Form S-1 · Telaria Inc

Tremor Video

Priced June 27, 2013 · $10.00 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 and the information set forth under the sections titled "Risk Factors," "Special Note Regarding Forward-Looking Statements," 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 "Tremor Video," "company," "our," "us," and "we" in this prospectus to refer to Tremor Video, Inc. and, where appropriate, our consolidated subsidiaries.

Mission

Our mission is to bring the certainty of science to the art of brand marketing.

Our Company

We are a leading provider of technology-driven video advertising solutions enabling brand advertisers to engage consumers across multiple internet-connected devices including computers, smartphones, tablets and connected TVs. Our clients include some of the largest brand advertisers in the world including all of the top 10 automakers and 9 of the top 10 consumer packaged goods companies. Our relationships with leading brand advertisers and their agencies have helped us create a robust online video ecosystem that includes more than 500 premium websites and mobile applications, over 200 of which partner with us on an exclusive basis. Our proprietary technology, VideoHub, analyzes in-stream video content, detects viewer and system attributes, and leverages our large repository of stored data to optimize video ad campaigns for brand-centric metrics. VideoHub also provides advertisers and agencies with advanced analytics and measurement tools enabling them to understand why, when and where viewers engage with their video ads.

Online video advertising is amongst the fastest growing advertising formats in the United States. According to eMarketer, while overall advertising spend is expected to grow by 3.5% on a compounded annual basis between 2012 and 2016, online video advertising spend is expected to grow by 28.9%. eMarketer estimated total U.S. advertising spend in 2012 to be $165.8 billion, of which online video advertising spend was $2.9 billion, or only 1.7%. As online audiences continue to spend more time watching videos, online video advertising spend is projected to reach $8.0 billion in 2016. Within online video advertising, mobile video advertising spend is expected to grow from $244 million to $2.1 billion, reflecting a 71.1% compounded annual growth rate from 2012 to 2016. Despite this tremendous growth, several factors including audience and device fragmentation, inadequate brand-centric measurement and optimization technology, and lack of performance and placement transparency have made it challenging to effectively deliver online video advertising. Our technology is designed to address these challenges.

Our VideoHub technology is the backbone of the Tremor Video Network through which we offer advertisers access to engaged consumers at scale in brand safe environments across multiple devices. We specialize in delivering in-stream video advertisements, which are served to viewers immediately prior to or during the publisher's content when viewers are most engaged. This is in contrast to traditional in-banner video advertising, which is served on the periphery of publisher content where viewers may not be directing their attention. We further enhance advertisers' campaigns with innovative ad formats specifically developed to harness the creative aspects of online video, which often result in consumers choosing to extend their interaction with a brand's message significantly past the original ad experience. To align our solutions with the goals of brand advertisers, we offer a number of brand performance-based pricing models for in-stream video advertising such as cost per engagement, or CPE, pricing where we are compensated only when viewers actively engage with advertisers' campaigns.

As a result, we enable our clients to effectively purchase measurable brand results rather than just impressions or clicks. We also license VideoHub technology to advertisers and their agencies through an intuitive and customizable console, which we call VideoHub for Advertisers, or VHA.

We have developed strong relationships with brand advertisers and their agencies, who we believe view us as a strategic and trusted partner with a deep understanding of their industry-specific needs. We have also developed strong relationships with publishers due to our ability to provide consistent yield and monetization for their video content. We continuously evaluate and refine our publisher network to ensure that our advertisers have access to premium video inventory in brand safe environments. We believe these relationships have created a network effect whereby advertisers increase their spend with us because of the results we deliver utilizing our proprietary technology and our publishers' premium inventory, which in turn allows us to attract additional high quality publishers and thereby additional advertising spend.

From 2011 to 2012, our revenue increased from $90.3 million to $105.2 million. This included an increase in revenue derived from the delivery of in-stream video advertising from $75.5 million to $99.7 million, or 32.1%. Additionally, over this period, our gross margin improved from 35.2% to 41.7%, driven in part by the adoption of our performance-based pricing models, while our net loss has decreased from $21.0 million to $16.6 million. For the three months ended March 31, 2013 as compared to the same period of 2012, our revenue increased from $17.3 million to $24.8 million, or 43.4%, our gross margin improved from 31.9% to 44.1% and our net loss decreased from $9.1 million to $5.2 million. For the three months ended March 31, 2012 and 2013, our revenue from the delivery of in-stream video advertising increased from $15.7 million to $24.0 million, or 52.9%. As a percentage of total revenue, revenue attributable to performance-based pricing for 2011, 2012 and the three months ended March 31, 2013 was 7.9%, 22.7% and 36.1%, respectively.

