By Drew FitzGerald
Millennial Media Inc. (>> Millennial Media, Inc.) lost more than a third of its market value after the operator of mobile ad networks provided a less-spectacular view of past and future revenue in an increasingly competitive market.
Shares of the Baltimore company Wednesday sank as far as 39% to $8.79, an all-time low, as fourth-quarter revenue fell well below the target management provided in November. A weaker-than-expected projection of sales this year, especially in the current quarter, likely accelerated the selloff.
The drop dragged shares back below their $13 initial public offering price less than a year ago, when Millennial's stock popped 92% on its first day of public trading. The company went on to surprise investors with stronger-than-expected results through September, benefiting alongside a cluster of other companies that jumped into an exploding market for advertising served on smartphones and tablet computers.
Facebook Inc. (>> Facebook Inc) illustrated that market's explosive growth during that time as its mobile ad revenue surged from practically nothing to $150 million by the end of last year.
Millennial's fourth-quarter revenue jumped 68%, yet that marked a slowdown from the previous quarter's 88% surge. The disappointing result prompted some analysts to warn a more-crowded market could stunt the company's double-digit growth in the long run.
"Because there [are] now dozens of mobile ad networks, the piece of the pie that each of them is getting is shrinking," Stifel Nicolaus analyst Nat Brogadir said.
Millennial competes with tech giants such as Google Inc. (>> Google Inc) and Apple Inc. (>> Apple Inc.) as well as smaller companies that provide targeted ads at the margins of popular apps like online radio service Pandora Media Inc. (P).
The company also makes money persuading users to click on a particular ad or download button, charging publishers a fee based on how many clicks they deliver. Executives on Tuesday blamed some of their slower revenue-growth estimates on their decision to avoid business that pays out regardless of whether consumers end up using an app, a model they characterized as unsustainable.
"Ultimately, the receiver of that download, of that incremental download, isn't really getting anything," Chief Executive Paul Palmieri said Tuesday during a conference call with analysts. "This is fool's gold, and there are a few companies that are pursuing this strategy, mostly smaller companies."
Write to Drew FitzGerald at [email protected]
Subscribe to WSJ: http://online.wsj.com?mod=djnwires