Fundamentals and Business Related Activities

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    Magnite: Massive Market Opportunity

    Everyone is writing great things about Magnite now when it is trading at $40 with a valuation of $4.40B but most of them neglected/ignored it went it was in single digits or when it’s valuation was below $1B. Same with our markets too. Now the management’s focus should be on getting a decent valuation for the company so that it gains some recognition. Many analysts and fund houses won’t be interested in penny stocks or small cap stocks

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    Google owner Alphabet sees record growth as ad spend soars

    Cutbacks by travel and entertainment advertisers were more than offset by new spending from online retail clients and others during lockdown.

    Google’s advertising business, including YouTube, accounted for 81% of Alphabet’s $56.9bn in fourth-quarter sales, up 23% compared with a year ago.

    Christopher Rossbach, of asset management company J. Stern & Co, said: “Alphabet’s results show that there is still a massive shift to online advertising.

    “Both Alphabet and Facebook have reported strong online advertising growth this quarter as advertisers are drawn to the better targeting, measurement, reach and ultimately return during the pandemic.”

    Even so, Google’s lead over the global internet advertising market is shrinking as becomes a bigger threat and China-focused vendors such as Alibaba enjoy a faster rebound from the pandemic.

    Last week, research company eMarketer estimated Google will capture 30% of the market in 2021.

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    Ad tech company Magnite is buying SpotX in play to deepen its strength in streaming ads

    Ad tech company Magnite is acquiring SpotX, a platform for connected TV and video advertising, for $1.17 billion in cash and stock.

    The deal is expected to close in the second quarter of this year. The company said it will be the largest independent CTV and video ad platform in the programmatic space once the deal closes. The company does serve clients on other formats, including display, mobile and audio.

    Though historically advertisers worked with a slew of supply side partners, there’s been a trend of limiting that spend to fewer partners. Advertisers and agencies are looking to do business with fewer supply-side platforms to avoid inefficiencies and the potential of fraud.

    Buying competitors to increase its scale and inventory could be a way of Magnite of giving itself a competitive advantage over its peers.

    This is a highly competitive field and you need to invest heavily to update your technology or soon you’ll go out business. I don’t like the issuance of warrants and the delay in dividend payment but I understand the tough nature of the industry and the importance of investing heavily in the business.

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    The management of BCG should try to grow the business faster by resolving all old issues quickly without wasting further time in petty old issues and the corporate governance issues should also be addressed seriously and swiftly as its one of the main pillar for survival and growth of any company, competition is rapidly growing and also consolidating both globally and locally and in the future only few large players will be in existence dominating the entire market.

    This is the time to grow faster and bigger as smaller players have no other options but to innovate.

    The link below gives info of how Pubmatic is growing rapidly (Courtesy – CNBC)

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    I think after this acquisition of SpotX, Magnite will become a very dominant player in the adtech industry especially on the seller side of things. The merger of Rubicon (seller side) and Telaria (CTV) to form Magnite made it the largest Sell Side platform and adding SpotX will make it very dominant. SpotX provides technology for “video ads” across all the mediums – desktop, mobile and connected devices.

    SpotX can help both Telaria and Rubicon. With Telaria, it can add CTV revenues and with Rubicon it can add revenues from video advertising across mobile and desktop.

    Many smaller players have merged or got acquired and some went out of business. Google, Facebook and other bigger companies are still growing. Don’t know how all these will impact BCG.

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    The Trade Desk Reports Fourth Quarter and Fiscal Year 2020 Financial Results

    TTD had explosive growth rates in the December quarter. If this trend continues then it’s net profit will be more than BCG’s revenues this year itself. 3 years back, BCG and TTD revenues were close but now TTD’s is more than double that of BCG’s. TTD’s margins are also increasing and have improved drastically.

    Don’t know what BCG has to do to have good growth rates. If this trend continues then BCG will end up being a laggard and will not gain recognition.

