Millennial Media Is Said to Talk With Banks About IPO Plans

May 18, 2011, 3:42 PM EDT By Olga Kharif and Serena Saitto

May 18 (Bloomberg) -- Millennial Media Inc., the third- largest U.S. mobile-advertising company, is talking to bankers about a potential initial public offering, according to two people with knowledge of the discussions.

The IPO may come later this year or in early 2012, valuing the company at $700 million to $1 billion, said one of the people, who requested anonymity because the plans haven’t been made public. Baltimore-based Millennial also could be a takeover target, the two people said.

Millennial makes money by helping advertisers find space on mobile devices, such as smartphones. It’s increasing its market share in the industry, even as it vies with technology giants Google Inc. and Apple Inc. Millennial accounted for 6.8 percent of mobile-ad revenue last year, up from 5.4 percent in 2009, according to research firm IDC. The company has carved out a niche by serving ads to different manufacturers’ phones and offering an alternative to the larger ad networks.

“Millennial has done surprisingly well,” said Karsten Weide, an analyst at Framingham, Massachusetts-based IDC. “One attraction is that they are independent and platform-agnostic.”

The total U.S. mobile-ad market generated $877 million in 2010, IDC estimates. Google, the market leader, solidified its standing last year, when it bought mobile advertising network AdMob for about $700 million. Apple, which ranks second, made its own inroads by purchasing the Quattro Wireless ad network for an undisclosed sum in 2010.

Microsoft Talks

Millennial previously held talks with Microsoft Corp. about an acquisition, according to two people familiar with the matter. There are no current discussions between the two companies, the people said.

Millennial is working with 20 of the world’s top 25 advertisers, Chief Executive Officer Paul Palmieri said in an interview. More than 94 percent of customers run repeat campaigns through Millennial, he said. Palmieri declined to comment on the company going public.

As the mobile ad market heats up, Millennial’s valuation could exceed $1 billion, said Tom Taulli, an independent IPO expert.

Millennial’s backers include Charles River Ventures, Columbia Capital, Bessemer Venture Partners, Acta Wireless and New Enterprise Associates Inc. On May 12, the company announced that BroadSoft Inc. Chief Financial Officer Jim Tholen had joined its board. He helped guide BroadSoft to an IPO last year.

Fast Ascent

“As they continue this rapid growth, I can be helpful strategically,” Tholen said in an interview. “Their ascent is pretty impressive.”

Millennial, which doesn’t provide financial results, expects to more than double its revenue this year, Palmieri said. The company also is expanding beyond Europe and the U.S. A new team based in Singapore will seek sales in such countries as Indonesia, Malaysia and India, Palmieri said.

Another focus: video advertising. Those ads currently contribute between 5 percent and 7 percent of revenue, Palmieri said. By year-end, that percentage should rise to as much as 18 percent, he said. Video ads typically sell for about 2 1/2 times more than regular mobile ads, he said.

“It’s going to have a huge revenue impact,” Palmieri said.

--Editors: Nick Turner, Lisa Rapaport

To contact the reporters on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net; Serena Saitto in New York, at ssaitto@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles@bloomberg.net

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