In Fast-Growing Mobile Ad Business, How Fast Is Fast Enough?

After Millennial Media reported this week a 71 percent surge in 2012 sales, the company’s CEO started calling top investors — to address their concerns.

As much as the mobile-advertising company is growing, it’s not enough to meet its own targets or the expectations of analysts. While putting ads on phones and tablets may be the industry’s future, predicting the industry’s growth is turning out to be difficult as companies compete to find successful models.

Paul Palmieri, a former Verizon executive who co-founded Millennial in 2006, now answers to shareholders as the CEO of the only publicly traded company focused solely on mobile advertising. He personally called about eight of them to explain why they shouldn’t panic after the stock dropped 38 percent following Millennial’s earnings report. Fourth-quarter revenue of $58 million fell a few million short of what the company had said it would be.

Palmieri’s message: “Don’t worry about the stock.” While it’s dropped around 60 percent since the company’s first day of trading last March, he’s trying to steer investors’ focus to long-term growth. If Millennial were facing too much competition from Google or Apple or one of the private company networks, you would have seen the company’s profits fall. Profit margins will stay between 40 and 42 percent, he said.

The experience hasn’t made Palmieri shy away from forecasts, either.

“We’re very serious about hitting our numbers,” he said. For 2013, Millennial expects sales of $270 million to $280 million, from $177.7 million in 2012.

Since Millennial, unlike competitors, has to publish its numbers for the world to see, it’s something of a barometer for an industry that’s still in its early days, with high expectations. There are few easy comparisons Millennial investors can make, for better or for worse. That makes for a volatile stock.

For example, in an eMarketer report on mobile display advertising, the firm says it expects Millennial’s annual growth rate to be 45.8 percent — slower than the industry average of 70.5 percent, according to the research firm. But the competitors eMarketer includes in that average are Google, Pandora, Apple, Facebook and Twitter, none of which run a mobile advertising platform like Millennial’s.

In the end, that will be the advantage, as Apple, Google and the others prioritize putting ads in their own ecosystems, leaving plenty of space for Millennial to sell, Palmieri said.

“There are very few markets where there’s a true role for an independent player,” he said. “This is one of them.”

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