YuMe’s Recent IPO

According to an eMarketer report, the advertising market in the US was estimated to be worth $66 billion last year, of which nearly $4 billion was spent on digital video ads. The digital video ad market is projected to grow 40% this year compared with a comparatively meager 3% growth in the TV ad industry. The digital video ad spending is driven by the increasing demand of consumers to cut the cord and shift to digital streaming services such as Hulu. Additionally, products such as IP-connected televisions, set-top devices, gaming consoles, and the Chromecast product launched by Google are making it easier for the consumer to shift to online streaming as a source of entertainment.

YuMe’s Offering

Fueled by the growth in digital video advertising, Redwood City-based YuMe (NYSE: YUME) went public last year. YuMe was founded in 2004 and is among the leading providers of digital video brand advertising solutions. Their proprietary data-science-driven technologies and large audience footprint help deliver improved returns on ad dollars by enabling advertisers to reach targeted audiences across multiple Internet-connected devices.

YuMe collects vast data from their software installed base of SDKs embedded in websites and entertainment applications on devices including personal computers, smartphones, tablets, Internet-connected TVs, and other devices.  They rely on tags and metadata by content creators who label their work well and use it to organize the ads. YuMe earns revenues by delivering digital video ads on these Internet-connected devices and charging their customers a fee per thousand impressions. They believe that their technology can find and target large brand-receptive audiences across these Internet-connected devices.

Over the five year period from 2007 through 2012, they have delivered over 21,000 advertising campaigns. Their customers include global brands and advertising agencies. For the year ended March last year, they had 64 of the top 100 U.S. advertisers including brands like American Express, AT&T, and McDonald’s.

YuMe’s Financials

YuMe has seen strong revenue growth over the past few years. For fiscal 2013, revenues grew 29% over the year to $151.1 million. They reported an adjusted EBITDA of $9 million, compared to $11.8 million in 2012. For Q4 2013, revenue grew 19% over the year to $54 million and adjusted EBITDA was $8.3 million. They ended the quarter with 367 advertising customers with average revenue per advertising customer of $145,000. For the current quarter, YuMe is expecting revenues of $35 million-$36 million with an adjusted loss of $4 million-$3 million. They expect to end the year 2014 with revenues of $190 million-$200 million with an adjusted EBITDA of $2 million-$8 million.

Till recently, YuMe was venture funded with $72.9 million raised from SV Angel, Felicis Ventures, Accel Partners, e.ventures, Khosla Ventures, DAG Ventures, Intel Capital, Samsung Ventures, Translink Capita, and WestSummit Capital. In August 2013, YuMe went public and sold 5.125 million shared at a list price of $9.00 per share. They plan to use the funding to grow their international operations.

YuMe’s International Expansion

Recently, they announced a tie up with Toshiba Europe GmbH, to deploy advertising on Toshiba’s latest smart TV portal, Cloud TV. The launch makes YuMe the first partner to provide smart TV portal monetization services in Europe. The service will initially be launched in the United Kingdom, Spain, France, Italy, Germany, Switzerland, Austria, Norway, Sweden, Denmark, and Finland. As part of their international expansion efforts and to grow their European footprint, YuMe has already opened offices in Germany and Sweden.

YuMe’s stock is trading at $7.66 with a market capitalization of $244.58 million. It touched a high of $12.08 in September last year. The company doesn’t seem to be having all that great a time in the public market.