Form S-1 · Millennial Media Inc

Millennial Media

Priced March 28, 2012 · $13.00 a share · Original on SEC EDGAR · PDF

Prospectus Summary


PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth under the sections "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in each case included in this prospectus. Unless the context otherwise requires, we use the terms "Millennial Media," "company," "we," "us" and "our" in this prospectus to refer to Millennial Media, Inc. and, where appropriate, our consolidated subsidiaries.

MILLENNIAL MEDIA, INC.

Our Mission

Our mission is to power the mobile app economy through innovative mobile advertising technology and solutions.

Our Company

We are the leading independent mobile advertising platform company. Our technology, tools and services help developers maximize their advertising revenue, acquire users for their apps and gain insight about their users. To advertisers, we offer significant audience reach, sophisticated targeting capabilities and the opportunity to deliver interactive and engaging ad experiences to consumers on their mobile connected devices. Our proprietary technology and data platform, known as MYDAS™, determines in real-time which ad to deliver, as well as to whom and when, with the goal of optimizing the effectiveness of advertising campaigns regardless of device type or operating system. In September 2012, our platform reached approximately 380 million unique users worldwide, including approximately 150 million unique users in the United States alone. More than 38,000 apps are enabled by their developers to receive ads delivered through our platform, and we can deliver ads on over 7,000 different mobile device types and models. Our platform is compatible with all major mobile operating systems, including Apple iOS, Android, Windows Phone, Blackberry and Symbian. According to a December 2011 report by International Data Corporation, a market research firm, or IDC, we are the second largest mobile display advertising platform in the United States with a 16.7% market share. We are the only one of the three principal mobile advertising platform companies that is not affiliated with a particular mobile operating system or set of devices.

As smartphones, tablets and other mobile connected devices become increasingly powerful and affordable, and mobile internet access becomes more widespread and faster, users are consuming more content on their mobile devices. Apps in particular are becoming a popular way for consumers to engage with and consume personalized digital content on their mobile connected devices. Gartner Inc., an industry research firm, or Gartner, forecasts that the total number of downloads from mobile application stores worldwide will increase from 8.2 billion in 2010 to 108.8 billion in 2015, representing a compound annual growth rate of 68%. As the number of apps has proliferated, however, it has become increasingly difficult for developers to differentiate their apps from those of competitors in overcrowded app stores. As a result, large and small developers are competing for advertising budgets and visibility among users in order to realize their business objectives.

With growth in this mobile app-based economy, mobile advertising creates new opportunities for advertisers to reach and engage audiences of potential consumers. Mobile devices are inherently personal in nature, facilitate anytime-anywhere access to their users, allow for engaging app-enabled experiences and offer location-targeting capabilities. We believe that the combination of these features creates a powerful opportunity for delivering highly targeted, interactive advertising through mobile connected devices. However, a number of factors, including device and operating system diversity, as well as technological challenges, make it difficult and complex to deliver mobile advertising effectively.

We help developers and advertisers remove complexity from mobile advertising. By working with us, developers gain access to our tools and services that allow their apps to display banner ads, interactive rich media ads and video ads from our platform. In return, developers supply us with space on their apps to deliver ads for our advertiser clients and also provide us with access to anonymous data associated with their apps and users. We analyze this data to build sophisticated user profiles and audience groups that, in combination with the real-time decisioning, optimization and targeting capabilities of our technology platform, enable us to deliver highly targeted advertising campaigns for our advertiser clients. Advertisers pay us to deliver their ads to mobile connected device users, and we pay developers a fee for the use of their ad space. As we deliver more ads, we are able to collect additional anonymous data about users, audiences and the effectiveness of particular ad campaigns, which in turn enhances our targeting capabilities and allows us to deliver better performance for advertisers and better opportunities for developers to increase their revenue streams. Our use of data for interest-based targeting, including location data, is based on consumer consent, and we offer consumers the ability to opt out of such targeting.

