Vibrant Media Gears Up for Possible Public Stock Offering

Little-Known Company Behind Hypertext Ads Taps IPO Specialist as Financial Chief

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NEW YORK ( -- Vibrant Media, purveyor of the once-confusing double-underlined hyperlinked ads in news articles, may be going for an IPO.

The New York-based internet company has hired a chief financial officer, Jeffrey Babka, who is known in the investor community as an IPO specialist.

Jeff Babka, Vibrant's CFO, was most recently financial chief at global IT security firm Sophos in the U.K.
Jeff Babka, Vibrant's CFO, was most recently financial chief at global IT security firm Sophos in the U.K.

"He fits into the business really well from a culture perspective," said CEO Doug Stevenson. "He's got a tremendous track record for success."

Mr. Stevenson cited Mr. Babka's previous role as CFO of NeuStar, a telecommunications company that launched an IPO in 2005 and raised over $700 million in the process.

"The markets were pretty difficult that year," Mr. Stevenson said, "and that was one of the best new-tech IPOs of 2005." More recently, Mr. Babka was chief financial officer at Sophos, a global IT security company based in Oxford, England, which was acquired by Apax Partners this past June at an $830 million valuation, according to the company.

It's just the latest sign the digital media IPO market is heating up, though there are reasons companies considering the move should be cautious.

A host of internet companies have recently been touted as the next big digital IPO, but it was Demand Media that set the bar when it filed for public offering this past summer. The content company specializing in low-cost, how-to content is looking to raise $1.5 billion with its offering, which is being underwritten by Goldman Sachs. The company has yet to announce the actual offering date, but industry analysts said Demand's announcement opened the gates for others to start looking at public offerings of their own. Some of the more high-profile companies that are reportedly ripe for an IPO are Yelp, LinkedIn and Hulu.

Doug Stevenson, Vibrant CEO, cites Mr. Babka's experience taking NeuStar public in the 'tough' year of 2005 as a reason for the hire.
Doug Stevenson, Vibrant CEO, cites Mr. Babka's experience taking NeuStar public in the 'tough' year of 2005 as a reason for the hire.
"Yes, we've been hearing about a number of companies looking to make public offerings," said Reed Philips, principal partner at DeSilva and Phillips. "But some of the smaller cap companies that went IPO in the past have gone back to private, which would give pause to some of those smaller companies." Mr. Phillips said the potential valuations on even some of the mid- to large-cap internet offerings are in flux, and that it will take time to see the merits of their going on the public market. Meanwhile, everybody is waiting for Demand's stock play.

Vibrant, which up till now has been a little-watched, humble internet company, specializes in a sector of internet advertising known as "in-text," or, to some, the bothersome ads that pop up when your mouse hovers over hyperlinked text. It signs exclusive deals with publishers and sells key words found within the body of the publishers' articles to advertisers. The links are identified by a green double-underline. The company has already expanded into France and Germany and Mr. Stevenson said they're working on plans to move into Latin America and Asia.

At the moment, the company said its annual revenue hovers just above $100 million, with no debt on the books.

"It's already profitable, and they've got a lot of options open to them, including going on the public markets," said Deric Emry, a partner at Vibrant's principal backer, ABS Capital Partner, who confirmed the company has reached out to investment banks. He said investors these days look more to a company's CFO to determine the merits of a public offering, which makes Mr. Babka's hiring key to pushing through an IPO. "The bankers can't babysit like they did years ago," he said.

Oleg Korenfeld, VP-revenue at Hachette Filipacchi Media, said Vibrant is generating good revenue for Hachette, which has been a Vibrant publishing partner for over three years. "In-text also allows us to generate alternative revenues without forcing any more graphic advertising on the page," he said. Mr. Korenfeld said the editors at Hachette were initially concerned about employing Vibrant's links but, over time, it has become less of an issue. "They're used to these links being there now," he said, "and we haven't heard one complaint from the readers."

Other publishers who have signed on with Vibrant include MSNBC, Gannett, IDG and Cox Communications, along with a host of other smaller publishers supplying the "mid- to long-tail" of internet content, such as Glam and Computer Interactive.

Marketers buying into Vibrant said part of the appeal is contextual relevance.

"If they're reading an article on 3-D TV, we offer up the opportunity for them to view a quick video of our products," said Louis Giagrande, senior manager of digital marketing at Samsung North America. "In-text bridges that gap between search and display." Mr. Giagrande pointed out that in-text ads allow a brand such as Samsung to address concerns about a potential recall of a product or even be in an article that may be negative to offer a competing viewpoint.

Vibrant's business model is heavily reliant on publishers to grow its business. It reached 101 million readers in August, according to ComScore, while its chief competitor in the in-text ad space, Kontera, reached about 92 million for the same month. Kontera is backed by Sequoia Capital.

Some experts say timing the public markets is a particularly difficult proposition right now. "We're seeing two issues with the IPO market," Mr. Philips said. "They're tested but it's not conclusive at the moment. The market hasn't restored to what it was." In the case of Vibrant, Mr. Phillips said that despite the company's stated ambitions, there is also the chance it could be positioning itself as a possible takeover target . "Sometimes companies will announce IPO plans only to make a play to be acquired," he said, though he pointed out that he has no information about Vibrant's inner workings.

"But, clearly, if the window starts to open," he said, "you're going to have a lot of people exploring an IPO."

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