Attached files

file filename
EX-3.2 - EX-3.2 - Millennial Media Inc.a2207905zex-3_2.htm
EX-3.3 - EX-3.3 - Millennial Media Inc.a2207905zex-3_3.htm
EX-23.1 - EX-23.1 - Millennial Media Inc.a2206760zex-23_1.htm
EX-10.9 - EX-10.9 - Millennial Media Inc.a2207905zex-10_9.htm
EX-10.11 - EX-10.11 - Millennial Media Inc.a2207905zex-10_11.htm
EX-10.12 - EX-10.12 - Millennial Media Inc.a2207905zex-10_12.htm
EX-10.10 - EX-10.10 - Millennial Media Inc.a2207905zex-10_10.htm

Table of Contents

As filed with the Securities and Exchange Commission on March 8, 2012

Registration No. 333-178909

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 3 to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



MILLENNIAL MEDIA, INC.
(Exact name of registrant as specified in its charter)



Delaware   7311   20-5087192
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

2400 Boston Street, Suite 201
Baltimore, MD 21224
(410) 522-8705
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)



Paul J. Palmieri
President and Chief Executive Officer
Millennial Media, Inc.
2400 Boston Street, Suite 201
Baltimore, MD 21224
(410) 522-8705
(Name, address, including zip code, and telephone number, including
area code, of agent for service)



Copies to:

Brent B. Siler, Esq.
Ryan E. Naftulin, Esq.
Brian F. Leaf, Esq.
Cooley LLP
One Freedom Square, Reston Town Center
11951 Freedom Drive
Reston, VA 20190-5656
Tel: (703) 456-8000
Fax: (703) 456-8100
  Ho Shin, Esq.
General Counsel and Chief Privacy Officer
Millennial Media, Inc.
2400 Boston Street, Suite 201
Baltimore, MD 21224
Tel: (410) 522-8705
  Robert D. Sanchez, Esq.
Mark R. Fitzgerald, Esq.
Michael C. Labriola, Esq.
Wilson Sonsini Goodrich & Rosati,
Professional Corporation
1700 K Street, NW, Fifth Floor
Washington, D.C. 20006
Tel: (202) 973-8800
Fax: (202) 973-8899



          Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o



          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 under the Securities Exchange Act of 1934. (Check one):

Large Accelerated Filer o   Accelerated Filer o   Non-accelerated Filer ý   Smaller Reporting Company o

          The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


Table of Contents

PROSPECTUS (Subject to Completion)
Issued March 8, 2012

The information in this prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we and the selling stockholders are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

                             Shares

GRAPHIC

COMMON STOCK



Millennial Media, Inc. is offering                             shares of its common stock and the selling stockholders identified in this prospectus are offering an additional                             shares. We will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders. This is our initial public offering and no public market currently exists for our common stock. We anticipate that the initial public offering price of our common stock will be between $               and $               per share.



We have applied to list our common stock on the New York Stock Exchange under the symbol "MM."



Investing in our common stock involves risks. See "Risk Factors" beginning on page 11.



PRICE $              A SHARE



 
 
Price to
Public
 
Underwriting
Discounts and
Commissions
 
Proceeds to
Millennial
Media
 
Proceeds to
Selling
Stockholders

Per Share

  $        $            $            $         

Total

  $                     $                     $                     $                  

We and the selling stockholders have granted the underwriters the right to purchase up to an additional                                          shares of common stock.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on                           , 2012.




MORGAN STANLEY

 

GOLDMAN, SACHS & CO.

 

BARCLAYS CAPITAL

ALLEN & COMPANY LLC  STIFEL NICOLAUS WEISEL

   

                           , 2012


Table of Contents

LOGO


Table of Contents

LOGO


TABLE OF CONTENTS



        You should rely only on the information contained in this prospectus and any related free writing prospectus we may authorize to be delivered to you. We have not, the selling stockholders have not and the underwriters have not, authorized any person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. Neither this prospectus nor any related free writing prospectus is an offer to sell, nor are they seeking an offer to buy, these securities in any state where the offer or solicitation is not permitted. The information contained in this prospectus is complete and accurate as of the date on the front cover of this prospectus, but information may have changed since that date.

        Until                        , 2012 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

        For investors outside the United States: We have not, the selling stockholders have not and the underwriters have not done anything that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.



Conventions Used in this Prospectus

        Mobile connected devices—We refer to mobile devices, such as traditional mobile phones, smartphones and tablets, that are able to connect to the internet through a cellular, wireless or other network as mobile connected devices.

        Apps—Software applications specifically designed to operate on mobile connected devices are commonly called apps. Mobile connected devices can access information and content either through apps downloaded onto the device or from web-based mobile sites accessed using a web browser installed on the device. For convenience, unless the context otherwise requires, we refer to these apps and web-based mobile sites together as apps.

        Developers—For convenience, we refer to the developers of apps and the publishers of web-based mobile sites together as developers.

        Unique users—When we discuss the number of unique users our platform reaches, we measure this as the total number of unique users whose devices made ad requests to our platform within the last 30 days. This represents the number of users to whom we had an opportunity to deliver ads during that period, not the number of users who actually received ads.

        Ad impressions—When we discuss the number of ad impressions we processed during a particular period, we measure this as the number of ad requests that were received by our platform from individual mobile devices, not the number of ads actually delivered or viewed by users.

        Number of apps—When we discuss the number of apps enabled by the developers of those apps to receive ads delivered through our platform, we count an app developed for multiple operating systems as multiple apps.

        New and existing clients—When we discuss existing clients, we are referring to advertiser clients who had, as of the beginning of the period being discussed, previously advertised on our platform at any time. An existing client would include a new brand or subsidiary of a parent company that had previously advertised with us. When we discuss new clients, we are referring to advertiser clients who had, as of the beginning of the period being discussed, not previously advertised on our platform.


Table of Contents


PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes thereto and the information set forth under the sections "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in each case included in this prospectus. Unless the context otherwise requires, we use the terms "Millennial Media," "company," "we," "us" and "our" in this prospectus to refer to Millennial Media, Inc. and, where appropriate, our consolidated subsidiaries.

MILLENNIAL MEDIA, INC.

Our Mission

        Our mission is to power the mobile app economy through innovative mobile advertising technology and solutions.

Our Company

        We are the leading independent mobile advertising platform company. Our technology, tools and services help developers maximize their advertising revenue, acquire users for their apps and gain insight about their users. To advertisers, we offer significant audience reach, sophisticated targeting capabilities and the opportunity to deliver interactive and engaging ad experiences to consumers on their mobile connected devices. Our proprietary technology and data platform, known as MYDAS®, determines in real-time which ad to deliver, as well as to whom and when, with the goal of optimizing the effectiveness of advertising campaigns regardless of device type or operating system. In December 2011, our platform reached approximately 200 million unique users worldwide, including approximately 100 million unique users in the United States alone. More than 30,000 apps are enabled by their developers to receive ads delivered through our platform, and we can deliver ads on over 7,000 different mobile device types and models. Our platform is compatible with all major mobile operating systems, including Apple iOS, Android, Windows Phone, Blackberry and Symbian. In December 2011, we processed 40 billion ad impressions. According to a December 2011 report by International Data Corporation, a market research firm, or IDC, we are the second largest mobile display advertising platform in the United States with a 16.7% market share. We are the only one of the three principal mobile advertising platform companies that is not affiliated with a particular mobile operating system or set of devices.

        As smartphones, tablets and other mobile connected devices become increasingly powerful and affordable, and mobile internet access becomes more widespread and faster, users are consuming more content on their mobile devices. Apps in particular are becoming a popular way for consumers to engage with and consume personalized digital content on their mobile connected devices. Gartner Inc., an industry research firm, or Gartner, forecasts that the total number of downloads from mobile application stores worldwide will increase from 17.7 billion in 2011 to 108.8 billion in 2015, representing a compound annual growth rate of 57%. As the number of apps has proliferated, however, it has become increasingly difficult for developers to differentiate their apps from those of competitors in overcrowded app stores. As a result, large and small developers are competing for advertising budgets and visibility among users in order to realize their business objectives.

        With growth in this mobile app-based economy, mobile advertising creates new opportunities for advertisers to reach and engage audiences of potential consumers. Mobile devices are inherently personal in nature, facilitate anytime-anywhere access to their users, allow for engaging app-enabled experiences and offer location-targeting capabilities. We believe that the combination of these features creates a powerful opportunity for delivering highly targeted, interactive advertising through mobile connected devices. However, a number of factors, including device and operating system diversity, as well as technological challenges, make it difficult and complex to deliver mobile advertising effectively.

 

1


Table of Contents

        We help developers and advertisers remove complexity from mobile advertising. By working with us, developers gain access to our tools and services that allow their apps to display banner ads, interactive rich media ads and video ads from our platform. In return, developers supply us with space on their apps to deliver ads for our advertiser clients and also provide us with access to anonymous data associated with their apps and users. We analyze this data to build sophisticated user profiles and audience groups that, in combination with the real-time decisioning, optimization and targeting capabilities of our technology platform, enable us to deliver highly targeted advertising campaigns for our advertiser clients. Advertisers pay us to deliver their ads to mobile connected device users, and we pay developers a fee for the use of their ad space. As we deliver more ads, we are able to collect additional anonymous data about users, audiences and the effectiveness of particular ad campaigns, which in turn enhances our targeting capabilities and allows us to deliver better performance for advertisers and better opportunities for developers to increase their revenue streams. Our use of data for interest-based targeting, including location data, is based on consumer consent, and we offer consumers the ability to opt out of such targeting.

        We have built relationships with developers and advertisers of all sizes. Our developer base includes large mobile web publishers, such as CBS Interactive and The New York Times, and large app developers, such as Zynga, Rovio and Pandora, as well as other developers, such as UberMedia and Gogii. Our advertiser clients include leading advertising agencies and brands, including 23 of the top 25 national advertisers as ranked by Advertising Age magazine, or Ad Age, based upon U.S. ad spending in 2010, as well as smaller advertisers and often the developers themselves.

        We have achieved significant growth as our platform has scaled and as we have expanded our product and service offerings. From 2009 to 2010, our revenue increased from $16.2 million to $47.8 million, or 195%, our gross margin improved from 29% to 34%, our net loss improved from $7.6 million to $7.1 million and our adjusted EBITDA improved from a loss of $7.0 million to a loss of $6.4 million. From 2010 to 2011, our revenue increased from $47.8 million to $103.7 million, or 117%, our gross margin improved from 34% to 39%, our net loss improved from $7.1 million to $287,000 and our adjusted EBITDA improved from a loss of $6.4 million to earnings of $1.8 million. Adjusted EBITDA is a financial measure that is not calculated in accordance with U.S. generally accepted accounting principles, or GAAP. For an explanation of the elements of adjusted EBITDA and a full reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP measure, see "—Adjusted EBITDA."

        During the year ended December 31, 2011, approximately 10% of our revenue was derived from outside of the United States, up from 3% during the year ended December 31, 2010. We commenced our international operations in the United Kingdom during the first half of 2010 and launched operations in Singapore during the fourth quarter of 2011.

Industry Background

        The convergence of several key trends is driving the growth of the mobile app economy and fundamentally changing the way that users consume content on their mobile connected devices. We believe these trends will continue to create a significant opportunity for mobile advertising. These trends include:

    Adoption of faster and more functional mobile connected devices.  Driven by intuitive user interfaces, increased functionality, faster processing speeds, better graphics processors and advanced display technologies with touch capabilities, it has become possible to deliver innovative, interactive and engaging consumer media experiences on a wide variety of mobile connected devices.

    Widespread access to faster wireless networks facilitates consumer consumption of content.  With the growth of mobile connected devices, consumers increasingly expect to have a high-quality online experience everywhere. Expansion of worldwide 3G network penetration, the rise of next-generation networks, such as 4G, and the prevalence of Wi-Fi access are facilitating the consumption of content on mobile connected devices. The combination of increased network access

 

2


Table of Contents

      and faster network technologies is enabling the development of rich media content, presenting new opportunities in the mobile ecosystem.

    Mobile usage has disrupted how content is consumed.  Consumers are increasingly using their mobile devices instead of personal computers or other traditional media to access content. Mobile devices have become an increasingly important part of daily life, with users relying on mobile connectivity to read newspapers, magazines and blogs, watch movies, play games, check sports scores, shop, monitor weather forecasts, conduct banking transactions, find maps and directions and listen to online radio stations. According to eMarketer, Inc., a market research firm, the amount of time spent by consumers with their mobile devices is rising at a faster rate than is time spent viewing other kinds of media.

    Growth of the mobile app economy.  Developers have created apps as an easy, intuitive and interactive way to instantly deliver content on mobile devices. Emerging technologies, such as improvements in computer programming languages for structuring and presenting web-based content, have allowed app developers to harness the increasing processing power and functionality of mobile devices and faster networks to deliver more engaging media to users. Gartner forecasts that the total number of free and charged-for downloads from mobile application stores worldwide will increase from 17.7 billion in 2011 to over 108 billion in 2015.

    Advertising industry is being disrupted by mobile advertising.  Traditional advertising media, such as billboards, newspapers, magazines, radio and television, often suffer from a number of inherent limitations, including limited ability to target specific audiences, limited ability to measure audience reach and, in some cases, limited geographic range. As consumers spend more time online with personal computers, or PCs, digital advertising has proven to be more effective because it allows for user interaction, provides better measurement and achieves expanded audience reach. However, even PC-based digital advertising suffers from a number of significant limitations with respect to personalization, accessibility and location-based targeting, all of which can be provided through mobile advertising.

Benefits of Mobile Advertising

        Mobile advertising provides significant benefits both to developers and to advertisers. For developers, mobile advertising allows them to make money, acquire users and gain insight into app usage. For advertisers, the combination of the inherently personal nature of mobile devices, their enhanced functionality and the proliferation of app-enabled experiences creates a powerful opportunity for highly targeted and effective advertising. We believe mobile advertising enjoys a number of benefits over traditional advertising and PC-based online digital advertising, including:

    anytime, anywhere access to users;

    personalization of the advertising experience;

    location-based targeting;

    more complete user engagement;

    enhanced audience targeting based on location, behavioral and demographic data; and

    superior monetization opportunities for developers.

Market Opportunity

        Given the benefits of mobile advertising as compared to traditional offline advertising and PC-based online advertising, we expect that marketers will continue to shift their advertising budgets to mobile. Gartner estimates that worldwide mobile advertising revenue, excluding advertising delivered in connection with search requests and maps, will grow from $1.8 billion in 2011 to approximately

 

3


Table of Contents

$13.5 billion in 2015, reflecting a compounded annual growth rate of 65%. We believe that we are well-positioned to capture a significant portion of this growing mobile advertising market.

Complexities of Mobile Advertising

        Despite the growing market opportunity for mobile advertising, companies in our industry must address several complexities and challenges in order to effectively deliver mobile advertising solutions, including:

    fragmentation of the mobile ecosystem caused by a wide diversity of device types, numerous operating systems and varied delivery and user engagement mechanisms;

    limitations in using traditional identification techniques typically used in PC-based web advertising, such as "cookies";

    difficulty in predicting user behavior, including when and where a user will be consuming content on a mobile device;

    varying connection quality that a mobile device may have at any given time; and

    difficulties measuring performance of ads and user interactions with them on mobile connected devices.

Needs of Mobile App Developers and Advertisers

        Developers require a flexible, easy-to-use solution that enables the delivery of engaging advertising to the users of their apps, regardless of the mobile operating system or device being used. Developers of all sizes want to minimize the complexities of monetizing their apps so that they can focus their resources instead on app development.

        Advertisers, to achieve their business objectives in the mobile app context, require scale, reach and the ability to target and engage specific audiences. Advertisers need solutions that help optimize their investment by delivering effective campaigns across multiple devices and operating systems, maximizing the number of potential consumers the campaigns reach and then measuring the effectiveness of those campaigns.

Our Competitive Strengths

        We believe the following strengths differentiate us from our competitors:

    Differentiated technology platform.  Our MYDAS technology platform is specifically architected to deliver mobile advertising at scale, rather than applying traditional online advertising technology or focusing on particular mobile operating systems. We designed our technology platform for the mobile environment, where the delivery and targeting of ads must allow for a much larger number of variables than in traditional online advertising. Our platform is capable of accounting for, and efficiently analyzing, variables such as wireless connection strength, device operating system and audience profile in real-time in order to decide which ad to send in response to a specific ad request from an app.

    Large and growing data asset.  We collect and analyze data from the billions of ads delivered on our platform each month to create anonymous profiles of unique users. This includes information such as data about the user's location or the user's interaction and response levels for ads shown on the device. This data helps us draw inferences about a user's demographic profile and better understand the user's behavior and preferences. To date, we have created more than 150 million proprietary anonymous unique user profiles. As we deliver more ads, our technology platform is able to dynamically recognize and link new information to these profiles, allowing us to continuously refine and gain additional insight into users' preferences and behavior, which helps us better deliver relevant ads to consumers.