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    BCG has to enter newer and bigger markets especially China as done by TTD before 5G technology takes routes across the globe because after 5G becomes common advertising will leapfrog hugely on all kinds of platforms and devices and the companies who are well equipped will grow hugely and rapidly.

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    Adtech industry is getting more competitive. Flipkart has also started adtech business.

    Amazon started adtech business in the last few years but has grown significantly and is now one of the top 4 (along with Facebook, Google and AOL).

    Flipkart gets leaner with a $300 million Jabong write-off as CEO Kalyan Krishnamurthy lists out the priorities for 2021

    Flipkart is also betting big on adtech (Advertising technology). Krishnamurthy said that Flipkart’s advertising platform is currently one of the top five in India today.

    Flipkart is strengthening its advertising and monetisation portfolio and has announced the launch of a custom built demand-side platform (DSP). It recently partnered with MediaMath to launch its demand-side platform.

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    @logan It’s high time BCG aligned/collaborated with big/dominant players to stay relevant and grow in the adtech business because technology and customer preferences along with rules/regulations on privacy/data is changing rapidly and those who are taking the right decisions at the right time will grow and benefit hugely.

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    Trade Desk (TTD) has shown great quarterly results and the stock price today is around 909 US Dollars up more than 7%, here is the link to the results

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    PubMatic rev up 31% to $148.7 million in fiscal year 2020

    Revenue in the full year of 2020 was $148.7 million, a 31% increase over $113.9 million in 2019. Net income was $26.6 million, an increase over net income of $6.6 million. Net dollar-based retention was 122%, an increase from 109% for 2019. Adjusted EBITDA was $50.3 million, a 116% increase over Adjusted EBITDA of $23.3 million in 2019. Net cash provided by operating activities was $24.3 million.

    “Our record performance demonstrates PubMatic’s differentiated market position across the digital advertising ecosystem. We are in the midst of an accelerated digital transformation, with consumers everywhere spending more time online as they shift transactions from the physical world to the Internet,” said PubMatic co-founder and CEO Rajeev Goel.

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    Great results @Logan. Hope for BCG still remains, but the enthusiasm wanes.
    Now Bharti Airtel too has entered the field of digital advertising as it hopes to leverage on its reach and eminent position in the digital space.

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    Magnite Reports Fourth Quarter 2020 Results

    * Revenue was $82.0 million for Q4 2020, up 69% from Q4 2019 on an as reported basis, and up 20% on a pro forma basis

    * Net income for Q4 2020 was $5.9 million, or income per share of $0.05, compared to net income of $1.5 million, or income per share of $0.03 for the fourth quarter of 2019

    * Adjusted EBITDA was $30.0 million representing a 37% Adjusted EBITDA margin, compared to Adjusted EBITDA of $15.3 million for the fourth quarter of 2019

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    Criteo Reports Fourth Quarter And Fiscal Year 2020 Financial Results

    Q4 2020

    * Revenue increased by 1% year-over-year, or was flat at constant currency, to $661 million (Q4 2019: $653 million)

    * Net income increased 13% year-over-year to $47 million (Q4 2019: $41 million)

    * Adjusted EBITDA decreased 6% year-over-year, or 9% at constant currency, to $103 million (Q4 2019: $109 million)

    Fiscal Year 2020

    * Revenue declined 8% year-over-year (8% at constant currency), to $2,073 million (FY 2019: $2,262 million)

    * Net income decreased 22% year-over-year to $75 million (FY 2019: $96 million)

    * Adjusted EBITDA decreased 16% year-over-year, or 17% at constant currency, to $251 million (FY 2019: $299 million)

    Like BCG, Criteo is also not growing. Other companies have had good growth rates. Criteo had to make structural changes across the company and it may report single digit growth rates this year. With BCG, the company needs additional funds.

