Israeli online advertising re-seller Marimedia has revealed plans to raise 30m dollars as it floats on London's AIM where it could gain interest as an interesting media play.
Despite fears of a 'tech bubble', the online advertising market still gains a proportionally much smaller share of ad spending than its share of media use, and from its current $120bn the market is forecast to grow at 11.2% compound between 2013 and 2018.
The company will have a market capitalisation of between $160m and $190m, with the between 15% and 33% of the shares
being floated in the initial public offer (IPO).
Marimedia has no debt and wants to use the placing proceeds to accelerate its growth strategy by increasing investment in its technology platform, Qadabra.
More sophisticated online advertising
Marimedia sells online advertising space for website publishers, where it charges a fee per action or per internet impression from advertisers.
Qadabra is a self-learning artificial intelligence that enables publishers to manage their advertising impression inventory and maximise revenue from digital media by analysing past performance data in order to establish the optimal, revenue-generating match of publisher advertising space being offered online with advertiser advertisements.
The software offers automatic integration with major online digital advertising platforms for publishers in order to offer advertisers' bids on a near-instantaneous auction basis.
House broker N+1 Singer says though Qadabra the company was exposed to "the underlying shift in the way that online media is being bought and sold".
The float proceeds will allow Marimedia to improve the real-time bidding and mobile market capabilities of Qadabra. Further in the future the company plans acquisitions to enter new markets and gain customers.
As Singer explains, online media was initially manually traded but is increasingly being traded electronically and in ever more sophisticated ways, such as Qadabra.
"Advertisers are looking to optimise their spend through complex buying criteria that needs technology. Publishers are looking to optimise their revenue generated via electronic trading that can find the advertiser willing to pay the most," says Analyst Jonathan Barrett.
From the publisher's perspective, the technology enables Marimedia to sell each impression individually and is focused on optimising each price achieved.
Marimedia takes a cut of revenues from the publisher and so its interests are strongly aligned with its clients.
Marimedia wants to become one of the leaders in the large and fast growing online media market.
According to Barrett: "It already operates at a relatively sophisticated level and is pursuing an increased range of technical capabilities and 'advertiser coverage'. As the online market shifts more significantly to this form of trading Marimedia aims to exploit its existing strong positioning in electronic trading and build market share."
Further forward, the analyst expects the rest of the media market to begin to trade electronically using technology like Qadabra, offering an even bigger prize to pursue.
"This market is currently approximately 3.3 times the size of the online media market," he says. "Marimedia already operates globally and its revenue mix is not dissimilar to the global media market."
On average across all revenue models in 2013, the company retained around $33 from every $100 received from advertisers, with the balance paid to publishers.
For calendar 2013, Marimedia generated revenue of $43.3m and operating profit of $8.72m, with cash from operations of $7.3m.
Tim Weller, Chief Executive of Incisive Media, has been appointed Chairman just prior to the float and brings strong publisher knowledge as well as public company experience.
He said: "The business is scaling rapidly, is profitable and I look forward to working with the management team as it focuses on extending the commercialisation of its proprietary technology and expand its offering to publishers worldwide."
One to watch.