Can the Bidstack bull-run continue?
Since it entered AIM last September, Bidstack Group’s unique take on native advertising has really struck a chord with investors looking for exposure to the rapidly growing video game sector. Indeed, its shares have risen from 6.2p to an impressive 11p over this period, giving it a current market cap of £21.3m. Here, we look at the operational progress made by the company to date before examining whether this positive momentum is sustainable.
Bidstack’s technology is based around inserting adverts into video games on multiple platforms in as natural a way as possible. For example, an advertiser may use the company to place an advert onto a passing billboard in a racing game, or one of the rolling banners found around the pitch in a football game.
Using Bidstack’s advanced technology, advertisers can target users based on variables such as age, gender, and location. This allows them to display different adverts to different users playing the same game, ensuring that potential customers are engaged in the most effective way possible. Meanwhile, advertisers are also able to change their campaigns in real time, allowing them to respond to market trends and business needs.
Bidstack’s business model is based around two sets of customers – those on the supply side and those on the demand side. On the supply side, the firm primarily targets game publishers and developers. Meanwhile, on the demand side, it serves advertising agencies, brands, and programmatic advertising platforms.
Acting as a kind of middle man, the organisation secures exclusive access to native in-game advertising space within video games on a contract basis before selling this to advertisers using a variable pricing model.
According to Bidstack, both sides benefit significantly from its unique style of advertising. Indeed, it argues that supply-side customers can monetise their titles further by integrating adverts into spaces that sit naturally within their games. Meanwhile, advertisers can use its technology to run targeted campaigns, boosting their brand and engaging potential customers without ruining their gaming experience.
Bidstack arrived on AIM in September last year, reversing into a cash shell called Kin Group. Alongside its entry to the public markets, the firm carried out a £3.5m oversubscribed placing and £770,000 vendor placing for certain shareholders at 6p a share. It said this money would provide working capital and finance the next stage of its growth, principally through expanding its sales team and developing the ‘range and efficacy’ of its products.
At listing, the business said its technology had been integrated into four games, including Football Manager 18. It that it had numerous agreements in place with programmatic advertising platform operators, giving it access to a further 150 integrated buy-side platforms.
Since then, the organisation has taken several significant steps forward. In December, it signed a contract with award-winning video game developer and publisher Codemasters to provide native in-game advertising for two of its titles. One of these was racing simulator DiRT Rally 2.0, the sequel to successful BAFTA-nominated title DiRT Rally.
Bidstack said the three-year, exclusive contract positions it to manage virtual advertising real estate for Codemasters across multiple platforms. Chief executive James Draper added: ‘Our agreement with Codemasters, a AAA rated games developer, provides us with further evidence that our proprietary technology is relevant and in demand by the world’s leading games creators.’
Then, in early March, the company announced that it had gone live with its first full integration with a demand-side platform (DSP). The move, completed with a firm called Avocet Systems, represented the first time Bidstack’s advertising inventory has been able to buy programmatically on a DSP. A DSP allows buyers of digital advertising space to purchase programmatically on one interface. This sort of arrangement enables Bidstack to take bids directly and control the price of its advertising space.
The full integration followed Bidstack’s integration with Pubmatic, a publisher focused sell-side platform, in late 2018. Pubmatic effectively acts as a reseller allowing advertisers to access a wholesale type of media purchase.
Draper said that although numerous hurdles remain before the Avocet deal results in a material impact on Bidstack’s revenues, he felt that getting on a DSP represented a ‘substantial achievement’ for the firm.
‘This is a major milestone for the business. It is testament to our technology and offering that Avocet have committed time and resource to overcome the challenges of getting our inventory into a DSP environment – a system originally designed for traditional display and mobile non-native advertising.’
Meanwhile, in March, the company also announced discussions with a trade group called the Interactive Advertising Bureau around creating a recognised advertising category for native in-game advertising.
Elsewhere, Bidstack has given several indications of its plans moving forward. When it listed, the firm said that it intends to broaden the number of games into which its technology is integrated significantly. It added that it was in discussions with a number of games publishers to agree on further exclusive contracts. Meanwhile, it also said it plans to widen its demand-side customer base further, both directly to specific brands and through other agencies.
Finally, in its year-end trading update, released in January, Bidstack announced revenues of £300,000 in 2018 and plans to ‘further strengthen its sales team in 2019 across a number of areas.’
Can it continue?
As mentioned, Bidstack has really captured the interest of retail investors since listing – it currently sits far above its last placing price. Aside from its smart model, which is already showing signs of success after engaging major industry players, a lot of this excitement likely stems from the attractive potential offered by the global video games industry. According to market researcher Newzoo, the global games market is expected to grow from $137.9bn in 2018 to more than $180.1bn in 2021. In other words, the sector is already massive, but soon it will be really massive.
If native advertising catches on as a concept and can capture some of this upside, then Bidstack will be positioned excellently as an early adopter of the technology. Early signs of this potential are already there – in its 2018 results the company said its platform on Football Manager 18 and 19 enjoyed c.1m impressions a day alone in December.
Aside from this upside potential, Bidstack is also looking comfortable on a corporate level. Although its cash balance is yet to be published, the company raised a great deal when it listed and has not announced any significant acquisitions since – just keep an eye out on this as we move forward. Elsewhere, the firm also boasts an impressive share register. It has already attracted the interest of Scottish billionaire and Stagecoach founder Ann Gloag, while Draper owned more than 20pc of the business back in September last year (the last update on the firm’s website).
It will be interesting to see if Bidstack can maintain the positive momentum it has generated since listing over the coming weeks and months by delivering more deals and harnessing the power of the video game industry.