January means a few things for many hundreds of millions of Americans. The beginning of a new year, the coldest temperatures of the year accompanied and playoff season in the NFL.
The Superbowl is the culmination of a long national obsession with the National Football League, from New York to Seattle and everywhere in between. But apart from the sporting contest, there is a huge focus on one other crucial aspect of the Superbowl: the halftime advertising.
While this year Katy Perry will become the latest in a long line of performers and acts that have dominated the actual half time show, the other half time show is the one that gets just as many, if not more, headlines the next day. The other show is the half time advertising.
Fifteen and thirty second advertising slots during half time at the Superbowl have such an enormous audience that companies pay literally millions of dollars to capture a piece of the national attention. In recent years, Youtube, Facebook and Twitter have ensured that discussion and replays of attention grabbing ads are instantly discussed, liked and shared among millions across the country and the world.
But while the Superbowl half time slot remains one of the most coveted in the nation, the advertising spend for companies on television is declining. In it’s place is an increased migration to website and mobile screen ads.
The Rubicon Project (RUBI) was listed on the New York Stock Exchange late last year, and caught the attention of options traders and option trading services alike for their big promises and leverage to this trend.
With the IPO in the past and the recent doubling of the share price from around $8 to over $16, is RUBI ready to push on to new heights?
Understanding the Business
The Rubicon Project (RUBI) is a business that operates exclusively in the advertising industry. In the past, companies could ring advertising departments of television companies like FOX or NBC and purchase slots during shows that contained their target audience. For example, Nike would likely buy slots during sports matches or car shows, while Tiffany & Co. might choose to advertise during shows like Ellen or Dr Phil.
In 2015, however, advertising has migrated from television screens to mobile, tablet, laptop and PC screens. What RUBI does is provide ad buyers and sellers an automated process to access advertising slots on these screens.
The point of difference is that they hope to do this in real time. The advantage for this style of targeting is that more people see the ad, and therefore the company buying the advertising slot gets the most benefit from their investment in advertising. For example, a food company might be able to target their products to commuters sitting on trains and buses who were reading their mobile phones and thinking about their dinner options, therefore maximising their reach and the chance of their ad succeeding in its goals.
The key products of RUBI are the advertising automation cloud, a platform that allows buyers and sellers of advertising across the world to interact and trade advertising slots. It also contains large ad networks, so created strategies and ads can be beamed out to a wide audience instantly. There are also the newer areas of big data analysis and collection, which further increase the success rates of ads by targeting them at even more specific audiences, and providing buyers better intelligence about their campaigns.
The company claims on its website that it can reach up to 600 million users across the globe, while services tens of thousands of advertiser brands and hundreds of mobile publishers and apps.
Metrics and Measures
The company heralded the recently disclosed third quarter financial results for The Rubicon Project (RUBI) as a record.
The headline-grabbing figure that turned around a prolonged slump in the share price and was the catalyst for interest from options trading services and options trading newsletters was the revenue growth of 60% when compared to the previous corresponding quarter.
The figure came in at $32.2 million, which was well ahead of the $20 million the previous year. The truly standout number buried a little deeper was the earnings before income tax and other costs of $4.8 million for the quarter. While it was small in dollar terms, it showed a staggering 656% increase on the previous year.
While the company still reported a net loss of around $4.6 million, it was an improvement on the previous loss. More interestingly, it showed that future revenue streams would “drop down” to profits more readily, as the company has a low number of fixed costs that need to rise to serve more clients due to the automated and cloud-based nature of their products.
The Investment Case
The investment case for a company like the Rubicon Project (RUBI) is a challenging one. On one hand, they are exposed to the seismic shift away from traditional advertising on television and print media (newspapers and magazines) to mobile devices and PC’s.
The global advertising industry is worth literally billions of dollars, and from zero a decade ago, mobile advertising alone is projected to reach $27 billion by 2017 according to leading research firm PWC.
On the other hand, however, is the fact that the technology that serves this market is so new and dynamic, that companies are still working out the best way to serve their clients and monetize their skills. This means that the barriers to entry are low, and the incentive to compete in the market is incredibly high, as the prizes on offer in terms of profits are stellar.
RUBI knows this, and understands that the battle for talent will be one of the determining factors in their long-term success as a company. To this end, they have been active on the acquisition front, with recently completed buyouts of iSocket and Shiny Ads to complement their existing service offering.
The final complicating piece to the puzzle is the fact that if the company achieves a consistent record of success, the companies that dominate online advertising services, Google, Facebook and Twitter, might become interested acquirers of Rubicon.
For a company leveraged towards mobile advertising that has established strong momentum that is only going to increase in the short-term, The Rubicon Project is an exposure to that trend. Added to that is their increased range of services through acquisitions and the potential for RUBI itself to become a target for the “bigger fish”. Stocks like this have key announcements or catalysts that greatly influence their stock price movements, and a well regarded and professional options trading newsletter can help investors like yourself achieve great financial rewards from their success.