 

4


Table of Contents

    Sophisticated audience targeting capabilities.  By leveraging the extensive data we collect to create audience profiles based on context and behavior, our platform can match advertising campaigns with target audiences automatically in real-time. Our platform also allows us to target these audiences within a specific geographic area to achieve the goals of an advertising campaign. We believe that our targeting capabilities enable us to maximize the campaign objectives of advertisers and the monetization objectives of developers.

    Trusted partner for developers.  We help developers focus on their core business of developing apps. Our extensive experience and data asset give us valuable industry insights and knowledge of successful developer business practices, which we share across our developer community. We believe that this partnership approach with developers helps to solidify our developer relationships and the strategic role we play in their businesses, providing us with increased access to advertising opportunities.

    Trusted partner for brand advertisers.  We have built relationships with leading advertising agencies and brands, including 23 of the top 25 Ad Age advertisers. We offer advertisers access to our mobile advertising specialists, who supervise and support advertising campaigns through all stages of planning and execution. As an independent advertising platform not focused on any particular device or operating system, we believe that we are able to effectively educate our advertiser clients on the latest mobile trends and help them plan and deliver engaging and effective advertising campaigns that deliver sustainable and measurable results.

    Mobile advertising industry pioneer and thought leader.  We believe that we have become the authoritative source for research and insight on the mobile advertising market. Using the data collected on our platform, we publish our monthly Scorecard for Mobile Advertising Reach and Targeting, or S.M.A.R.T. report, which provides a comprehensive view of trends in mobile advertising, and our Mobile Mix report, which highlights monthly trends for connected devices, device manufacturers and mobile operating systems.

    Significant scale and reach.  According to IDC, we are the second largest mobile display advertising platform in the United States, with a 16.7% market share. We are the only one of the three principal mobile advertising platform companies that is not affiliated with a particular mobile operating system or set of devices. In December 2011, our platform reached approximately 100 million unique mobile users in the United States and approximately 200 million users worldwide. Our technology and tools have been integrated into many of the most popular apps available through major distribution channels, such as the Android Market and the Apple App Store.

    Powerful network effects that connect our developers and advertisers.  We believe that developers and advertisers both benefit from the use of our advertising platform. As the targeting capability of our advertising campaigns increases, we believe advertisers will be willing to pay more for our services, which in turn will attract developers to our platform since we can help them more effectively generate revenue through the advertising space within their apps.

Our Growth Strategy

        We seek to become the strategic independent platform partner of choice for developers and advertisers wanting to capitalize on the large and growing mobile advertising opportunity. The key elements of our strategy are to:

    innovate through continued investments in technology and data;

    deepen our relationship with developers;

    increase our share of advertising budgets from existing advertisers;

    acquire new developers and advertisers;

 

5


Table of Contents

    increase our global market penetration;

    expand our network of third-party providers of tools and services;

    pursue strategic acquisitions; and

    provide further insight into the mobile app economy.

Risks Related to our Business

        Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully in the "Risk Factors" section of this prospectus immediately following this prospectus summary. These risks include, among others:

    We have incurred significant net losses since inception and we expect our operating expenses to increase significantly in the foreseeable future;

    We may not be able to compete successfully, particularly against larger competitors, such as Google or Apple, that may have greater resources or control their own mobile connected devices, mobile operating systems or content distribution channels;

    Our business depends on our ability to collect and analyze data about mobile device user behavior, and we may become subject to liabilities or reputational harm as a result of governmental regulation or industry standards relating to consumer privacy and data protection;

    We may not be able to enhance our mobile advertising platform to keep pace with technological and market developments;

    We depend on developers for mobile advertising space to deliver our advertiser clients' advertising campaigns;

    Our international operations subject us to increased challenges and risks;

    Our failure to protect our intellectual property rights could diminish the value of our services and weaken our competitive position; and

    We may need additional capital in the future to meet our financial obligations and to pursue our business objectives, and this additional capital may not be available on favorable terms, or at all.

Corporate Information

        We were incorporated under the laws of the State of Delaware on May 30, 2006. Our principal executive office is located at 2400 Boston Street, Suite 201, Baltimore, Maryland. Our telephone number is (410) 522-8705. Our website address is www.millennialmedia.com. Information contained in, or accessible through, our website does not constitute a part of, and is not incorporated into, this prospectus.

        "Millennial Media," the Millennial Media logo, "MYDAS," "S.M.A.R.T.," "Mobile Mix," "mmDev," "mmStudio," "mMedia," "mmPlan" and other trademarks or service marks of Millennial Media, Inc. appearing in this prospectus are the property of Millennial Media, Inc. This prospectus contains additional trade names, trademarks and service marks of others, which are the property of their respective owners.

 

6


Table of Contents


THE OFFERING

Common stock offered by Millennial Media

                  shares

Common stock offered by the selling stockholders

                  shares

Total common stock offered

                  shares

Total common stock to be outstanding after this offering

                  shares

Use of proceeds

  The principal purposes of this offering are to create a public market for our common stock and to facilitate our future access to the public equity markets, as well as to obtain additional capital. We intend to use the net proceeds from this offering for working capital and general corporate purposes, including further expansion of our international operations and product development. In addition, we may use a portion of the proceeds from this offering for acquisitions of complementary businesses, technologies or other assets, although we do not currently have any plans for any acquisitions. We will not receive any of the proceeds from the sale of shares to be offered by the selling stockholders. See "Use of Proceeds" on page 33.

Risk factors

  See the section titled "Risk Factors" beginning on page 11 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Proposed NYSE symbol

  MM

        The number of shares of our common stock that will be outstanding after this offering is based on 65,690,038 shares of common stock outstanding as of December 31, 2011, and excludes:

    7,650,498 shares of our common stock issuable upon the exercise of stock options outstanding under our 2006 equity incentive plan as of December 31, 2011, at a weighted average exercise price of $1.11 per share, of which 135,124 shares were issued upon the exercise of options subsequent to December 31, 2011;

    106,250 shares of our common stock issuable upon the exercise of stock options granted subsequent to December 31, 2011, at an exercise price of $6.00 per share;

    50,750 shares of our common stock issuable upon the exercise of an outstanding warrant to purchase common stock as of December 31, 2011, at an exercise price of $1.18 per share;

                      shares of our common stock subject to stock options we expect to grant upon the effective date of the registration statement of which this prospectus is a part, which will have an exercise price per share equal to the initial public offering price per share in this offering, and a restricted stock unit we expect to issue to one of our executive officers at the same time equal to $225,000 divided by the initial public offering price per share in this offering; and

    an additional                 shares of our common stock to be reserved for future issuance under our equity incentive plan following this offering.

        Except as otherwise indicated herein, all information in this prospectus, including the number of shares that will be outstanding after this offering, assumes or gives effect to:

    the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 47,679,003 shares of our common stock, which will occur automatically upon the closing of this offering; and

    no exercise of the underwriters' over-allotment option.

 

7


Table of Contents


SUMMARY CONSOLIDATED FINANCIAL DATA

        In the following tables, we provide our summary consolidated financial data. We have derived the summary consolidated statement of operations data for the years ended December 31, 2009, 2010 and 2011 and balance sheet data as of December 31, 2011 from our audited consolidated financial statements appearing elsewhere in this prospectus.

        When you read this summary consolidated financial data, it is important that you read it together with the historical financial statements and related notes to those statements, as well as "Management's Discussion and Analysis of Financial Condition and Results of Operations," which are included in this prospectus.

 
  Year Ended December 31,  
 
  2009   2010   2011  
 
  (in thousands, except share and per share data)
 

Consolidated Statement of Operations Data:

                   

Revenue

  $ 16,220   $ 47,828   $ 103,678  

Cost of revenue

    11,596     31,602     63,595  
               

Gross profit

    4,624     16,226     40,083  

Operating expenses:

                   

Sales and marketing

    4,609     8,508     14,255  

Technology and development

    1,095     2,175     5,181  

General and administrative

    6,326     12,535     21,321  
               

Total operating expenses

    12,030     23,218     40,757  
               

Loss from operations

    (7,406 )   (6,992 )   (674 )

Total other income (expense)

    (144 )   (107 )   (99 )
               

Loss before income taxes

    (7,550 )   (7,099 )   (773 )

Income tax (expense) benefit

        (22 )   486  
               

Net loss

    (7,550 )   (7,121 )   (287 )

Accretion of dividends on redeemable convertible preferred stock

    (1,793 )   (2,933 )   (5,022 )
               

Net loss attributable to common stockholders

  $ (9,343 ) $ (10,054 ) $ (5,309 )
               

Net loss attributable to common stockholders per share—basic and diluted

  $ (0.56 ) $ (0.56 ) $ (0.32 )
               

Pro forma net loss per share—basic and diluted(1)

              $ (0.00 )
                   

Weighted average shares of common stock outstanding used in computing net loss attributable to common stockholders per share—basic and diluted

    16,783,411     17,965,893     16,362,810  
               

Weighted average shares of common stock outstanding used in computing pro forma net loss per share—basic and diluted

                64,041,813  
                   

Other Financial Data:

                   

Adjusted EBITDA(2)

  $ (7,048 ) $ (6,436 ) $ 1,839  

      (1)
      Pro forma basic and diluted net loss per share have been calculated assuming (i) the conversion of all outstanding shares of redeemable convertible preferred stock into an aggregate of 47,679,003 shares of common stock as of the beginning of the applicable year or at the time of issuance, if later, and (ii) the reclassification of the outstanding preferred stock warrant to additional paid-in capital as of the beginning of the applicable year. The numerator of pro forma net loss per share of common stock is derived by adding $78,000 for the year ended December 31, 2011 related to the change in fair value of the preferred stock warrant liability and by adding $5.0 million for the year ended December 31, 2011 related to accretion of dividends on redeemable convertible preferred stock, respectively.

      (2)
      We define adjusted EBITDA as net loss plus: income tax (expense) benefit, interest income (expense), net, depreciation and amortization, and stock-based compensation. Please see "—Adjusted EBITDA" for more information and for a reconciliation of adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP.

 

8


Table of Contents

        The following table presents our summary balance sheet data as of December 31, 2011:

    on an actual basis;

    on a pro forma basis to give effect to:

    the conversion of all then outstanding shares of our redeemable convertible preferred stock into an aggregate of 47,679,003 shares of our common stock, which will occur automatically upon the closing of this offering; and

    the reclassification of the preferred stock warrant liability to additional paid-in-capital upon the automatic conversion of the redeemable convertible preferred stock issuable upon exercise of such warrant into common stock; and

    on a pro forma as adjusted basis to give further effect to our sale of                                    shares of common stock in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
  As of December 31, 2011  
 
  Actual   Pro forma   Pro forma
as adjusted
 
 
  (in thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 16,707   $ 16,707   $    

Accounts receivable, net of allowances

    34,986     34,986        

Total assets

    61,885     61,885        

Series B warrant outstanding

    183            

Total liabilities

    29,638     29,455        

Total redeemable convertible preferred stock

    76,668            

Additional paid-in capital

        76,803        

Total stockholders' (deficit) equity

    (44,421 )   32,430        

        The pro forma as adjusted information presented in the summary balance sheet data is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease each of cash and cash equivalents, working capital, total assets and total stockholders' equity on a pro forma as adjusted basis by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

 

9


Table of Contents


ADJUSTED EBITDA

        To provide investors with additional information regarding our financial results, we have used within this prospectus adjusted EBITDA, a non-GAAP financial measure. We have provided below a reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.

        We have included adjusted EBITDA in this prospectus because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, adjusted EBITDA is a key financial measure used by the compensation committee of our board of directors in connection with the determination of compensation for our executive officers. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

        Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are:

    although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

    adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

    adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation;

    adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and

    other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

        Because of these and other limitations, you should consider adjusted EBITDA alongside other GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP financial results. The following table presents a reconciliation of adjusted EBITDA to net loss for each of the periods indicated:

 
  Year Ended December 31,  
 
  2009   2010   2011  
 
  (in thousands)
 

Net loss

  $ (7,550 ) $ (7,121 ) $ (287 )

Adjustments:

                   

Interest (income) expense, net

    144     28     21  

Income tax expense (benefit)

        22     (486 )

Depreciation and amortization expense

    146     223     759  

Stock-based compensation expense

    212     412     1,832  
               

Total net adjustments

    502     685     2,126  
               

Adjusted EBITDA

  $ (7,048 ) $ (6,436 ) $ 1,839  
               

 

10


Table of Contents


RISK FACTORS

        Investing in our common stock involves a high degree of risk. Before you invest in our common stock, you should carefully consider the following risks, as well as general economic and business risks, and all of the other information contained in this prospectus. Any of the following risks could have a material adverse effect on our business, operating results and financial condition and cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. When determining whether to invest, you should also refer to the other information contained in this prospectus, including our consolidated financial statements and the related notes thereto.

Risks Related to Our Business and Our Industry

We have incurred significant net losses since inception, and we expect our operating expenses to increase significantly in the foreseeable future. Accordingly, we may never achieve profitability.

        We incurred net losses of $287,000 and $7.1 million in 2011 and 2010, respectively, and we had an accumulated deficit of $44.4 million as of December 31, 2011. We do not know when or if we will ever achieve profitability. Although our revenue has increased substantially in recent periods, it is likely that we will not be able to maintain this rate of revenue growth. Historically, our operating expenses have increased in proportion to our revenue. We anticipate that our operating expenses will continue to increase in the foreseeable future to the extent that our revenue grows and as we increase headcount, particularly our sales and technology-related headcount, incur general and administrative expenses associated with being a public company and expand our facilities. Although we expect to achieve operating efficiencies and greater leverage of resources as we grow, if we are unable to do so, we may be unable to achieve profitability. If we are not able to achieve and maintain profitability, the value of our company and our common stock could decline significantly.

We operate in an intensely competitive industry, and we may not be able to compete successfully.

        The mobile advertising market is highly competitive, with numerous companies providing mobile advertising services. We compete primarily with Google Inc. and Apple Inc., both of which are significantly larger than us and have more capital to invest in their mobile advertising businesses. They, or other companies that offer competing mobile advertising solutions, may establish or strengthen cooperative relationships with their mobile operator partners, brand advertisers, app developers or other parties, thereby limiting our ability to promote our services and generate revenue. Competitors could also seek to gain market share from us by reducing the prices they charge to advertisers or by introducing new technology tools for developers. Moreover, increased competition for mobile advertising space from developers could result in an increase in the portion of advertiser revenue that we must pay to developers to acquire that advertising space.

        Our business will suffer to the extent that our developer clients and advertiser clients purchase and sell mobile advertising directly from each other or through other companies that are able to become intermediaries between developers and advertisers. For example, we are aware of companies that have substantial existing platforms for developers but that currently do not heavily use those platforms for mobile advertising campaigns. These companies could compete with us to the extent they expand into mobile advertising. Other companies, such as large app developers with a substantial mobile advertising business, may decide to directly monetize some or all of their advertising space without utilizing our services. Other companies that offer analytics, mediation, exchange or other third-party services may also become intermediaries between mobile advertisers and developers and thereby compete with us. Any of these developments would make it more difficult for us to sell our services and could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses or the loss of market share.

11


Table of Contents

The mobile advertising market may deteriorate or develop more slowly than expected, which could harm our business.

        Advertising on mobile connected devices is an emerging phenomenon. Advertisers have historically spent a smaller portion of their advertising budgets on mobile media as compared to traditional advertising methods, such as television, newspapers, radio and billboards, or online advertising over the internet, such as placing banner ads on websites. Future demand and market acceptance for mobile advertising is uncertain. Many advertisers still have limited experience with mobile advertising and may continue to devote larger portions of their advertising budgets to more traditional offline or online personal computer-based advertising, instead of shifting additional advertising resources to mobile advertising. In addition, our current and potential advertiser clients may ultimately find mobile advertising to be less effective than traditional advertising media or marketing methods or other technologies for promoting their products and services, and they may even reduce their spending on mobile advertising from current levels as a result. If the market for mobile advertising deteriorates, or develops more slowly than we expect, we may not be able to increase our revenue.

Our business is dependent on the continued growth in usage of smartphones, tablets and other mobile connected devices.

        Our business depends on the continued proliferation of mobile connected devices, such as smartphones and tablets, that can connect to the internet over a cellular, wireless or other network, as well as the increased consumption of content through those devices. Consumer usage of these mobile connected devices may be inhibited for a number of reasons, such as:

    inadequate network infrastructure to support advanced features beyond just mobile web access;

    users' concerns about the security of these devices;

    inconsistent quality of cellular or wireless connection;

    unavailability of cost-effective, high-speed internet service; and

    changes in network carrier pricing plans that charge device users based on the amount of data consumed.

