Is the Rubicon Project Google Adsense’s Only Real Competitor?

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The Rubicon Project (NYSE:RUBI), a company that provides automated online advertising services, is on the rise. At least, as a business, Rubicon Project is on the rise. Total advertising spending managed, or gross revenue, increased 34 percent on the year to $129.6 million, “primarily driven by an increase in pricing due to increased bidding activity.” The take rate, Rubicon Project’s share of managed revenue, increased 0.4 percentage points to 17.8 percent, yielding net revenue of $23 million, up 39 percent on the year.

If these numbers seem small, well, they are. As of May 14, when Rubicon Project stock was up nearly 10 percent on post-earnings euphoria, the company commanded a market cap of $431.85 million, placing it at the low end of the range generally considered small cap. Moreover, before the post-earnings pop, shares were down more than 43 percent since April 2 when the company launched its IPO.

But even though revenue is relatively low, growth is strong and the basis for the growth seems healthy. That increased bidding activity was no anomaly — according to a March 2014 report from Internet analytics firm comScore, Rubicon Project’s advertising network reached 219.8 million people, or 96.8 percent of the total Internet population.

For some context, that’s a wider reach than Google’s (NASDAQ:GOOG)(NASDAQ:GOOGL) ad network, which is the largest buy-side ad network. So even though you won’t see Rubicon Project topping net digital display ad revenue charts, such as those compiled by eMarketer, there is at least one metric on which the company competes with Google. More to the point, advertisers are willing to pay for the reach of Rubicon Project’s network.

But Rubicon Project is still losing money. In the first-quarter, the company reported a non-GAAP loss of 15 cents per share, down from break-even in the year-ago period. Worse, looking ahead to the second-quarter, non-GAAP earnings are expect to decline to a loss between 21 cents and 24 cents per share, and shares outstanding are expected to increase 27.7 percent to 33.2 million.

Rubicon Project specializes in automated display advertising services. It’s fair to think about the company as a kind of middle man between publishers who want to monetize content and advertisers that want to get a message out. Another way to think about Rubicon Project is as a market, matching supply with demand.

The “automated” part of Rubicon Project’s business is important. Like most automation, programmatic advertising simplifies the process of buying and selling ads and therefore reduces waste. Due to this, use of automated ad services is increasing rapidly — and Rubicon Project appears poised to ride the wave. Rubicon Project’s strong first-quarter was, according to CEO and Chief Product Architect Frank Addante, thanks to growth in real-time bidding (RTB) revenue.

According to Addante, Rubicon Project’s RTB revenue growth outpaced the growth of the RTB market, which itself was enormous. In March, eMarketer reported that RTB ad buys increased 76.5 percent in 2013 to $3.39 billion, accounting for about half of all programmatic ad buys in the U.S. and about 19 percent of total digital display ad spending. By 2018, total RTB spending is expected to increase to $12.02 billion and account for 29.5 percent of total digital display ad spending.

It’s important to keep in mind that Google is the biggest player in the overall digital display ad market by far. According to eMarketer, Google took a leading 17.6 percent share of total display ad revenue, beating second place Facebook (NASDAQ:FB) by 2.1 percentage points. By 2015, Google is expected to increase its share of total display ad revenue to 24.6 percent, while Facebook is expected to increase its share to 16.2 percent, leaving a gap of 8.2 percentage points between the two.

Speaking to Business Insiderback in 2012, Addante said that, “We’ve been on the tail of Google for a while now.” This is certainly true in terms of reach and in terms of the sophistication of its automated system, but in terms of sheer volume Rubicon Project is still a long ways off. It will be interesting to watch how the company evolves and to see if it can continue to grow faster than the market in the near future.

As important as the ad business is to Google, the company is about more than that. Earlier in May, we took a look at a couple of ways Google is expanding beyond its core business and into interesting — and potentially highly lucrative — new markets. Here are a couple of places you might find Google in the coming years.

1. Taking on Amazon

Prepare for two titans of the tech world to square off over your hard earned money. While Amazon (NASDAQ:AMZN) is currently leading the way in all things e-commerce, Google is already hot on its heels. Having acquired a number of companies to build up a formidable online shopping presence, Google may be looking to usurp the balance of power in e-commerce.

As Wired spells things out, it’s the perfect way to show how effective Google ads can be. “In the end, it’s all about advertising, Google’s main source of revenue. The less often consumers think of Google as the first stop for online shopping, the less incentive brands have to advertise there. What’s more, if Google can get shoppers to not only start their product search on the site but buy and even pay for that product, the company can show advertisers just how well Google ads work.” So by supplanting Amazon for product searches, Google can effectively put on display an advertising showcase.

How will they get there? Recent acquisitions with companies like DeepMind and RangeSpan seem to indicate the direction Google plans to go. Together, those two companies alone increase the depth and spectrum of Google’s commercial abilities. Combined with Google Wallet and Google Shopping, the company will be able to follow real-time trends in e-commerce, predict future buying trends, and point shoppers to the most relevant ads and content.

