There's an old adage when it comes to investing: follow the money. More often than not, it's a wise consideration. After all, big money, for some reason, tend to know more than the ordinary retail investor. Whether that's drawn from raw intuition or from an excessive amount of due diligence really doesn't matter. What does is for investors to pay attention. And with that in mind, investors may want to learn why significant investment dollars have been sent in Kubient's (NASDAQ: KBNT) direction, sending shares about 7% higher since last week.
Before getting into why Kubient is attracting attention, it's worth noting that outside investors and insiders are increasing stakes significantly. For instance, Saudi Arabian investment company Mithuq Capital SPC increased its stake in the company to 10.1% last month. Notably, Mithuq also owns a reported $300 million stake in Tremor (NASDAQ; TRMR), an ad-tech company that KBNT has ties to. Thus, connecting the speculative dots, Mithuq's interest there, especially with the three already linked, could bode well for additional Mithuq interest in Kubient going forward. And, by the way, insiders aren't giving up equity, either. They, too, have been accumulating, with the reporting group now owning about 40.1% of the outstanding stock. Moreover, not a single insider sold shares at any time last year. Thus, while many small-cap investors get the "needed cash to pay taxes" selling excuse from insiders, KBNT shareholders had none of that.
That's indeed a vote of confidence. Not only that, when 41% of company shares are aligned with its retail base, good things tend to happen. And based on its 2022 business plan to accelerate client adoption of its Audience Cloud technology, investors, especially those taking advantage of current undervalued prices, may do more than benefit from those "good" things; they may earn potentially exponential returns in the process.
There are plenty of reasons to turn that expectation into reality.
The Best At What They Do
The biggest may be that Kubient is considered the best at what they do. And in no uncertain terms, it's an essential function in a multi-billion-dollar space. Its mission is well-defined- transform the digital advertising industry to audience-based marketing through its next-generation cloud-based infrastructure. Doing so enables efficient marketplace liquidity for buyers and sellers of digital advertising. Sounds like a simple proposition, right? It's not when taking the matter to the highest level. That's what KBNT intends to do.
Actually, they already are. The company created Kubient Audience Cloud, an innovative and comprehensive technology and platform that facilitates a flexible open marketplace for advertisers and publishers to reach, monetize and connect their audiences. Stay with me; that's the easy part.
Where Kubient differentiates itself and really shines a new light is that its platform is proving to be the best at providing a transparent programmatic environment utilizing proprietary AI-powered pre-bid ad fraud prevention technology. Not only that, they embed proprietary real-time bidding marketplace automation for the digital out-of-home industry, performing each function at lightning-fast speeds.
Better still, its Audience Cloud platform has a massive market reach, enabling its product to offer a best-in-class solution for brands and publishers that demand transparency and the ability to reach audiences across all channels and ad formats. In other words, if it's digital, advertisers and promotion companies need Kubient.
Its product is so needed that KBNT earned attention from Lake Street Capital, resulting in an engagement enabling KBNT to more quickly develop innovations and enhance its technological capabilities. The relationship also opens several new opportunities.
In fact, Kubient CEO noted that in addition to the continued strengthening of its Audience Cloud marketplace, the relationship with Lake Street adds optionality to merge, acquire, or invest in complementary businesses at a much faster rate. By the way, that's part of the Kubient game plan. And to support that intent, Lake Street's role is to look for strategic opportunities and investments that can extend KBNT's business reach to drive revenues higher. In turn, KBNT growing into the size of Verve or Tremor could happen faster than many expect. And considering that its deal with Lake Street is likely performance-based, expect some news on that front, possibly sooner than later.
Technological Power Play
The excellent news is that whether a deal is a merger of equals or an outright acquisition, KBNT has the luxury of bargaining from a technological position of strength. Few, if any competitors, can match Kubient's under 300 milliseconds speed to detect ad fraud, and that ability is accelerating the pace for Kubient to distance itself from the competitive landscape.
Keep in mind, ad fraud is a huge market to target. And for all intents and purposes, not a single advertiser, despite its budget, should be under-appreciating the value Kubient provides. On the contrary, paying attention could save some advertisers millions of dollars per year. It's an easy calculation after understanding the process of digital ad placement.
