THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
11 June 2015
ADGORITHMS LTD
("Adgorithms" or the "Company")
First day of dealings on AIM following £27.0m placing
Market capitalisation at Placing Price of approximately £82.1m
Adgorithms, a leading software company operating in the high growth online advertising market, is pleased to announce that admission and trading of its Ordinary Shares will commence at 8.00am today on AIM.
The Business:
· The Company's proprietary, artificial intelligence based, algorithmic software platform, Albert™, operates in the high growth online advertising market. It enables the automation and optimisation of online advertising campaigns
· Albert ensures campaigns are run efficiently, analysing advertising opportunities and determining the correct price to pay per impression, resulting in targeted placement and maximised return on investment for advertisers
· Albert has been developed by Adgorithms over the past five years, is highly scalable, self-learning and through its ability to analyse consumer behaviour is able to constantly update its knowledge to predict user intent and deliver impressions that are likely to engage the viewer
· Adgorithms is profitable and cash generative, with a blue-chip client base, which helps validate the effectiveness of its technology. Adgorithms currently employs 45 employees, 23 of whom focus on research and development
Placing highlights and use of proceeds:
· The Placing has raised approximately £27.0 million before expenses through the placing of 20,300,751 Ordinary Shares, comprising 16,541,353 new shares and 3,759,398 existing shares at a placing price of 133 pence
· The net proceeds of the Placing receivable by the Company are expected to be used to fund the following key initiatives:
- Accelerate both investment and development of Albert in order to maintain Adgorithms' competitive advantage
- Integrate the Company's SaaS platform into some of the world's leading brands who have expressed an interest in licensing the software to manage online campaigns in-house
- Broaden the Company's sales footprint, opening offices in New York, San Francisco and London, in order to drive account wins and feed more campaigns into Albert
- Selective acquisitions of media agencies, who have corporate clients but have little or no exposure to technology, in order to accelerate the widespread adoption of Albert
· On Admission, the Company will have a market capitalisation of £82.1 million at the placing price, with 61,698,853 Ordinary Shares in issue at Admission
· Adgorithms will trade under the ticker symbol ADGO and its ISIN will be IL0011354904
· Liberum is acting as NOMAD and Broker to Adgorithms
Or Shani, Chief Executive Officer of Adgorithms, commented:
"We are delighted with the support shown by institutional investors, which is a further strong endorsement of our technology, business model and future growth prospects.
"Since founding the business in 2010, we have developed one of the most cost effective, efficient and scalable software solutions in the online advertising sector. Our technology is able to adapt and update depending on consumer behaviour patterns and react to market change, but, more importantly, we offer customers increased return on their advertising spend.
"As a public company, we believe shareholders and customers will benefit from our ability to capitalise on the growth opportunities that exist within the online advertising market."
For further information, please contact:
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Adgorithms |
Tel: +972 3537 7137 |
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Or Shani, Chief Executive Officer |
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Ron Stern, Chief Financial Officer |
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Liberum (NOMAD and Broker) |
Tel: +44 20 3100 2000 |
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Neil Patel / Chris Clarke / Tom Fyson |
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Vigo Communications |
Tel: +44 20 7016 9570 |
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Jeremy Garcia / Ben Simons / Fiona Henson |
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Capitalised terms used in this announcement have the meanings given to them in the Company's admission document published on 5 June 2015.
The Company's admission document is available at http://adgorithms.com.
About Adgorithms
Overview of Adgorithms
Adgorithms is a software company which operates in the high growth online advertising market. Over the past five years, Adgorithms has developed a proprietary, artificial intelligence based algorithmic technology, called Albert, which is one of the most efficient, cost effective and scalable software platforms in the online advertising market.
The market has experienced significant structural change in recent years. Traditionally, brands employed media agencies to create advertising campaigns and purchase advertising placement opportunities on publishers' websites. Agencies would liaise with publishers directly to acquire a predetermined amount of online placement opportunities or ''inventory'' for their clients.
The key challenge facing brands and agencies is selecting the inventory that will deliver the best ROI for advertisers, given the quantum of advertising opportunities available.
