What The Viant IPO Means For Ad Tech: Opinion By M&A Advisor Ryan Klinfelter

The Viant IPO has ad tech buzzing. We wrote about it in the U of Digital Newsletter. Ryan Klinefelter, M&A advisor and U of Digital community member was kind enough to contribute to the opinion section.

Viant, the ad tech company that bought MySpace, sees shares surge 90% in IPO
February 10th, 2021
Source: CNBC

Summary: Viant, which operates a demand-side platform (DSP) called Adelphic (Viant acquired mobile-first DSP Adelphic in 2017), debuted on the Nasdaq last week under the ticker symbol $DSP. Its shares popped more than 90% right out of the gate. Originally priced at $25, shares opened at $44 and closed at nearly $48 for the day. By the end of the week, shares were trading as high as $68, ending the week at $65.49. The impressive showing follows PubMatic’s promising December IPO (shares originally priced at $20 are now trading at nearly $50), and of course Magnite and The Trade Desk are killing it. Viant has quite the history: The brothers Tim, Chris and Russ Vanderhook founded the company in 1999 as Specific Media and it bought MySpace in 2011. Time acquired a 60% stake in Viant in 2016. Meredith became Viant’s owner when it acquired Time in 2018, and Viant’s co-founders bought back Time’s 60% stake in 2019.

Opinion: One year ago did anyone think that PubMatic and Viant would be public companies with $6B of market capitalizations? There has been a record IPO market in the last 12 months, with around 500 companies becoming public via direct listings, traditional IPOs and SPACs. So it isn’t unusual that ad tech will have both darlings (The Trade Desk and Magnite) and new entrants (Viant and PubMatic). What is astonishing is a gigantic reversal of fortunes for an industry shunned by public investors for the better part of five years, because of the spectacular failures of 2010s ad tech companies like RocketFuel and Videology. These same investment banks, gatekeepers to public market institutional investors, vowed to never again cover ad tech with their equity analysts and gracefully uninvited ad tech companies to nearly all major tech conferences (Goldman Sachs, looking at you). 

If this IPO doesn’t scream ‘ad tech is HOT’, we’re not sure what does. The valuation is crazy. Viant generated ~$150M in revenue in 2020 and ~$10M in net profit. From 2019 to 2020 they declined ~4% (granted there was a pandemic, but in that timeframe digital advertising actually grew a few percentage points). They are currently valued at $3.86B. It just doesn’t add up. Also, Viant just isn’t that exciting of an ad tech product. When the company is touting MySpace as a valuable source of user data, you know something is astray.

So then why is the market is so bullish on Viant, and ad tech in general, right now? We believe there are 3 key reasons:

1) Post-pandemic ad spend rebound, and the pandemic’s acceleration of the shift from traditional to digital advertising
2) Antitrust headwinds for the walled gardens
3) The Trade Desk’s runaway success

Compared to the 2010s, the advertising market is 100-200% bigger, more global, the competition is probably going to be regulated, and the ad tech industry has shown an abundance of creativity to grab our attention in new ways – CTV, digital out of home, gaming, retail-tech, commerce networks. and beyond. It does feel different this time around. But how many scaled, public solutions are needed in one market? Magnite and SpotX tells us, not as many.

For now, Viant has set the pace. Expect a ton of investor enthusiasm in ad tech and more overblown valuations. From there, perhaps we’ll be headed towards another bust. 

Sorry for being downers. Listen, we get it, this is EXCITING. We’re excited for the folks that will make tons of money off of these IPOs and acquisitions in the coming months and years. But we worry about the bust, which feels inevitable. Some people are going to be left holding the bag when that happens. The eager acquirers, the uninformed retail investors, and some of the employees. That stinks. And bigger picture, the up and down roller coaster is not healthy for the industry. It hampers longevity and sustainability of the space. It’d be much better to have steady, incremental growth and valuations. Alas, we don’t have that.

Seatbelts!