Tremor Video’s Shaky IPO

eMarketer expects overall advertising spend in the U.S. to grow at 3.5% annually over the period 2012 through 2016. Within advertising, online video advertising is among the fastest growing segments, with a projected compounded annual growth rate of 28.9% during this period to be an $8 billion segment. Advertisers spent $2.9 billion last year on online video advertising out of $165.8 billion spent on advertising overall.

Tremor Video’s Offerings
New York–based Tremor Video is making waves in this high-growth video advertising industry. Founded in 2005, Tremor Video is a leading provider of technology-driven video advertising solutions. Its solutions help advertisers connect with end consumers across multiple Internet-enabled devices, including computers, smartphones, tablets and connected TVs. Initially, Tremor’s solutions helped advertisers with video advertising for both in-stream and in-banner ads. Beginning in 2011, they began to focus on in-stream video advertising instead of banner ads and have seen positive results from this decision.

Tremor’s proprietary technology, VideoHub for Advertisers (VHA), helps advertisers deliver more effective campaigns by leveraging their database to analyze in-stream video content and identify viewer and system attributes. VideoHub is also able to provide brand-centric metrics to marketers to help them create more focused and effective ads. VideoHub also comes with filters that ensure proper placement of ads, thus ensuring that the brands are not advertised next to offensive videos.

Today, Tremor’s clients include some of the big names in multiple industries. It provides advertising solutions to all of the top 10 automakers and 9 of the top 10 consumer packaged goods companies. The company earns revenues through sales of in-stream video ads through the Tremor Video Network and through licensing of the VHA solution. The Tremor Video Network includes a collection of 500 websites and mobile apps.

Tremor’s Financials
Tremor ended the previous year with revenues of $105.2 million compared with $90.3 million recorded in 2011. Revenue growth was attributed to the focused effort on in-stream ads which grew 32% from $75.5 million in 2011 to $99.7 million in 2012. For the quarter ended March this year, Tremor saw revenues grow 43% to $24.8 million. In-stream video ads accounted for $24 million in revenues during the previous quarter.

Despite this strong revenue growth, Tremor continues to suffer losses. It ended the previous year with a loss of $1.48 per share compared with a loss of $2.02 per share in the previous year. Loss for the March-ending quarter dropped to $0.44 per share from $0.83 per share reported a year ago.

Till recently, Tremor had been venture funded, with $116 million in funding from investors that include SV Angel, Canaan Partners, Masthead Venture Partners, European Founders Fund, Meritech Capital Partners, SAP Ventures, Draper Fisher Jurvetson (DFJ), Triangle Peak Partners, and W Capital Partners. Earlier last month, it issued an IPO on the NYSE under the Ticker TRMR by selling 7.5 million shares at $10 each.

The market has not seemed too pleased with Tremor’s offering. The stock is trading at low levels of $6.96 after having reached a high of $11.09 on the day of listing. Analysts are concerned with the comparatively meager 17% revenue growth reported by the company in such a fast-paced industry.