Industry Background and Market Opportunity

Advertisers often view the advertising market as a funnel that maps a potential consumer's purchase decision process from the moment he or she is introduced to a brand to the point of purchase. At the top of the marketing funnel, advertisers are focused on building brand awareness amongst the largest possible number of potential consumers and use reach as the primary metric to measure success. Traditionally, advertisers have preferred national television and outdoor media, such as a Super Bowl commercial or Times Square billboard, to achieve brand awareness. At the bottom of the marketing funnel, advertisers are focused on generating specific actions by a consumer in a short period of time. At this stage of the funnel, advertisers have generally relied on direct response marketing, such as newspaper inserts and coupons, as well as online search and display advertising, where conversions are used to measure campaign success.

In the middle of the marketing funnel, advertisers seek to engage consumers and educate them about their brand in order to differentiate themselves from competitors and drive consumer preferences toward a particular branded product to influence future purchase decisions, which we refer to as brand lift. Historically, advertisers have sought to achieve middle of the funnel objectives through print, which can tell a deeper story about a product and its benefits, and allows the reader to linger as long as he or she likes, and to a lesser extent through local and cable television, which offers a more targeted audience for a product's message than national television. Traditional solutions for middle of the funnel marketing have significant limitations because they lack interactivity, the ability to measure and analyze the results of brand-centric ad campaigns in real-time and the ability to adjust campaigns in real-time to optimize for desired performance.

We believe in-stream video is a highly effective channel for brand advertisers to meet their middle of the funnel objectives by combining the rich "sight, sound and motion" of television, the opt-in engagement of print and the real-time measurement and optimization capabilities of online.

Several factors, including the availability of high-speed broadband and mobile network infrastructure, growth of internet-connected devices capable of video consumption, an increase in online video content and a behavioral shift towards online video viewing, are driving robust growth in online video consumption and creating a significant opportunity for in-stream video advertising. As a result, online video advertising is amongst the fastest growing advertising formats in the United States.

Tremor Video Technology and Solutions

VideoHub powers our video advertising solutions to effectively address the challenges faced by brand advertisers to achieve their middle of the funnel objectives.

Through VideoHub we deliver:

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    Brand-centric key performance indicators. We have developed a suite of brand-centric key performance indicators, or KPIs, such as engagement (i.e., the interaction of a viewer with a video ad), brand lift (i.e., a positive shift in preference towards a brand or branded product driven by exposure to a video ad and brand education), and time spent (i.e., the amount of time a viewer spends with a video ad), which are tailored to the needs of brand advertisers.
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    Brand-centric optimization. Using a proprietary algorithm, VideoHub builds a decision tree that predicts performance of the video ad campaign for the chosen KPI based on its analysis of a series of attributes, which we call signals. VideoHub optimizes the campaign for the selected KPI by analyzing the signals of each ad request, such as video player size, geography, publisher, content category, length of video, browser type and viewer data, and prioritizing the delivery of ads that are more likely to perform.
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    In-stream video analysis and categorization. VideoHub performs an analysis on every video stream and categorizes it among one of approximately 72 video content categories enabling us to further optimize a video ad campaign.
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    Ad performance transparency. VideoHub offers advertisers transparency into the workings of its decision tree so that they can understand what signals are driving the performance of their video ad campaigns.
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    Ad placement transparency. VideoHub tracks the number of impressions served to a specific publisher site and whether a video ad placement is fully, partially, or not visible to a viewer, which we refer to as viewability. With this functionality, advertisers know where an ad campaign is running and can validate that their video ads are viewable.
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    Cross site and channel measurement. Our proprietary metric, eQ score+, allows advertisers to compare video inventory quality across different publisher sites by measuring attributes such as viewability, the size of the video player and ad completion rate. In addition, VideoHub provides advertisers and agencies access to metrics that measure audience reach and frequency of viewing by a particular audience, similar to what is used in the television industry, enabling them to compare the brand performance of their online and offline video ad campaigns.

The Tremor Video Network offers advertisers access to premium video inventory at scale across multiple internet-connected devices in brand safe environments.

Through the Tremor Video Network we deliver:

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    Scale and reach across multiple devices. The Tremor Video Network delivers scale and reach across multiple internet-connected devices, including computers, smartphones, tablets, and connected TVs, enabling our clients to use our solutions to address their online video advertising needs across these devices. We have partnered with more than 500 premium websites and mobile applications, over 200 of which partner with us on an exclusive basis.
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    Premium video content. We continuously evaluate and refine our publisher network to ensure that our advertisers have access to high performing content in a brand safe environment.
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    Brand safety. Our technology prevents video ads from being served within content that is identified as objectionable for the brand advertiser, including content that contains accidents, distasteful or obscene language, substance abuse, violence, gambling, sex or crime.
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    In-stream video focus. We specialize in delivering in-stream video advertisements, which can be served to viewers immediately prior to or during the publisher's content when they are most engaged.
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    Advanced ad formats. Our proprietary ad formats give brand advertisers the ability to create a more engaging experience across multiple internet-connected devices, allowing viewers to explore content within the ad itself and learn more about the brand.
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    Innovative pricing models. We offer innovative brand performance-based pricing for in-stream video advertising, such as CPE and cost per video completion, or CPVC, pricing where we are compensated only if the video is completed.

