Marin Software CEO Chris Lien slept pretty well last night, even though today is arguably the most important day in his company’s seven-year history. The San Francisco-based online advertising company Lien founded in 2006 went public on Friday, marking the first major ad tech IPO of what is expected to be an especially active year for the intersection of Madison Avenue and Wall Street.
“Going public is not something you start doing a few days prior to going public,” Lien said over the phone a few hours after Marin’s public market debut. In fact the company has been working on this offering “for well over a year,” he said. That helped soften Lien’s pillow last night, as did his recent eight-day investor road show, during which he churned through more than 50 meetings. “I slept pretty well last night because I was pretty tired,” said the chief executive.
Lien should have sweet dreams tonight as well. Marin initially priced its offering at $14.00, then saw its stock open at $19.00 and jump to $19.93 two minutes later. The market has been correcting itself since that early peak, but the company’s stock is still up more than 20 percent from the offering price as of this writing. Again Lien is dusting off his shoulders, saying that the stock’s early performance is “in line with how we hoped the stock would trade...We want to trade well on the first day, so it doesn’t distract from the company.”
However Lien and his company could have been in for a rude awakening on Friday morning. When Marin Software filed to go public last month, it disclosed—and has updated—plenty of numbers about its business. Some reassuring, one alarming. The company, which has raised $105.7 million in funding since its inception, has seen its revenue grow for 15 straight quarters and closed 2012 with $59.6 million in revenue, up 65 percent year-over-year. That growth has been driven by 531 active advertisers using Marin’s platform to manage $4.7 billion in annualized ad spend last year.
But many observers zeroed in on one statistic: the company has yet to record an annual net profit.
In a discussion of the potential ad tech IPO market, Jay MacDonald, CEO and managing partner of Digital Capital Advisors, told Adweek recently that companies looking to go public need a track record of profitability. The implication was that a profit-starved company wouldn’t be received well by Wall Street, especially after recent woes.
For example, Groupon had yet to turn a profit by the time it went public in November 2011 and has seen its stock value drop by nearly 80 percent. Then there’s Zynga and most notably Facebook, whose IPO a lot of people have said iced the market for other tech companies.
But as Lien rightly pointed out, a better way to judge Marin is by pitting it against companies that sell software to businesses like Salesforce, which has grown its stock by 13 percent over the past year. But still, why not wait for another ad tech company to IPO, to be the first public pancake? Or did Marin want to become the pace car? “We’re not that clever,” said Lien of the timing.
As for the profitability and reception concerns, Lien again plays it cool. His team briefed potential and existing investors on the company’s strategy to invest heavily in marketing and research and development to drive revenue growth. Marin Software has been expanding its business beyond its stronghold in paid search to include display, social and mobile advertising. It expects to break even by 2015.
As the stock’s performance thus far has shown, people are buying into the strategy, and perhaps as importantly, they’re not selling. “None of our private investors sold stock in the IPO, and some purchased additional stock at the offering,” he said.
While Friday may mark the most important day for Lien’s company to date, and while he’s grateful for the IPO, “it’s just another event for the company,” he said. That sounds like spin, right? “Even as I’m sitting here, I’m sending emails on developments in the business.”