The Company created an artificial intelligence based proprietary software solution to make the process more efficient for advertisers by maximising their ability to deliver an advertisement to the right user, at the right price and at the right time, delivering attractive ROIs. Furthermore, unlike labour-intensive campaign management, Albert can automate the management of hundreds of thousands of campaigns simultaneously, allowing the Company to significantly leverage its personnel and scale its business rapidly.
Business Overview
The Company's software, Albert, is a proprietary artificial intelligence based programmatic platform, which plans, identifies, prices and delivers relevant advertisements in multiple fields of online advertising.
Using complex algorithms, historical data and artificial intelligence, Albert seeks to predict user intent and deliver advertisements that are likely to engage that particular user and result in higher engagement for the brand. It analyses the available advertising opportunities on the advertising exchanges, decides which one of them is most relevant and ultimately determines the right price to pay for a specific impression. The advert is then displayed on the screen of the user. This whole process occurs in under a second.
Key strengths of Albert
Adgorithms' technology has the following strengths which differentiate it from other technology companies and position the Company to capitalise on the opportunities in the online advertising market.
Automation of campaign management
The Company is highly scalable given the ability of its software to significantly leverage personnel. The Directors believe that by using Albert, an employee can oversee up to 5,000 campaigns simultaneously, whereas a single employee in a traditional agency engaged in manual campaign management can manage only tens of campaigns simultaneously.
Self-learning
The accuracy of Albert improves with every online advertisement it delivers, as it incorporates new data whilst continuing to learn from previous data. This ability of Albert enables it to adapt to changes in the marketplace in order to capitalise on opportunities and to minimise purchasing of non-effective inventory, including fraudulent advertising activity.
Understanding of consumer behaviour patterns
Albert has powerful and actionable insights into consumer behavioural patterns and web properties that it can leverage, such that the Directors believe it is able to target the most relevant audience for a particular advertising campaign more effectively, and achieve KPIs set by brands quicker and more cost effectively, than its peers. Adgorithms offers clients targeted online advertising via demographic, geographic location, time of day and behavioural characteristics.
Cost of media
Albert is able to attribute an economic value to an online advertising opportunity on a granular level which, when appraised in the context of an advertising budget of a client, can maximise ROI and reduce client CPA. In the same way, Albert can also identify undervalued inventory available on advertising exchanges which it then acquires and aggregates for resale at its economic value, generating an immediate profit.
Fraud reduction
Fraud is a significant problem in the advertising industry and, according to the Interactive Advertising Bureau trade group, bot-generated traffic accounts for approximately 36 per cent. of web traffic. Using self-developed pattern recognition techniques, Albert is able minimise fraudulent activity for the Company's clients.
Reaction to market change
As Albert is self-learning and recalibrates on a continuous basis, it is able to maintain its performance in fluctuating and volatile markets. The Directors believe that a large proportion of media buying on advertising exchanges is conducted manually and such campaigns are therefore less responsive to market changes.
Clients
The Company provides services both directly and indirectly to brands and media agencies.
Direct
Adgorithms works directly with companies who wish to advertise their goods and services, and also with media agencies working on their behalf to optimise advertising campaigns. At the outset of an engagement, the Company is supplied with creative materials, such as a banner or video advertisement, a pre-defined KPI to launch an advertising campaign and an advertising budget. Examples of KPIs include a number of user click-throughs on a banner or a user watching a video advertisement for a specified period of time. The creative materials and KPIs are inputted into and processed by Albert, following which it bids for impressions in real time based on observed or predicted user intent. Albert will then optimise the performance of the campaign until the KPI is reached. Albert does this by using its own data and also proprietary data which its clients provide (including data in relation to which users have the highest value to the client), contributing to the feedback loop.
By using Albert to determine the right price to pay for a particular impression, the Company has a proven ability to maximise ROI from a client's advertising budget and reduce customer CPA. The automation of the campaign management by Albert also minimises the need for human intervention, creating efficiencies and reducing labour costs for the advertiser, and particularly for media agencies (which often manage many campaigns concurrently).
Indirect
In addition to managing campaigns directly, Adgorithms also uses its software to acquire inventory from advertising exchanges which it believes to be under-priced relative to the economic value Albert prescribes to a particular impression. This inventory is then aggregated and sold, via the advertising exchanges, to advertisers or media agencies seeking advertising space.
