You might be surprised to learn traditional television advertising revenues in the U.S. are projected to grow steadily over the next five years. Broadcast and cable television revenues continue to flourish despite operator consolidations, cord cutters, and fresh new online and mobile advertising platforms.
According to the Wall Street Journal*, Proctor & Gamble is rethinking their online targeted advertising strategies due to “limited effectiveness”.
“P&G’s push to find broader reach with its advertising is also evident in the company’s recent increases in television spending. Toward the end of last year P&G began shifting money back into television. During the first quarter of 2016, the company’s television ad spending jumped 11% to $429 million.”
According to PwC on Statista, television advertising revenue in the United States is forecast to grow from $73 Billion in 2016 to $81.7 billion by 2020.
Adaptive Ad Systems, Inc. (OTC Pink: AATV), understands the technical trajectory of television and advertising in the coming decade. AATV is scaled for growth with industry experts and proprietary systems which enable cost efficient ad insertion and full service media buying on television networks in any format, on any device, with broadcasters, cable operators or networks of any size.
Adaptive Ad Systems, Inc. (OTC Pink: AATV): Overview
Newport Beach, California-based, Adaptive Ad Systems, Inc. (OTC Pink: AATV) engages in the manufacturing, marketing, and installation of the company’s unique, proprietary ad insertion hardware, software and turnkey services for cable, broadcast and television network operators.
AATV first enables ad insertion capabilities through cable or IPTV and then delivers quality brand and local advertising revenue to national and regional video providers of almost any size. AATV’s specialty is placement of systems into Universities and Colleges across the U.S.
Adaptive Ad Systems, Inc. (OTC Pink: AATV) has a streamlined approach to advertising technology and placement: Low overhead, automated software and efficient and accurate scheduling and billing through the company’s proprietary technology. Costs are kept to a minimum by outsourcing non-management positions, utilizing cloud technology, automation, and in-house manufacturing.
Overall, the company has built and maintains its own unique, proprietary system for many aspects of its business, including: hardware, ad insertion software, traffic scheduling and billing system. In addition, Adaptive Ad Systems, Inc. (OTC Pink: AATV) has contracted ad systems and services with over 200 cable TV systems, which serves approximately 1.1 Million households, across 45 States and 73 DMAs (Nielsen Designated Market Areas).
Opportunity: 30 Million Households Served By Tier 2 and Tier 3 Cable Systems, Emerging Networks
Across the United States, there are over 30 million households within Tier 2 and Tier 3 cable systems, traditionally found in more rural communities and areas. Available local cable breaks range between 2 to 4 minutes per hour per network if the operator chooses to sell the local inventory for additional revenue, but additional equipment and personnel are normally required. Emerging niche television and broadcast networks ranging from 3 to 20 Million households are also a target opportunity with more than 15 minutes per hour available for national and local commercial insertion and sales.
AATV: Goals and Growth Strategies
Adaptive Ad Systems, Inc. (OTC Pink: AATV) has a sales and implementation strategy in place to contract and install ad insertion systems to 10% of the cable households for 3+ million household minimum. When management accomplishes this goal, Adaptive Ad Systems, Inc. (OTC Pink: AATV) will rank within the top five cable television ad providers. By securing national and regional networks, additional millions of households will provide valuable inventory for AATV clients.
Aside from expanding its cable and network footprint, Adaptive Ad Systems, Inc. (OTC Pink: AATV) has a goal to raise ad sales revenue to $12 per subscriber per year. This is still far below the industry average cable company owned asset ad revenue of $72 to $106 per subscriber per year. In other words, Adaptive Ad Systems, Inc. (OTC Pink: AATV) is able to strategically increase their footprint and develop ad sales revenue, while staying far more cost efficient operationally, compared to the industry average.
Through management’s plans to further expand their ad-insertion network to reach 3 Million households, while keeping costs minimal, Adaptive Ad Systems, Inc. (OTC Pink: AATV) is forecasting the following earnings:
- 2016: revenues of $9 Million and net income of $3.21 Million
- 2017: revenues of $36 Million and net income will expand to $11.9 Million
- 2018: revenues of $72 Million, on net income of $26.64 Million.
Overall, Adaptive Ad Systems, Inc. (OTC Pink: AATV) is in position to obtain 10%+ of the Tier 2 and Tier 3 ad insertion market over the next three years, and the company will be working to secure $8 million in financing to help jumpstart growth and operations. Management will allocate $8 million to be 100% invested in capital purchases: ad insertion hardware installations into new systems, further development of online ad insertion to target streaming advertising markets.
