Kubient, Inc. (NASDAQ: KBNT) shares are attractive at current levels. In fact, they present a valuation disconnect that is, for all intents and purposes, too big to ignore. And not everyone is. Kubient recently earned a significant boost in interest from Saudi-based investment company Mithuq Capital, a billion-dollar investment firm that increased its ownership position in Kubient to upward of 10.1%.
Keep in mind, Mithuq Capital also has a reported $300 million stake in another ad-tech company, Tremor (NASDAQ; TRMR), which is not only a significant endorsement for the ad-fraud prevention sector in general but also a signal that they see KBNT doing the right things in the right markets at the right time.
Trust Mithuq's investment instincts. After all, Kubient's mission to eradicate ad fraud through its Audience Cloud Marketplace platform targets a billion-dollar market opportunity. The better news is that only a tiny handful of companies have a platform capable of preventing digital ad fraud to a level comparable to KBNT Audience Cloud technology. Hence, the interest is justified. Moreover, when independent investment companies own a more than 10% stake in small-cap stocks, it's usually a good time to consider following the money.
Of course, investors should make sure there is substance behind investor interest beyond bullish trading momentum. Kubient has plenty.
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Comprehensive Ad Fraud Prevention Technology
Foremost, its Audience Cloud Marketplace ad-fraud prevention platform can be a game-changer to prevent bot-driven clicks for advertisers and hosts and a potential revenue-generating juggernaut to KBNT. Thus, KBNT is a win-win proposition for both clients and investors in a market where digital fraud ad protection and more needed than ever. And since its platform is a more comprehensive approach to tackling the issues, KBNT may be the most well-positioned company to take advantage of the burgeoning market opportunities that see billions of dollars put to work daily. To remain the client choice for protection Kubient has a simple goal- make sure clients get what they pay for.
That's happening now. And its Audience Cloud platform is expected to transform the digital advertising industry and become the gateway to reliable and effective audience-based marketing through its next-generation cloud-based technology. Results can be significant.
In fact, as KBNT continues to prove its competitive advantages, it could become the go-to source to enable efficient marketplace liquidity for buyers and sellers of digital advertising, which puts billions of potential revenue dollars into its near and long-term crosshairs. More importantly, they are doing things differently than their competitors.
Thus, don't compare KBNT technology to a unidimensional ad fraud prevention company; it's not an accurate presentation. KBNT is better, more comprehensive, and able to screen for ad fraud at lightning-fast speeds. Hence, comparing KBNT technology against higher multiple competitors should really only be used to show one thing- the valuation disconnect between price and intrinsic value.
Here And Now
By the way, investors don't need to wait for this "next best thing" in ad-fraud prevention to hit the markets. It's already there. The company created Kubient Audience Cloud, an innovative and comprehensive platform that facilitates a flexible open marketplace for advertisers and publishers to reach, monetize and connect their audiences. As noted, its advantages are inherent to being different.
The Kubient difference is also a significant advantage because its platform provides a transparent programmatic environment utilizing proprietary AI-powered pre-bid ad fraud prevention technology. Not only that, its platform uses additional embedded proprietary real-time bidding marketplace automation for the digital industry that generates detailed, accurate, and actionable data at lightning-fast speeds. Best of all, it allows advertisers to know they are getting what they paid for before they actually pay.
Its market reach is another outstanding feature. Its Audience Cloud platform has a virtually unlimited reach 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. But it gets better. Perhaps the best part of Kubient's Audience Cloud platform is that everyone in the digital ad channel can benefit. And, because it can save a large advertiser potentially millions of dollars a year, and billions in aggregate, by making sure messages are actually seen by real people, it's fair to assume that in addition to helping clients, it's a platform they need.
Others in the investment sector are taking notice, too. Kubient engaged Lake Street Capital to evaluate ways to drive shareholder value higher through additional innovations and enhancements to its technological capabilities. That relationship puts multiple strategic options in play, including the optionality to merge, acquire, or invest in complementary businesses at an accelerated pace.
Incidentally, growth through acquisition remains a vital part of the Kubient game plan. Thus, having an ally in Lake Street, whose role is to look for strategic opportunities and investments, should add considerable value to the forward-looking opportunities. Undoubtedly, the collaboration has established a conduit that aligns KBNT's mission with its shareholder base. Remember, insiders own a significant number of shares. So, deals made through Lake Street can be more than accretive; they can be potentially exponential value drivers in the near and long term.
An Unmatched Element- Speed
Still, trading in the present is fine, too. In that respect, Lake Street may already be close to finding deals that amount to a merger of equals or an outright acquisition. The good thing on that front is that KBNT has the luxury of negotiating agreements from a technological position of strength by having an impressive portfolio of assets. And, don't think competitors aren't paying attention. While KBNT competitors may be able to do some of the things Kubient can, few, if any, can match Kubient's under 300 milliseconds speed to detect ad fraud. While a potential deal-maker for KBNT on its own, speed is still only part of the competitive advantage. Its platform's detail, accuracy, reliability, and scalability are other features too good to ignore. Thus, to modify an old saying goes, if they can't beat them, they might as well join them.
