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Are DSPs Building Justifiable Valuations?

I am reading more and more stories about DSPs raising large piles of money:

Lotame: $34m

MediaMath: $24m

DataXu: $19m

TradeDesk: $2.5m

TradeDesk appears to have a nice, sane strategy. If Invite Media was the industry leader and they were worth ~$80m, then all the rest of these companies are a long, long way away from justifying their valuations.

I am hearing more and more stories about how much of the revenue flowing through these platforms is essentially ad network business where the DSPs are taking on risk to run performance campaigns for agencies. While that is really interesting, is that revenue valuable? While it seems like the IPO market is opening, acquisition should still seem like a viable way out. If you build a $200m top-line ad network, I am unsure if anyone will acquire you today.

I wish I had more to say here, but why don’t people comment and we can go from there.




5 Responses to “Are DSPs Building Justifiable Valuations?”

  1. Brian O'Kelley Says:

    On the other hand, if Google is investing, say, $50MM a year into the Invite/DFA/etc platform… how can these guys expect to compete without tens of millions? It’s table stakes for a $1B market opportunity, and I’d argue that all of these companies are dramatically undercapitalized. When these businesses hit critical mass, their technology will either scale or it won’t. At AppNexus, our CPU usage doubles every 5 weeks (that’s the core targeting / optimization engine). Fortunately, from our experience at Right Media we knew that would happen and have been working for three years on the infrastructure to handle it (as well as massive algorithmic improvements – last I heard it took Yahoo 7,500 servers to handle the same computational complexity and scale that we handle with around 500). So, ask your question a different way: which of the companies you list has the technical chops to -handle- the $1B play. I betcha Google does.

  2. Roland Cozzolino Says:

    While I agree with Brian on several aspects, your question is flawed on numerous levels. First and foremost, DSPs are not networks. Secondly, risk (at least in the financial world) is generally associated to profit/loss based on portfolio performance, etc. Self-serve clients of our platform take on their own risk but gain significant transparency into the media buy across numerous supply sources. We charge you to use our platform and to access the inventory we built infrastructure to work with. That being said, we do assume risk when utilizing our algorithms to optimize your buys, but that is a risk we are more than happy to take on, and is significantly different from the ad network/pre-buy risks. Finally, I recall lots of companies taking money on when it is available as a means to both increase liquidity levels and grow. While I do not know who will be left standing when the dust settles, I am fairly confident the obvious answers of Google and Microsoft are of any significance to the DSP success. It will happen, as does all private innovation, regardless of what the big boys do.

  3. brent Says:

    Roland, How is the risk different from ad networks taking on risk in campaign delivery? I must be missing something.

  4. sunscreen Says:

    A creative man is motivated by the desire to achieve, not by the desire to beat others.

  5. brent Says:

    What fun is that?