We also license VideoHub technology, packaged with an intuitive and customizable user interface, to advertisers and their agencies through our VHA solution.

Competitive Strengths

Our key competitive strengths include:

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    Differentiated and proprietary technology that analyzes in-stream video content, detects viewer and system signals and leverages our large repository of stored data to effectively optimize video ad campaigns for brand-centric metrics, while reducing operational complexity and cost.
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    Our focus on innovation, which has allowed us to develop advanced ad formats, brand-centric performance-based pricing models, in-stream video analysis and categorization, and advanced analytical tools.
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    Our strong multi-channel capabilities, which allow brand advertisers to deliver their video ad campaigns across multiple internet-connected devices. This alleviates their need to pursue an ad hoc approach with multiple providers.
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    Strategic relationships with brand advertisers and their agencies that we serve through our highly experienced sales force and creative teams. Our clients include some of the largest brand advertisers in the world, including all of the top 10 automakers and 9 of the top 10 consumer packaged goods companies.
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    A publisher network consisting of more than 500 premium websites and mobile applications, over 200 of which partner with us on an exclusive basis. Under our exclusive arrangements, the publishers' video inventory is only available through our sales force and our exclusive publishers' sales forces.
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    A large repository of data generated from over 20 billion in-stream video ad impressions delivered through the Tremor Video Network. We leverage this data asset and the insights we have gained from the billions of video impressions we have previously delivered to continuously refine our algorithms and improve our optimization capabilities.

Growth Strategy

The key elements of our growth strategy are to:

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    continue to develop innovative solutions that improve the transparency and enhance the effectiveness of online video advertising;
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    attract new advertisers and agencies and increase our share of advertising budgets from existing advertisers and agencies, and encourage advertisers to adopt performance-based pricing models;
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    increase our penetration in mobile, which includes smartphones and tablets, and connected TV;
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    attract new premium publisher partners and enter into new exclusive relationships where appropriate across multiple devices;
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    pursue high margin licensing opportunities;
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    extend our technology to brand-focused, programmatic buying for online video advertising; and
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    selectively expand our presence internationally.

Risks Related to Our Business

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the section of this prospectus captioned "Risk Factors." These risks include, among others:

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    The market in which we compete and our business model is continuing to develop, therefore our past operating results may not be indicative of future performance and our future operating results may fluctuate materially and may increase your investment risk.
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    Unfavorable conditions in the global economy or reductions in digital advertising spend could limit our ability to grow our business and negatively affect our operating results.
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    If we fail to adapt and respond effectively to rapidly changing technology and changing client needs, our solutions may become less competitive or obsolete.
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    The market in which we participate is intensely competitive and fragmented, and we may not be able to compete successfully with our current or future competitors.
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    We may not be able to maintain our access to premium advertising inventory, and our growth could be impeded if we fail to acquire new advertising inventory.
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    If we are unable to protect our intellectual property rights or if it is alleged or determined that our solutions or another aspect of our business infringe the intellectual property rights of others, our business could be harmed.

Corporate Information

Tremor Video, Inc. was originally organized as Tremor Media, LLC in November 2005 and converted into a corporation named "Tremor Media, Inc." under the laws of the State of Delaware in September 2006. We changed our name to Tremor Video, Inc. in June 2011.

Our principal executive office is located at 53 West 23rd Street, New York, New York 10010. Our telephone number is (646) 723-5300. Our website address is www.tremorvideo.com. Information contained in, or accessible through, our website does not constitute a part of, and is not incorporated into, this prospectus.

The Tremor Video logo and names Tremor Video, Tremor Video Network, VideoHub, Video Hub for Advertisers, VHA, eQ score+ and other trademarks or service marks of Tremor Video, Inc. appearing in this prospectus are the property of Tremor Video, Inc. and its consolidated subsidiaries. This prospectus contains additional trade names, trademarks and service marks of others, which are the property of their respective owners.

THIS IS THE END OF A COMPOSITION COMPONENT

The Offering

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The number of shares of our common stock that will be outstanding after this offering is based on the number of shares outstanding as of March 31, 2013, and excludes:

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    10,503,925 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2013, at a weighted-average exercise price of $2.26 per share;
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    387,000 shares of common stock issuable upon the exercise of options that were granted after March 31, 2013, at a weighted-average exercise price of $5.43 per share;
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    shares of our common stock reserved for future issuance pursuant to our 2013 Equity Incentive Plan, or 2013 Plan, and our 2013 Employee Stock Purchase Plan, or 2013 ESPP, which will each become effective prior to the completion of this offering and which will each contain provisions that automatically increase their share reserves each year; and
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    213,802 shares of common stock issuable upon the exercise of preferred stock warrants that were outstanding as of March 31, 2013, at a weighted-average exercise price of $2.14 per share.

Unless otherwise indicated, this prospectus reflects and assumes the following:

Unbinding the full filing…