Billion-dollar valuations and an IPO frenzy: Adtech bubble or new paradigm?

By Michael FosterAugust 7, 2014

When Facebook bought WhatsApp for $19 billion, the response was a mix of outrage and amusement: How could a young, small company be worth so much? Some people who understand the power of online platforms defended the valuation, but others dismissed it as a sign of a bubble. Now that Alibaba is rumored to be in talks to buy Snapchat for $10 billion, the question is still valid: Is there a new tech bubble or are we in a new paradigm?

Executives at a number of adtech firms and publishers will discuss these huge valuations at this year’s LeadsCon. Moderated by Mike Boland, VP of BIA/Kelsey, executives from Marchex, and Matomy Media Group will discuss why the value of online media companies keeps going up and just how sustainable these growing valuations are going forward.

While messaging platforms have been worth billions of dollars, big valuations have come to the adtech industry as well. For instance, online video DSP TubeMogul recently had an IPO at over $300 million. But that IPO hasn’t done well—the stock has fallen over 15 percent since coming onto the market. Likewise, ad exchange specialist Rubicon has fallen over 38 percent since their IPO in April, while last year’s IPOs Tremor Video (down 59 percent), YuMe (down 33 percent) and RocketFuel (down 53 percent) have all seen their on-paper value continue to decline with no relief in sight.

While the movements of the stock market are opaque to everyone, this consistently poor performance is leading skeptics to wonder exactly how you can value an adtech company and whether investors know how to understand the increasingly complex transactions and business models of the new world of real-time bidding advertising.

Of course, not all adtech companies are suffering declining values. Many have refrained from going the IPO route, such as recently-acquired LiveRail, which is promising customers and clients alike that it will be able to use Facebook’s robust data to improve ad performance in the long run.

Other companies are likely to follow LiveRail’s lead and partner up with bigger companies to provide new technology and business models that yield better performing ads and greater opportunities for advertisers. While the market changes its makeup at a breakneck pace, investors will likely struggle to identify which companies are providing value and which are not.

This article is brought to you by LeadsCon New York.

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