The Directors believe that large global brands and media agencies have difficulty buying cost effective and high quality impressions in scale and they therefore value Adgorithms' ability to identify such impressions. Furthermore, it is recognised by brands that a large portion of impressions are ineffective or fraudulent. Since Albert has the ability to predict which impressions have a higher statistical likelihood of user engagement, the impression packages that it sells ordinarily command a higher than average price per impression.
SaaS
In 2014, the Company launched a beta version of an online self-service platform under a SaaS model that brands and agencies can license in order to manage campaigns online by themselves. It allows clients to run online advertising campaigns automatically, reducing the unnecessary complexity and cost associated with manual processes and multiple providers involved in advertising campaign management. It also enables brands to own all of the data generated during their campaign and gain specific insight into the effectiveness of their campaigns, enabling them to continually improve their marketing strategy.
It is intended that a portion of the net proceeds of the Placing will be used to fund the continued development of this platform. The Company's strategy is to target larger brands and agencies with its SaaS offering, whilst continuing to serve smaller clients in-house.
ALBERT
The Company's technology solution enables online advertisers to efficiently and effectively engage and convert customers. Its solution is comprised of the Adgorithms software, called Albert, data assets, the feedback loop and access to display, video, mobile and social advertising inventory through the online advertising exchanges.
Overview
On a daily basis, the Company is presented with billions of opportunities to deliver an advertisement to users when advertising impressions become available through the various advertising exchanges. For each impression that becomes available, the Company has realtime software systems that recommend an advertiser's specific creatives (e.g. banners or videos) based on a prediction of the likelihood of a user engaging with an advertisement. Albert is designed to determine the most appropriate advertisement to show to the user and determines what price to pay for the advertising impression.
The core of the Company's solution involves:
· determining a user's engagement with display advertisements, which is a relatively rare event that requires a large sample size of relevant data to accurately predict;
· obtaining a large sample size of relevant data, which is difficult, in particular where the most relevant data points are also the most sparse e.g. very recent data on specific product interest; and
· building powerful, scalable and flexible systems that operate both accurately and quickly, between the time a user navigates to a page and an advertisement is delivered.
Albert is designed to continuously download data from advertising exchanges, analysing and storing it in its internal database. It then re-calibrates its prediction models so that the prediction and bidding are constantly up to date with new media sources available through the exchanges and with the ever-changing pricing and quality landscape of existing media. As those internal predictions are updated in Albert, they are propagated to the various exchanges so that customer's campaigns running in the exchanges can bid more aggressively for opportunities that are considered positive for that advertiser, and less aggressively or not at all for opportunities the software now considers less favourable.
To achieve those performance goals, Albert acquires hundreds of gigabytes of data daily, containing information on impressions, engagements and conversions, and performs tens of thousands of updates every hour. It collects and analyses information on millions of online websites and mobile applications that are available for it to advertise in, evaluating the performance of each of the campaigns it manages in those websites and based on that generates prediction for future performance of advertising campaigns in relevant media spots. Using this feedback loop, Albert is able to choose from the tens of billions of available opportunities daily, the hundreds of millions of impressions it predicts would be optimal for its customers.
MARKET OVERVIEW
According to ZenithOptimedia, the global advertising market will grow 4.9 per cent. in 2015 to reach US$545 billion by the end of the year. Growth in 2016 and 2017 is expected to increase to 5.6 per cent. and 5.2 per cent., respectively, driven by stronger global economic conditions, spread of the mobile medium as an advertising channel and growing role of programmatic in the media buying process.
Increasing proliferation of the internet worldwide and, more recently, the mobile medium has resulted in online advertising expenditure being the fastest growing medium within the total global advertising space.
Within the programmatic section of the online advertising market, Albert is positioned at the most advanced end, where there are very few participants. Albert allows full automation of programmatic buying, differentiating it from competitors who engage in programmatic buying, due to its artificial intelligence based approach.
STRATEGY
As the online advertising market continues to trend toward programmatic buying and campaign management, the Company's goal is to become the leading automated platform through which brands and agencies optimise online advertising campaigns to deliver user engagement and conversion.
The Company's key strategic focus is to bring Albert to the mainstream of online advertising campaign management through both its in-house and SaaS offerings.