We have built relationships with developers and advertisers of all sizes. Our developer base includes large mobile web publishers, such as CBS Interactive and The New York Times, and large app developers, such as Zynga, Rovio and Pandora, as well as other developers, such as UberMedia and Gogii. Our advertiser clients include leading advertising agencies and brands, including 24 of the top 25 national advertisers as ranked by Advertising Age magazine, or Ad Age, based upon U.S. ad spending in 2011, as well as smaller advertisers and often the developers themselves.

We have achieved significant growth as our platform has scaled and as we have expanded our product and service offerings. From 2009 to 2010, our revenue increased from $16.2 million to $47.8 million, or 195%, our gross margin improved from 29% to 34%, our net loss improved from $7.6 million to $7.1 million and our adjusted EBITDA improved from a loss of $7.0 million to a loss of $6.4 million. From 2010 to 2011, our revenue increased from $47.8 million to $103.7 million, or 117%, our gross margin improved from 34% to 39%, our net loss improved from $7.1 million to $287,000 and our adjusted EBITDA improved from a loss of $6.4 million to earnings of $1.8 million. Our revenue increased from $43.9 million for the six months ended June 30, 2011 to $72.3 million for the six months ended June 30, 2012, our gross margin improved from 38% to 40% during this period, while our net loss grew from $175,000 to $6.2 million and our adjusted EBITDA decreased from $68,000 to a loss of $3.2 million. Adjusted EBITDA is a financial measure that is not calculated in accordance with U.S. generally accepted accounting principles, or GAAP. For an explanation of the elements of adjusted EBITDA and a full reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP measure, see "—Adjusted EBITDA."

During the six months ended June 30, 2012, approximately 12% of our revenue was derived from our international operations, up from 7% during the six months ended June 30, 2011. We commenced our international operations in the United Kingdom during the first half of 2010, launched operations in Singapore during the fourth quarter of 2011 and opened offices in continental Europe and Southeast Asia during 2012.

Industry Background

The convergence of several key trends is driving the growth of the mobile app economy and fundamentally changing the way that users consume content on their mobile connected devices. We believe these trends will continue to create a significant opportunity for mobile advertising. These trends include:

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    Adoption of faster and more functional mobile connected devices. Driven by intuitive user interfaces, increased functionality, faster processing speeds, better graphics processors and advanced display technologies with touch capabilities, it has become possible to deliver innovative, interactive and engaging consumer media experiences on a wide variety of mobile connected devices.
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    Widespread access to faster wireless networks facilitates consumer consumption of content. With the growth of mobile connected devices, consumers increasingly expect to have a high-quality online experience everywhere. Expansion of worldwide 3G network penetration, the rise of next-generation networks, such as 4G, and the prevalence of Wi-Fi access are facilitating the consumption of content on mobile connected devices. The combination of increased network access and faster network technologies is enabling the development of rich media content, presenting new opportunities in the mobile ecosystem.
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    Mobile usage has disrupted how content is consumed. Consumers are increasingly using their mobile devices instead of personal computers or other traditional media to access content. Mobile devices have become an increasingly important part of daily life, with users relying on mobile connectivity to read newspapers, magazines and blogs, watch movies, play games, check sports scores, shop, monitor weather forecasts, conduct banking transactions, find maps and directions and listen to online radio stations. According to eMarketer, Inc., a market research firm, the amount of time spent by consumers with their mobile devices is rising at a faster rate than is time spent viewing other kinds of media.
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    Growth of the mobile app economy. Developers have created apps as an easy, intuitive and interactive way to instantly deliver content on mobile devices. Emerging technologies, such as improvements in computer programming languages for structuring and presenting web-based content, have allowed app developers to harness the increasing processing power and functionality of mobile devices and faster networks to deliver more engaging media to users. Gartner forecasts that the total number of free and charged-for downloads from mobile application stores worldwide will increase from 8.2 billion in 2010 to over 108 billion in 2015.
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    Advertising industry is being disrupted by mobile advertising. Traditional advertising media, such as billboards, newspapers, magazines, radio and television, often suffer from a number of inherent limitations, including limited ability to target specific audiences, limited ability to measure audience reach and, in some cases, limited geographic range. As consumers spend more time online with personal computers, or PCs, digital advertising has proven to be more effective because it allows for user interaction, provides better measurement and achieves expanded audience reach. However, even PC-based digital advertising suffers from a number of significant limitations with respect to personalization, accessibility and location-based targeting, all of which can be provided through mobile advertising.

