as it grows to $6 or $7 billion where I think you've got basically everybody [working online].
One of the things you're going to see is these Web-video companies have probably the first chance to consolidate the other display businesses that are behind them or just take their business away. They don't have to buy them. They can just grow and take it. Everyone talks about video is video is video, but nobody buys that way.
By “video is video is video ,” you mean that, TV or online, it’s all video, right? You're saying nobody buys that way?
I mean the heads of agencies and marketers give those speeches at conferences because they're trying to ultimately steer their ships over the years. People forget that is the way TV media is bought. It's not even like they're just this one video-activation office that controls all tactical video buying. What happens is you have separate silos for a national broadcast buyer and national cable buyer. A different person buys local broadcast. A different person buys local cable. You even have in some shops different people that buy prime time versus the people that buy daytime. I think it's going to be some time until we see real convergence.
The online-ad industry has long talked about attracting TV budget online. When or how do you see that happening?
I think we're going to see money come out of direct response. And, as media becomes more targeted, some direct-response and promotion budgets turn into media. If you look at the big players, Google is certainly preparing for not just its future about display, but its future being video display.
The two places where Web video wins is it takes money out of static display and it takes money out of print. We're looking at a market that's probably even aggressively expected to only grow from, let's say, $3 billion a year to $8 billion or $10 billion. That's pretty good growth. So there's plenty that's going to be lost by newspapers and magazines in that time and from other display that's going to fuel that. There won't be a problem finding growth.
Some people like to make headlines by saying they're shifting their TV budgets, but that's actually not how they spend. In spite of TV having been well-priced up last year, it's growing again. It's not losing to Web video. It continues to grow independently on its own. I do think though that there will be significant linkage over time.