Here's why consolidation makes sense. While reading this article, you undoubtedly had a flurry of ads pop up on the screen. Now, these ads weren't set to show days ago; they happened instantaneously based on many factors learned about you. More importantly, they are served with the pretense that a real person at that exact time will be reading them. Getting the ad to show is the easy part. However, there is much more to consider behind the digital scenes.
As an article or web page loads, the behind-the-scenes action is incredible, with thousands of advertisers competing in millisecond speed to bid and place ads to drive user interest and reach a targeted audience to deliver their message about the product or service offered. When the viewer sees the ad, it's a result of potentially millions of scans performed at incredible speeds that decide on the ad itself as well as its placement. However, while that process alone is mind-boggling, it's not what makes Kubient technology a must-have product.
More Than Speedy, KBNT Has Best-In-Class Functionality
What makes Kubient technology invaluable is that beyond the speed of execution, it has an inherent ability to recognize whether the internet traffic for where the ad is placed is being visited by humans or bots. In other words, it sniffs out ad fraud in the blink of an eye, resulting in cost savings to an advertiser. Obviously, if an ad is displayed to a bot, it isn't worth the money spent. Advertisers know this. However, the problem they faced is that until Kubient's platform, when an advertiser bid to land a spot on a web page, they had no insight into whether its ad was viewed by a human or a bot. There was no recourse, either. These ads are done and gone in seconds. Thus, billions spent, sometimes millions wasted. But, Kubient changed the dynamic and positively disrupted the digital ad sector.
That's excellent news for Kubient, its shareholders, and its clients. And as noted, in addition to being cost-effective for clients, Kubient technology sleuths ad fraud in a fraction of a second. The result - no ad bid gets placed if the millisecond scan indicates it's a bot. If it's legit, the page is released, and the advertiser hits the offer. For all intents and purposes, it's an invaluable tool to reduce and even eliminate fraudulent ad spending on views that have zero chance of resulting in a sale. With this in mind, Kubient and its investors benefit from a massive market opportunity. Its clients, though, can save billions in the process.
Tapping Into Billion Dollar Markets
Yes, billions. Current data show that ad-fraud costs advertisers more than $13 billion per year. While that market offers substantial revenue-generating opportunities, it's a drop in the bucket compared to the expectation that ad fraud will reach upwards of $100 billion by the end of 2023. The thing is, Kubient is showing that ad fraud can be stopped. Therefore, by utilizing Kubient, advertisers don't need to account for residual waste as a business condition just to get what they pay for. Operating results show that more clients realize the value proposition, which helped push KBNT revenues significantly higher.
And they are more than good; they are pushing their highest levels ever. Kubient generated roughly $2.9 million in 2020 revenues. But, since then, those numbers are surging higher, resulting in KBNT posting a net revenue increase of 141% year-over-year and 35% quarter-over-quarter to $677,000. Notably, those gains are organic, coming through an increase in partnerships on both the supply and demand side of the Audience Cloud marketplace.
The better news is that a revenue-generating tailwind follows Kubient into the new year. Although the company doesn't provide guidance, connecting the dots suggest that its revenue trajectory is steepening. And, with the ad-fraud market expected to explode higher in 2022-23, revenues could spike appreciably in the process. Here's more good news on a valuation front: Kubient has only about 14.4 million shares outstanding. Better still, with 41% of those shares tightly held and a tightly held interest by Mithuq, investor demand could propel its market cap considerably higher as investors target a return to 52-week highs of $16.26 per share. Incidentally, re-claiming that level makes sense; KBNT appears better positioned today than when they posted that considerably higher stock price.
Moreover, after a successful capital raise last year, Kubient has the cash, talent, and technology to meet new challenges head-on. Thus, several factors point toward Kubient being ripe for investment consideration for investors seeking plays to take advantage of exposed valuation disconnects.
Right Markets, Right Time- Kubiebnt 2022
In addition, it never hurts the investment proposition when the company considered has best-in-class technology. Moreover, that consideration gets heightened knowing there's a place for ad platforms to embrace KBNT technology, especially when digital ad budgets typically go through a tight funnel into the hands of a single provider. This means that clients can and often move away if their services provider isn't trustworthy. Thus, ad hosts have significant skin in the game to ensure they aren't serving bots.
Still, new investors' biggest attraction to KBNT is that Kubient is in growth mode, revenues are tracking higher, and business at the end of 2021 should include an appreciable tailwind into the new year. Not only that, a low O/S count and more than 41% of its shares being tightly held can also contribute to rising prices if KBNT delivers on its near-term objectives. Of course, as alluded to, following the money adds to the value proposition and helps validate the KBNT mission. Thus, a sum of its parts quickly equates to a compelling investment proposition that should be considered sooner than later.
In fact, being timely is advisable as Kubient can easily justify a substantially higher share price valuation today. And considering the accretive opportunities in play, a deal with Lake Street to increase shareholder value, and with KBNT stock proving it can defy the bears in weak markets, what's excellent today can be better tomorrow.
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