Digital Ad Firm Marin Software Files for $75M IPO

One of the Biggest Independent Search Agencies, But Marin Isn't Profitable

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Marin Software, one of the biggest independent search ad firms, has filed for an initial public offering that could raise $75 million.

Marin Software CEO Chris Lien
Marin Software CEO Chris Lien

Founded in 2006, San Francisco-based Marin competes with the likes of Adobe and Google's DoubleClick as well as privately-owned Kenshoo and manages search, display and social spending for big advertisers. It had $42.5 million in revenue in the first nine months of 2012, up from $24.7 million in the same time period in 2011, a 72% increase, according to the filing.

Clients include some of the largest media and digital agencies like Razorfish, MediaCom, iProspect, ZenithOptimedia and Rosetta.

Marin had $3.2 billion in annualized ad spend under its management in 2011 (computed by multiplying the December spend by 12), up from $1.7 billion in 2010. It didn't have a figure available for 2012.

While the filing points to Marin's 14 consecutive quarters of revenue growth, it also raises the specter of better-capitalized competitors like Google and Adobe as a risk to its business, since they have the flexibility to adopt "more aggressive pricing policies" and pour more resources into product development and sales.

And though Marin's revenue shows robust growth, the costs of growing the business through investments in data-center capacity and hiring of sales and marketing staff are substantial and growing. The company reported net losses of $19.2 million in the first nine months of 2012, up from $17.4 million in the same period of 2011, which points to the difficulty of building a profitable company on the low-margin model of digital ad management and optimization.

"We do not expect to be profitable in the foreseeable future and we cannot be certain that we will be able to attain profitability on a quarterly or annual basis," according to the filing.

Flagging other risks, the filing notes that Marin is at the mercy of API access terms provided by partners like Google, Yahoo!, Facebook and Bing, and that its growth depends on the strength of its relationship with ad agencies, which require a substantial investment to build.

"These relationships may not result in additional customers or enable us to generate significant revenues," the filing said.

Marin Software had 386 employees as of September and offices in Australia, France, Germany, Japan, Singapore and the U.K. Marin has raised a total of $78.5 million, including a $30 million Series F round last February.

The IPO was underwritten by Goldman, Sachs & Co., Deutsche Bank Securities, UBS Investment Bank, Wells Fargo Securities and Stifel Nicolaus.

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