        For any of these reasons, users of mobile connected devices may limit the amount of time they spend on these devices and the number of apps they download on these devices. If user adoption of mobile connected devices and consumer consumption of content on those devices do not continue to grow, our total addressable market size may be significantly limited, which could compromise our ability to increase our revenue and to become profitable.

If mobile connected devices, their operating systems or content distribution channels, including those controlled by our primary competitors, develop in ways that prevent our advertising from being delivered to their users, our ability to grow our business will be impaired.

        Our business model depends upon the continued compatibility of our mobile advertising platform with most mobile connected devices, as well as the major operating systems that run on them and the thousands of apps that are downloaded onto them. The design of mobile devices and operating systems is controlled by third parties with whom we do not have any formal relationships. These parties frequently introduce new devices, and from time to time they may introduce new operating systems or modify existing ones. Network carriers, such as Verizon, AT&T or T-Mobile, may also impact the ability to download apps or access specified content on mobile devices.

        In some cases, the parties that control the development of mobile connected devices and operating systems include companies that we regard as our most significant competitors. For example, Apple controls two of the most popular mobile devices, the iPhone and the iPad, as well as the iOS operating system that

12


Table of Contents

runs on them. Apple also controls the App Store for downloading apps that run on Apple's mobile devices. Similarly, Google controls the Android operating system and, if its proposed acquisition of Motorola Mobility is completed, it will also control a significant number of additional mobile devices. If our mobile advertising platform were unable to work on these devices or operating systems, either because of technological constraints or because a maker of these devices or developer of these operating systems wished to impair our ability to provide ads on them or our ability to fulfill advertising space, or inventory, from developers whose apps are distributed through their controlled channels, our ability to generate revenue could be significantly harmed.

We do not control the mobile networks over which we provide our advertising services.

        Our mobile advertising platform is dependent on the reliability of network operators and carriers who maintain sophisticated and complex mobile networks, as well as our ability to deliver ads on those networks at prices that enable us to realize a profit. Mobile networks have been subject to rapid growth and technological change, particularly in recent years. We do not control these networks.

        Mobile networks could fail for a variety of reasons, including new technology incompatibility, the degradation of network performance under the strain of too many mobile consumers using the network, a general failure from natural disaster or a political or regulatory shut-down. Individuals and groups who develop and deploy viruses, worms and other malicious software programs could also attack mobile networks and the devices that run on those networks. Any actual or perceived security threat to mobile devices or any mobile network could lead existing and potential device users to reduce or refrain from mobile usage or reduce or refrain from responding to the services offered by our advertising clients. If the network of a mobile operator should fail for any reason, we would not be able to effectively provide our services to our clients through that mobile network. This in turn could hurt our reputation and cause us to lose significant revenue.

        Mobile carriers may also increase restrictions on the amounts or types of data that can be transmitted over their networks. We currently generate different amounts of revenue from our advertiser clients based on the kinds of ads we deliver, such as display ads, rich media ads or video ads. In some cases, we are paid by advertisers on a cost-per-thousand, or CPM, basis depending on the number of ads shown. In other cases, we are paid on a cost-per-click, or CPC, or cost-per-action, or CPA, basis depending on the actions taken by the mobile device user. Different types of ads consume differing amounts of bandwidth and network capacity. If a network carrier were to restrict the amounts of data that can be delivered on that carrier's network, or otherwise control the kinds of content that may be downloaded to a device that operates on the network, it could negatively affect our pricing practices and inhibit our ability to deliver targeted advertising to that carrier's users, both of which could impair our ability to generate revenue.

Mobile connected device users may choose not to allow advertising on their devices.

        The success of our business model depends on our ability to deliver targeted, highly relevant ads to consumers on their mobile connected devices. Targeted advertising is done primarily through analysis of data, much of which is collected on the basis of user-provided permissions. This data might include a device's location or data collected when device users view an ad or video or when they click on or otherwise engage with an ad. Users may elect not to allow data sharing for targeted advertising for a number of reasons, such as privacy concerns, or pricing mechanisms that may charge the user based upon the amount or types of data consumed on the device. Users may also elect to opt out of receiving targeted advertising from our platform. In addition, the designers of mobile device operating systems are increasingly promoting features that allow device users to disable some of the functionality, which may impair or disable the delivery of ads on their devices, and device manufacturers may include these features as part of their standard device specifications. Although we are not aware of any such products that are widely used in the market today, as has occurred in the online advertising industry, companies may develop products that enable users to prevent ads from appearing on their mobile device screens. If any of these

13


Table of Contents

developments were to occur, our ability to deliver effective advertising campaigns on behalf of our advertiser clients would suffer, which could hurt our ability to generate revenue and become profitable.

Our limited operating history makes it difficult to evaluate our business and prospects and may increase your investment risk.

        We commenced operations in 2006 and, as a result, we have only a limited operating history upon which you can evaluate our business and prospects. Although we have experienced significant revenue growth in recent periods, it is likely that we will not be able to sustain this growth. As part of the nascent mobile advertising industry, we will encounter risks and difficulties frequently encountered by early-stage companies in rapidly evolving industries, including the need to:

    maintain our reputation and build trust with our advertiser and developer clients;

    offer competitive pricing to both advertisers and developers;

    maintain and expand our network of advertising space through which we deliver mobile advertising campaigns;

    deliver advertising results that are superior to those that advertisers or developers could achieve directly or through the use of competing providers or technologies;

    continue to develop and upgrade the technologies that enable us to provide mobile advertising services;

    respond to evolving government regulations relating to the internet, telecommunications, privacy, direct marketing and advertising aspects of our business;

    identify, attract, retain and motivate qualified personnel; and

    manage our expanding operations.

If we do not successfully address these risks, our revenue could decline and our ability to pursue our growth strategy and attain profitability could be compromised.

We may not be able to enhance our mobile advertising platform to keep pace with technological and market developments.

        The market for mobile advertising services is characterized by rapid technological change, evolving industry standards and frequent new service introductions. To keep pace with technological developments, satisfy increasing advertiser and developer requirements, maintain the attractiveness and competitiveness of our mobile advertising solutions and ensure compatibility with evolving industry standards and protocols, we will need to regularly enhance our current services and to develop and introduce new services on a timely basis.

        For example, advances in technology that allow developers to generate revenue from their apps without our assistance could harm our relationships with developers and diminish our available advertising inventory within their apps. Similarly, technological developments that allow third parties to better mediate the delivery of ads between advertisers and developers by introducing an intermediate layer between us and our developer clients could impair our relationships with those developers. Our inability, for technological, business or other reasons, to enhance, develop, introduce and deliver compelling mobile advertising services in response to changing market conditions and technologies or evolving expectations of advertisers or mobile device users could hurt our ability to grow our business and could result in our mobile advertising platform becoming obsolete.

14


Table of Contents

We depend on developers for mobile advertising space to deliver our advertiser clients' advertising campaigns, and any decline in the supply of advertising inventory from these developers could hurt our business.

        We depend on developers to provide us with space within their apps on which we deliver ads. The developers that sell their advertising inventory to us are not required to provide any minimum amounts of advertising space to us, nor are they contractually bound to provide us with a consistent supply of advertising inventory. The tools that we provide to developers allow them to make decisions as to how to allocate advertising inventory among us and other advertising providers, some of which may be our competitors. A third party acting as a mediator on behalf of developers, or any competing mediation tools embedded within a developer's apps, could result in pressure on us to increase the prices we pay to developers for that inventory or otherwise block our access to developer inventory, without which we would be unable to deliver ads on behalf of our advertiser clients.

        We generate a significant portion of our revenue from the advertising inventory provided by a limited number of developers. In most instances, developers can change the amount of inventory they make available to us at any time. Developers may also change the price at which they offer inventory to us, or they may elect to make advertising space available to our competitors who offer ads to them on more favorable economic terms. In addition, developers may place significant restrictions on our use of their advertising inventory. These restrictions may prohibit ads from specific advertisers or specific industries, or they could restrict the use of specified creative content or format. Developers may also use a fee-based or subscription-based business model to generate revenue from their content, in lieu of or to reduce their reliance on ads.

        If developers decide not to make advertising inventory available to us for any of these reasons, decide to increase the price of inventory, or place significant restrictions on our use of their advertising space, we may not be able to replace this with inventory from other developers that satisfy our requirements in a timely and cost-effective manner. If this happens, our revenue could decline or our cost of acquiring inventory could increase.

Our business depends on our ability to collect and use data to deliver ads, and any limitation on the collection and use of this data could significantly diminish the value of our services and cause us to lose clients and revenue.

        When we deliver an ad to a mobile device, we are often able to collect anonymous information about the placement of the ad and the interaction of the mobile device user with the ad, such as whether the user visited a landing page or watched a video. We may also be able to collect information about the user's mobile location. As we collect and aggregate this data provided by billions of ad impressions, we analyze it in order to optimize the placement and scheduling of ads across the advertising inventory provided to us by developers. For example, we may use the collected information to limit the number of times a specific ad is presented to the same mobile device, to provide an ad to only certain types of mobile devices, or to provide a report to an advertiser client on the number of its ads that were clicked. We also compile the data derived from our platform to publish monthly reports of key mobile industry trends in the form of our S.M.A.R.T. and Mobile Mix reports, which we provide to advertisers and developers to enable them to improve their business decisions about mobile advertising or monetization strategies and to promote their use of our services.

        Although the data we collect is not personally identifiable, our clients might decide not to allow us to collect some or all of this data or might limit our use of this data. For example, app developers may not agree to provide us with the data generated by interactions with the content on their apps, or device users may not consent to having information about their device usage provided to the developer. Any limitation on our ability to collect data about user behavior and interaction with mobile device content could make it more difficult for us to deliver effective mobile advertising programs that meet the demands of our advertiser clients.

15


Table of Contents

        Although our contracts with advertisers generally permit us to aggregate data from advertising campaigns, these clients might nonetheless request that we discontinue using data obtained from their campaigns that have already been aggregated with other clients' campaign data. It would be difficult, if not impossible, to comply with these requests, and these kinds of requests could also cause us to spend significant amounts of resources. Interruptions, failures or defects in our data collection, mining, analysis and storage systems, as well as privacy concerns and regulatory restrictions regarding the collection of data, could also limit our ability to aggregate and analyze mobile device user data from our clients' advertising campaigns. If that happens, we may not be able to optimize the placement of advertising for the benefit of our advertiser clients, which could make our services less valuable, and, as a result, we may lose clients and our revenue may decline.

Our business depends in part on our ability to collect and use location-based information about mobile connected device users.

        Our business model depends in part upon our ability to collect data about the location of mobile connected device users when they are interacting with their devices, and then to use that information to provide effective targeted advertising on behalf of our advertising clients. Our ability to either collect or use location-based data could be restricted by a number of factors, including new laws or regulations, technology or consumer choice. Limitations on our ability to either collect or use location data could impact the effectiveness of our platform and our ability to target ads.

Our business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

        In the course of providing our services, we transmit and store information related to mobile devices and the ads we place, including a device's geographic location for the purpose of delivering targeted location-based ads to the user of the device, with that user's consent. Federal, state and international laws and regulations govern the collection, use, retention, sharing and security of data that we collect across our mobile advertising platform. We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data protection. However, it is possible that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure, or perceived failure, by us to comply with U.S. federal, state, or international laws, including laws and regulations regulating privacy or consumer protection, could result in proceedings or actions against us by governmental entities or others. We are aware of several ongoing lawsuits filed against companies in our industry alleging various violations of privacy-related laws. These proceedings could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, adversely affect the demand for our services and ultimately result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless our clients from the costs or consequences of inadvertent or unauthorized disclosure of data that we store or handle as part of providing our services.

        The regulatory framework for privacy issues worldwide is evolving, and various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices, including some directed at the mobile industry in particular. It is possible that new laws and regulations will be adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways, that would affect our business, particularly with regard to location-based services, collection or use of data to target ads and communication with consumers via mobile devices.

        The U.S. government, including the Federal Trade Commission and the Department of Commerce, has announced that it is reviewing the need for greater regulation of the collection of consumer information, including regulation aimed at restricting some targeted advertising practices. The Federal Trade Commission has also proposed revisions to the Children's Online Privacy Protection Act, or COPPA,

16


Table of Contents

that could, if adopted, create greater compliance burdens on us. COPPA imposes a number of obligations, such as obtaining parental permission, on website operators to the extent they collect certain information from children who are under 13 years old. The proposed changes would broaden the applicability of COPPA, including the types of information that would be subject to these regulations, and could apply to information that we or our clients collect through mobile devices or apps that is not currently subject to COPPA.

        As we expand our operations globally, compliance with regulations that differ from country to country may also impose substantial burdens on our business. In particular, the European Union has traditionally taken a broader view as to what is considered personal information and has imposed greater obligations under data privacy regulations. In addition, individual EU member countries have had discretion with respect to their interpretation and implementation of the regulations, which has resulted in variation of privacy standards from country to country. In January 2012, the European Commission announced significant proposed reforms to its existing data protection legal framework, including changes in obligations of data controllers and processors, the rights of data subjects and data security and breach notification requirements. The EU proposals, if implemented, may result in a greater compliance burden if we deliver ads to mobile device users in Europe. Complying with any new regulatory requirements could force us to incur substantial costs or require us to change our business practices in a manner that could compromise our ability to effectively pursue our growth strategy.

        In addition to compliance with government regulations, we voluntarily participate in several trade associations and industry self-regulatory groups that promulgate best practices or codes of conduct addressing the provision of location-based services, delivery of promotional content to mobile devices, and tracking of device users or devices for the purpose of delivering targeted advertising. We could be adversely affected by changes to these guidelines and codes in ways that are inconsistent with our practices or in conflict with the laws and regulations of U.S. or international regulatory authorities. If we are perceived as not operating in accordance with industry best practices or any such guidelines or codes with regard to privacy, our reputation may suffer and we could lose relationships with advertiser or developer partners.

Our quarterly operating results have fluctuated in the past and may do so in the future, which could cause our stock price to decline.

        Our operating results have historically fluctuated and our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control. You should not rely on period-to-period comparisons of our operating results as an indication of our future performance. Factors that may affect our quarterly operating results include the following:

    seasonal patterns in mobile advertisers' spending, which tend to be cyclical;

    the addition of new advertiser or developer clients or the loss of existing advertisers or developers;

    changes in demand for our mobile advertising services;

    changes in the amount, price and quality of available advertising inventory from developers;

    the timing and amount of sales and marketing expenses incurred to attract new advertisers and developers;

    changes in the economic prospects of advertisers or the economy generally, which could alter current or prospective advertisers' spending priorities, or could increase the time it takes us to close sales with advertisers;

    changes in our pricing policies, the pricing policies of our competitors or the pricing of mobile advertising generally;

17


Table of Contents

    changes in governmental regulation of the internet, wireless networks, mobile advertising or the collection of mobile device user data;

    costs necessary to improve and maintain our technology platform;

    timing differences at the end of each quarter between our payments to developers for advertising space and our collection of advertising revenue related to that space; and

    costs related to acquisitions of other businesses.

Our operating results may fall below the expectations of market analysts and investors in some future periods. If this happens, even just temporarily, the market price of our common stock may fall.

Seasonal fluctuations in mobile advertising activity could adversely affect our cash flows.

        Our cash flows from operations could vary from quarter to quarter due to the seasonal nature of our advertisers' spending. For example, many advertisers devote the largest portion of their budgets to the fourth quarter of the calendar year, to coincide with increased holiday purchasing. To date, these seasonal effects have been masked by our rapid revenue growth. However, if and to the extent that seasonal fluctuations become more pronounced, our operating cash flows could fluctuate materially from period to period as a result.

We do not have long-term agreements with our advertiser clients, and we may be unable to retain key clients, attract new clients or replace departing clients with clients that can provide comparable revenue to us.

        Our success requires us to maintain and expand our current advertiser client relationships and to develop new relationships. Our contracts with our advertiser clients generally do not include long-term obligations requiring them to purchase our services and are cancelable upon short or no notice and without penalty. As a result, we may have limited visibility as to our future advertising revenue streams. We cannot assure you that our advertiser clients will continue to use our services or that we will be able to replace, in a timely or effective manner, departing clients with new clients that generate comparable revenue. If a major advertising client representing a significant portion of our business decides to materially reduce its use of our platform or to cease using our platform altogether, it is possible that we would not have a sufficient supply of ads to fill our developer clients' advertising inventory, in which case our revenue could be significantly reduced. Any non-renewal, renegotiation, cancellation or deferral of large advertising contracts, or a number of contracts that in the aggregate account for a significant amount of revenue, could cause an immediate and significant decline in our revenue and harm our business.

Our sales efforts with both advertisers and developers require significant time and expense.