Benefits of Mobile Advertising

Mobile advertising provides significant benefits both to developers and to advertisers. For developers, mobile advertising allows them to make money, acquire users and gain insight into app usage. For advertisers, the combination of the inherently personal nature of mobile devices, their enhanced functionality and the proliferation of app-enabled experiences creates a powerful opportunity for highly targeted and effective advertising. We believe mobile advertising enjoys a number of benefits over traditional advertising and PC-based online digital advertising, including:

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    anytime, anywhere access to users;
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    personalization of the advertising experience;
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    location-based targeting;
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    more complete user engagement;
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    enhanced audience targeting based on location, behavioral and demographic data; and
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    superior monetization opportunities for developers.

Market Opportunity

Given the benefits of mobile advertising as compared to traditional offline advertising and PC-based online advertising, we expect that marketers will continue to shift their advertising budgets to mobile. Gartner estimates that worldwide mobile advertising revenue, excluding advertising delivered in connection with search requests and maps, will grow from $1.8 billion in 2011 to approximately $13.5 billion in 2015, reflecting a compounded annual growth rate of 65%. We believe that we are well-positioned to capture a significant portion of this growing mobile advertising market.

Complexities of Mobile Advertising

Despite the growing market opportunity for mobile advertising, companies in our industry must address several complexities and challenges in order to effectively deliver mobile advertising solutions, including:

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    fragmentation of the mobile ecosystem caused by a wide diversity of device types, numerous operating systems and varied delivery and user engagement mechanisms;
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    limitations in using traditional identification techniques typically used in PC-based web advertising, such as "cookies";
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    difficulty in predicting user behavior, including when and where a user will be consuming content on a mobile device;
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    varying connection quality that a mobile device may have at any given time; and
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    difficulties measuring performance of ads and user interactions with them on mobile connected devices.

Needs of Mobile App Developers and Advertisers

Developers require a flexible, easy-to-use solution that enables the delivery of engaging advertising to the users of their apps, regardless of the mobile operating system or device being used. Developers of all sizes want to minimize the complexities of monetizing their apps so that they can focus their resources instead on app development.

Advertisers, to achieve their business objectives in the mobile app context, require scale, reach and the ability to target and engage specific audiences. Advertisers need solutions that help optimize their investment by delivering effective campaigns across multiple devices and operating systems, maximizing the number of potential consumers the campaigns reach and then measuring the effectiveness of those campaigns.

Our Competitive Strengths

We believe the following strengths differentiate us from our competitors:

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    Differentiated technology platform. Our MYDAS technology platform is specifically architected to deliver mobile advertising at scale, rather than applying traditional online advertising technology or focusing on particular mobile operating systems. We designed our technology platform for the mobile environment, where the delivery and targeting of ads must allow for a much larger number of variables than in traditional online advertising. Our platform is capable of accounting for, and efficiently analyzing, variables such as wireless connection strength, device operating system and audience profile in real-time in order to decide which ad to send in response to a specific ad request from an app.
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    Large and growing data asset. We collect and analyze data from the billions of ads delivered on our platform each month to create anonymous profiles of unique users. This includes information such as data about the user's location or the user's interaction and response levels for ads shown on the device. This data helps us draw inferences about a user's demographic profile and better understand

      the user's behavior and preferences. To date, we have created more than 300 million proprietary anonymous unique user profiles. As we deliver more ads, our technology platform is able to dynamically recognize and link new information to these profiles, allowing us to continuously refine and gain additional insight into users' preferences and behavior, which helps us better deliver relevant ads to consumers.

