Is Bidstack a buy now its placing has passed?
Since we last covered Bidstack, the video game advertising business has added a wealth of talent to its management and advisory teams and carried out a critical placing to support its future growth. With the video game industry continuing to grow relentlessly in the background, we have taken a look at whether the company represents a good buying opportunity at its current 18.1p share price.
Bidstack has created technology that can place adverts into organic spaces within video games in as natural a way as possible. For example, the company can place an advert onto a passing billboard in a racing game, or onto one of the rolling banners found around the pitch in a football game.
The firm’s revenue model is based on two types of customer – game developers and advertisers. On the supply side, Bidstack secures access to advertising space from a game’s publisher or developer. Any revenues generated from this space are then split on an agreed basis. The approach enables developers to create recurring revenues by utilising space with multiple advertisers that – previously – would either be unused or locked in with one advertiser.
Meanwhile, on the demand side, advertisers pay to insert adverts onto Bidstack’s hired video game real estate. The technology enables these parties to maximise exposure by allowing them to alter their campaigns in real time, tailor adverts to specific players, monitor their success and avoid ad-blockers. Importantly, a unique feature of Bidstack’s technology is that its advertising space can be featured on so-called Demand Side Platforms (DSPs). Brand owners and advertising agencies allocate a certain amount to spread among the opportunities uploaded to these platforms that best suit their campaigns.
Since listing last September, Bidstack has taken London by storm – indeed, its shares have risen from 6.2p to highs of 21p. The firm currently sits at 18.1p with a market cap of £45.1m. This rise has stemmed in part from the opportunity presented by such a unique approach to the vast global video gaming industry – indeed, one-third of the world’s population is now estimated to play video games. However, it has also been helped by the organisation’s steady news flow.
Shortly after going public, the company signed a deal with AIM-listed, award-winning video game developer Codemasters. This will see it provide exclusive native in-game advertising to two of the firm’s titles for three years, including the popular game DiRT Rally 2. It has also gone live with its first full integration into a demand-side platform called Avocet Systems, marking the first time its advertising inventory has been able to buy programmatically on a DSP. The company is also in discussions with the Interactive Advertising Bureau (IAB) – a trade group for the digital advertising industry – around creating a recognised advertising category for native in-game advertising.
Since TMS last covered Bidstack in March, the business has also announced numerous high-profile hires. Notably, at the beginning of April, it established an advisory committee to harness the talents of a select group of high-profile executives across both the video gaming and digital advertising industries.
The organisation kicked things off by hiring Pete Beeney and Joel Livesey, senior figures from Spotify and The Trade Desk respectively, to support it in monetising the video game industry’s move towards a streamed subscription model. Several days later, it added Will Kassoy – CEO of AdColony, a video advertising platform reaching over one billion consumers globally – to the platform.
Elsewhere, Bidstack has also hired Mike Hayes as a non-executive director. Hayes has previously worked as CEO of SEGA Europe and America, where he was responsible for over 1,000 employees and more than £400m in annual revenues. He has also worked as sales and marketing director at Nintendo, where he oversaw the launch of well-known brands like Mario, Zelda, Donkey Kong and Streetfighter as well as the.
Finally, this week saw Bidstack announce the appointment of Lewis Sherlock as its new VP sales. Sherlock was most recently head of demand platforms for Europe, the Middle East and Africa at Oath, Verizon’s combination of Yahoo and AOL.
After peaking at 21p towards the end of last month, Bidstack took a mild hit after details of its intention to carry out a placing were leaked. Shortly afterwards, it carried out a £5m raise at 12.5p a share – a discount to the 15.4p at which it had sat the previous day. The company expects the raise to have left it with unaudited available cash in excess of £6m. At the time, chief executive James Draper said this would give the firm the necessary financial resources to capitalise on its strong current position.
‘I believe this will lead to an exciting period for those in and around the business and I look forward to sharing further information on the significant team and commercial developments when I can,’ he added. ‘We’re delighted with progress to date. I would like to thank our existing shareholders and our new investors for their support.’
So, now that the placing is out of the way could Bidstack’s bull run continue? There are currently many strings to the firm’s bow.
Firstly, the company’s current cash balance looks like it could cover its operations for some time – indeed, its administrative expenses for the year ended 31 December 2018 came in at roughly £1.3m, or c.£105,000 a month. This means it has plenty of cash left over to continue pushing its product, an offering that is now backed by an unprecedented level of industry experience.
Crucially, its first-mover opportunity in the video game advertising market still seems enormous. According to Newzoo, revenues from the sales of video games last year were higher than those for the global film, video on demand, and music industries combined. Alongside this massive growth in players, the number of people watching others play has also surged. It is believed that more US citizens now watch gamers play video games than traditional spectating sporting events on TV.
Elsewhere, the industry’s towards streaming is really not something at which to be sniffed. There are numerous potential advantages to the software. For example, it enables users to play games on multiple devices whenever they have a decent internet connection without actually needing to download or install the game. Importantly, because the content is not stored on their device, they can play top-of-the-range games that require state-of-the-art hardware without actually owning that hardware.
With Google, Microsoft, and Sony all backing the move towards streaming, it could be a massive opportunity for Bidstack. Although the company has now recovered broadly from its pre/post-place dip, it will be interesting to see where its shares go now.