        Attracting new advertiser and developer clients requires substantial time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing our current relationships. For example, it may be difficult to identify, engage and market to potential advertiser clients who do not currently spend on mobile advertising or are unfamiliar with our current services or platform. Furthermore, many of our clients' purchasing and design decisions typically require input from multiple internal constituencies. As a result, we must identify those involved in the purchasing decision and devote a sufficient amount of time to presenting our services to each of those individuals.

        The novelty of our services and our business model often requires us to spend substantial time and effort educating potential advertiser and developer clients about our offerings, including providing demonstrations and comparisons against other available services. This process can be costly and time-consuming. If we are not successful in streamlining our sales processes with advertisers and developers, our ability to grow our business may be adversely affected.

18


Table of Contents

If we do not achieve satisfactory results under performance-based pricing models, we could lose clients and our revenue could decline.

        We offer our services to advertisers based on a variety of pricing models, including CPM, CPA and CPC. Under performance-driven CPA and CPC pricing models, from which we currently derive a significant portion of our revenue, advertisers only pay us if we provide the results they specify. These results-based pricing models differ from fixed-rate pricing models, like CPM, under which the fee is based on the number of times the ad is shown, without regard to its effectiveness. As a result, under our contracts with advertisers that provide for us to be paid on a CPC or CPA basis, we must be able to develop effective ad campaigns that result in the desired actions being taken by consumers. If we are not able to perform effectively under these arrangements, it could hurt our reputation with advertisers and developers and could cause our revenues to decline.

If we cannot increase the capacity of our mobile advertising technology platform to meet advertiser or device user demand, our business will be harmed.

        We must be able to continue to increase the capacity of our MYDAS technology platform in order to support substantial increases in the number of advertisers and device users, to support an increasing variety of advertising formats and to maintain a stable service infrastructure and reliable service delivery for our mobile advertising campaigns. If we are unable to efficiently and effectively increase the scale of our mobile advertising platform to support and manage a substantial increase in the number of advertisers and mobile device users, while also maintaining a high level of performance, the quality of our services could decline and our reputation and business could be seriously harmed. In addition, if we are not able to support emerging mobile advertising formats or services preferred by advertisers, we may be unable to obtain new advertising clients or may lose existing advertising clients, and in either case our revenue could decline.

If we fail to detect click fraud or other invalid clicks on ads, we could lose the confidence of our advertiser clients, which would cause our business to suffer.

        Our business relies on delivering positive results to our advertiser clients. We are exposed to the risk of fraudulent and other invalid clicks or conversions that advertisers may perceive as undesirable. Because of their smaller sizes as compared to personal computers, mobile device usage could result in a higher rate of accidental or otherwise inadvertent clicks by a user. Invalid clicks could also result from click fraud, where a mobile device user intentionally clicks on ads for reasons other than to access the underlying content of the ads. If fraudulent or other malicious activity is perpetrated by others, and we are unable to detect and prevent it, the affected advertisers may experience or perceive a reduced return on their investment. High levels of invalid click activity could lead to dissatisfaction with our advertising services, refusals to pay, refund demands or withdrawal of future business. Any of these occurrences could damage our brand and lead to a loss of advertisers and revenue.

System failures could significantly disrupt our operations and cause us to lose advertiser clients or advertising inventory.

        Our success depends on the continuing and uninterrupted performance of our own internal systems, which we utilize to place ads, monitor the performance of advertising campaigns and manage our inventory of advertising space. Our revenue depends on the technological ability of our platform to deliver ads and measure them on a CPM, CPC or CPA basis. Sustained or repeated system failures that interrupt our ability to provide services to clients, including technological failures affecting our ability to deliver ads quickly and accurately and to process mobile device users' responses to ads, could significantly reduce the attractiveness of our services to advertisers and reduce our revenue. Our systems are vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious human acts and

19


Table of Contents

natural disasters. In addition, any steps we take to increase the reliability and redundancy of our systems may be expensive and may not be successful in preventing system failures.

Failure to adequately manage our growth may seriously harm our business.

        We have experienced, and may continue to experience, significant growth in our business. If we do not effectively manage our growth, the quality of our services may suffer, which could negatively affect our reputation and demand for our services. Our growth has placed, and is expected to continue to place, a significant strain on our managerial, administrative, operational and financial resources and our infrastructure. Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require us to, among other things:

    implement additional management information systems;

    further develop our operating, administrative, legal, financial and accounting systems and controls;

    hire additional personnel;

    develop additional levels of management within our company;

    locate additional office space;

    maintain close coordination among our engineering, operations, legal, finance, sales and marketing and client service and support organizations; and

    manage our expanding international operations.

        Moreover, as our sales increase, we may be required to concurrently deploy our services infrastructure at multiple additional locations or provide increased levels of customization. As a result, we may lack the resources to deploy our services on a timely and cost-effective basis. Failure to accomplish any of these requirements could impair our ability to deliver our mobile advertising platform in a timely fashion, fulfill existing client commitments or attract and retain new clients.

Our increasing international operations subject us to increased challenges and risks.

        We have recently started to expand our operations internationally, including opening international offices in the United Kingdom in the first half of 2010 and launching operations in Singapore in the fourth quarter of 2011. We expect to further expand our international operations by opening offices in new countries and regions worldwide. However, we have a limited operating history as a company outside the United States, and our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple cultures, customs, legal systems, alternative dispute systems, regulatory systems and commercial infrastructures. International expansion will require us to invest significant funds and other resources. Expanding internationally may subject us to new risks that we have not faced before or increase risks that we currently face, including risks associated with:

    recruiting and retaining talented and capable employees in foreign countries;

    providing mobile advertising services among different cultures, including potentially modifying our platform and features to ensure that we deliver ads that are culturally relevant in different countries;

    increased competition from local providers of mobile advertising services;

    compliance with applicable foreign laws and regulations;

    longer sales or collection cycles in some countries;

    credit risk and higher levels of payment fraud;

20


Table of Contents

    compliance with anti-bribery laws, such as the Foreign Corrupt Practices Act and the UK Anti-Bribery Act;

    currency exchange rate fluctuations;

    foreign exchange controls that might prevent us from repatriating cash earned outside the United States;

    economic instability in some countries, particularly those in Europe given our recent expansion in the United Kingdom;

    political instability;

    compliance with the laws of numerous taxing jurisdictions, both foreign and domestic, in which we conduct business, potential double taxation of our international earnings and potentially adverse tax consequences due to changes in applicable U.S. and foreign tax laws;

    the complexity and potential adverse consequences of U.S. tax laws as they relate to our international operations;

    increased costs to establish and maintain effective controls at foreign locations; and

    overall higher costs of doing business internationally.

        If our revenue from our international operations, and particularly from our operations in the countries and regions on which we have focused our spending, do not exceed the expense of establishing and maintaining these operations, our business and operating results will suffer.

If we do not retain our senior management team and key employees, or attract additional sales and technology talent, we may not be able to sustain our growth or achieve our business objectives.

        Our future success is substantially dependent on the continued service of our senior management team, particularly Paul Palmieri, our chief executive officer, Chris Brandenburg, our chief technology officer, Stephen Root, our chief operating officer, and Michael Avon, our chief financial officer. We do not maintain key-person insurance on any of these employees. Our future success also depends on our ability to continue to attract, retain and motivate highly skilled employees, particularly employees with technical skills that enable us to deliver effective mobile advertising solutions and sales and client support representatives with experience in mobile and other digital advertising and strong relationships with brand advertisers and app developers. Competition for these employees in our industry is intense. As a result, we may be unable to attract or retain these management, technical, sales and client support personnel that are critical to our success, resulting in harm to our key client relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs. The loss of the services of our senior management or other key employees could make it more difficult to successfully operate our business and pursue our business goals.

Acquisitions or investments may be unsuccessful and may divert our management's attention and consume significant resources.

        A key part of our growth strategy is to pursue additional acquisitions or investments in other businesses or individual technologies, including additional technology tools for app developers that allow them to generate revenue from their apps through advertising that we can supply. Any acquisition or investment may require us to use significant amounts of cash, issue potentially dilutive equity securities or incur debt. In addition, acquisitions involve numerous risks, any of which could harm our business, including:

    difficulties in integrating the operations, technologies, services and personnel of acquired businesses, especially if those businesses operate outside of our core competency of delivering mobile advertising;

21


Table of Contents

    cultural challenges associated with integrating employees from the acquired company into our organization;

    ineffectiveness or incompatibility of acquired technologies or services;

    potential loss of key employees of acquired businesses;

    inability to maintain the key business relationships and the reputations of acquired businesses;

    diversion of management's attention from other business concerns;

    litigation for activities of the acquired company, including claims from terminated employees, clients, former stockholders or other third parties;

    in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;

    costs necessary to establish and maintain effective internal controls for acquired businesses;

    failure to successfully further develop the acquired technology in order to recoup our investment; and

    increased fixed costs.

Activities of our advertiser clients could damage our reputation or give rise to legal claims against us.

        Our advertiser clients' promotion of their products and services may not comply with federal, state and local laws, including, but not limited to, laws and regulations relating to mobile communications. Failure of our clients to comply with federal, state or local laws or our policies could damage our reputation and expose us to liability under these laws. We may also be liable to third parties for content in the ads we deliver if the artwork, text or other content involved violates copyrights, trademarks or other intellectual property rights of third parties or if the content is defamatory, unfair and deceptive, or otherwise in violation of applicable laws. Although we generally receive assurance from our advertisers that their ads are lawful and that they have the right to use any copyrights, trademarks or other intellectual property included in an ad, and although we are normally indemnified by the advertisers, a third party or regulatory authority may still file a claim against us. Any such claims could be costly and time-consuming to defend and could also hurt our reputation within the mobile advertising industry. Further, if we are exposed to legal liability, we could be required to pay substantial fines or penalties, redesign our business methods, discontinue some of our services or otherwise expend significant resources.

Our business depends on our ability to maintain the quality of our advertiser and developer content.

        We must be able to ensure that our clients' ads are not placed in developer content that is unlawful or inappropriate. Likewise, our developers rely upon us not to place ads in their apps that are unlawful or inappropriate. If we are unable to ensure that the quality of our advertiser and developer content does not decline as the number of advertisers and developers we work with continues to grow, then our reputation and business may suffer.

Our inability to use software licensed from third parties, or our use of open source software under license terms that interfere with our proprietary rights, could disrupt our business.

        Our technology platform incorporates software licensed from third parties, including some software, known as open source software, which we use without charge. Although we monitor our use of open source software, the terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide our platform to our clients. In the future,

22


Table of Contents

we could be required to seek licenses from third parties in order to continue offering our platform, which licenses may not be available on terms that are acceptable to us, or at all. Alternatively, we may need to re-engineer our platform or discontinue use of portions of the functionality provided by our platform. In addition, the terms of open source software licenses may require us to provide software that we develop using such software to others on unfavorable license terms. Our inability to use third-party software could result in disruptions to our business, or delays in the development of future offerings or enhancements of existing offerings, which could impair our business.

Software and components that we incorporate into our mobile advertising platform may contain errors or defects, which could harm our reputation and hurt our business.

        We use a combination of custom and third-party software, including open source software, in building our mobile advertising platform. Although we test software before incorporating it into our platform, we cannot guarantee that all of the third-party technology that we incorporate will not contain errors, bugs or other defects. We continue to launch enhancements to our mobile advertising platform, and we cannot guarantee any such enhancements will be free from these kinds of defects. If errors or other defects occur in technology that we utilize in our mobile advertising platform, it could result in damage to our reputation and losses in revenue, and we could be required to spend significant amounts of additional resources to fix any problems.

Our failure to protect our intellectual property rights could diminish the value of our services, weaken our competitive position and reduce our revenue.

        We regard the protection of our intellectual property, which includes trade secrets, copyrights, trademarks, domain names and patent applications, as critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others.

        We have begun to seek patent protection for certain of our technologies and currently have five U.S. patent applications on file, although there can be no assurance that these patents will ultimately be issued. We are also pursuing the registration of our domain names, trademarks and service marks in the United States and in certain locations outside the United States. Effective trade secret, copyright, trademark, domain name and patent protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. We may be required to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which we may not pursue in every location. We may, over time, increase our investment in protecting our intellectual property through additional patent filings that could be expensive and time-consuming.

        We have licensed in the past, and expect to license in the future, some of our proprietary rights, such as trademarks or copyrighted material, to third parties. These licensees may take actions that diminish the value of our proprietary rights or harm our reputation.

        Monitoring unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Our competitors may also independently develop similar technology. In addition, the laws of many countries, such as China and India, do not protect our proprietary rights to as

23


Table of Contents

great an extent as do the laws of European countries and the United States. Further, the laws in the United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property. Our failure to meaningfully protect our intellectual property could result in competitors offering services that incorporate our most technologically advanced features, which could seriously reduce demand for our mobile advertising services. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination that is unfavorable to us. In addition, litigation is inherently uncertain, and thus we may not be able to stop our competitors from infringing upon our intellectual property rights.

We operate in an industry with extensive intellectual property litigation. Claims of infringement against us may hurt our business.

        Our success depends, in part, upon non-infringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures or adverse consequences. The mobile telecommunications industry generally is characterized by extensive intellectual property litigation. Although our technology is relatively new and our industry is rapidly evolving, many participants that own, or claim to own, intellectual property historically have aggressively asserted their rights. From time to time, we may be subject to legal proceedings and claims relating to the intellectual property rights of others, including one currently pending proceeding related to an alleged patent infringement, as described in "Business—Legal Proceedings," and we expect that third parties will continue to assert intellectual property claims against us, particularly as we expand the complexity and scope of our business.

        Future litigation may be necessary to defend ourselves or our clients by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights. Some of our competitors have substantially greater resources than we do and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target us. Regardless of whether claims that we are infringing patents or other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend and could:

    adversely affect our relationships with our current or future clients;

    cause delays or stoppages in providing our mobile advertising services;

    divert management's attention and resources;

    require technology changes to our platform that would cause us to incur substantial cost;

    subject us to significant liabilities; and

    require us to cease some or all of our activities.

        In addition to liability for monetary damages against us, which may be tripled and may include attorneys' fees, or, in some circumstances, damages against our clients, we may be prohibited from developing, commercializing or continuing to provide some or all of our mobile advertising solutions unless we obtain licenses from, and pay royalties to, the holders of the patents or other intellectual property rights, which may not be available on commercially favorable terms, or at all.

24


Table of Contents

Our business involves the use, transmission and storage of confidential information, and the failure to properly safeguard such information could result in significant reputational harm and monetary damages.

        We may at times collect, store and transmit information of, or on behalf of, our clients that may include certain types of confidential information that may be considered personal or sensitive, and that are subject to laws that apply to data breaches. We believe that we take reasonable steps to protect the security, integrity and confidentiality of the information we collect and store, but there is no guarantee that inadvertent or unauthorized disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. If such unauthorized disclosure or access does occur, we may be required to notify persons whose information was disclosed or accessed. Most states have enacted data breach notification laws and, in addition to Federal laws that apply to certain types of information, such as financial information, Federal legislation has been proposed in the past that would establish broader Federal obligations with respect to data breaches. We may also be subject to claims of breach of contract for such disclosure, investigation and penalties by regulatory authorities and potential claims by persons whose information was disclosed. The unauthorized disclosure of information may result in the termination of one or more of our commercial relationships or a reduction in client confidence and usage of our services. We may also be subject to litigation alleging the improper use, transmission or storage of confidential information, which could damage our reputation among our current and potential clients, require significant expenditures of capital and other resources and cause us to lose business and revenue.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

        After the completion of this offering, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations of the stock market on which our common stock is traded. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. Commencing with our fiscal year ending December 31, 2013, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting in our Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts. Prior to this offering, we have never been required to test our internal controls within a specified period, and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.

        We may in the future discover areas of our internal financial and accounting controls and procedures that need improvement. Our internal control over financial reporting will not prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

        If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements, and we or our independent registered public accounting firm may conclude that our internal controls over financial reporting are not effective. If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other regulatory authorities.

25


Table of Contents

We may need additional capital in the future to meet our financial obligations and to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to meet our financial obligations and grow our business.

        While we anticipate that our existing cash and cash equivalents, together with availability under our existing credit facility, will be sufficient to fund our operations for at least the next 12 months, we may need to raise additional capital to fund operations in the future or to finance acquisitions. If we seek to raise additional capital in order to meet various objectives, including developing future technologies and services, increasing working capital, acquiring businesses and responding to competitive pressures, capital may not be available on favorable terms or may not be available at all. In addition, pursuant to the terms of our credit facility, we may be restricted from using the net proceeds of financing transactions for our operating objectives. Lack of sufficient capital resources could significantly limit our ability to take advantage of business and strategic opportunities. Any additional capital raised through the sale of equity or debt securities with an equity component would dilute our stock ownership. If adequate additional funds are not available, we may be required to delay, reduce the scope of, or eliminate material parts of our business strategy, including potential additional acquisitions or development of new technologies.

Our net operating loss carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.