    (Note – The results were announced 2 weeks back, I didn’t check it at that time)

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    In a bull market which is only one of its kind in many many years all the managements of listed companies in their right frame of “business mind” like to see their stock prices zoom to dizzying heights but then there are some unique ones who are very happy in artificially keeping their share prices lower/subdued for their own vested reasons which totally lacks logic.

    With Airtel throwing its hat in the ring of digital adtech business the much bigger company like Reliance may not be far behind as they have already shown interest and intent in entering/competing in most of the digital business.

    So its time the management of BCG buckle up as the company not only faces the imminent threat of competition on the business side but also faces a takeover threat/risk from these corporate giants (theoretically and practically possible) as the stock prices of the company is languishing around Rs.8 with a total market cap of just Rs.400 crores which is peanuts in valuations compared to the size of its sales and profits as such an acquisition will give a headstart to the new entrant, all these due to the callous attitude of the management towards corporate governance which is taking its toll on the valuations of the company the management may be doing a very good job on the business side but if they ignore the corporate governance part not only does the investors suffer but also the company, the issuance of PWs to the chosen few at throwaway valuations was a very clumsy act on the part of management to raise their stakes through backdoor as alleged by many investors this may save the management from takeover after their conversion into shares (after 18 months) but there is always the chances of a slip between the cup and the lip if someone very big planned a takeover on the company in the next few months, the management is very happy and elated about the rapid growth in the number of retail investors over the past few months but if someone offered a price of say for example Rs.40-50 almost all investors barring a few will surrender their shares to that buyer, so the withholding of prices by artificial methods for whatever reason at these low levels for a prolonged period of time will only prove counterproductive.

    Its high time the management sorted out the remaining legacy issues at the earliest focus fully on growing the business at a faster pace along with quickly improving the corporate governance side too so that the perception about the company in the eyes of markets and investors changed for the better resulting in the stock prices attaining their rightful levels at the earliest.

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    Thank you for providing the multiple sets of results of companies in the same field @ Logan.
    We have spoken ad nauseam about BCG’s potential but the lack of ability of the management to truly get its act together in order to realise its true potential in this exciting field of ad tech. They have been painfully slow in resolving legacy issues, improving on corporate governance, obtaining funding deemed so necessary for growth, and in the bargain losing out completely in the fantastic growth that the digital advertising sector has seen, and which has been acknowledged by Mr Reddy in the last few conference calls.
    If resolution of these issues is genuinely beyond the capability and capacity of this team of technocrats, would it not be better to just sell the company or the promoters’ holding to a stronger and more capable player, who can then at-least help in realising its potential?
    That may, of course, result in an open offer being made to all retail shareholders by the new owners, but at least this constant struggle and gameplay would come to an end.
    This may appear to be an anti management post, but it’s not meant to be, as I would truly like to see Mr Reddy continue to be at the helm of this multinational conglomerate that he has so assiduously built up over many years of hard and visionary work.
    The next few weeks and months will be revealing for us all, as we await the shift from drama and subterfuge to transparency and growth which we have awaited for the last so many years.

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    @odysee You hit the nail right on its head, the management/promoters are shooting on their own foot by continuing with the charade by not ending legacy issues quickly in fact it seems that they are very happy living with those issues, all management’s are selfish to an extent but even in that the company’s shareholders as a whole gain by way of higher stock prices, higher dividends, bonus shares etc. but this management is totally clueless about what its doing and what is the benefit of deliberately keeping the stock prices depressed for such a prolonged periods of time?

    They have issued 2 preferential issues in an year at throwaway prices to a chosen few of their friends/well wishers as a means to gain back door entry for owning higher stakes but yet are trying to keep the prices down by keeping the taps closed by deliberately delaying the closure of legacy issues there may be even a greater possibility that very vital news which can lead to the stocks soaring are being deliberately suppressed.

    Its in the interests of all stake holders (from management to retail investors) that the shares of the company is allowed to find its own real value at the earliest as it benefits all and hurts none otherwise there are big sharks who will takeover the company overnight as its available at almost free of cost if considered the prized assets the company possesses.

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