gross margin

Mobile Advertising Comes Of Age

Source: http://www.businessinsider.com/millennial-media-ipo-2012-1

 

millennial media ad impressionsMillennial Media, a mobile advertising network, filed for an IPO last week. We were waiting for this, as we’d predicted this would happen this year (though we didn’t think it would happen so soon).

How is Millennial Media’s business?

Pretty good, actually.

Here are the highlights:

  • The company generated $70 million in revenue in the first nine months of 2011, from just $6.2 million in 2008;
  • The company has never had a profitable quarter and is still losing money, $4 million for the first nine months of 2011.
  • It’s pretty big and growing pretty fast: it processed 40 billion ad impressions in December 2011, and impressions are growing fast (see chart); Millennial Media has 16.7% marketshare according to IDC.

The Business

millennial media revenues and lossesYou’ll almost certainly see plenty of headlines about Millennial “never turning in a profit” throughout its road show. That’s correct. It’s also irrelevant.

Millennial is growing fast and into an enormous market opportunity–mobile advertising. It should not be profitable. Gartner thinks mobile advertising will be a $20.6 billion market by 2015, which may be conservative. That’s the opportunity Millennial is going after.

What’s more, Millennial Media seems to be gaining both market and operating leverage.

millennial media advertisersMillennial Media’s gross margin, which is roughly the amount it keeps after payments to publishers, improved from 34% to 39% in the first nine months of 2011 compared to the same period in 2010. This is happening as Millennial is growing both advertisers and spending per advertisers, as you can see in the chart at right.

What’s more, Millennial’s losses are narrowing, as you can see in the chart above.

All of this suggests that Millennial is gaining both market leverage–as it gets more established it can keep more of the revenue it generates for publishers–and operating leverage–gaining operational efficiencies as it scales up.

The Market

Mobile Advertising RevenueOne thing people might be worried about is competition from Apple and Google. We’re not. Here’s why:

  • Even though Google is much bigger than Millennial (see chart at right, using data aggregated and estimated by Business Insider Intelligence), most of that is on owned-and-operated properties. Google’s AdMob network is bigger than Millennial’s but it is not dominant.
  • Apple’s online advertising format/network, iAds, has struggled in the marketplace.
  • Ad networks are not a winner take all market. On the web, there are a few giants, and many profitable smaller players. There’s no reason why it couldn’t be the same on mobile, and Millennial, as the biggest independent player, is well positioned.

THE BOTTOM LINE: Millennial Media looks like a strong business scaling up nicely in an exciting, fast-growing market. It’s kind of a boring business–an ad network, but it seems to be executing well. More importantly, don’t trust the media reports that will inevitably bang on about how Millennial has never been profitable. Yes, that’s true, but it doesn’t matter.

 

 

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Tuesday, January 10th, 2012 news No Comments

The World’s Largest Blockbuster Drug Just Went Generic — Here Are The Winners And Losers (PFE, WPI, ABC, TEVA, MRK, MYL, CVS, WAG)

Source: http://www.businessinsider.com/the-nations-largest-blockbuster-drug-just-went-generic-2011-11


pfizerap1017

With the expiration of Pfizer’s patent exclusivity on Lipitor, the nation’s top selling drug will go generic and see a market share split that will force manufacturers into a share race.

Lipitor, a cholesterol drug that reduces cholesterol, came to market in 1997 and ultimately peaked with sales of $13 billion. Last year, it contributed $10.7 billion in revenue to Pfizer.

Analysts remain divided over how much market share Pfizer will be able to hold on to. The company is aggressively discounting the drug through a program to entice patients to remain on Lipitor. Over the coming 180 days, Watson Pharmaceuticals and Ranbaxy Laboratories of India will enter the market.

Eight Citi analysts poured over data and see Pfizer retaining 40-50% of market share over the next half year. Delays out of Ranbaxy, which were prompted by U.S. regulatory bans over questionable quality concerns, will aid Pfizer.

But after the 180 days, when another round of pharmaceuticals like Teva and Aurobindo are allowed entry, the cost of Lipitor will drop to “pennies a day,” Citi analyst John Boris writes.

However, most of Lipitor’s decline has already been priced into Pfizer stock over the past year. “We maintain our Pfizer 4Q11E/2012E Lipitor sales/EPS contribution at $930M/$640M,” Boris continues. That represents a Lipitor sales contribution of 14-18% of fourth EPS, before falling to just 2% of earnings in 2012.

The largest to benefit from the change may be drug stores like CVS and Walgreens, which may see an uptick as more patients can afford to take cholesterol medications, even as average drug prices decline.

“In addition, we believe that the drugstores will be able to generate stronger gross profit dollars as the average gross margin for generic drugs is generally 50 to 60%, while the average gross margin for branded drugs is approximately 20%,” Boris says. 

Meanwhile, Pfizer is betting its name on smaller blockbusters in other drug categories to contribute $4 billion in new revenue by 2014 as it re-emerges in a world post-Lipitor.

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Wednesday, November 30th, 2011 news No Comments

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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