The Directors believe that mainstream adoption of the technology will be accelerated following successful acquisitions by the Company and management of larger online advertising budgets by Albert.
Adgorithms has two key strategies to grow its direct client network:
US & European Sales Offices
The Company intends to open an office in New York followed by offices in San Francisco and London and recruit a sales team to drive account wins with direct clients, including brands and media agencies.
M&A
Given the scale of the opportunity available to the Company, the Directors believe the Company can accelerate direct sales penetration via acquisitions, in order to capitalise on the rapidly developing online advertising market and build market share.
The Company aims to acquire online advertising-related companies with a large direct client base and strong sales teams. Following the integration of Albert into these companies, management expects to reduce the cost of media and account management headcount, thereby improving margins and profitability. Furthermore, by using Albert to run the advertising programmes of their client base, the Director's believe Adgorithms can influence the success and outcome of these campaigns. Over time this is expected to further enhance profitability.
Adgorithms intends to make selective acquisitions in the near term, funded by a portion of the proceeds of the Placing and the Company's existing cash flow.
CURRENT TRADING & PROSPECTS
Since 31 December 2014, the Company's trading has experienced strong year on year growth, in line with expectations.
The Company has also commenced revenue generation from the mobile and social advertising segments of the market, which represent new business units of the Company.
The Company's revenues experience seasonality, customary to the online advertising industry, whereby those in the last quarter of the year tends to be the strongest quarter, driven by the holiday and shopping season in the US and Europe, as well as the tendency for brands to spend the remainder of their advertising budget prior to year end.
BOARD OF DIRECTORS AND SENIOR MANAGEMENT
John Allwood, Independent Non-Executive Chairman
Mr. Allwood is a non-executive director of TalkTalk Telecom Group plc and IMImobile plc. He has spent his career in media and telecoms holding a number of senior positions including Chief Executive of Orange UK, Finance Director and Chief Executive of Mirror Group plc, Finance Director and COO of Mecom Group plc and Managing Director of Telegraph Media Group Limited. He is a governor of Exeter University.
Or Shani, Chief Executive Officer
Mr. Shani founded Adgorithms in 2010. Mr. Shani has significant leadership experience from the online advertising industry, previously serving as the Head of Online Marketing at Online365 (now WebForce), Director of Trading Business Development at SupersonicAds and Head of Affiliates and Media Team at ValueNet. Previously, Mr. Shani worked at Mansion Group, an online gaming operator, in a Media Buying capacity. Mr. Shani also served as an officer in the Israeli Air-Force for 8 years.
Ron Stern, Chief Financial Officer
Mr. Stern has twelve years of M&A, Private Equity and Venture Capital experience. He was previously Senior Advisor to the Pritzker Group, Chicago-based investment firm, where he was responsible for deal sourcing in Israel. Previously, he assisted Kleiner Perkins Caufield & Byers in identifying and evaluating investment opportunities in Israel. Prior to his work with KPCB, Mr. Stern was a partner at Shamrock Capital Advisors, the investment arm of the Disney family. At Shamrock he was responsible for executing ten transactions and served as Executive Chairman of a U.S. technology company, where he led a successful turnaround of the business. Prior to Shamrock, he was a Senior Associate at Cap Gemini Ernst & Young in New York and worked at the purchasing department of Intel in Israel. Additionally, he is the founder of Value Israel Ltd., a private investment advisory firm focused on the high tech and clean energy sectors in Israel. Mr. Stern is a graduate of the Hebrew University of Jerusalem and Columbia Business School, where he attained his MBA in Finance and Entrepreneurship.
Lisa Gordon, Independent Non-Executive Director
Ms. Gordon brings over 25 years of industry experience to Adgorithms. She is currently Corporate Development Director at Local World, a large media network focussed on regional news via online and print titles in the UK. She previously served on the board of Chrysalis Group plc, and at the time was the youngest female director of a listed UK company, as Corporate Development Director and latterly CEO of Chrysalis New Media. Ms. Gordon has also served as a board member of Future plc, a specialist magazine publisher. She started her career in the City as a research analyst and part of the No 1 Extel rated Media and Leisure team for County Natwest.