AATV: Financial and Industry Analysis
Turning to the Adaptive Ad Systems, Inc. (OTC Pink: AATV)’s financial and industry analysis, the ad-insertion company has a market cap value of nearly $93.9 million, as of August 2016. Furthermore, Adaptive Ad Systems, Inc. (OTC Pink: AATV) has a share structure of 500 million authorized shares and 48.13 million shares outstanding, as of June 2016.
During the second quarter ending on June 30, 2016, Adaptive Ad Systems, Inc. (OTC Pink: AATV) reported total revenue of $892,814 and a net profit of $289,947 or $0.006 per common stock share. During the first six months of 2016, the company reported total revenues of nearly $1.91 million and a net profit of $624,121 or $0.0130 per common stock share.
Due to Adaptive Ad Systems, Inc. (OTC Pink: AATV)’s unique, proprietary ad-insertion technology and catering to niche cable and network markets throughout the United States, the company does not have any real direct competition within the markets that it operates. However, for the purposes of understanding valuation and a sense of how other companies in the ad insertion and ad solutions industry are currently operating financially. Here are five companies that are worth taking a look at with respect to Adaptive Ad Systems, Inc. (OTC Pink: AATV)’s financials and valuation:
SeaChange International (NASDAQ: SEAC) engages in advertising solutions to cable providers, telecom companies, satellite companies, and other media companies. Solutions include ad insertion, management, distribution of video content, licensing, and more. As of August 2016, SeaChange International (NASDAQ: SEAC) listed a market cap valuation of $115.66 million, 35.16 million shares outstanding, and a float of nearly 34.5 million shares. Regarding ad solutions, the company’s fiscal second quarter that ended on April 30, 2016, reported total revenue of $21.57 million, but a net loss of nearly $8.91 million, during the quarter.
NeuLion Inc. (OTC Pink: NEUL) provides a wide range of digital video solutions and services, such as ad solutions, to on-demand and live digital content events globally. As of August 2016, NeuLion Inc. (OTC Pink: NEUL) had a market cap valuation of nearly $225.9 million and only lists outstanding shares, which was at 282.04 million. During the second quarter of 2016, NeuLion Inc. (OTC Pink: NEUL) reported total revenue of $24.11 million, but a net loss of $776,000 during the period.
TubeMogul Inc (NASDAQ: TUBE) provides software solutions for advertisers. The company’s software allows advertisers to plan, buy, optimize, and calculate global advertising solutions across a variety of platforms including on-demand, digital video, cable, connected television, social media, and more. TubeMogul Inc (NASDAQ: TUBE) has a market cap valuation of $358.67 million, 35.76 million shares outstanding, and a float of nearly 20.32 million shares, as of August 2016. During the second quarter of 2016, TubeMogul Inc (NASDAQ: TUBE) reported total revenue of $55.4 million, but a net loss of $3.8 million during the period.
The Rubicon Project Inc (NYSE: RUBI) is a provider of an advertising buying and selling platform. The technology allows advertisers to buy and sell advertising units, real-time bidding, static bidding, and features advertising solutions for the internet, mobile and other digital platforms. As of August 2016, The Rubicon Project Inc (NYSE: RUBI) had a market cap valuation of $474.5 million, 48.46 million shares outstanding, and a float of nearly 31.56 million shares. During the first quarter of 2016, The Rubicon Project Inc (NYSE: RUBI) reported total revenue of $69.23 million and net profit of nearly $2.3 million during the period.
Alphabet Inc (NASDAQ: GOOG) is a holding company containing all subsidiaries and interests of Google Inc. Google’s rise to dominance was paved through online advertising solutions, which still accounts for an important portion of the overall business, but less so than a decade ago. In addition, with Google Fiber, Alphabet Inc. (NASDAQ: GOOG) is looking to enter into the ad insertion and solutions business through its Google Fiber cable service. As of August 2016, Alphabet Inc (NASDAQ: GOOG) has a market cap value of $539 billion, shares outstanding of 343.6 million, and a float of nearly 591.4 million shares. During the second quarter of 2016, Alphabet Inc (NASDAQ: GOOG) reported total revenue of $21.5 billion and net income of nearly $4.9 billion during the period.
Overall, Adaptive Ad Systems, Inc. (OTC Pink: AATV) is in an excellent position to benefit from expanding market cap, as the company plans to roll out ad insertion solutions to numerous new, niche cable, network and TV markets across the United States for the remainder of 2016. In addition, the company’s lean, scalable business model will help Adaptive Ad Systems, Inc. (OTC Pink: AATV) continues to be among the stalwarts of the ad insertion industry, as other ad rivals carry net losses and heavy leverage. With continued expansion into niche markets planned over the next several years, Adaptive Ad Systems, Inc. (OTC Pink: AATV) could see its market cap expand into the hundreds of millions in the near future.