Morgan Stanley Launches Coverage of Rubicon Project

Morgan Stanley initiated coverage of programmatic player Rubicon Project with a report that sees a growing programmatic advertising business but an increasingly competitive one.

Rubicon Project this week announced an alliance with AdMore that takes it into the television advertising marketplace.

The report says that Rubicon’s real-time-bidding business is large and growing, with Rubicon having a 12% share of a $6.4 billion market that’s expanding at a 20% rate annually between 2014 and 2020.

“But this space is highly competitive and we see pricing pressure ahead,” the report said. Competing ad exchanges are willing to take substantially lower rates than Rubicon’s. “This take rate pressure holds back net revenue growth . . . and ultimately limits earnings upside.”

Rubicon’s Admore deal involves putting TV inventory on Rubicon's smaller but faster growing order platform.

Morgan Stanley isn’t too impressed with the order platform for three reasons.

  • First, we believe premium inventory will be more difficult to move to programmatic.
  • Second, we don't believe agencies are motivated to adopt this product.
  •  Third, Google is signaling a full launch into the programmatic direct market in 2016.

For those reasons, Morgan Stanley sees a lot of growth in how much revenue goes through the platform but not much net revenue.

Morgan Stanley is rating the stock as even-weight.

Jon Lafayette

Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.