Or Russo, Chief Operating Officer and Head of Data Research
Mr. Russo joined Adgorithms in 2012. Mr. Russo has experience in organisational management and data research. He was previously an officer in the Israeli Air Force. He also served in the Air Force's strategic planning branch, in which he deployed the use of data research in order to plan for the future and solve complex problems. Mr. Russo's expertise is the ability to combine between the analytic field of data research and operational side of business execution.
Tomer Naveh, Chief Technology Officer
Mr. Naveh has 22 years of experience in software development, including 15 years in consulting and executive management. Prior to Adgorithms, he served as the Head of Innovation at SundaySky, an Israeli company providing automatically generated videos for online businesses and retailers, where he established the company's online advertising offering used by brands such as Office Depot and Lenovo. Previously, Mr. Naveh was co-Founder and CEO of Glydo, a startup in the online content recommendations space. He was also Vice President of R&D at Onset Technology and MessageVine, and co-owner of Zoop software solutions. Previously, he was a member of the Israeli Army Elite Cyber Intelligence Unit. He is an MBA graduate from Indiana University and additionally holds an MSc in Computer Science (Cum Laude) from the Hebrew University of Jerusalem, and a BSc in Mathematics (Cum Laude) and Computer Science (Summa Cum Laude) from Tel-Aviv University.
REASONS FOR ADMISSION
The Company is seeking admission of the Enlarged Share Capital to trading on AIM as part of its plan to become a leading technology provider for the online advertising sector. The Directors believe that the exposure and governance gained by being a publicly traded company will assist the Company in building trust-based relationships with key global brands. In addition, a public market in the Ordinary Shares will improve access to capital and will provide the Company with the ability to incentivise its employees through the Share Option Plan which will assist the Company in continuing to attract, retain and motivate high calibre employees.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM PART OF, AND SHOULD NOT BE CONSTRUED AS, AN OFFER OR INDUCEMENT TO ENGAGE IN ANY INVESTMENT ACTIVITY OR AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR BUY, PLACING SHARES IN ANY JURISDICTION. IN PARTICULAR, THE PLACING SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT, UNDER THE APPLICABLE STATE SECURITIES LAWS OF THE UNITED STATES OR UNDER THE APPLICABLE SECURITIES LAWS OF AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA AND MAY NOT BE OFFERED OR SOLD DIRECTLY, OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA TO OR FOR THE ACCOUNT OR BENEFIT OF US PERSONS, OR ANY PERSON RESIDENT IN AUSTRALIA, CANADA, SOUTH AFRICA OR JAPAN, IF THE EXTENSION OR AVAILABILITY OF THE PLACING WOULD BREACH ANY APPLICABLE LAW UNLESS AN EXEMPTION FROM ANY REGISTRATION REQUIREMENT IS AVAILABLE.
This document includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'', ''may'', ''will'' or ''should'' or, in each case, their negative or other variations or comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Company's actual results of operations, financial condition, liquidity, dividend policy and the development of its strategies may differ materially from the impression created by the forward-looking statements contained in this document.
The information in this announcement speaks only as at the date of this announcement. Subject to its legal and regulatory obligations (including under the AIM Rules for Companies), the Company expressly disclaims any obligations to update or revise any statement contained herein.
Liberum, which is regulated by the FCA, is acting as broker and nominated adviser to the Company and for no one else in connection with the matters described herein. Its responsibilities as the Company's nominated adviser under the AIM Rules for Nominated Advisors are owed solely to London Stock Exchange plc and are not owed to the Company or to any Director or to any other person in respect of any decision to acquire Placing Shares. Liberum is acting for the Company in relation to Admission and the Placing and no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor for providing advice in relation to Admission or the Placing, the contents of this announcement or any transaction or arrangement referred to herein. Apart from the responsibilities and liabilities if any, which may be imposed on Liberum by the FSMA or the regulatory regime established thereunder, Liberum does not accept any responsibility whatsoever for the contents of this announcement (or the omission of any information in it) or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Placing Shares or the Placing. Liberum accordingly disclaims all and any liability whether arising in tort, contract or otherwise (to the fullest extent permissible by law and save as referred to above), which it might otherwise have in respect of this announcement or any such statement.