Earlier this week in something of a surprise JumpTap aggreed to be acquired by larger competitor Millennial Media for roughly $225 million in an all-stock deal. JumpTap had been on a publicly stated course toward an IPO. However JumpTap CEO George Bell told BizJournals that the uncertainty of the public markets swayed him in the direction of Millennial’s offer:
“Our view was that Wall Street remained a very choppy, uncertain bedfellow and, despite good performance in our growth, it wasn’t clear that we would have Wall Street’s ‘permission’ to go public,” Bell said. “Joining up with Millennial Media, of course, allows us to achieve a public status for our employees and shareholders without the pain of going through an IPO process ourselves.”
Millennial bought smaller rival JumpTap in part because it needs to bulk up to better compete with bigger, more visible networks such as Google, Facebook, Twitter and even Pandora. Last year Millennial had revenues of roughly $178 million vs. $104 million in 2011.
With the addition of JumpTap, Millennial expects FY 2013 revenue to come in between $270 and $280 million. That’s impressive growth but there’s a substantial contribution being made by JumpTap’s revenue. Compare the fact that Facebook is on course to make $1 billion in mobile revenue by Q1 2014 and Google will probably take in $4 billion in mobile ad revenue this year.
IDC’s 2012 estimates put Millennial in the number two “network” position after Google. JumpTap is number four:
- Google (AdMob): $243 million
- Millennial Media: $151 million
- Apple iAd: $125 million
- JumpTap: $90 million
The IDC 2012 estimate was off, as you can see, by about $26 million (not bad as these things go). It might similarly be low for JumpTap.
Let’s say that JumpTap’s revenues will come in around $100 million for 2013. Add that to Millennial’s $178 million and that’s where the latter’s 2013 revenue guidance likely comes from ($178 + $100).
There will undoubtedly be more mobile ad network consolidation in the next 12 – 24 months. For example I expect Yahoo to make an ad-related mobile acquisition. Microsoft may as well; and Facebook will probably buy more mobile startups. The mobile ad network space is even more more of a “winner take all” market than the PC network segment. Indeed, five or six companies in the US will take about 75% of global mobile ad revenue in 2013.
Millennial is in a sort of metaphorical “middle seat”: neither big enough nor specialized enough. Accordingly it may be squeezed from “below” by specialist ad networks such as xAd and by programmatic buying. From “above,” as mentioned, the company faces tough competition from Google and Facebook.
All that is why Millennial is going after larger scale and better data for more precision targeting. The risk remains, however, that despite JumpTap, Millennial might not be able to differentiate itself enough and lose out to more visible or “muscular” rivals.