As Google builds up its e-commerce assets, Amazon and other online retailers had best start developing strategies to compete.

2. Building Your New Friends

It’s been obvious that Google sees robotics as a major factor going forward. The company has purchased a half-dozen robotics companies over the past six months alone, none more high profile than Boston Dynamics. Boston Dynamics builds robots that have the ability to walk on their own, and have been developing technology to be put into use by the U.S. military. It has created models including the BigDog, Cheetah, and Atlas, all somewhat unsettling. This is the genesis of all the Skynet jokes you’ve been hearing.

Google had also onboarded companies like Meka Robotics and Redwood Robotics around the same time, spurring excitement over what it could be planning. Is it possible it could be conjuring up ideas for a vast mechanized army for the government? Possible, yes, but unlikely. Google is most likely looking at ways to implement the manipulation and vision technology into a way that will generate revenue.

With robotics technology leaping ahead at unprecedented rates and new technologies and innovations happening often, it might not be too long before Google starts developing artificial personalities, much like the we’ve seen in the movie Her. While thoughts of Terminator’s Skynet and giant warring robot armies are fun, the truth is that Google is much more likely to be monetizing its technology than destroying it on a battlefield.

3. Driving You to Work

Many experts agree: self-driving cars are the next big thing. Google has been testing the technology for a while now, and has come away with impressive results. It is theorized that by 2040, almost all cars on the road will be computer-controlled, much to the dismay of car enthusiasts world-wide. A pioneer in the world of autonomous cars, Google started its experiment by packing its vehicles with sensors and sending them off into the world. After 700,000 miles without an incident, the technology looks primed for widespread application.

The technology has grown to watch out for bicyclists and stop for passing trains. It can navigate crowded and busy city streets safely and more efficiently than with a person behind the wheel. As Google puts it, “We’ve improved our software so it can detect hundreds of distinct objects simultaneously — pedestrians, buses, a stop sign held up by a crossing guard, or a cyclist making gestures that indicate a possible turn. A self-driving vehicle can pay attention to all of these things in a way that a human physically can’t — and it never gets tired or distracted.” It’s hard to argue with that.

Self-driving automobiles, while still a developing technology, offer a lot of advantages. More free time for passengers, higher safety rates, and better efficiency are just the beginning. Some car companies have taken it upon themselves to test their own, like Volvo. As the technology continues to grow, and new systems are perfected to make self-driving cars even more enticing, expect to see adoption taking place on a wide scale in the near future.

As a passenger in your own vehicle, all you’ll need to worry about is how to pass the time as you sit back and relax.

4. Running Your Home & Office

Automation software is looking to become Google’s new bread and butter. High profile acquisitions like Nest raised some eyebrows, and has people wondering if the company is looking toward building a smart house of sorts. While Nest is composed of little more than a climate control device, it’s a big step up from simply lighting something on fire in a brick enclave, which was the standard for heating homes for hundreds or thousands of years. In just a couple of decades, Google could not only take the heating and cooling of our homes under its wing, but several other aspects of home automation as well.

It’s not far-fetched to think Google can take Nest’s automation software and apply it to other areas of the home, including kitchen appliances like ovens and refrigerators. It has also, in some ways, started to take over your television and entertainment, in the form of the ChromeCast. Don’t forget Google Fiber, which will be supplying your home with internet and cable if you’re lucky enough to live inside a service area.

Building a conscious home is a hefty task, and one that Google is sure to chip away at over the coming years. But don’t be surprised to see new homes and apartments come with installed automation systems, based on the Nest model. Combined with a car that could potentially park itself in your garage, a home that is monitoring itself for optimum comfort levels, and maybe a future robot pal to greet you, Google is aiming to have a hand in almost every aspect of life.

5. Your Body

Does Google look to actually break the barrier and make itself a part of, well, you? It looks that way. The world is only getting used to the idea of Google Glass, the wearable technology that comes in the form of a pair of glasses, offering users an interface to stay connected whereever they go. Glass, of course, has been met with some backlash. But Google Glass is only the beginning, as the company is just beginning to develop technologies for  physical enhancement.

Another big development on the wearable tech front is the advent of smart contact lenses that offer embedded cameras and physical health monitoring abilities. There are an exciting number of possibilities for a technology like smart contacts, offering ways to possibly help blind and disabled individuals, and even get a whole new way to capture footage for movies and sporting events. The development does have a long way to go, however, including FDA approval and many test cycles.

The possibilities robotics offers physical adopters is another path Google could possibly take. Amputees could look forward to new limbs, or athletes could look to muscle augmentations. This is not only an exciting path, but a potentially dangerous and morally hazardous one.

For now, the company is sticking to visual, wearable technology. But in a decade, the possibility of being fully connected to your environment, both physically and mentally, is looking more and more likely to come to fruition. Changing the way the world works may not have been what Google wanted to do when it launched in 1998, but recent developments inspire a different feeling.

Not bad for a search engine born from a research paper.

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