The ad tech money merry-go-round continues to whirl. Last week search advertising giant Marin Software filed to go public (a planned $75 million IPO), marking the first ad tech firm slated for an IPO in what is expected to be a frenzied market. A second company may soon follow—and it’s likely to be Criteo.
The Paris-based online ad retargeter, said to be valued around $1 billion, has picked a bank after holding a bake-off last month, per three sources with knowledge of the matter. Two said the bank was retained to manage the company’s IPO, and one source explicitly ruled out a private funding round, pointing to the nearly $40 million the company culled together last September. Sources declined to specify which bank was hired so as not to disrupt business relationships.
Earlier today, the French publication JDN reported that Criteo is likely to have an IPO this year, per Business Insider.
“We’re focusing on building the business,” said Criteo president Greg Coleman. “There are a number of different things we can do including an IPO.”
But the options for ad tech firms carrying nine-digit-plus valuations like Criteo may be slimming. “The higher the valuation, the fewer the options,” said Jay MacDonald, CEO and managing partner of Digital Capital Advisors. “I think 2013 will be one of the most crowded M&A markets since 2007 but without the same number of buyers. If companies are going out, they have to show they are strongly profitable and have a unique and long-term value proposition. An IPO is different. You need a track record of profitability.”
In that case, Marin may force Criteo to file for an IPO sooner in order to preempt any impact from the search ad firm’s debut. Last week’s regulatory filing showed Marin has yet to turn an annual net profit since its inception in 2006. If public tech investors are still stinging from Groupon’s struggles—the daily deals service had also never booked a profitable period prior to its IPO—Marin’s IPO may receive a chilly reception, icing Wall Street for Criteo as Groupon, Zynga and Facebook had for consumer-facing tech firms.
“A number of companies in 2012 thought they would get out via an IPO,” MacDonald said. “The money that is in a lot of these companies has been in the businesses longer than [investors] thought. Doubling and quadrupling down on their investments is not something these guys contemplated.” That could pressure some companies to jump the public market gun.
Criteo doesn’t seem to fall into that trap. It’s been profitable since 2008, Coleman told Adweek last summer. At the time he also projected the 800-employee firm would rake in roughly $300 million in revenue last year, tripling its 2011 figure with Criteo’s relatively nascent U.S. business accounting for 20 percent of overall revenue. He declined to update those figures in an interview earlier this month, but said 96 percent of customers have renewed their business.
While Criteo and Marin appear to be peaking—not to mention freshly funded AppNexus and DataXu—not all ad tech firms are so easily taking their business to the bank. Supply-side platform Rubicon Project had hired Bank of America Merrill Lynch late last year to raise a funding round at a $300 million valuation but was unable to find any takers, according to two sources close to the situation. "There wasn't a fundraising process," said Rubicon Project CEO Frank Addante, who declined to comment on any relationship with Bank of America Merrill Lynch because of regulatory requirements governing banker relationships.
"Rubicon Project is profitable and has been for quite some time, Addante added. "We have a strong and growing balance sheet. Our growth strategy has included M&A and we are constantly looking at potential target companies to acquire. We have acquired four technology companies in the past. As such, we maintain an ongoing dialogue with investors to potentially finance specific acquisitions."
Several media buyers and other ad tech execs balked at Rubicon’s perceived inflated valuation and speculated that prospective investors did as well. “Rubicon has grown significantly over the years but probably can’t grow at the same clip as they did in the past,” MacDonald said.