Event Summary
Real Media
(NASDAQ: RLMD proposed) has been in the Internet advertising business as long
as anyone. But, unlike its competition it has remained a private company, with
71 percent owned by a print advertising filer, PubliGroupe, and 12 percent by
a subsidiary of Advance Publications. The company has now chosen to go with
an initial offering of up to $75 million of its common stock.
The
proceeds of the offering are intended for general corporate purposes. These
include expansion of its sales, marketing, and operating capabilities; product
and technology development; and possible acquisitions of or investments in companies
or assets.
Market
Impact
Real
Media is a respectable firm, with publishing clients ranging from Playboy to
the New York Times, and advertising clients like Intel and Visa. However, for
an advertising specialist it has kept an unusually low profile, while DoubleClick
(NASDAQ: DCLK) and Engage (NASDAQ: ENGA) enact the Battle of the Titans in the
press.
Now
Real Media has opted to reach for the gold ring. And its reach is not small.
Figure 1 compares Real Media's offering with the initial offerings for three
Internet advertising companies that went public - DoubleClick, Engage, and NetGravity
(later purchased by DoubleClick). It shows the value of the offering as projected
in the initial filing document and the value the company received when it did
file. These may differ because the company offers a different number of shares
or achieves a different offering price from the one guessed at in the initial
filing. The chart also shows the revenues for the twelve months preceding the
offering.
It remains to be seen whether Real Media will make the most of its influx of
cash. The company has always been somewhat conservative, and has strong ties
through its major stockholder to the print industry, which itself is not the
best sign of the agility needed in Internet business.
While
product development and sales activities are important, and should be funded
with this offering, even if the final offering is only a substantial fraction
of the projected $75 million that's a lot of sales people to hire and product
development to do.
Real
Media's stated strategy includes, but underemphasizes, acquisition as a strategy.
We believe that acquisition should be pursued aggressively with these funds.
Real Media's best strategy would be to acquire a state-of-the-art personalization/targeting
technology, as we believe this will be the high value in Internet advertising,
both for general consumer sites and for verticals.
User
Recommendations
Going public changes the nature of a company. While the current market for Internet
stocks will do interesting things to the stock price, it will also focus much
more scrutiny on the company. There is no reason for serious concern about the
effects of this offering on customers, but it is only prudent to keep an eye
on the company during the first few quarters after the offering is consummated.
Prospective
customers who will be making a decision after the offering will want to see
how effectively the funds are put to use. Any selection of a product or a service
should take into account the vendor's ability to create and implement visionary
strategy. The months after an IPO are an excellent time to see how a company
performs.