        We may be limited in the portion of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. federal income tax purposes. At December 31, 2011, we had federal net operating loss carryforwards of $27.0 million, which expire at various dates through 2031. Our gross state net operating loss carryforwards are equal to or less than the federal net operating loss carryforwards and expire over various periods based on individual state tax law.

        We periodically assess the likelihood that we will be able to recover our net deferred tax assets. We consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible profits. As a result of this analysis of all available evidence, both positive and negative, we concluded that a valuation allowance against our net deferred tax assets should be applied as of December 31, 2011. To the extent we determine that all or a portion of our valuation allowance is no longer necessary, we will recognize an income tax benefit in the period such determination is made for the reversal of the valuation allowance. Once the valuation allowance is eliminated or reduced, its reversal will no longer be available to offset our current tax provision. These events could have a material impact on our reported results of operations.

Risks Related to this Offering and Ownership of Our Common Stock

An active trading market for our common stock may not develop.

        Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters and may bear no relationship to the price at which the common stock will trade upon completion of this offering. Although we have applied to list our common stock on the New York Stock Exchange, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult to sell shares you purchase in this offering without depressing the market price for the shares or to sell your shares at all.

The trading price of the shares of our common stock is likely to be volatile, and purchasers of our common stock could incur substantial losses.

        Our stock price is likely to be volatile. The stock market in general and the market for technology companies in particular have experienced extreme volatility that has often been unrelated to the operating

26


Table of Contents

performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including:

    actual or anticipated variations in quarterly operating results;

    changes in financial estimates by us or by any securities analysts who might cover our stock;

    conditions or trends in our industry;

    stock market price and volume fluctuations of other publicly traded companies and, in particular, those that operate in the advertising, internet or media industries;

    announcements by us or our competitors of new product or service offerings, significant acquisitions, strategic partnerships or divestitures;

    announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;

    capital commitments;

    additions or departures of key personnel; and

    sales of our common stock, including sales by our directors and officers or specific stockholders.

In addition, in the past, stockholders have initiated class action lawsuits against technology companies following periods of volatility in the market prices of these companies' stock. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management's attention and resources.

If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

        The trading market for our common stock will rely in part on the research and reports that equity research analysts publish about us and our business. We do not currently have and may never obtain research coverage by equity research analysts. Equity research analysts may elect not to provide research coverage of our common stock after the completion of this offering, and such lack of research coverage may adversely affect the market price of our common stock. In the event we do have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.

If you purchase shares of our common stock in this offering, you will suffer immediate dilution of your investment.

        We expect the initial public offering price of our common stock to be substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our pro forma net tangible book value per share after this offering. Based on an assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $            per share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to this offering and the assumed initial public offering price.

        In addition, as of December 31, 2011, we had outstanding stock options to purchase an aggregate of 7,650,498 shares of common stock at a weighted-average exercise price of $1.11 per share and an outstanding warrant to purchase 50,750 shares of our common stock at an exercise price of $1.18 per share.

27


Table of Contents

To the extent these outstanding options and warrant are exercised, there will be further dilution to investors in this offering.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

        Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline significantly.

        Upon completion of this offering, we will have outstanding                        shares of common stock, assuming no exercise of outstanding options or the warrant. Of these shares, the                         shares sold in this offering will be freely tradable, and                        additional shares of common stock will be available for sale in the public market beginning 180 days after the date of this prospectus following the expiration of lock-up agreements between some of our stockholders and the underwriters, which lock-up period is subject to potential extension in specified circumstances for up to an additional 34 days. The representatives of the underwriters may release these stockholders from their lock-up agreements with the underwriters at any time and without notice, which would allow for earlier sales of shares in the public market.

        In addition, promptly following the completion of this offering, we intend to file one or more registration statements on Form S-8 registering the issuance of approximately                        shares of common stock subject to options or other equity awards issued or reserved for future issuance under our equity incentive plans. Shares registered under these registration statements on Form S-8 will be available for sale in the public market subject to vesting arrangements and exercise of options, the lock-up agreements described above and the restrictions of Rule 144 in the case of our affiliates.

        Additionally, after this offering, the holders of an aggregate of                        shares of our common stock and 50,750 shares of our common stock issuable upon the exercise of an outstanding warrant, or their transferees, will have rights, subject to some conditions, to require us to file one or more registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. If we were to register these shares for resale, they could be freely sold in the public market. If these additional shares are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our management and hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.

        There are provisions in our certificate of incorporation and bylaws as they will be in effect following this offering that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control was considered favorable by you and other stockholders. For example, our board of directors will have the authority to issue up to 5,000,000 shares of preferred stock. The board of directors can fix the price, rights, preferences, privileges, and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares of preferred stock may delay or prevent a change in control transaction. As a result, the market price of our common stock and the voting and other rights of our stockholders may be adversely affected. An issuance of shares of preferred stock may result in the loss of voting control to other stockholders.

28


Table of Contents

        Our charter documents will also contain other provisions that could have an anti-takeover effect, including:

    only one of our three classes of directors will be elected each year;

    stockholders will not be entitled to remove directors other than by a 662/3% vote and only for cause;

    stockholders will not be permitted to take actions by written consent;

    stockholders cannot call a special meeting of stockholders; and

    stockholders must give advance notice to nominate directors or submit proposals for consideration at stockholder meetings.

        In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which regulates corporate acquisitions by prohibiting Delaware corporations from engaging in specified business combinations with particular stockholders of those companies. These provisions could discourage potential acquisition proposals and could delay or prevent a change in control transaction. They could also have the effect of discouraging others from making tender offers for our common stock, including transactions that may be in your best interests. These provisions may also prevent changes in our management or limit the price that investors are willing to pay for our stock.

        Our amended and restated certificate of incorporation will also provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

        Upon completion of this offering, our executive officers, directors and current beneficial owners of 5% or more of our common stock and their respective affiliates will, in aggregate, beneficially own approximately        % of our outstanding common stock. These persons, acting together, would be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with our interests or the interests of other stockholders.

We will have broad discretion in the use of proceeds from this offering and may invest or spend the proceeds in ways with which you do not agree and in ways that may not yield a return.

        We will have broad discretion over the use of proceeds from this offering. You may not agree with our decisions, and our use of the proceeds may not yield any return on your investment in us. Our failure to apply the net proceeds of this offering effectively could compromise our ability to pursue our growth strategy.

Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gains.

        We have not declared or paid cash dividends on our common stock to date. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the terms of any existing or future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

29


Table of Contents

We will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States.

        As a public company listed in the United States, we will incur significant additional legal, accounting and other expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and stock exchanges, may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

        Failure to comply with these rules might also make it more difficult for us to obtain some types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.

30


Table of Contents


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," but are also contained elsewhere in this prospectus. In some cases, you can identify forward-looking statements by the words "may," "might," "will," "could," "would," "should," "expect," "intend," "plan," "objective," "anticipate," "believe," "estimate," "predict," "project," "potential," "continue" and "ongoing," or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:

    the expansion of the mobile advertising market in general;

    the expected growth of app downloads, mobile ad revenue, number of mobile connected devices and Wi-Fi enabled devices, wireless network penetration and mobile consumption of content;

    market trends, including overall opportunities for mobile advertising and shifting advertising budgets;

    the ongoing improvement and refinement of our ad targeting capabilities and the willingness of advertisers to pay more for ads as a result; and

    our growth strategy.

        You should refer to the "Risk Factors" section of this prospectus for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

        You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

31


Table of Contents


INDUSTRY AND MARKET DATA

        Some of the industry and market data contained in this prospectus are based on independent industry publications, including those generated by International Data Corporation, or IDC, Gartner, Inc., or Gartner, eMarketer and Informa Telecoms & Media, or other publicly available information. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. These industry publications, surveys and forecasts generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause results to differ materially from those expressed in these publications.

        The Gartner reports described in this prospectus represent data, research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. and are not representations of fact. Each Gartner report speaks as of its original publication date, and not as of the date of this prospectus, and the opinions expressed in the Gartner reports are subject to change without notice. The Gartner reports consist of:

    Gartner, Inc., "Forecast: Mobile Application Stores, Worldwide, 2008-2015", S. Baghdassarian, C. Milanesi, May 18, 2011;

    Gartner, Inc., "Forecast: Mobile Advertising, Worldwide, 2008-2015", S. Baghdassarian, A. Frank, March 21, 2011; and

    Gartner, Inc., "Market Trends: Future Platforms for Wi-Fi Growth, 2011-2015", M. Hung, June 29, 2011.

        We have also included in this prospectus industry and market data derived from reports of IDC. The IDC reports consist of:

    International Data Corporation, "2011 U.S. Mobile Online Advertising Sizing and Vendor Market Shares", doc #231886, December 2011;

    International Data Corporation, "Worldwide Smartphone 2011-2015 Forecast Update: September 2011", doc #230173, September 2011; and

    International Data Corporation, "Worldwide and U.S. Media Tablet 2011-2015 Forecast Update: October 2011", doc #230896, October 2011.

        We have also included in this prospectus information derived from the following report published by Cisco Systems, Inc., which is used with permission:

    Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2010-2015.

32


Table of Contents


USE OF PROCEEDS

        We estimate that the net proceeds from our issuance and sale of                        shares of our common stock in this offering will be approximately $             million, or approximately $             million if the underwriters exercise their over-allotment option in full, based upon an assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of shares by the selling stockholders, although we will bear the costs, other than underwriting discounts and commissions, associated with those sales.

        Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

        The principal purposes of this offering are to create a public market for our common stock and to facilitate our future access to the public equity markets, as well as to obtain additional capital. We intend to use the net proceeds from this offering for working capital and general corporate purposes, including further expansion of our international operations and product development.

        In addition, we may use a portion of the net proceeds from this offering to acquire, invest in or license complementary products, technologies or businesses, but we currently have no agreements or commitments with respect to any potential acquisition, investment or in-license. We may allocate funds from other sources to fund some or all of these activities.

        The expected use of net proceeds from this offering represents our intentions based upon our present plans and business conditions. We cannot predict with certainty all of the particular uses for the proceeds of this offering or the amounts that we will actually spend on the uses set forth above. Accordingly, our management will have significant flexibility in applying the net proceeds of this offering.

        The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business. Pending their use, we intend to invest the net proceeds of this offering in a variety of capital-preservation investments, including short- and intermediate-term, interest-bearing, investment-grade securities.


DIVIDEND POLICY

        We have never declared or paid any dividends on our common stock. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Additionally, our ability to pay dividends on our common stock is limited by restrictions under the terms of the agreements governing our credit facility.

33


Table of Contents


CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2011:

    on an actual basis;

    on a pro forma basis to give effect to:

    the conversion of the outstanding shares of our convertible preferred stock into an aggregate of 47,679,003 shares of our common stock, which will occur automatically upon the closing of this offering;

    the reclassification of our preferred stock warrant liability to additional paid-in-capital upon the automatic conversion of our preferred stock issuable upon exercise of such warrant into common stock; and

    the filing of an amendment to our certificate of incorporation concurrently with the completion of this offering; and

    on a pro forma as adjusted basis to give further effect to our sale of                        shares of common stock in this offering at an assumed initial public offering price of $        per share, which is the midpoint of the range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

        The following information is illustrative only of our cash and cash equivalents and capitalization following the completion of this offering and will change based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the related notes appearing elsewhere in this prospectus.

 
  As of December 31, 2011  
 
  Actual   Pro forma   Pro forma
as adjusted
 
 
  (in thousands, except share and per share data)
 

Cash and cash equivalents

  $ 16,707   $ 16,707   $    
               

Series B warrant outstanding

  $ 183   $   $    

Redeemable convertible preferred stock, $0.001 par value; 47,729,753 shares authorized, 47,679,003 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted

    76,668            

Stockholders' (deficit) equity:

                   

Preferred stock, $0.001 par value; no shares authorized, issued or outstanding, actual or pro forma; 5,000,000 shares authorized, no shares issued or outstanding, pro forma as adjusted

               

Common stock, $0.001 par value; 74,892,833 shares authorized, 18,011,035 shares issued and outstanding, actual; 74,892,833 shares authorized, 65,690,038 shares issued and outstanding, pro forma; 250,000,000 shares authorized,                 shares issued and outstanding, pro forma as adjusted

    17     65        

Additional paid-in-capital

        76,803        

Accumulated other comprehensive loss

    (25 )   (25 )      

Accumulated deficit

    (44,413 )   (44,413 )      
               

Total stockholders' (deficit) equity

    (44,421 )   32,430        
               

Total capitalization

  $ 32,430   $ 32,430   $    
               

34


Table of Contents

        Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by approximately $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

        The number of shares of common stock outstanding in the table above does not include:

    7,650,498 shares of our common stock issuable upon the exercise of stock options outstanding under our 2006 equity incentive plan as of December 31, 2011, at a weighted average exercise price of $1.11 per share, of which 135,124 shares were issued upon the exercise of options subsequent to December 31, 2011;

    106,250 shares of our common stock issuable upon the exercise of stock options granted subsequent to December 31, 2011, at an exercise price of $6.00 per share;

    50,750 shares of our common stock issuable upon the exercise of an outstanding warrant to purchase common stock as of December 31, 2011, at an exercise price of $1.18 per share;

                     shares of our common stock subject to stock options we expect to grant upon the effective date of the registration statement of which this prospectus is a part, which will have an exercise price per share equal to the initial public offering price per share in this offering, and a restricted stock unit we expect to issue to one of our executive officers at the same time equal to $225,000 divided by the initial public offering price per share in this offering; and

    an additional                 shares of our common stock to be reserved for future issuance under our equity incentive plan.

35


Table of Contents


DILUTION

        If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Net tangible book value per share is determined by dividing our total tangible assets less total liabilities and convertible preferred stock by the number of outstanding shares of our common stock.

        As of December 31, 2011, we had a deficit in net tangible book value of $(46.9) million, or approximately $(2.61) per share of common stock. On a pro forma basis, after giving effect to the conversion of the outstanding shares of our convertible preferred stock into shares of our common stock and the reclassification of the preferred stock warrant liability to stockholders' equity upon the closing of this offering, our net tangible book value would have been approximately $29.9 million, or approximately $0.46 per share of common stock.

        Investors participating in this offering will incur immediate and substantial dilution. After giving effect to the issuance and sale of                        shares of our common stock in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2011 would have been approximately $             million, or approximately $            per share of common stock. This represents an immediate increase in the pro forma net tangible book value of $            per share to existing stockholders, and an immediate dilution in the pro forma net tangible book value of $            per share to investors purchasing shares of our common stock in this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share

        $    

Actual net tangible book value per share as of December 31, 2011

  $ (2.61 )      

Increase per share attributable to conversion of preferred stock and reclassification of preferred stock warrant liability

    3.07        
             

Pro forma net tangible book value per share before this offering

  $ 0.46        

Increase in pro forma net tangible book value per share attributable to new investors participating in this offering

             
             

Pro forma as adjusted net tangible book value per share after this offering

             
             

Dilution per share to investors participating in this offering

        $    
             

        The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $            per share would increase or decrease our pro forma as adjusted net tangible book value by approximately $             million, or approximately $            per share, and the dilution per share to investors participating in this offering by approximately $            per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

        If the underwriters exercise their option in full to purchase                        additional shares of common stock in this offering, the pro forma as adjusted net tangible book value per share after the offering would be $            per share, the increase in the pro forma net tangible book value per share to existing stockholders would be $            per share and the dilution to new investors purchasing common stock in this offering would be $            per share.

        The following table sets forth as of December 31, 2011, on the pro forma basis described above, the differences between the number of shares of common stock purchased from us, the total consideration paid and the weighted average price per share paid by existing stockholders and by investors purchasing

36


Table of Contents

shares of our common stock in this offering at an assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page on this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

 
  Shares purchased   Total consideration    
 
 
  Weighted average
price per share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

            % $         % $    

New investors

                               
                         

Total

          100 % $       100 %      
                         

        Each $1.00 increase or decrease in the assumed initial public offering price of $            per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $             million, and increase or decrease the percent of total consideration paid by new investors by                         percentage points, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

        The table above also excludes:

    7,650,498 shares of our common stock issuable upon the exercise of stock options outstanding under our 2006 equity incentive plan as of December 31, 2011, at a weighted average exercise price of $1.11 per share, of which 135,124 shares were issued upon the exercise of options subsequent to December 31, 2011;

    106,250 shares of our common stock issuable upon the exercise of stock options granted subsequent to December 31, 2011, at an exercise price of $6.00 per share;

    50,750 shares of our common stock issuable upon the exercise of an outstanding warrant to purchase common stock as of December 31, 2011, at an exercise price of $1.18 per share;

                     shares of our common stock subject to stock options we expect to grant upon the effective date of the registration statement of which this prospectus is a part, which will have an exercise price per share equal to the initial public offering price per share in this offering, and a restricted stock unit we expect to issue to one of our executive officers at the same time equal to $225,000 divided by the initial public offering price per share in this offering; and

    an additional                 shares of our common stock to be reserved for future issuance under our equity incentive plan.

