Rubicon Project and Telaria Merge to Become the Largest Independent SSP

Combined company has $143 million in cash and no debt

rubicon project and telaria logos
Rubicon Project and Telaria announced their impending merger in December. Rubicon, Telaria

Key Insights:

Rubicon Project and Telaria closed their merger this morning, officially forming the largest independent supply-side platform on the market.

The company, which will announce a new name in the coming months, is coming together during the coronavirus pandemic that has put a strain on the global economy and caused ad budgets to shrink.

Following the completion of the deal, the combined company has $143 million cash on hand, and no debt. Michael Barrett, CEO of Rubicon Project, said having such a strong balance sheet is fortunate in these financially uncertain times.

“We see this as an opportunity to prove to our clients that we’re that stable, scaled, global player that’s with them in great times, and also with them in really hard times,” said Barrett, who is now the CEO of the combined company, in an interview.

The newly combined company, which will trade on the New York Stock Exchange as RUBI, seems set to get even bigger. Rubicon reported $156 million in revenue for 2019; Telaria reported $68 million in revenue over the same period.

“I really do think the thesis of coming together… is the opportunity that we’ve felt there’d be further consolidation, and that the combination of two companies could accelerate that consolidation,” Barrett said. “Now you have this horrific backdrop [of coronavirus]. We certainly have seen in past instances, like 2008, that you see consolidation. I think we’re poised to be a net acquirer when it’s all said and done.”

While the deal is billed as a merger, Rubicon stockholders will own 52.9% of the combined company. Rubicon targeted Telaria specifically for its capabilities in connected TV.

Telaria CEO Mark Zagorski is serving as president and COO of the new company. He said redundancies following the merger will likely be in areas such as accounting and finance.

By the end of 2020, the combined company will have roughly 50% of its revenue tied to video, and CTV could account for up to 20% of total revenue, according to analysis from Craig-Hallum Capital Group.

“Video as a whole will be a majority of our business in the next few years,” Zagorski told Adweek. “If you combined CTV with outstream, desktop, etc., I could see that being the biggest chunk of our business.”

Connected TV ad spend is expected to reach $8.9 billion by the end of 2020, according to eMarketer, but that pales in comparison to the $70 billion spend on linear TV. There will still be more pay TV households than non-pay TV households in the U.S. by 2023, according to eMarketer.

Tracey Scheppach, CEO and co-founder of Matter More Media, said that while more people are cutting the cord, the combined company could look at an acquisition to “move upstream” into linear TV to capture a greater share of ad budgets.

“If you can do addressable in CTV and addressable in linear, that would be very powerful together,” Scheppach said.

The combined company is positioning itself as the sell-side version of The Trade Desk: a large, independent, omnichannel platform. It’s also going headfirst into a nascent CTV marketplace, where Telaria already has dealt with the likes of Hulu and Pluto TV, which has yet to see any one player dominate the space the way Google and Facebook do across digital.

“I think the longer-term focus will be on the combined company’s ability to win more business as supply-path optimization trends accelerate,” said Jason Kreyer, senior research analyst at Craig-Hallum.

“If Rubicon can displace other ad platforms, that should ultimately drive acceleration in revenue growth paired with improved profitability. Given The Trade Desk has consistently put up 30%+ growth and Ebitda margins, I think those are the standards investors will look for to validate ‘The Trade Desk of the sell-side,’” Kreyer said.

Zagorski said the company will differentiate through its ability to offer inventory across all forms of digital media all in one place. Initially, however, that inventory will run through separate exchanges.

“From a business management perspective, we will be consolidating those operations so that buyers will have single points of contact and seamless business transaction capabilities. Platform-wise, that’s a longer-term story to play out,” said Zagorski.

Scheppach said differentiation will come down to transparency.

“Providing unique and differentiated offerings around transparency and connection to other [forms of] video and other messaging will be the key to the success of this merger,” she said. “Marketers need to understand where their ads are running, at what frequency, and how those ads connect to the larger investments they are making in video, TV and other forms of messaging. Dumping money into a black hole is not a viable long-term strategy for brands.”

@andrewblustein Andrew Blustein is a programmatic reporter at Adweek.