Rubicon Project is slashing take rates and embracing header bidding to engineer its turnaround
A week after the after the announcement of its purchase of nToggle, Rubicon Project published financial results with revenue falling to $42.9m, resulting in a $11.6m loss during the second quarter, with chief executive Michael Barrett using the subsequent earnings call to reveal his turnaround strategy.
Rubicon Project has experienced legal challenges over its historic take rate
Although its revenues are falling and losses continue to deepen, Rubicon Project's Barrett and chief financial officer David Day (both of whom took up their current roles in the first quarter of the year) laid out their turnaround strategy on the company's subsequent earnings call, one they hope will deliver in 2018. This includes:
1. Cutting its take rates in a transition towards a lower margin, high volume business model
2. The impending launch of its server-to-server side header bidding solution
3. A continued increase in its focus on mobile app inventory
Rubicon Project missed earlier earnings projections by $0.03, with its share price dipping 8.1% in the immediate aftermath of the numbers being published, although the prices did recover later according to Seeking Alpha.
While the numbers paint a gloomy picture for the predominantly sell-side focused adtech outfit, which has experienced a number of travails dating to early 2016, Rubicon Project's leadership were quick to highlight some of the highlights from the period (see below).
Other highlights include Rubicon Project experiencing a sequential 7% increase in total ad spend during the period, with total mobile ad spend up 21% compared to the first period of the year.
The split in Rubicon Project's ad spend during the reporting period was 42% mobile and 58% on desktop, compared to the opening quarter of the year, when mobile represented 35% of ad spend.
Speaking to financial analysts, Barrett explained his belief that the "payback period" for nToggle will be three years and that the addition of its technology was helping to improve win rates.
He added: "It's clear that the world of programmatic advertising, and what it takes to win in this new world has changed dramatically with the introduction of header bidding. All-in-all, we made great progress in Q2, we're on our way to becoming the exchange where all inventory that can be bought and sold programmatically can be found.
"We're working towards becoming the lowest total cost-per-transaction providers for buyers and sellers and continuing to improve win-rate with the addition of nToggle's technology to our platform.
"Although our financial results will lag these efforts, we believe that our strategic initiative have us on track to drive year-over-year growth by the end of 2018, and deliver long term shareholder value."
Meanwhile, Day explained to investors how Rubicon's average take rate for the period, ie the fee it collects on all transactions (something it is currently experiencing legal challenges over) averaged at circa 21% for period. This is 30% lower from its historic high, with the number edging towards just below 19% as the period closed, according to Day. He also went on to say how its partnership with Amazon's Transparent Ad Marketplace (TAM) helped bolster its mobile app inventory.
Speaking separately, Barrett also spoke of his outfit's ambitions to launch its own server-side header bidding solution within the next month, as a successor to its existing client-side header bidding solution Fast Lane.
"This quarter we began working aggressively with Amazon's offering TAM, we will be launching our server-side solution in the coming month, and probably announcing further partnerships on the server header-side [sic]," he said.