        The foregoing table does not reflect the sales by existing stockholders in connection with sales made by them in this offering. Sales by the selling stockholders in this offering will reduce the number of shares held by existing stockholders to                        shares, or        % of the total number of shares of our common stock outstanding after this offering, and will increase the number of shares held by new investors to                        shares, or        % of the total number of shares of our common stock outstanding after this offering. In addition, if the underwriters exercise their option to purchase additional shares in full, the number of shares held by the existing stockholders after this offering would be reduced to                        , or         % of the total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors would increase to                        , or        % of the total number of shares of our common stock outstanding after this offering.

        The shares of our common stock reserved for future issuance under our equity benefit plans will be subject to automatic annual increases in accordance with the terms of the plans. To the extent that options or warrants are exercised, new options are issued under our equity incentive plan, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

37


Table of Contents


SELECTED CONSOLIDATED FINANCIAL DATA

        The following selected consolidated financial data for the years ended December 31, 2008, 2009, 2010 and 2011 and the selected consolidated balance sheet data as of December 31, 2008, 2009, 2010 and 2011 are derived from our audited consolidated financial statements, which have been audited by Ernst & Young LLP, independent registered public accounting firm. The selected consolidated financial data for the year ended December 31, 2007 and the selected consolidated balance sheet data as of December 31, 2007 are derived from unaudited financial statements. Our historical results are not necessarily indicative of the results to be expected in the future. The selected consolidated financial data should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this prospectus.

 
  Year Ended December 31,  
 
  2007   2008   2009   2010   2011  
 
  (in thousands, except share and per share data)
 

Consolidated Statement of Operations Data:

                               

Revenue

  $ 1,503   $ 6,281   $ 16,220   $ 47,828   $ 103,678  

Cost of revenue

    1,245     4,992     11,596     31,602     63,595  
                       

Gross profit

    258     1,289     4,624     16,226     40,083  

Operating expenses:

                               

Sales and marketing

    1,668     3,463     4,609     8,508     14,255  

Technology and development

    545     663     1,095     2,175     5,181  

General and administrative

    3,512     5,682     6,326     12,535     21,321  
                       

Total operating expenses

    5,725     9,808     12,030     23,218     40,757  
                       

Loss from operations

    (5,467 )   (8,519 )   (7,406 )   (6,992 )   (674 )

Total other income (expense)

    270     160     (144 )   (107 )   (99 )
                       

Loss before income taxes

    (5,197 )   (8,359 )   (7,550 )   (7,099 )   (773 )

Income tax (expense) benefit

                (22 )   486  
                       

Net loss

  $ (5,197 ) $ (8,359 ) $ (7,550 ) $ (7,121 ) $ (287 )

Accretion of dividends on redeemable convertible preferred stock

    (619 )   (1,542 )   (1,793 )   (2,933 )   (5,022 )
                       

Net loss attributable to common stockholders

  $ (5,816 ) $ (9,901 ) $ (9,343 ) $ (10,054 ) $ (5,309 )
                       

Net loss per share attributable to common stockholders—basic and diluted

  $ (0.36 ) $ (0.60 ) $ (0.56 ) $ (0.56 ) $ (0.32 )
                       

Pro forma net loss per share—basic and diluted(1)

                          $ (0.00 )
                               

Weighted average shares of common stock outstanding used in computing net loss per share attributable to common stockholders

    16,258,835     16,377,394     16,783,411     17,965,893     16,362,810  
                       

Weighted average shares of common stock outstanding used in computing pro forma net loss per share

                            64,041,813  
                               

Other Financial Data:

                               

Adjusted EBITDA(2)

  $ (5,325 ) $ (8,284 ) $ (7,048 ) $ (6,436 ) $ 1,839  

    (1)
    Pro forma basic and diluted net loss per share have been calculated assuming (i) the conversion of all outstanding shares of redeemable convertible preferred stock into an aggregate of 47,679,003 shares of common stock as of the beginning of the applicable period or at the time of issuance, if later, and (ii) the reclassification of the outstanding preferred stock warrant from

38


Table of Contents

      long-term liabilities to additional paid-in capital as of the beginning of the applicable period. The numerator of pro forma net loss per share of common stock is derived by adding $78,000 for the year ended December 31, 2011 related to the change in the fair value of the preferred stock warrant liability and by adding $5.0 million for the year ended December 31, 2011 related to accretion of dividends on redeemable convertible preferred stock.

    (2)
    We define adjusted EBITDA as net loss plus: income tax (expense) benefit, interest income (expense), net, depreciation and amortization, and stock-based compensation. Please see "—Adjusted EBITDA" for more information and for a reconciliation of adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with GAAP.

 
  As of December 31,  
 
  2007   2008   2009   2010   2011  
 
  (in thousands)
 

Consolidated Balance Sheet Data:

                               

Cash and cash equivalents

  $ 15,921   $ 10,200   $ 19,171   $ 27,803   $ 16,707  

Accounts receivable, net of allowances

    774     2,280     6,485     19,978     34,986  

Total assets

    17,315     13,042     26,136     49,115     61,885  

Long-term debt, including current portion

        2,975     2,238          

Total liabilities

    1,789     5,731     10,190     17,807     29,638  

Total redeemable convertible preferred stock

    21,924     23,476     41,202     71,622     76,668  

Total stockholders' deficit

    (6,398 )   (16,165 )   (25,256 )   (40,314 )   (44,421 )

Adjusted EBITDA

        To provide investors with additional information regarding our financial results, we have used within this prospectus adjusted EBITDA, a non-GAAP financial measure. We have provided a reconciliation below of adjusted EBITDA to net loss, the most directly comparable GAAP financial measure.

        We have included adjusted EBITDA in this prospectus because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Additionally, adjusted EBITDA is a key financial measure used by the compensation committee of our board of directors in connection with the development of incentive-based compensation for our executive officers. Accordingly, we believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

        Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are:

    although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

    adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

    adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation;

39


Table of Contents

    adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and

    other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

        Because of these and other limitations, you should consider adjusted EBITDA alongside other GAAP-based financial performance measures, including various cash flow metrics, net income (loss) and our other GAAP financial results. The following table presents a reconciliation of adjusted EBITDA to net loss for each of the periods indicated:

 
  Year Ended December 31,  
 
  2007   2008   2009   2010   2011  
 
  (in thousands)
 

Net loss

  $ (5,197 ) $ (8,359 ) $ (7,550 ) $ (7,121 ) $ (287 )

Adjustments:

                               

Interest (income) expense, net

    (270 )   (160 )   144     28     21  

Income tax expense (benefit)

                22     (486 )

Depreciation and amortization expense

    33     106     146     223     759  

Stock-based compensation expense

    109     129     212     412     1,832  
                       

Total net adjustments

    (128 )   75     502     685     2,126  
                       

Adjusted EBITDA

  $ (5,325 ) $ (8,284 ) $ (7,048 ) $ (6,436 ) $ 1,839  
                       

40


Table of Contents


MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes to those statements included later in this prospectus. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in "Risk Factors" and "Special Note Regarding Forward-Looking Statements."

Overview

        We are the leading independent mobile advertising platform company and the second largest mobile display advertising platform overall in the United States. Our technology, tools and services help developers maximize their advertising revenue, acquire users for their apps and gain insight about their users. To advertisers, we offer significant audience reach, sophisticated targeting capabilities and the opportunity to deliver interactive and engaging ad experiences to consumers on their mobile connected devices. More than 30,000 apps are enabled to receive ads through our platform, and we can deliver ads on over 7,000 different mobile device types and models. Our platform is compatible with all major mobile operating systems, including Apple iOS, Android, Windows Phone, Blackberry and Symbian.

        We help developers and advertisers remove complexity from mobile advertising. By working with us, developers gain access to our tools and services that allow their apps to display banner ads, interactive rich media ads and video ads from our platform. In return, developers supply us with space on their apps to deliver ads for our advertiser clients and also provide us with access to anonymous data associated with their apps and users. We analyze this data to build sophisticated user profiles and audience groups that, in combination with the real-time decisioning, optimization and targeting capabilities of our technology platform, enable us to deliver highly targeted advertising campaigns for our advertiser clients. Advertisers pay us to deliver their ads to mobile connected device users, and we pay developers a fee for the use of their ad space. As we deliver more ads, we are able to collect additional anonymous data about users, audiences and the effectiveness of particular ad campaigns, which in turn enhances our targeting capabilities and allows us to deliver better performance for advertisers and better opportunities for developers to increase their revenue streams.

        We have built relationships with developers and advertisers of all sizes. Our developer base includes large mobile web publishers, such as CBS Interactive and The New York Times, and large app developers, such as Zynga, Rovio and Pandora, as well as other developers, such as UberMedia and Gogii. Our advertiser clients include leading advertising agencies and brands, including 23 of Ad Age's top 25 national advertisers, as well as smaller advertisers and often the developers themselves.

        We operate in one segment, mobile advertising services. We have increased our revenue from $1.5 million for the year ended December 31, 2007 to $103.7 million for the year ended December 31, 2011. During the year ended December 31, 2011, approximately 10% of our revenue was derived from outside of the United States, up from 3% during the year ended December 31, 2010. We commenced our international operations in the United Kingdom during the first half of 2010 and in Asia during the fourth quarter of 2011 with the launch of operations in Singapore. We offer the same services internationally as we do in the United States, and we intend to continue to pursue a strategy of expanding our international operations.

41


Table of Contents

Key Operating and Financial Performance Metrics

        We monitor the key operating and financial performance metrics set forth in the table below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies.

        Gross margin is our gross profit, or revenue less cost of revenue, expressed as a percentage of our total revenue. Our gross margin has been and will continue to be primarily affected by our pricing terms with new and existing developers.

        Adjusted EBITDA represents our earnings before net interest (income) expense, income taxes, depreciation and amortization, adjusted to eliminate stock-based compensation expense, which is a non-cash item. Adjusted EBITDA is not a measure calculated in accordance with GAAP. Please refer to "Selected Consolidated Financial Data—Adjusted EBITDA" in this prospectus for a discussion of the limitations of adjusted EBITDA and a reconciliation of adjusted EBITDA to net loss, the most comparable GAAP measurement, for the years ended December 31, 2009, 2010 and 2011.

        Adjusted EBITDA should not be considered as an alternative to any measure of financial performance calculated and presented in accordance with GAAP. In addition, adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted EBITDA in the same manner that we do. We prepare adjusted EBITDA to eliminate the impact of stock-based compensation expense, which we do not consider indicative of our core operating performance. We encourage you to evaluate these adjustments, the reasons we consider them appropriate and the material limitations of using non-GAAP measures as described in "Selected Consolidated Financial Data—Adjusted EBITDA."

 
  Year Ended December 31,  
 
  2009   2010   2011  
 
  (dollars in thousands)
 

Revenue

  $ 16,220   $ 47,828   $ 103,678  

Gross margin

    28.5 %   33.9 %   38.7 %

Net loss

  $ (7,550 ) $ (7,121 ) $ (287 )

Adjusted EBITDA

  $ (7,048 ) $ (6,436 ) $ 1,839  

Components of Operating Results

    Revenue

        We generate revenue by charging advertisers to deliver ads to users of mobile connected devices. Depending on the specific terms of each advertising contract, we generally recognize revenue based on the activity of mobile users viewing these ads. Our fees from advertisers are commonly based on the number of ads delivered, views, clicks or actions by users on mobile advertisements we deliver, and we recognize revenue at the time the user views, clicks or otherwise acts on the ad. We sell ads on several bases: cost per thousand, or CPM, on which we charge advertisers for each ad delivered to a consumer; cost per click, or CPC, on which we charge advertisers for each ad clicked on by a user; and cost per action, or CPA, on which we charge advertisers each time a consumer takes a specified action, such as downloading an app. Our revenue recognition policies are discussed in more detail in the section below entitled "—Critical Accounting Policies and Significant Judgments and Estimates."

        Our brand advertiser clients, which currently comprise a majority of our revenue, generally use CPM pricing, although some brand advertisers use CPC pricing terms with us from time to time. On the other hand, our performance advertiser clients typically use CPC pricing, but sometimes use CPA pricing. The mix of revenue generated from brand advertisers and performance advertisers on our platform changes throughout the year. For example, we typically see a higher percentage of our revenue from brand advertisers in the second and fourth quarters of the year than we do during the first and third quarters. The

42


Table of Contents

overall mix of advertisers using CPM, CPC and CPA pricing models changes throughout the year, and we are not aware of any meaningful trends in our revenue resulting from each of these three categories at this time.

    Cost of Revenue

        Cost of revenue consists primarily of the agreed-upon payments we make to developers for their advertising space on which we deliver mobile ads. These payments are typically determined in advance as either a fixed percentage of the advertising revenue we earn from mobile ads placed on the developer's app or as a fixed fee for the ad space. We recognize cost of revenue on a developer-by-developer basis at the same time as we recognize the associated revenue. Costs owed to developers but not yet paid are recorded on our consolidated balance sheets as accrued cost of revenue.

    Operating Expenses

        Operating expenses consist of sales and marketing, technology and development and general and administrative expenses. Salaries and personnel costs are the most significant component of each of these expense categories. We grew from 66 employees at December 31, 2009 to 222 employees at December 31, 2011, and we expect to continue to hire new employees in order to support our anticipated revenue growth. We include stock-based compensation expense in connection with the grant of stock options in the applicable operating expense category based on the respective equity award recipient's function.

        Sales and marketing expense. Sales and marketing expense consists primarily of salaries and personnel-related costs for our advertiser-focused sales and marketing employees, including stock-based compensation, commissions and bonuses. Additional expenses include marketing programs, consulting, travel and other related overhead. The number of employees in sales and marketing functions grew from 24 at December 31, 2009 to 69 at December 31, 2011, and we expect our sales and marketing expense to increase in the foreseeable future as we further increase the number of our sales and marketing professionals and expand our marketing activities.

        Technology and development expense. Technology and development expense primarily consists of salaries and payroll-related costs for development employees, including stock-based compensation and bonuses. Additional expenses include costs related to the development, quality assurance and testing of new technology and enhancement of existing technology, amortization of internally developed software related to our technology infrastructure, consulting, travel and other related overhead. We engage third-party consulting firms for various technology and development efforts, such as documentation, quality assurance and support. The number of employees in technology and development functions grew from 10 at December 31, 2009 to 44 at December 31, 2011. We intend to continue to invest in our technology and development efforts, by hiring additional development personnel and by using outside consulting firms for various technology and development efforts. We believe continuing to invest in technology and development efforts is essential to maintaining our competitive position.

        General and administrative expense. General and administrative expense primarily consists of salaries and personnel-related costs for product, operations, developer support, business development, administration, finance and accounting, legal, information systems and human resources employees, including stock-based compensation and bonuses. Additional expenses include consulting and professional fees, travel, insurance and other corporate expenses. The number of employees in general and administrative functions grew from 32 at December 31, 2009 to 109 at December 31, 2011, and we expect our general and administrative expenses to increase in absolute terms as a result of our preparation to become and operate as a public company. After the completion of this offering, these expenses will also include costs associated with compliance with the Sarbanes-Oxley Act and other regulations governing public companies, directors' and officers' liability insurance, increased professional services and an enhanced investor relations function.

43


Table of Contents

    Other Income (Expense)

        Other income and expense consists primarily of interest income, interest expense and changes in the fair value of our preferred stock warrant liability. Interest income is derived from interest received on our cash and cash equivalents. Interest expense consists primarily of the interest incurred on outstanding borrowings under our credit facilities. During the years ended December 31, 2009 and 2010, we had borrowings under a term loan with a bank, which was repaid in full in 2010. During the year ended December 31, 2011, we entered into a new line of credit facility with a bank, but we have not borrowed under this facility to date.

        The fair value of our preferred stock warrant liability is re-measured at the end of each reporting period and any changes in fair value are recognized in other income or expense. Upon completion of this offering, the preferred stock warrant will automatically, in accordance with its terms, become a warrant to purchase common stock, which will result in the reclassification of the preferred stock warrant liability to additional paid-in capital, and no further changes in fair value will be recognized in other income or expense.

    Income Tax (Expense) Benefit

        Income tax expense consists of U.S. federal, state and foreign income taxes. To date, we have not been required to pay U.S. federal income taxes because of our current and accumulated net operating losses. We incurred minimal state and foreign income tax liabilities for the years ended December 31, 2010 and 2011.

        Income tax benefit consists of changes in judgment about the realizability of our deferred tax assets.

Results of Operations

        The following table sets forth selected consolidated statement of operations data for each of the periods indicated.

