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What happened

Shares of The Rubicon Project (NYSE:RUBI) fell as much as 17.3% on Thursday morning. The operator of online advertising services released third-quarter earnings on Wednesday night, beating analyst expectations but following up with a dim view of the upcoming fourth quarter.

So what

In the third quarter, Rubicon Project saw adjusted earnings rising 39% year-over-year to $0.32 per diluted share. GAAP (generally accepted accounting principles) revenue increased 2%, landing at $65.8 million. Analysts would have settled for earnings of $0.09 per share on sales near $63 million, so Rubicon Project exceeded the Street's projections by a wide margin.

On the other hand, management reduced its full-year revenue guidance again, this time centering that range on $276 million. That's down from the roughly $290 million target Rubicon Project posted three months ago -- and that was a reduction from an original target of $335 million.

On the upside, the bottom-line guidance now points to earnings of approximately $0.90 per share, up from $0.80 per share as of the second-quarter report. But investors focused on the top line and gave the stock a severe haircut.

Now what

To explain the weakening sales trend, management pointed to a variety of negative factors. Chief among them, ad sales designed for traditional web pages -- both desktop and mobile -- are shrinking across the board. Rubicon Project is doing well in ads for mobile in-app experiences, but less so when the user has to fire up a web browser of any kind.

The stock has now lost 61% of its value so far in 2016, struggling to find a new direction. CEO Frank Addante hopes to turn the shifting market sands into an opportunity, built around the app-based advertising market. Sales in that segment increased by 69% from the year-ago period, so it may be too early to call Rubicon Project a lost cause.

That said, a turnaround from this dark pit will require excellent execution in the coming quarters and years. That's asking a lot from a management team that had to reduce its sales goals twice in the span of three short quarters. I'll watch from the sidelines.