Mobile advertising is currently a billion dollar market and we’ve witnessed tech giants like Google and Apple move into the space with the acquisitions of mobile ad networks AdMob and Quattro Wireless, respectively. AdMob is now part of Google’s mobile advertising business and Apple is using Quattro to power its new ad format, iAds. But there is another player that has silently been growing its business under the radar to become a dominant network in mobile advertising: Millennial Media.
Currently, Millenial has the largest U.S. reach out of all the networks in terms of audience size according to Nielsen; with ads reaching 63 million of a total of 77 million mobile web users in the U.S., or 81% of the U.S. mobile web.
Despite being one of the “big three” in the still-small mobile ad space, Millennial is relatively unknown, while its competitors have seen prominent coverage in the media. Besides its monthly reports on mobile ad traffic, Millennial has avoided some of the drama that has been taking place in the industry. I caught up with the company’s CEO and co-founder Paul Palmieri to talk about how Millennial catapulted from a bootstrapped Baltimore-based startup to the largest independent mobile advertising company.
Palmieri is a seasoned vet in the wireless and advertising industries. He ran the consumer mobile data arm at Verizon and developed a fledgling mobile ad network at Advertising.com. Unfortunately, as the bubble burst, Advertising.com cut Palmieri’s group before it was eventually sold to AOL. But Palmieri always thought there was more potential in the mobile advertising industry, especially as mobile web usage grew. While iPhones and Android phones were nonexistent in 2004, Palmieri knew that the market would produce more technologically advanced phones than the current offering at the time, the Palm Treo. In 2006, he teamed up with another Advertising.com alum, engineer Chris Brandenburg to work on developing a company that could monetize mobile display advertising.
Fast forward another four years, and now Millennial Media, which Palmieri jokingly calls the “quiet giant,” is competing with the likes of Google and Apple in mobile advertising. The company is still small with only 85 full-time employees. I was actually surprised that Millennial had less than 100 staff members considering it is one of the largest mobile advertising networks in the world. Palmieri counters that Millennial’s proprietary technologies have helped not only keep customers happy but also helped keep the company lean.
The company offers a mobile media planning platform, called MYDAS, that quickly creates and implements advertising plans; in fact, all sales reps carry iPads to meetings to demo the product and actually create campaigns on the technology. Umpire, another Millennial product, is a realtime ad serving platform that allows publishers to dynamically switch between ad networks based on impressions and performance.
Millennial also provides advertisers with highly optimized audience creation and retargeting technologies, which include preset anonymous audience segments that Millennial has identified through its own interactions. Ad viewers are enrolled in “Audiences” based on their observed behaviors on sites, survey participation, and click-stream data. Once enrolled, users can be specifically targeted in campaigns that Millennial’s advertisers purchase and leverage for future re-targeting purposes. Millennial claims this ability to target ads to highly segmented audiences promises advertisers with a 5-times lift in interaction rates. The company also notes that it makes a clear disclosure of these techniques and provides a simple opt-out mechanism. Nevertheless, online ad targeting is a political hot potato, and when you add in location targeting, it could get tricky.
On the device side, Palmieri highlights that Millennial’s platform independence creates more diversification and thus reaches more mobile users. In a given month, 45% of the impressions on the network are from smartphones, roughly 39% from feature phones, and around 16% from connected devices such as tablets and gaming systems.
One of the little-known secrets of Millennial is that it’s more than just a mobile ad network. The company also operates and manages private mobile ad networks for large media companies and conglomerates that have multiple apps and sites, essentially powering a self-service ad network for these companies. Millennial also has a deal with a “prominent internet media company” (Palmieri declined to name the company) that has completely outsourced its mobile advertising to Millennial.
While Millennial may not generate the press hype that AdMob and Quattro have seen, the company has certainly attracted the attention of technology’s leading venture capital firms. The company has raised $38.3 million to date in venture funding from Charles River Ventures, New Enterprise Associates, Bessemer Venture Partners and Columbia Capital.
While Palmieri won’t disclose concrete revenue and sales numbers, he told me that revenue has been steadily growing and the company is well past its target revenue for the first half of the year. According to IDC research published last December, Millennial Media was on target to make $35 million in U.S. mobile advertising revenue for 2009. AdMob’s revenue was estimated at $31 million (we reported a $40 million run-rate at the end of last year) and Quattro Wireless was reported to have seen $20 million in revenue for the year. Palmieri says the company isn’t cash-flow positive yet but will hit that mark this year.
Still, Millennial is playing in a competitive space with two of the most powerful tech companies on the planet, Google, and Apple. Either one could have bought Millennial, but they decided to go with its rivals instead. Remember, Apple makes the iPhone and iPad—two devices that dominate the mobile advertising market. And Google is behind all the Android devices.
With the launch of iAds, Apple CEO Steve Jobs said that he expects 48% of spending on mobile advertising in the United States from July through December of 2010 to go to Apple’s iAd platform for the iPhone and iPad. But Palmieri says he isn’t worried. “We’ve been offering the same rich-media formats as iAds for years now,” says Palmieri. While there is certainly a novelty to iAds, Palmieri expects Millennial’s ads to perform as well if not better than Apple’s ads.
Millennial has also been making acquisitions to boost its offerings to advertisers and publishers. Earlier this year the company acquired startup Tap Metrics, a company that provides mobile analytics to developers. And the company is actively looking to make more purchases in the space, says Palmieri.
The looming question in everyone’s minds is whether Millennial will sell to a big technology company looking to take a piece of the mobile advertising pie, such as Microsoft. While Palmieri says that an acquisition isn’t something he’s totally against, his focus at the moment is on taking the company public in the next year or so.
George Zachary, a partner at Charles River Ventures and board member of Millennial, also feels confident that the startup can be a public company in the next year. Zachary credits the company’s success partly to the core ideals of the founders in not wanting to sacrifice quality, despite growing fast.
If mobile advertising is going to be as huge as everyone thinks, there is plenty of room for more than two players. Millennial is proving that a non-Silicon Valley based startup with the right technology, talent and leadership can find success in a competitive field that includes both Google and Apple. And with a possible IPO in 2011, it looks like Millennial won’t be a “quiet giant” for much longer.