 
  Year Ended December 31,  
 
  2009   2010   2011  
 
  (in thousands)
 

Revenue

  $ 16,220   $ 47,828   $ 103,678  

Cost of revenue

    11,596     31,602     63,595  
               

Gross profit

    4,624     16,226     40,083  

Operating expenses:

                   

Sales and marketing

    4,609     8,508     14,255  

Technology and development

    1,095     2,175     5,181  

General and administrative

    6,326     12,535     21,321  
               

Total operating expenses

    12,030     23,218     40,757  
               

Loss from operations

    (7,406 )   (6,992 )   (674 )

Other income (expense):

                   

Interest income (expense)

    (144 )   (28 )   (21 )

Other expense

        (79 )   (78 )
               

Total other income (expense)

    (144 )   (107 )   (99 )
               

Loss before income taxes

    (7,550 )   (7,099 )   (773 )

Income tax (expense) benefit

        (22 )   486  
               

Net loss

  $ (7,550 ) $ (7,121 ) $ (287 )
               

44


Table of Contents

        The following table sets forth our consolidated statement of operations data as a percentage of revenue for each of the periods indicated.


 
  Year Ended December 31,  
 
  2009   2010   2011  

Revenue

    100.0 %   100.0 %   100.0 %

Cost of revenue

    71.5     66.1     61.3  
               

Gross margin

    28.5     33.9     38.7  

Operating expenses:

                   

Sales and marketing

    28.4     17.8     13.7  

Technology and development

    6.8     4.5     5.0  

General and administrative

    39.0     26.2     20.6  
               

Total operating expenses

    74.2     48.5     39.3  
               

Loss from operations

    (45.7 )   (14.6 )   (0.6 )

Other income (expense):

                   

Interest income (expense)

    (0.9 )   (0.1 )   (0.0 )

Other expense

        (0.2 )   (0.1 )
               

Total other income (expense)

    (0.9 )   (0.3 )   (0.1 )
               

Loss before income taxes

    (46.6 )   (14.9 )   (0.7 )

Income tax (expense) benefit

        (0.0 )   0.5  
               

Net loss

    (46.6 )%   (14.9 )%   (0.2 )%
               

    Comparison of Years Ended December 31, 2010 and 2011

 
  Year Ended December 31,    
   
 
 
  2010   2011   Period-to-Period
Change
 
 
   
  Percentage of
Revenue
   
  Percentage of
Revenue
 
 
  Amount   Amount   Amount   Percentage  
 
  (dollars in thousands)
 

Revenue

  $ 47,828     100.0 % $ 103,678     100.0 % $ 55,850     116.8 %

Cost of revenue

    31,602     66.1     63,595     61.3     31,993     101.2  
                           

Gross profit

    16,226     33.9     40,083     38.7     23,857     147.0  

Operating expenses:

                                     

Sales and marketing

    8,508     17.8     14,255     13.7     5,747     67.5  

Technology and development

    2,175     4.5     5,181     5.0     3,006     138.2  

General and administrative

    12,535     26.2     21,321     20.6     8,786     70.1  
                           

Total operating expenses

    23,218     48.5     40,757     39.3     17,539     75.5  
                           

Loss from operations

    (6,992 )   (14.6 )   (674 )   (0.6 )   6,318     (90.4 )

Other income (expense):

                                     

Interest income (expense)

    (28 )   (0.1 )   (21 )   0.0     7     (25.0 )

Other expense

    (79 )   (0.2 )   (78 )   (0.1 )   1     (1.3 )
                           

Total other income (expense)

    (107 )   (0.3 )   (99 )   (0.1 )   8     (7.5 )
                           

Loss before income taxes

    (7,099 )   (14.9 )   (773 )   (0.7 )   6,326     (89.1 )

Income tax (expense) benefit

    (22 )   0.0     486     0.5     508     (2,309.1 )
                           

Net loss

  $ (7,121 )   (14.9 )% $ (287 )   (0.2 )% $ 6,834     (96.0 )%
                           

45


Table of Contents

        Revenue. Revenue increased by $55.9 million, or 116.8%, from $47.8 million for the year ended December 31, 2010 to $103.7 million for the year ended December 31, 2011. This growth was primarily attributable to an increase in the number of advertiser clients using our platform as well as an increase in spending from our existing advertiser clients. Revenue from our existing advertiser clients increased by 128.1% during the year ended December 31, 2011 as compared to the year ended December 31, 2010 and represented 77.5% of our total revenue for the year ended December 31, 2011. The increase in revenue from existing clients was driven by additional campaigns from brands that had previously advertised with us, larger campaign sizes and new brands owned by existing clients that began advertising with us during the year. Revenue from new advertiser clients increased by 87.2% during the year ended December 31, 2011 as compared to the year ended December 31, 2010 and represented 22.5% of our total revenue for the year ended December 31, 2011.

        Our revenue from international operations increased from $1.5 million, or 3.1% of total revenue, for the year ended December 31, 2010, to $10.3 million, or 10.0% of total revenue, for the year ended December 31, 2011. We commenced our international operations in the United Kingdom during the first half of 2010 and in Asia during the fourth quarter of 2011 with the launch of operations in Singapore. The revenue growth in our international operations during the year ended December 31, 2011 as compared to the year ended December 31, 2010 was primarily attributable to our first full year of international operations and revenue generation in 2011, as well as an increase in our international sales force focused on generating revenue.

        We also substantially increased our overall sales force during the year ended December 31, 2011, allowing us to increase our number of advertising client relationships and the number of developer applications enabled to receive ads delivered through our platform.

        Cost of revenue. Cost of revenue increased by $32.0 million, or 101.2%, from $31.6 million, or 66.1% of revenue, for the year ended December 31, 2010, to $63.6 million, or 61.3% of revenue, for the year ended December 31, 2011. The increase in cost of revenue was driven primarily by the need to purchase greater quantities of advertising inventory for use in delivering mobile ads. The decrease in cost of revenue as a percentage of revenue and corresponding increase in gross margin for the year ended December 31, 2011 was primarily the result of more favorable pricing terms with developers. This was largely the result of increased usage of our self-service portal for developers, mmDev, which is the primary interface for our smaller developers that do not require a full-service solution. Developers using mmDev receive access to valuable tools, services and analytics through the self-service portal. Fees paid to developers for ads placed through this portal are generally lower, especially for smaller developers who do not qualify for volume-based discounts, resulting in higher gross margin from these ads.

        Sales and marketing. Sales and marketing expense increased by $5.8 million, or 67.5%, from $8.5 million, or 17.8% of revenue, for the year ended December 31, 2010, to $14.3 million, or 13.7% of revenue, for the year ended December 31, 2011. The increase in sales and marketing expense was primarily attributable to a $3.4 million increase in salaries and personnel-related costs, as we increased the number of sales and marketing personnel to support our expanding client base and experienced higher commission costs associated with higher revenue. The number of full-time sales and marketing employees increased from 44 at December 31, 2010 to 69 at December 31, 2011. In addition, we experienced a $1.7 million increase in our marketing programs and consulting expense. The decrease in sales and marketing expense as a percentage of revenue for the year ended December 31, 2011 was primarily the result of our growth in revenue and improved efficiencies in our sales organization.

        Technology and development. Technology and development expense increased by $3.0 million, or 138.2%, from $2.2 million, or 4.5% of revenue, for the year ended December 31, 2010, to $5.2 million, or 5.0% of revenue, for the year ended December 31, 2011. The increase in technology and development expense was primarily attributable to a $2.5 million increase in salaries and personnel-related costs

46


Table of Contents

associated with an increase in headcount. The number of full-time technology and development employees increased from 19 at December 31, 2010 to 44 at December 31, 2011.

        General and administrative. General and administrative expense increased by $8.8 million, or 70.1%, from $12.5 million, or 26.2% of revenue, for the year ended December 31, 2010, to $21.3 million, or 20.6% of revenue, for the year ended December 31, 2011. The increase in general and administrative expense was primarily attributable to a $4.8 million increase in salaries and personnel-related costs associated with an increase in headcount as well as corresponding increases of $1.2 million in information systems costs and $2.5 million in other corporate infrastructure costs necessary to support the overall growth in our business. The number of full-time general and administrative employees increased from 56 at December 31, 2010 to 109 at December 31, 2011. The decrease in general and administrative expense as a percentage of revenue for the year ended December 31, 2011 was primarily the result of our growth in revenue and improved operating efficiencies.

        Income tax benefit. For the year ended December 31, 2011, we recognized an income tax benefit of $486,000 due to a change in judgment, resulting from our acquisition of another entity during the year, about our ability to realize a portion of our deferred tax assets.

    Comparison of Years Ended December 31, 2009 and 2010

 
  Year Ended December 31,    
   
 
 
  2009   2010   Period-to-Period
Change
 
 
   
  Percentage of
Revenue
   
  Percentage of
Revenue
 
 
  Amount   Amount   Amount   Percentage  
 
  (dollars in thousands)
   
   
 

Revenue

  $ 16,220     100.0 % $ 47,828     100.0 % $ 31,608     194.9 %

Cost of revenue

    11,596     71.5     31,602     66.1     20,006     172.5  
                           

Gross profit

    4,624     28.5     16,226     33.9     11,602     250.9  

Operating expenses:

                                     

Sales and marketing

    4,609     28.4     8,508     17.8     3,899     84.6  

Technology and development

    1,095     6.8     2,175     4.5     1,080     98.6  

General and administrative

    6,326     39.0     12,535     26.2     6,209     98.2  
                           

Total operating expenses

    12,030     74.2     23,218     48.5     11,188     93.0  
                           

Loss from operations

    (7,406 )   (45.7 )   (6,992 )   (14.6 )   414     (5.6 )

Other income (expense):

                                     

Interest income (expense)

    (144 )   (0.9 )   (28 )   (0.1 )   116     (80.6 )

Other expense

            (79 )   (0.2 )   (79 )   100.0  
                           

Total other income (expense)

    (144 )   (0.9 )   (107 )   (0.3 )   37     (25.7 )
                           

Loss before income taxes

    (7,550 )   (46.6 )   (7,099 )   (14.9 )   451     (6.0 )

Income tax expense

            (22 )   0.0     (22 )   100.0  
                           

Net loss

  $ (7,550 )   (46.6 )% $ (7,121 )   (14.9 )% $ 429     (5.7 )%
                           

        Revenue. Revenue increased by $31.6 million, or 194.9%, from $16.2 million for the year ended December 31, 2009 to $47.8 million for the year ended December 31, 2010. This growth was primarily attributable to an increase in the number of advertiser clients using our platform as well as an increase in spending from our existing advertising clients during the year ended December 31, 2010 as compared to the year ended December 31, 2009. Revenue from our existing advertiser clients increased by 259.2% during the year ended December 31, 2010 as compared to the year ended December 31, 2009 and represented 73.8% of our total revenue for the year ended December 31, 2010. The increase in revenue from existing clients was driven by additional campaigns from brands that had previously advertised with

47


Table of Contents

us, larger campaign sizes and new brands owned by existing clients that began advertising with us during the period. Revenue from new advertiser clients increased by 100.3% during the year ended December 31, 2010 as compared to the year ended December 31, 2009 and represented 26.2% of our total revenue for the year ended December 31, 2010. We also commenced our international operations in the United Kingdom during the second quarter of 2010 and generated $1.5 million in revenue during the year ended December 31, 2010 related to our international operations.

        Cost of revenue. Cost of revenue increased by $20.0 million, or 172.5%, from $11.6 million, or 71.5% of revenue, for the year ended December 31, 2009 to $31.6 million, or 66.1% of revenue, for the year ended December 31, 2010. The increase in cost of revenue was driven primarily by the need to purchase greater quantities of advertising inventory for use in delivering mobile ads. The decrease in cost of revenue as a percentage of revenue and corresponding increase in gross margin for the year ended December 31, 2010 was primarily the result of more favorable pricing terms with developers driven by the launch of our self-service developer portal, mmDev, in the first quarter of 2010. Fees paid to developers for ads placed through this portal are generally lower, resulting in higher gross margins from these ads.

        Sales and marketing. Sales and marketing expense increased by $3.9 million, or 84.6%, from $4.6 million, or 28.4% of revenue, for the year ended December 31, 2009, to $8.5 million, or 17.8% of revenue, for the year ended December 31, 2010. The increase in sales and marketing expense was primarily attributable to a $3.0 million increase in salaries and personnel-related costs, as we increased the number of sales and marketing personnel to support our expanding client base and experienced higher commission costs associated with higher revenue. The number of full-time sales and marketing employees increased from 24 at December 31, 2009 to 44 at December 31, 2010. In addition, we experienced a $577,000 increase in our marketing programs and consulting expense. The decrease in sales and marketing expense as a percentage of revenue for the year ended December 31, 2010 was primarily the result of our growth in revenue and improved efficiencies in our sales organization.

        Technology and development. Technology and development expense increased by $1.1 million, or 98.6%, from $1.1 million, or 6.8% of revenue, for the year ended December 31, 2009, to $2.2 million, or 4.5% of revenue, for the year ended December 31, 2010. The increase in technology and development expense was primarily attributable to an $898,000 increase in salaries and personnel-related costs associated with an increase in headcount, as well as a $154,000 increase in consulting expense. The number of full-time technology and development employees increased from 10 at December 31, 2009 to 19 at December 31, 2010. The decrease in technology and development expense as a percentage of revenue for the year ended December 31, 2010 was primarily the result of our growth in revenue.

        General and administrative. General and administrative expense increased by $6.2 million, or 98.2%, from $6.3 million, or 39.0% of revenue, for the year ended December 31, 2009, to $12.5 million, or 26.2% of revenue, for the year ended December 31, 2010. The increase in general and administrative expense was primarily attributable to a $3.3 million increase in salaries and personnel-related costs associated with an increase in headcount as well as corresponding increases of $476,000 in information technology and $1.2 million in other corporate infrastructure costs necessary to support the overall growth in our business. The number of full-time general and administrative employees increased from 32 at December 31, 2009 to 56 at December 31, 2010. In addition, we experienced a $709,000 increase in bad debt expense during the year ended December 31, 2010 as compared to the year ended December 31, 2009, primarily due to our growth in revenue and advertising client base. The decrease in general and administrative expense as a percentage of revenue for the year ended December 31, 2010 was primarily the result of our growth in revenue and improved operating efficiencies.

        Income tax expense. For the year ended December 31, 2010, we recognized state income tax expense of $22,000 that was not offset by deferred tax assets.

48


Table of Contents

Quarterly Results of Operations

        The following tables show our unaudited consolidated quarterly results of operations for each of our eight most recently completed quarters, as well as the percentage of total revenue for each line item shown. This information has been derived from our unaudited financial statements, which, in the opinion of management, have been prepared on the same basis as our audited financial statements and include all adjustments, consisting of normal recurring adjustments and accruals, necessary for the fair presentation of the financial information for the quarters presented. This information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus.

