Once in a while, a company comes up with the right concept at just the right time. And that’s what looks to be happening with Rubicon Project Inc., a Playa Vista online advertising exchange company.
In each quarter since its initial public offering in the spring, Rubicon’s revenue and earnings have soared past both its own guidance and Wall Street expectations. And last week’s fourth-quarter earnings report continued that trend, with revenue and profits both ahead of analysts’ estimates.
What’s more, the company reported its first profitable quarter, with net income of $1.4 million.
That sent Rubicon shares up 10 percent the next day to $19.67, their highest level since the immediate aftermath of the company’s April IPO. For the week ended Feb. 25, shares rose 15 percent, making Rubicon one of the biggest gainers on the LABJ Stock Index. (See Page 30.)
Rohit Kulkarni, an analyst with RBC Capital Markets in San Francisco, cited a whole host of reasons for Rubicon’s stellar performance in a report last week, all coming down to one central point: the right idea – automated online exchange trading of ads – at the right time.
“Rubicon has emerged as one of the leaders of automated advertising just at the time when awareness and acceptance of the concept is exploding,” Kulkarni told the Business Journal.
Sameet Sinha, an analyst with brokerage B. Riley & Co. of West Los Angeles, put it even more succinctly: “They have the right product and the right timing.”
Indeed, Rubicon Chief Executive Frank Addante said on an earnings call last week that, according to Magna Global, the market for real-time bidding for ads has grown from zero to $9 billion in just five years,.
Unlike some other players in this new world of automated advertising, Rubicon is a pure-play, with a fully automated system that matches buyers and sellers of ads on an independent exchange, much in the way eBay Inc. works. Rubicon gets a percentage of the final transaction price.
Yet despite its explosive revenue growth, two major challenges loom for Rubicon. The rapidly expanding market has already drawn competition from tech giants Google Inc. and Facebook Inc., and that competition will only intensify.
Also, Kulkarni said, Rubicon is playing catch-up in mobile advertising.
The company did team up in the summer with InMobi of Singapore to develop an ad exchange for mobile devices, and Addante said the company has arrangements with 50 other mobile sellers. But Kulkarni said more deals of the same stripe will be needed or Rubicon could get left behind.
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