In less than a decade, Millennial Media has become a titan, if an obscure one, of the mobile advertising industry.
The Canton-based, Baltimore-born startup is generally considered one of the top three mobile advertising companies along with Google and Apple. It went public in spring 2012. In 2013 it acquired two smaller companies as it looks to compete with Google in a mobile ad industry that’s expected to top $40 billion in 2018. Millennial employs 200 people at its Canton headquarters, recently doubled the size of its Baltimore office, “is focused on deepening its roots in Baltimore” — and just parted ways with its 43-year-old cofounder Paul Palmieri.
As of Jan. 25, Palmieri stepped down from Millennial’s board of directors and as CEO of the company he helped build. He left for a position as venture adviser with New Enterprise Associates (NEA), a venture capital firm with international reach and offices in Chevy Chase, Md., that has invested in Millennial Media. (Patrick Kerins, a partner with NEA, is chairman of the board at Millennial.)
“It’s a little bit like a parent sending their child off to college,” Palmieri said in an interview with Technical.ly Baltimore. “On one hand you’re very proud of the outcome of raising a kid and at the same time very, very excited for the next journey.”
In a statement Palmieri said the move to NEA was motivated by his desire to work with “early-stage entrepreneurs.” Although his ties to Millennial are not completely cut. He remains the largest independent shareholder of Millennial Media stock, and for at least another year, he’s staying on as an adviser to Millennial’s board and to Michael Barrett, the former Yahoo! chief revenue officer selected to replace Palmieri at CEO.
Barrett, 51, has said he’s not interested in selling Millennial Media, but he inherits a tall task. Since Millennial’s IPO its share price has lagged. Net losses through the first nine months of 2013 stood at $11.4 million. Although revenue projections for Q4 of 2013 — between $106 and $109 million — exceed the company’s expectations, Millennial Media has an accumulated deficit of $61.5 million as of September 2013. (In the company’s recent S-3 filing, one line reads: “We do not know when or if we will ever achieve profitability.”)
Palmieri is undeterred. “I cherish my ownership. I’m incredibly optimistic about the future,” he said. “This is a company that’s incredibly strong and incredibly focused on growing as the market grows.”
In late January, Technical.ly Baltimore spoke more with Palmieri about his predictions for Millennial’s future, his motivations for leaving the company he cofounded and what he’s expecting next in his new role at New Enterprise Associates.
This interview has been edited for length and clarity.
TB: Why go to work for NEA? What are you looking for there you didn’t have at Millennial?
PP: NEA is one of the largest venture capital firms in the U.S. I think it’s a very special opportunity for an entrepreneur who has taken investment from a venture capital firm, has delivered good results to that firm, and then is welcomed into that firm — it’s one of the things that’s a very positive feedback loop. … They are a group that understands the major platform transformation that’s happening with mobile.
And I wanted to focus on a little bit on where I’d like to be moving toward in the future: thinking about entrepreneurs and what the dynamics of startups are, being able to bring value as new companies are looking at tech and figuring it out.
TB: When did you decide to leave Millennial Media?
PP: Certainly some time ago. We’re not releasing what the time frame was. Recruiting a guy like Michael Barrett takes months, not weeks.
TB: What makes Baltimore city the place for an entrepreneur to found a company, possibly one as big as Millennial?
PP: I think this city is in a very unique position. There’s a lot of skills that are here, desirable skills for starting and building tech companies. There’s engineering talent here that I believe is rare relative to other markets.
TB: Is that an advantage, though, or just a distinction? What’s an advantage to being based in Baltimore?
PP: The advantage companies have being in Baltimore is it’s not Silicon Valley — you have to win. You can’t half-win and be successful if you’re a company in Baltimore. You have to, from the very beginning, be determined that you’re going to be a leader in your industry.
That kind of thought process and discipline I think exists in other companies that have started here in Baltimore, and you see that in a Sourcefire [the Columbia-based cybersecurity firm acquired by Cisco Systems for $2.7 billion in 2013].
TB: Since its IPO, Millennial Media has posted several quarters of losses. What does that mean for the company’s future growth?
PP: I would point you to Amazon’s initial shareholder letter when they went public in the late 1990s: if you’re the kind of investor that’s looking for profits right now amidst growing markets, we will invest in growth ahead of profitability so long as this market is growing at a fast clip. Millennial Media is no different. In a high-growth industry, where you have a company that, prior to going public, turned in profitable results, a company that in various quarters achieved profitability and is constantly sort of on that line between some profit and slightly to the negative, you can tell that that’s a company that’s very closely managing investments in growth and investments in the future.
TB: Do you think Millennial can compete with Google and Apple going forward?
PP: Millennial Media has market share that rivals Google and Apple. Millennial Media has its best days ahead, for sure. We are just at the beginning stages of a very fast growing market for mobile advertising. … From a profitability perspective, the company will post profitability when it’s smart to do so, and will be investing in growth while this market is growing incredibly fast.