The simplest explanation is this: when a webpage loads, advertisers compete in bidding and placing ads to drive user interest and have a targeted audience learn more about the product or service offered. This, of course, happens at milli-second speed, so much so that potentially millions of ads can be scanned and evaluated for page placement. That's the advantage of speed, which Kubient has. However, that's just one part of the Kubient value.
Kubient technology goes way beyond speed of execution with its inherent ability to recognize whether the internet traffic for where the ad is placed is being visited by humans or bots. It's a significant issue costing advertisers substantial amounts of money. Remember, if an ad talks to a bot, at least in 2022, it isn't worth the money spent. Advertisers know this. However, the problem is up until Kubient's platform, when an advertiser bid to land a spot on a web page, they remained unable to tell if the ad was being viewed by a human or a bot. That is unless that advertiser is using Kubient.
Frankly, they should be. In addition to being cost-effective, Kubient technology identifies ad fraud in a fraction of a second, with further detection signaling whether a webpage is loaded by a human or bot. No ad bid gets placed if the millisecond scan indicates it's a bot. If it's legit, the advertiser sets the offer. It's an invaluable tool that can eliminate fraudulent ad spending on views that have zero chance of resulting in a sale. Know this, too; it's a big business offering massive opportunities.
Billions Needing Protection
Stats from 2020 showed that ad fraud cost advertisers more than $13 billion. But, that's not an alarming number compared to the expectation that ad fraud will reach upwards of $100 billion by 2023. The thing is, it doesn't need to be a part of the business, and there should be no residual waste like in the food sector business. In advertising, companies should expect and get what they pay for. Kubient provides that service.
Moreover, they have management making sure that its business continues to target the right market addressing the right needs at the right time. Revenues are pushing higher as a result. Kubient generated about $2.9 million in 2020 revenues. Since then, the numbers are ramping higher, with KBNT posting a net revenue increase of 141% year-over-year and 35% quarter-over-quarter to $677,000. Those gains are organic, coming through an increase in partnerships on both the supply and demand side of the Audience Cloud marketplace.
While Kubient doesn't provide guidance, it's fair to suggest that its revenue trajectory is to the upside. As consumers turn more toward digital commerce, that trend should stay in place for the foreseeable future. More good news from a valuation perspective is that the company has only about 14.4 million shares outstanding. And with 41% of those shares tightly held, investor demand could propel its roughly $39 million market cap considerably higher. KBNT stock traded as high as $16.26 over the past 52-weeks, and with KBNT looking better positioned than ever to earn new business, that high could be in the crosshairs for later this year.
If all goes as planned, it's well within reach. Moreover, despite arguments that ad detection software and technology can be commoditized, that's actually far from the truth. Although several companies can do some of what Kubient can do, few, if any, can do everything Kubient can do. In addition, technology is changing by the day, and not all ad-fraud protection companies have the means to keep pace with upgrading their technology to meet new challenges. That's not the case at Kubient.
After a successful capital raise last year, Kubient has the cash, talent, and technology to meet new challenges head-on. To those seeking undervalued investment opportunities, that should be the defining consideration when evaluating Kubient as an investment.
Different Is Good, Being The Best Rules
By the way, being best-in-class does make a difference. Consider this. Mobile phones can be purchased for $25 to upwards of $1000, and both can do many of the same things. But, many people buy the more expensive phone because it does so much more in addition to doing the expected. That's the way to look at Kubient.
While Kubient has competitors that can do some aspects of ad fraud protection, they lack the layers of platform functionality to do it quickly and accurately. Remember, blocking legitimate ads doesn't inspire client satisfaction. Thus, with potentially billions at stake, expect Kubient to continue earning client attention by being the best in the market and delivering results beyond those offered by commoditized competitors.
Beyond client interest, investors should take advantage, too. Indeed, there's a lot to appreciate at Kubient. They have a strong shareholder base, significant insider ownership, deep-pocketed investors increasing positions, and technology that is best in class today and scalable to meet the needs of tomorrow. So, at $2.71 a share, Kubient stock is more than attractive; it presents a valuation disconnect that is simply too big to ignore.
In this case, the better alternative may be to pay attention. Better still, consider the investment into Kubient before the valuation gap closes.
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