Wall Street Is Punishing Adtech Players For Failing To Make Money

If you're looking for signs of the adtech bubble popping, then Ad Age may have found a couple for you. Three high-profile adtech companies went public in the last year and a half — Mobile ad network Millennial Media, online-ad provider Marin Software and video-ad server Tremor Video — and all have seen their stocks largely rejected by investors, even while the broader market rises.

Here's a summary of public adtech stocks, based on their IPOs (or historic highs) and their current prices:

• Marin Software: Debuted at $16.26, now languishes at $12.
• Millennial Media: Debuted at $23.50, now at $9.67
• Tremor Video: Debuted at $8.50, now at $8.36
• Velti: Debuted at $15.58, now at $1.13
• Augme Technologies: Hit $4.90 in 2003, now at 36 cents.

You could add Groupon into the mix too. It debuted at $26.90, and is now worth only $8.90.

All these companies are chronically unprofitable. The Velti situation is most worrying — its revenues are down too and the company is in turnaround mode.

So what is going on here? Ad Age suggests that Wall Street doesn't understand adtech. Three CEOs of the above companies say their top priorities are to explain to investors how their business models work.

Luma Partners CEO Terence Kawaja says the companies that have gone public aren't the cream of the crop. "Not the best of the companies in their categories are going out first," he said.

And, of course, there's the "scale" problem. Generally, folks at tech startups regard scaling-up as their top priority, not revenue. Get the users or the audience first, and worry about how to monetize it later. It's a sign of Silicon Valley's financial immaturity.

That lack of sophistication is now coming home to roost: Trendy startup founders may be disdainful of revenue models, but investors sure are not.

The proof here is the one public adtech company that is the exception to the rule: Opera Software. Opera debuted at NKR 23.20, and is now trading nicely at 46.40.

Why? Take a look at its financials: It's profitable.