Online advertising is back in fashion.
Friday's successful IPO of YuMe (NYSE:YUME) and AOL's move earlier in the week to snap up Adap.tv in a $405 million deal point to an increasing appetite for companies that let advertisers get noticed on the Internet.
Now we'll have to see if Millennial Media (UNKNOWN:MM.DL) can live up to its end of the bargain when the mobile display advertising speedster reports quarterly results tomorrow.
Things haven't been easy for Millennial since it went public at $13 last year. The stock may have more than doubled during its first day of trading, but it's been largely downhill ever since. The stock begins this trading week in the single digits.
Millennial could've been special. It went public as the country's second-largest provider of mobile display marketing, and it was the largest platform that was operating system agnostic since the top dog was -- and continues to be -- Google (NASDAQ:GOOGL).
Revenue growth has certainly not disappointed along the way. Millennial's top line soared 71% last year. Analysts see revenue climbing another 55% this year and 47% come 2014. Given the explosion in popularity of tablets and smartphones, this shouldn't come as a surprise. Google certainly isn't growing this quickly, even though the popularity of Android as the smartphone and tablet platform of choice probably makes Millennial's cross-platform appeal less compelling.
It's been a different story on the bottom line at Millennial. The fast-growing mobile marketer posted a loss last year, and it's expected to post another quarterly deficit tomorrow.
The news should get better from here. Wall Street sees Millennial turning a healthy profit during the second half of this year. Wall Street's profit target of $0.42 a share for next year may even make Millennial a bargain relative to its heady growth rate.
The market's starting to believe. Millennial remains a busted IPO, but the shares have rallied 56% since bottoming out in April.
Last week's YuMe and Adap.tv news can only help bring more visibility to the space.
YuMe is a leading provider of digital video brand advertising solutions, reaching a worldwide audience of 257 million unique monthly users in May. Revenue soared 70% last year, and it managed to squeeze out a small profit.
The IPO didn't generate a lot of buzz, pricing at the low end of its range on Friday at $9. That's pretty much where it wrapped up its trading day debut. It may be a failure by IPO standards, but at least it was able to get to market. Adap.tv was in talks with investment bankers to go public earlier this year, but then AOL made it an offer that was too good to be true. Again, the initial market reaction is that Adap.tv failed in its goal to reach investors directly, but doesn't AOL forking over more than $400 million for the company lend credibility to the online marketing market?
Millennium Media has the niche's best shot yet at redemption tomorrow. Let's see if display advertising shows up.