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    Sophisticated audience targeting capabilities. By leveraging the extensive data we collect to create audience profiles based on context and behavior, our platform can match advertising campaigns with target audiences automatically in real-time. Our platform also allows us to target these audiences within a specific geographic area to achieve the goals of an advertising campaign. We believe that our targeting capabilities enable us to maximize the campaign objectives of advertisers and the monetization objectives of developers.
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    Trusted partner for developers. We help developers focus on their core business of developing apps. Our extensive experience and data asset give us valuable industry insights and knowledge of successful developer business practices, which we share across our developer community. We believe that this partnership approach with developers helps to solidify our developer relationships and the strategic role we play in their businesses, providing us with increased access to advertising opportunities.
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    Trusted partner for brand advertisers. We have built relationships with leading advertising agencies and brands, including 24 of the top 25 Ad Age advertisers. We offer advertisers access to our mobile advertising specialists, who supervise and support advertising campaigns through all stages of planning and execution. As an independent advertising platform not focused on any particular device or operating system, we believe that we are able to effectively educate our advertiser clients on the latest mobile trends and help them plan and deliver engaging and effective advertising campaigns that deliver sustainable and measurable results.
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    Mobile advertising industry pioneer and thought leader. We believe that we have become the authoritative source for research and insight on the mobile advertising market. Using the data collected on our platform, we publish our monthly Scorecard for Mobile Advertising Reach and Targeting, or S.M.A.R.T. report, which provides a comprehensive view of trends in mobile advertising, and our Mobile Mix report, which highlights monthly trends for connected devices, device manufacturers and mobile operating systems.
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    Significant scale and reach. According to IDC, we are the second largest mobile display advertising platform in the United States, with a 16.7% market share. We are the only one of the three principal mobile advertising platform companies that is not affiliated with a particular mobile operating system or set of devices. In September 2012, our platform reached approximately 380 million unique mobile users worldwide, including approximately 150 million users in the United States. Our technology and tools have been integrated into many of the most popular apps available through major distribution channels, such as Google Play and the Apple App Store.
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    Powerful network effects that connect our developers and advertisers. We believe that developers and advertisers both benefit from the use of our advertising platform. As the targeting capability of our advertising campaigns increases, we believe advertisers will be willing to pay more for our services, which in turn will attract developers to our platform since we can help them more effectively generate revenue through the advertising space within their apps.

Our Growth Strategy

We seek to become the strategic independent platform partner of choice for developers and advertisers wanting to capitalize on the large and growing mobile advertising opportunity. The key elements of our strategy are to:

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    innovate through continued investments in technology and data;
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    deepen our relationship with developers;
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    increase our share of advertising budgets from existing advertisers;
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    acquire new developers and advertisers;
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    increase our global market penetration;
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    expand our network of third-party providers of tools and services;
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    pursue strategic acquisitions; and
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    provide further insight into the mobile app economy.

Recent Developments (preliminary and unaudited)

Our consolidated financial statements for our third quarter ended September 30, 2012 are not yet available. Accordingly, the financial results we present below are preliminary and subject to completion. As a result, these preliminary results may differ from the actual results that will be reflected in our consolidated financial statements for the quarter when they are completed and released. Our expectations with respect to our unaudited results for the period discussed below are based upon management estimates and are the responsibility of management. Our independent registered public accounting firm has not audited, reviewed or performed any procedures with respect to these preliminary financial data and, accordingly, does not express an opinion or any other form of assurance about them.

We are providing the following preliminary results for the third quarter ended September 30, 2012:

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    Revenue of $46.5 million to $47.0 million;
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    Gross profit of $18.8 million to $19.2 million;
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    Gross margin of 40.5% to 40.8%;
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    Net loss of $(1.9) million to $(2.4) million; and
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    Adjusted EBITDA of $1.5 million to $2.0 million.

    Revenue

We expect our revenue for the third quarter ended September 30, 2012 to be in the range of $46.5 million to $47.0 million, which is an increase of approximately $21.3 million to $21.8 million as compared to revenue of $25.2 million for the third quarter ended September 30, 2011. Our revenue from advertiser clients is described in more detail below under "Management's Discussion and Analysis of Financial Condition and Results of Operations—Components of Operating Results—Revenue."

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