From Unicorn To Unicorpse - Rocket Fuel Bids Adieu

According to a recent report by Interactive Advertising Bureau, digital ad spending accounted for $17.6 billion during the third quarter of 2016, a robust 20% growth over the year. Google and Facebook accounted for 99% of the growth in the quarter, with Google raking in 54% of the growth, Facebook 45% and the remaining 1% being left for the rest of the world. Clearly smaller ad-tech firms are struggling.

Rocket Fuel’s Financials

Redwood City-based Rocket Fuel (Nasdaq: FUEL) has failed to regain its Unicorn status. Earlier this month, Rocket Fuel reported its second quarter results that failed to revive interest. Revenues for the quarter fell 22% over the year to $90.7 million. It continued to report losses and recorded a loss of $0.39 per share for the quarter compared with $0.24 reported a year ago. On an adjusted basis, loss per share came in at $0.21 for the quarter.

Revenues from North America were down 25% to $69.9 million and revenues from other markets fell 14% to $20.8 million.

By segment, Platform Solutions revenue accounted for 38% of the quarter’s revenues compared with 18% a year ago. Media Services revenue brought in the remaining 62% revenue for the quarter, falling from the 82% share a year ago.

Rocket Fuel’s Expansion

Rocket Fuel’s dismal performance is not for lack of trying. Earlier this quarter, it announced the release of new self-service offerings, including Dynamic Creative and improved Native capabilities that integrate into Dynamic Creative. The Dynamic Creative for self-service solution dynamically selects the layout and products most appropriate for each advertising moment and can create targeted advertisements almost real-time based on prospective consumers’ internet browsing habits.

Earlier this month, Rocket Fuel also announced its partnership with Snap. Rocket Fuel is now a Snapchat Certified Partner that allows their customers to leverage Rocket Fuel’s predicting marketing platform to reach the audience and demographic segments available on Snap. Customers will be able to leverage Rocket Fuel’s existing support for connected TV and video channels as well. Marketers will be able to offer targeted Snap ads that are full-screen, 100% viewable, and have audio on by default.

Rocket Fuel’s Sale

But despite all the measures, Rocket Fuel was lapped up by its competitor Sizmek for a highly discounted price of $145 million. Austin-based Sizmek was acquired last year by private equity firm Vector Capital for $122 million. Sizmek was initially known as Digital Generation and had a TV ad delivery business. It sold that business in 2013, rebranded itself as Sizmek, and began focusing on the digital ad world. Over the past few years, Sizmek has grown inorganically as it expanded into the mobile advertising market. Today Sizmek offers tools for buying, targeting, and optimizing ads and their content. The acquisition will help Sizmek deliver an omni-channel tool that integrates creativity and AI-enabled decisioning with a self-service predictive marketing platform. Together, the two companies will be able to connect more than 20,000 advertisers and 3,600 agencies to audiences in more than 70 countries around the globe.

Rocket Fuel was venture funded till September 2013. It had raised $76.6 million in funding from investors including Mohr Davidow Ventures, Labrador Ventures, Wilson Sonsini Goodrich & Rosati, DLA Piper, MF Capital, Nokia Growth Partners, Northgate Capital, Summit Partners, and Comerica Bank. It went public on the NASDAQ in September 2013 and raised $116 million.

Rocket Fuel had listed on the stock exchange in September 2013 at $29 a share. Initially the market was pleased with the company and the stock soon rose to $61.23 with a market capitalization of $1.99 billion. But since then, the company has turned into a Unicorpse. Its stock is currently trading at $2.60 with a market capitalization of $122 million. It had peaked to $5.90 in May this year and has recovered from the year low of $1.70 that it had fallen to in December last year.

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Photo credit: Thos Ballantyne/Flickr.com.