By Scott Dance, The Baltimore Sun
April 7, 2013
Millennial Media's stock has lost three-fourths of its value since the Canton company went public a year ago as an established force in the mobile advertising market. Ask CEO Paul Palmieri about that, and he'll repeat what he deems wise words from a prominent contemporary.
"I care very much about our share owners, and so I care very much about our long-term share price," Palmieri said, quoting from an interview Amazon.com CEO Jeff Bezos gave to the Harvard Business Review in January. "I do not follow the stock on a daily basis, and I don't think there's any information in it."
Millennial has maintained rapid growth — revenue jumped by 68 percent in the fourth quarter of 2012 relative to the same period a year earlier. But that hasn't been enough for Wall Street analysts, given lofty expectations for advertising opportunities on smartphones and tablet devices, and competition from heavyweights Google, Apple and Facebook — all of which are focused on translating the growing use of mobile devices into advertising revenue.
When the fourth quarter results were announced in February, Millennial shares lost 40 percent of their value in a day, and have slid even further since then. Shares of Millennial have been trading in the $6 range, well below the $25 it traded for on the company's New York Stock Exchange debut in March 2012.
Palmieri says he isn't letting the stock market doldrums become be a distraction from what he describes as a mission to defeat the larger rivals and command the mobile advertising market. Still, neither are its giant tech rivals, who are shifting quickly and using their broad reach to gobble up massive shares of the market.
"This is an expanding market, and we're a leader in that market," Palmieri said. "We've got to stay ahead."
Meanwhile, as Millennial focuses on riding the industry's growth, forecast to top $7 billion this year, the company is focused on deepening its roots in Baltimore. Parking woes that threatened its expansion at the Can Company development have been resolved, at least in the short term. And the company is still searching for a more permanent (and spacious) place to call home.
Millennial has risen from a 2006 startup that spent many of its early days at a site not far from its current headquarters — in the city's Emerging Technology Center incubator. Since then, it has expanded around the country and the globe, with about 380 employees and plans to continue to hire.
Its business has two sides — one building up a stock of advertising space on mobile apps and mobile-friendly websites, the other selling that space to advertisers. Millennial uses the reach of that ad network, plus the ability to narrowly target specific demographics and users for advertisers, to woo big-name brands looking to spend marketing dollars efficiently and effectively.
One campaign the company counts as a success targeted men browsing in between plays on Super Bowl Sunday to get them thinking about Valentine's Day a few weeks later. Jewelry store Pandora and its ad agency, Baltimore-based GKV, prompted the men to "Create a Valentine's Gift in Minutes."
Palmieri said he counts that ability to connect advertisers with unique audiences as a strength. The company's efforts to expand its ad network's reach and recruit top-dollar advertisers reinforce each other, he said. (The Baltimore Sun's advertising department works with Millennial on mobile advertising network sales.)
While Millennial Media has spent years dedicated to its mobile strategy, now some major players are also seizing on the burgeoning opportunities. Given the amount of time people spend browsing social networking sites Facebook and Twitter or searching via Google on their phones, it was an obvious step for those sites to exploit the medium.
Web advertising research firm eMarketer estimates that Google has a grasp on more than half of mobile advertising dollars to be spent this year, while Millennial Media's share is forecast at about 1 percent.
But while much of Google's advantage comes from ads served during web searches, Millennial is among the leaders when it comes to display ads, including banner or video ads on mobile websites and apps.
IDC, another research firm, estimated Millennial's share of the display ad market at about 17 percent in 2011, second only to Google's 24 percent.
Facebook and Twitter have moved quickly to embed ads in users' feeds, which allows for more frequent yet unobtrusive marketing, said Clark Fredericksen, vice president for communications at eMarketer. Google is meanwhile taking advantage of the fact that search ads are expected to be the fastest-growing for the industry, he said.
The tech giants cast a shadow that has spooked some on Wall Street considering whether to bet on Millennial. When the company announced its fourth-quarter financial results in February, stock analysts seized on comments company leaders made about deals they couldn't lock down by year's end, triggering the stock slide.
"The long knives are out for that company," CNBC stock picker Jim Cramer said of Millennial on his show "Mad Money" last month. But Cramer said he didn't plan "to write this one off yet."
Despite the surge in competition, the added attention could be a boon for Millennial, in the sense that a rising tide lifts all boats.
"The entrance of major players has helped validate the market," Fredericksen said. "It puts Millennial in a position to grow very quickly as a result."
Baltimore is meanwhile eyeing that growth trajectory, too. City officials worked closely with the company when executives complained that dozens of parking spaces in Canton sat empty during the day, while Millennial workers and visitors were unable to use them because of permit restrictions. City Councilman James Kraft pushed for a vote early this year to do away with permit parking in the area.
Palmieri called the city's accommodation for his company encouraging. "They really showed they want us here," he said.
But sticking around might not be easy. The modern, colorful spaces of Millennial's office are in a state of constant flux, with desks frequently being shifted around to make room for more workers. In one area, an area of walled-off desks extends over its carpet onto the bright-blue tile of a kitchen area, which had to shrink to make room for the expanded workforce. Last year, the company renewed its lease at the Can Company, but only for two years.
Palmieri has said in interviews he has considered moving outside the city, or even to Washington. But he says those comments weren't intended as threats — the goal is to establish a long-term home, with room for a conference center-type space for the broader local tech community. If that is possible in Canton, that would be ideal, Palmieri said.
In the meantime, company officials plan to continue to focus on building their business for the long term. Palmieri drew on another well-regarded thinker to explain that philosophy — economist Benjamin Graham's assertion that the stock market is in the short run a voting machine, and in the long run a weighing machine.
"Our business is what carries weight. Our growth is what carries weight," Palmieri says. "We're trying to build a company that is to be weighed, not to be voted upon."
Copyright © 2013, The Baltimore Sun