Millennial Media Gain May Spur Mobile-Technology IPOs
Millennial Media Inc. (MM), a seller of advertising space on mobile devices, almost doubled in its first day of trading, a sign investors have a growing appetite for providers of mobile services.
The Baltimore-based company lets advertisers target consumers through smartphone and tablet applications. The initial public offering is seen as a barometer for interest in other would-be IPOs that rely on mobile technology.
Companies such as the music provider Spotify Ltd., payment service Square Inc., location-sharing site Foursquare Labs Inc., storage provider Dropbox Inc. and tablet-application maker Flipboard Inc. all may benefit from the buzz and push ahead with their own public offerings, said Tom Taulli, an IPO consultant in Newport Beach, California.
“If you wanted to go public, you could get an IPO off the ground pretty easily,” he said.
Millennial Media (MM) advanced 92 percent to $25 yesterday in its trading debut. The company had sold 10.2 million shares at $13 apiece in the IPO on March 28, pricing above its offering range of $9 to $11 each.
Morgan Stanley, Goldman Sachs & Co. and Barclays Plc led the deal, with assistance from Allen & Co. and Stifel Financial Corp. The shares are trading on the New York Stock Exchange under the symbol MM.
Facebook’s Ad Push
Facebook Inc. (FB), which filed for its own IPO last month, also stands to benefit from demand for mobile services. The company began placing ads in the smartphone version of its software this month, aiming to make money from its 425 million mobile users.
“When people see a mobile advertising company is being received so well, it makes people more excited about the Facebook IPO,” said Eric Jackson, founder of Ironfire Capital LLC, a Naples, Florida-based hedge fund.
Other mobile-ad companies will get a boost as well, said Matt Murphy, a partner at Kleiner Perkins Caufield & Byers, a venture firm in Menlo Park, California. “Investors have tremendous demand,” he said.
Aiming to capitalize on the trend, Kleiner Perkins recently funded a stealth mobile-ad startup. It’s also a backer of InMobi and SessionM, two other companies in the field.
SessionM was started by Lars Albright, a co-founder of Quattro Wireless, which served as the basis for Apple Inc. (AAPL)’s mobile-ad push. Apple acquired Quattro in 2010.
Millennial Media’s success could make an IPO a viable opportunity for more companies, said Albright, chief executive officer of the Boston-based company.
“It opens up more options for businesses that can gain scale,” he said. “It shows there’s potential for an IPO.”
Before Millennial Media’s IPO, the most-successful mobile- ad providers got acquired by companies such as Apple, Google Inc. (GOOG) and Nokia Oyj. Google bought AdMob for about $700 million in 2010, several months after Apple’s acquisition of Quattro.
U.S. mobile-advertising spending reached $1.45 billion in 2011, up from $769.6 million in 2010, according to EMarketer Inc. This year, advertisers are expected to increase their mobile spending to $2.61 billion, the research firm said.
The money raised in the IPO should help Millennial Media take on its larger rival, Google.
“They now have the money to hire more sales people, expand internationally,” said Karsten Weide, an analyst at Framingham, Massachusetts-based research firm IDC.
Google’s share of the mobile display-ad market rose to an estimated 24 percent in 2011, from 19 percent in 2010, IDC said in December. Millennial Media climbed to 17 percent from 15 percent, while Apple saw its share decline to 15 percent from 19 percent, IDC said.
Now investors are watching to see how Millennial Media’s stock holds up, said Noah Elkin, an analyst at New York-based EMarketer.
“Assuming that the stock performs well, it will be somewhat of a barometer for startups in the mobile-ad space,” he said.
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