The Deal: Advertising Technology Hits the Road
NEW YORK ( TheStreet) -- New players in the advertising technology space have made bets with the public markets in growth bids, becoming attractive for big fish in the new media world in the process.
As new and old media place increasing emphasis on online video and mobile content, successfully monetizing these efforts via advertising means big money. Several companies in this space have raised capital through initial public offerings in recent months, the path smoothed for many by the JOBS Act. These businesses have had mixed financial results since going public, and some suggest that the market for ad tech companies could become overcrowded. But large strategic suitors like AOL Inc. and Google Inc. could still pick off these emerging companies as they grow in the public eye to gain proprietary technology. That sort of consolidation would thin the ranks.
"There's a lot of these ad tech network companies out there, and there's a real question as to who the real winners are going to be, how consolidation is going to occur, and whether with Google controlling 40% of the ad market, whether that is sustainable for other entrants in the marketplace," said David Weild, founder and chairman of investment banker Weild & Co.
Industry watchers believe the IPO market for the tech sector, as well as other areas, has turned a corner. As of Sept. 26, at least 147 companies have gone public in the U.S. this year, up 52% from the same period in 2012, according to IPO tracking firm Renaissance Capital. "With the initial debacle of the Facebook IPO, that certainly spooked a lot of people, but I think finally the turtle's coming out of its shell a little bit. There's a little bit of stability here," said Mitchell Littman, a founding partner of Littman Krooks LLP, who specializes in securities law. "I actually think this could really be a shot in the arm for technology companies."
But how these companies perform after their IPOs will determine the level of interest from the bigger players. In an overcrowded market, executives may have a tough time making companies stand out.
The Jumpstart Our Business Startups Act, signed into law in April 2012, is easing the path for growing companies in the advertising tech sector to go public. What the new law does in essence is encourage funding for small and middle market businesses by easing and modifying various security regulations.
"[Several] things are really helping the market," explained Weild, "particularly the 'testing the waters' provision, and the confidential filings provision."
Weild says that under the JOBS Act, any company with under $1 billion in sales can elect to be treated by regulators as an "emerging growth company," which opens up several options on how to market securities to new investors. Among these, which is important for many of these new ad technology businesses pitching their businesses, is a change in how soon stock presentations can be made to investors