digital value chain IPO – mediamind, lacks lustre – heres why.

Posted on August 15, 2010

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In a world controlled by giants, mediamind’s IPO was a real stab in the dark. while its a great product and has some market share, its challenged by the size of its competitors and lack of defendible technology position. i.e. it does what google and Microsoft do, but not sooo much better that they cannot compete!

Microsoft spent $400M last quarter on R&D (across MSN, Hotmail etc) we can assume that beat the $4.5M spent in the last 6 months by Media Mind. even if we give media mind a greater efficiency due to focus and size of 10x – its still $45M…. i would hate to see what google invests in doubleclick a quarter. their marketing budgets are also bigger!

this means that over time, they can drive the market to their particular strengths and copy any features they dont have, its hard to build a business in that kind of environment.

I sure do hope media mind’s reason for listing is acquisitions – in which case they may have a chance as there are  a lot of niche players they could mop up to roll up the digital value chain.

In case you are looking to read more about the company, here is an extract from the media mind prospectus

We are a leading global provider of digital advertising campaign management solutions to advertising agencies and advertisers. Our goal is to enable digital media advertisers to engage consumers of digital media with more impact and efficiency.Our integrated campaign management platform, MediaMind, helps advertisers and agencies simplify the complexities of managing their advertising budgets across multiple digital media channels and formats, including online, mobile, rich media, in-stream video, display and search. MediaMind provides our customers with an easy-to-use, end-to-end solution to enhance planning, creation, delivery, measurement and optimization of digital media advertising campaigns. As a result, our customers are able to enhance brand awareness, strengthen communications with consumers, increase website traffic and conversion, and improve online and offline sales. Our solutions are delivered through a scalable technology infrastructure that allows delivery of digital media advertising campaigns of any size.

We are the only major provider of integrated campaign management solutions not committed to, or affiliated with, a particular publisher, agency or agency group, or advertising network. We believe our independence allows us to provide our customers with unbiased insight and analysis regarding the implementation and effectiveness of their digital media advertising campaigns.

Offering: 5 million shares at $11.5 per share. Net proceeds of approximately $3 million will be used for capital expenditure.

Lead Underwriters: J.P. Morgan (JPM), Deutsche Bank Securities (DB)

Financial Highlights:

Revenues increased by $9.8 million, or 36%, to $37.2 million in the six months ended June 30, 2010, from $27.4 million in the six months ended June 30, 2009…. Gross margin increased slightly from 94% in the six months ended June 30, 2009 to 95% in the six months ended June 30, 2010…Research and development expenses increase by $1.2 million, or 37%, to $4.5 million in the six months ended June 30, 2010, from $3.3 million in the six months ended June 30, 2009…Selling and marketing expenses increased by $5.5 million, or 34%, to $21.6 million in the six months ended June 30, 2010, from $16.1 million in the six months ended June 30, 2009…Net income increased to $3.4 million in the six months ended June 30, 2010, from $1.9 million in the six months ended June 30, 2009…

Competitors

The markets in which we operate are rapidly evolving and highly competitive. We expect this competitive environment to continue. We believe that the principal competitive factors affecting the market for digital advertising services and tools are existing strategic relationships with customers and vendors globally; ease-of- use, integration and customization; innovation; technology; quality and breadth of service, including local language support; data analysis; price and independence.

We compete against other integrated campaign management and ad serving providers, stand-alone rich media companies, and channel-specific niche providers. Our main competitors in the campaign management and ad serving category are DoubleClick (which was acquired by Google in March 2008) (GOOG), Atlas (which was acquired by Microsoft in May 2007) (MSFT) and MediaPlex , a division of ValueClick (VCLK). Our main competitors in the stand-alone rich media category are niche players, such as PointRoll (which is owned by Gannett) (GCI), Eyewonder (which was acquired by Limelight Networks in December 2009) (LLNW), Unicast (which is owned by DG FastChannel) (DGIT) and FlashTalking. Google (GOOG) and Microsoft (MSFT) have significantly greater name recognition and greater financial, technical and marketing resources than we do. In addition, many of our other competitors have longer operating histories, greater name recognition, larger client bases or greater financial, technical and marketing resources than we do. We believe that we maintain a competitive position in the markets in which we operate.

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