Rubicon Project Finishes Chango Integration, Grows Revenue 88%

Rubicon Q2 Earnings

Rubicon Project branched out into new areas in a strong Q2 that saw revenue grow 88% to $53 million.

Managed revenue grew 48% to $227.2 million. Rubicon increased its cut of managed revenue, with take rate going up from 18.4% from last year to 21.4% this year. (Read the full earnings release here.)

The company closed and fully integrated its acquisition of Chango, a search retargeter it purchased at the end of March. That was six months ahead of schedule. The acquisition helped grow the Buyer Cloud Rubicon had already started building internally, as it expands from being a seller solution to an end-to-end marketplace.

Rubicon's Buyer Cloud is still a small part of its overall business. Using Chango's 2014 revenue of $47 million Canadian as a guideline, it's likely that the Buyer Cloud added less than $10 million in managed revenue (which Rubicon will report on a gross basis, not a net basis) to the $227 million of total managed revenue for the quarter.

The idea for the Buyer Cloud is to enable buyers across multiple channels and modes of buying: guaranteed orders, RTB, private marketplaces and mobile, video and display media. Rubicon allows for buying and optimization between those channels and buying types, not just within them.

“We’re in the process of creating a unified offering,” Rubicon President Greg Raifman told AdExchanger after the earnings. “Having static bidding, RTB and order automation, all in one platform, holds a lot of value once you can leverage that data across all these capabilities and methods of buying.” Plus, it’s convenient and efficient.

In Q2, Rubicon celebrated a victory as its second channel after desktop gained traction. Mobile now accounts for 22% of Rubicon's inventory, with an annual run rate of over $200 million. Partnerships with inMobi, Apple and xAd have helped power that shift. And because Rubicon already worked with publishers to monetize their desktop inventory, it's been able to get them to add mobile without too much difficulty.

Seventy percent of the comScore 1,000 publishers Rubicon works with use Rubicon for mobile, a figure CEO Frank Addante highlighted as the "network effects and marketplace effects" Rubicon is taking advantage of as it expands its offerings for buyers and sellers.

Next, it's hoping those network effects will help with its video and guaranteed orders businesses.

Rubicon has the video tech, but not much inventory. The company is not breaking out video revenue yet. "Give us a little time," Raifman said.

Rubicon's strategy is to wait out the current programmatic video market, which is filled with low-quality inventory. With the desktop video market saturated with tech providers, it’s looking elsewhere to put down roots: direct orders for premium video inventory and mobile video. It launched the latter this quarter.

“Quality supply hasn’t made its way into automated marketplaces, “ Addante said. But he sees that changing. Media companies that “used to give video away with their TV spots now realize … they can make significant money off automated marketplaces. We’ve been waiting for that to happen, rather than trying to accelerate a video business artificially with low-quality inventory.”

The guaranteed orders business, like video, is still nascent, despite Rubicon’s investments and acquisitions in the area. Overall, orders grew from 15% last quarter to 17% this quarter, but that includes non-guaranteed orders (what Rubicon calls private marketplaces). Rubicon indicated revenue in guaranteed orders is negligible at this point.

But it’s working on building up supply for guaranteed orders. It signed up key publishers this quarter, including eBay, The Economist, Daily Mail, The Guardian and Viacom. On the buy side, it’s working with agencies to encourage them to move test budgets in guaranteed orders through its platform.

Rubicon was in the red last Q2, and it’s losing money again this quarter: $11.9 million. Adjusted EBITDA remained positive, growing to $6.7 million from $2.7 million last year.

Rubicon predicts it will post revenue of $63 million to $65 million next quarter, and it’s anticipating revenue for the full year could go up to $250 million.

Rubicon stock spiked 20% in after-hours trading.

 

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