Even with PubMatic using an adjusted net income figure to gauge profitability, which excludes some costs, it earned respect from analysts.
“They’re running the business with some degree of discipline, which does not go unnoticed,” Wieser said. “A year ago, some people might have said they need to spend more. No one gave credit to Criteo for managing expenses. By contrast, Rocket Fuel was encouraged to spend as much as they needed to scale. Now, I think the reverse would be true, where a company needs to pay attention to the bottom line as well as top-line growth.
This message has also been absorbed by Rocket Fuel, whose Q4 2014 earnings call last week contained references to "discipline" and "profitability."
PubMatic stated that 25% of its fourth-quarter revenue came from mobile. That figure did not include revenue from its May acquisition of Mocean, a mobile ad server. Mobile revenue grew 500% from 2013 to 2014.
That high adoption impressed financial analysts, who suspected that PubMatic might have a higher percentage of mobile revenue than Rubicon, which resisted breaking out platform-specific numbers during its Tuesday Q4 earnings. “People want to know that if we’re heading to a more mobile-centric world they’re not left behind, that they’re part of it,” Rice said.
OpenX meanwhile reported that mobile accounted for 25% of revenues, the same number. It grew mobile 100% from the previous year, indicating that it was probably farther ahead in mobile last year but that PubMatic has caught up.
“[PubMatic’s] mobile growth rate is off the charts, but the fact that it’s 25% of revenues is significant,” said Ed Bierdeman, managing director of the research group at Woodside Capital. “Mobile is one of the fastest-growing opportunities in the entire space. If a company wants to continue their growth rate or accelerate their growth rate, it would have to get into higher-opportunity growth rates like video and mobile.”
Private companies rarely release numbers – so why did PubMatic?
The reasons floated include: 1). It wants to show the ad tech world – including potential customers – it’s on par with its competitors, 2). the company is laying the groundwork for an IPO or 3). it's angling to be acquired.
PubMatic says it released the information to combat the “growing confusion in the marketplace, or which tech and media companies are working for themselves vs. agencies vs. publishers,” said President Kirk McDonald. “We’re sharing this information to repeat and affirm that the publisher is our boss, and it’s been a healthy business to do that.”
“PubMatic has a philosophical point of view that’s different," Wieser said. "PubMatic wants to create software for publishers, while Rubicon, like a lot of others, wants to be a marketplace.”
But right now, PubMatic does look similar to supply-side platform competitors like OpenX, Rubicon or even Google AdX. “Essentially, they do exactly the same thing as Rubicon, but the positioning is different. The long-term orientation will likely be different,” Wieser said.
PubMatic affirms this view, stating it wants to become more like a SaaS business.
“If you’re running your business just three to four degrees in a different direction, over time you’ll look very different,” McDonald said. “All the SSPs have become exchanges. I’m beginning to feel like PubMatic is the last standing pure SSP.”
PubMatic released figures supporting its software-leaning orientation: It forecasts $100 million in annual recurring revenue next year from customers who have been with PubMatic for nine months or longer. Forty percent of the 372 publisher groups on the platform use more than one of the company’s products (like its analytics product, aimed at bringing the company closer to a SaaS model). The average publisher has used the platform 29 months.
Pubmatic expects revenue retention of 150% – i.e., existing customers will spend 50% more next year – which McDonald chalks up to increasing adoption of programmatic. The company stands to benefit from increased volume because it takes a fee off every impression.
“The business has grown through a success-based, revenue-share model,” McDonald said. “We’re seeing more interest in publishers who want to convert from that to a fee-based model. They’re wondering, ‘If I know I will have a relationships that will last for a year, what would happen if I have a rental model?’”