 
  Three Months Ended  
 
  March 31,
2010
  June 30,
2010
  Sept. 30,
2010
  Dec. 31,
2010
  March 31,
2011
  June 30,
2011
  Sept. 30,
2011
  Dec. 31,
2011
 
 
  (in thousands)
   
 

Revenue

  $ 8,825   $ 9,258   $ 11,004   $ 18,741   $ 21,493   $ 22,447   $ 25,189   $ 34,549  

Cost of revenue

    5,859     6,478     7,090     12,175     13,569     13,675     15,293     21,058  
                                   

Gross profit

    2,966     2,780     3,914     6,566     7,924     8,772     9,896     13,491  

Operating expenses:

                                                 

Sales and marketing

    2,033     1,944     2,013     2,518     3,392     3,582     3,204     4,077  

Technology and development

    489     562     525     599     648     1,150     1,518     1,865  

General and administrative

    2,266     2,477     2,709     5,083     3,907     4,658     5,381     7,375  
                                   

Total operating expenses

    4,788     4,983     5,247     8,200     7,947     9,390     10,103     13,317  
                                   

(Loss) income from operations

    (1,822 )   (2,203 )   (1,333 )   (1,634 )   (23 )   (618 )   (207 )   174  

Other income (expense):

                                                 

Interest expense

    (22 )           (6 )       (1 )   (1 )   (19 )

Other income (expense)

    5     2         (86 )       (26 )   (36 )   (16 )
                                   

Total other (expense) income

    (17 )   2         (92 )       (27 )   (37 )   (35 )
                                   

(Loss) income before income taxes

    (1,839 )   (2,201 )   (1,333 )   (1,726 )   (23 )   (645 )   (244 )   139  

Income tax (expense) benefit

                (22 )       493     2     (9 )
                                   

Net (loss) income

  $ (1,839 ) $ (2,201 ) $ (1,333 ) $ (1,748 ) $ (23 ) $ (152 ) $ (242 ) $ 130  
                                   

49


Table of Contents

 
  Three Months Ended  
 
  March 31,
2010
  June 30,
2010
  September 30,
2010
  December 31,
2010
  March 31,
2011
  June 30,
2011
  September 30,
2011
  December 31,
2011
 
 
  (as a percentage of revenue)
 

Revenue

    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %

Cost of revenue

    66.4     70.0     64.4     65.0     63.1     60.9     60.7     61.0  
                                   

Gross margin

    33.6     30.0     35.6     35.0     36.9     39.1     39.3     39.0  

Operating expenses:

                                                 

Sales and marketing

    23.0     21.0     18.3     13.4     15.8     16.0     12.7     11.8  

Technology and development

    5.5     6.1     4.8     3.2     3.0     5.1     6.0     5.4  

General and administrative

    25.7     26.8     24.6     27.1     18.1     20.8     21.4     21.3  
                                   

Total operating expenses

    54.2     53.9     47.7     43.7     36.9     41.9     40.1     38.5  
                                   

(Loss) income from operations

    (20.6 )   (23.9 )   (12.1 )   (8.7 )   (0.0 )   (2.8 )   (0.8 )   0.5  

Other income (expense):

                                                 

Interest expense

    (0.2 )           (0.0 )       (0.0 )   (0.0 )   (0.1 )

Other income (expense)

    0.1     0.0         (0.5 )       (0.1 )   (0.1 )   (0.0 )
                                   

Total other (expense) income

    (0.1 )   0.0         (0.5 )       (0.1 )   (0.1 )   (0.1 )
                                   

(Loss) income before income taxes

    (20.7 )   (23.9 )   (12.1 )   (9.2 )   (0.0 )   (2.9 )   (0.9 )   0.4  

Income tax (expense) benefit

                (0.1 )       2.2     0.0     (0.0 )
                                   

Net (loss) income

    (20.7 )%   (23.9 )%   (12.1 )%   (9.3 )%   (0.0 )%   (0.7 )%   (0.9 )%   0.4 %
                                   

Quarterly Trends and Seasonality

        Our overall operating results fluctuate from quarter to quarter as a result of a variety of factors, some of which are outside our control. We have experienced rapid growth since our inception, as well as other major corporate developments. For instance, we have significantly increased the number of developer applications we support, entered into new international markets, made two acquisitions, and increased our advertiser client base over the last two years. These changes have resulted in substantial growth in our revenue and corresponding increases in operating expenses to support our growth. Our growth has led to uneven overall operating results due to changes in our investment in sales and marketing and technology and development from quarter to quarter, increases in employee headcount and the impact of contractual relationships with new and existing developers. Our historical results should not be considered a reliable indicator of our future results of operations.

        Our quarterly revenue and gross margin have generally increased from quarter to quarter, with revenue increasing from $8.8 million in the quarter ended March 31, 2010 to $34.5 million in the quarter ended December 31, 2011 and gross margin increasing from 33.6% to 39.0% during this period. Our increase in quarterly revenue was mainly due to an increased number of advertiser clients using our platform as well as an increase in spending from our existing advertising clients. Our increase in gross margin has been largely the result of more favorable pricing terms with new and existing developers, primarily as a result of increased usage of our mmDev self-service developer portal.

        In the first and second quarters of 2010, we experienced a rapid increase in the number of developer applications on our platform, with a corresponding increase in advertising revenue. However, during the second quarter of 2010, our technology platform and operations did not effectively manage the surge in

50


Table of Contents

activity during that quarter, resulting in an unfavorable impact on our cost of revenue and corresponding gross profit. We subsequently enhanced our technology and operational capabilities during the remainder of 2010, and our gross profit and gross margin recovered.

        Our revenue also tends to be seasonal in nature, with the fourth quarter of each calendar year historically representing the largest percentage of our total revenue for the year. Many brand advertisers spend the largest portion of their advertising budgets during the fourth quarter, in preparation for the holiday season.

Liquidity and Capital Resources

    Sources of Liquidity

        To date, we have funded our operations principally through private placements of our capital stock and bank borrowings. We have raised $64.8 million from the sale of redeemable convertible preferred stock to third parties.

        In August 2011, we entered into a line of credit with Silicon Valley Bank, or SVB, which allows for borrowings up to $15.0 million. Amounts borrowed under the line of credit are secured by all of our assets. Advances under the line of credit bear interest at a floating rate equal to SVB's prime rate, with interest payable monthly. The line of credit agreement requires that we maintain a ratio of cash, cash equivalents and billed accounts receivable to current liabilities of at least 1.25 to 1.00. Additionally, the line of credit agreement contains an unused line fee of 0.25% per year, calculated on the average unused portion of the loan, payable monthly. The line of credit is scheduled to mature on August 11, 2013, at which time all outstanding borrowings would be due and payable. As part of the line of credit, we have a maximum of $2.0 million in available but unused letters of credit. As of December 31, 2011, we had not yet drawn on this line of credit.

    Working Capital

        The following table summarizes our cash and cash equivalents, accounts receivable, working capital and cash flows for the periods indicated:

 
  As of and For the Year Ended
December 31,
 
 
  2009   2010   2011  
 
  (in thousands)
 

Cash and cash equivalents

  $ 19,171   $ 27,803   $ 16,707  

Accounts receivable, net of allowances

    6,485     19,978     34,986  

Working capital

    16,909     30,571     23,954  

Cash provided by (used in):

                   

Operating activities

    (6,173 )   (10,483 )   (2,758 )

Investing activities

    (79 )   (712 )   (5,588 )

Financing activities

    15,223     19,831     (2,703 )

        Our cash and cash equivalents at December 31, 2011 were held for working capital purposes. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts, certificates of deposit and money market funds that are currently providing only a minimal return.

        Of our total cash and cash equivalents, less than 2.0% was held outside of the United States at December 31, 2011 and 2010. Our international operations consist of selling and marketing functions supported by our U.S. operations, and we are dependent on our U.S. operations for our international working capital needs. If our cash and cash equivalents held outside of the United States were ever needed

51


Table of Contents

for our operations inside the United States, we would be required to accrue and pay U.S. taxes to repatriate these funds. We currently intend to permanently reinvest these foreign amounts outside the United States, and our current plans do not demonstrate a need to repatriate the foreign amounts to fund our U.S. operations.

    Cash Flows

    Operating Activities

        For the year ended December 31, 2011, our net cash used in operating activities of $2.8 million consisted of a net loss of $287,000 and $5.0 million of cash used to fund changes in working capital, which was primarily driven both by the domestic and international expansion of our operations and by our investment in technology and development and personnel to facilitate our growth, offset by $2.5 million in adjustments for non-cash items. Adjustments for non-cash items primarily consisted of non-cash stock compensation expense of $1.8 million, depreciation and amortization expense of $759,000 and bad debt expense of $345,000, partially offset by $481,000 in deferred income tax benefits. The increased depreciation and amortization expense primarily related to increased capital expenditure requirements and our intangible assets resulting from the acquisition of a business. The decrease in cash resulting from changes in working capital primarily consisted of an increase in accounts receivable of $15.3 million, primarily driven by increased revenue during the year as we continue to expand our operations both domestically and internationally, an increase in prepaid expenses and other assets of $1.4 million, primarily the result of additional deposit requirements for new office space and future marketing events and memberships, and a decrease in deferred revenue of $194,000 as a result of fewer clients prepaying for advertising services. These decreases were partially offset by increases in operating cash flow due to a $9.8 million increase in accounts payable and accrued expenses and accrued cost of revenue, driven primarily by an increase in developer-related charges, and a $2.0 million increase in accrued payroll and payroll related expenses resulting from an increase in the number of employees.

        For the year ended December 31, 2010, our net cash used in operating activities of $10.5 million consisted of a net loss of $7.1 million and $5.0 million of cash used to fund changes in working capital, which was primarily driven both by the domestic and international expansion of our operations and by our investment in technology and development and personnel to facilitate our growth, offset by $1.6 million in adjustments for non-cash items. Adjustments for non-cash items primarily consisted of non-cash stock compensation expense of $412,000, depreciation and amortization expense of $223,000, bad debt expense of $870,000 and an increase in the fair value of our preferred stock warrant liability of $79,000. The decrease in cash resulting from changes in working capital primarily consisted of an increase in accounts receivable of $14.4 million, primarily driven by increased revenue during the period, as a result of operational expansion domestically and the addition of new international operations, and an increase in prepaid expenses and other assets of $378,000. These decreases were partially offset by increases in operating cash flow due to a $8.2 million increase in accounts payable and accrued expenses and accrued cost of revenue, driven primarily by an increase in developer-related charges, a $1.3 million increase in accrued payroll and payroll related expenses resulting from the increased number of employees, and an increase in deferred revenue of $329,000 as a result of an increase in the number of prepaid ads by clients.

        For the year ended December 31, 2009, our net cash used in operating activities of $6.2 million consisted of a net loss of $7.6 million, partially offset by cash of $832,000 provided by changes in working capital and $545,000 in adjustments for non-cash items. Adjustments for non-cash items primarily consisted of non-cash stock compensation expense of $212,000, depreciation and amortization expense of $146,000 and bad debt expense of $161,000. The increase in cash resulting from changes in working capital primarily consisted of an increase of $3.9 million in accounts payable and accrued expenses and accrued cost of revenue, driven primarily by an increase in developer-related charges and a $1.2 million increase in accrued payroll and payroll related expenses resulting from the increased number of employees. These increases were partially offset by decreases in operating cash flow due to an increase in accounts receivable of $4.4 million, primarily driven by increased revenue during the period corresponding to our domestic market growth.

52


Table of Contents

    Investing Activities

        Our investing activities have consisted primarily of purchases of property and equipment, as well as business acquisitions.

        For the year ended December 31, 2011, net cash used in investing activities was $5.6 million. This amount consisted of $2.1 million of cash consideration paid, net of cash received, as part of an acquisition and $3.5 million for the purchase of property and equipment.

        For the year ended December 31, 2010, net cash used in investing activities was $712,000, consisting of $640,000 for the purchase of property and equipment and $72,000, net of cash received, paid as part of an acquisition.

        For the year ended December 31, 2009, net cash used in investing activities was $79,000, attributable to the purchase and disposition of property and equipment.

    Financing Activities

        For the year ended December 31, 2011, net cash used in financing activities was $2.7 million, consisting of $827,000 used to repurchase common stock from one of our executive officers and $2.0 million in deferred offering costs and financing fees for this offering and other financing transactions. These amounts were partially offset by $166,000 in cash received upon the exercise of stock options.

        For the year ended December 31, 2010, net cash provided by financing activities was $19.8 million, consisting of $27.5 million in net proceeds from our Series D preferred stock financing and $127,000 in cash received upon the exercise of stock options, partially offset by $5.5 million used to repurchase common stock from two of our executive officers and $2.3 million used to repay in full our term loan from a bank.

        For the year ended December 31, 2009, net cash provided by financing activities was $15.2 million, consisting of $15.9 million in net proceeds from our Series C preferred stock financing and $53,000 in cash received upon the exercise of stock options, partially offset by $750,000 in payments on our term loan.

        The net proceeds of this offering will be classified as cash received from financing activities. In addition, if and to the extent that employees exercise additional stock options either in connection with or following this offering, the proceeds of those exercises would be classified as cash from financing activities.

    Operating and Capital Expenditure Requirements

        We believe the net proceeds from this offering, together with our existing cash balances and interest income we earn on these balances, will be sufficient to meet our anticipated cash requirements through at least the next 12 months. During this period, we expect our capital expenditure requirements to be approximately $4.0 million, most of which is for computer and network equipment, such as servers, switches and laptops. The remaining amounts are mostly for new office space leasehold improvements and furniture as we expand our operations internationally and in the United States. If our available cash balances and net proceeds from this offering are insufficient to satisfy our liquidity requirements, we may seek to sell equity or convertible debt securities or enter into an additional credit facility. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of convertible debt securities, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all.

53


Table of Contents

Contractual Obligations

        We have non-cancelable contractual obligations for office space. The following table discloses aggregate information about material contractual obligations and periods in which payments were due as of December 31, 2011. Future events could cause actual payments to differ from these estimates.

 
  Payment due by period  
Contractual Obligations
  Total   Less than 1
year
  1-3 years   3-5 years   More than 5
years
 
 
  (in thousands)
 

Operating lease obligations

  $ 4,217   $ 1,365   $ 2,388   $ 464   $  
                       

Total

  $ 4,217   $ 1,365   $ 2,388   $ 464   $  
                       

        During 2011, we entered into a line of credit with Silicon Valley Bank, although we have not borrowed under this facility.

Off-Balance Sheet Arrangements

        As of December 31, 2011, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

Critical Accounting Policies and Significant Judgments and Estimates

        Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates.

        While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing elsewhere in this prospectus, we believe the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements.

    Revenue Recognition

        We recognize revenue based on the activity of mobile users viewing ads through developer applications and mobile websites. Our revenue is recognized when our advertising services are delivered based on the specific terms of the advertising contract, which are commonly based on the number of ads delivered, or views, clicks or actions by users on mobile advertisements. At that time, our services have been provided, the fees charged are fixed or determinable, persuasive evidence of an arrangement exists, and collectability is reasonably assured.

        In the normal course of business, we act as an intermediary in executing transactions with third parties. The determination of whether revenue should be reported on a gross or net basis is based on an assessment of whether we are acting as the principal or an agent in our transactions with advertisers. The determination of whether we are acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of each arrangement. While none of the factors individually are considered presumptive or determinative, in reaching our conclusions on gross versus net revenue recognition, we place the most weight on the analysis of whether or not we are the primary obligor in the

54


Table of Contents

arrangement. To date, we have determined that we are the primary obligor in all our advertising arrangements because we are responsible for identifying and contracting with third-party advertisers, establishing the selling prices of the advertisements sold, and performing all billing and collection activities, including retaining credit risk, and bearing sole responsibility for fulfillment of the advertising. Accordingly, we act as the principal in all of our arrangements and therefore report revenue earned and costs incurred related to these transactions on a gross basis.

        We record deferred revenue when we receive cash payments from our advertiser clients in advance of when we perform the services under our arrangements with them.

    Accounts Receivable and Allowances for Doubtful Accounts and Sales Credits

        Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts that we maintain for estimated losses expected to result from the inability of some clients to make payments as they become due. Our estimated allowance is based on our analysis of past due amounts and ongoing credit evaluations. Historically, our actual collection experience has not varied significantly from our estimates, due primarily to our credit and collection policies and the financial strength of many of our clients.

        We also estimate an allowance for sales credits based on our historical experience of sales credits as a percentage of revenue. Historically, actual sales credits have not significantly differed from our estimates. However, if our revenue and client base continues to grow, higher than expected sales credits may result in future write-offs that are greater than our estimates.

    Business Combinations

        In business combinations, we determine the acquisition purchase price as the sum of the consideration we provide. When we issue stock-based awards to an acquired company's selling stockholders, we evaluate whether the awards are contingent consideration or compensation for post-business combination services. Our evaluation includes, among other things, whether the vesting of the stock-based awards is contingent on the continued employment of the selling stockholder beyond the acquisition date. If continued employment is required for vesting, the awards are treated as compensation for post-acquisition services and recognized as future compensation expense over the required service period.

        We allocate the purchase price in a business combination to the identifiable assets and liabilities of the acquired business at their acquisition date fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill.

        To date, the assets acquired and liabilities assumed in our business combinations have primarily consisted of acquired working capital and definite-lived intangible assets. The carrying value of acquired working capital is assumed to be equal to its fair value, given the short-term nature of these assets and liabilities. We estimate the fair value of definite-lived intangible assets acquired using a discounted cash flow approach, which includes an analysis of the future cash flows expected to be generated by the asset and the risk associated with achieving these cash flows. The key assumptions used in the discounted cash flow model include the discount rate that is applied to the forecasted future cash flows to calculate the present value of those cash flows and the estimate of future cash flows attributable to the acquired intangible asset, which include revenue, operating expenses and taxes.

    Stock-Based Compensation

        Stock options awarded to employees, directors and non-employee third parties are measured at fair value at each grant date. We consider publicly traded guideline companies, precedent transactions, discounted free cash flows, and an analysis of our enterprise value in estimating the fair value of our common stock. We recognize compensation expense ratably over the requisite service period of the option

55


Table of Contents

award. Options generally vest ratably over a four-year period, except those options granted to non-employee third parties, portions of which may vest immediately or ratably over two years.

    Determination of the Fair Value of Stock-based Compensation Grants

        The determination of the fair value of stock-based compensation arrangements is affected by a number of variables, including estimates of the fair value of our common stock, expected stock price volatility, risk-free interest rate and the expected life of the award. We value stock options using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options that are fully transferable and have no vesting restrictions. Black-Scholes and other option valuation models require the input of highly subjective assumptions, including the expected stock price volatility.

        The following summarizes the assumptions used for estimating the fair value of stock options granted to employees for the periods indicated:

 
  Year Ended December 31,
 
  2009   2010   2011

Assumptions:

           

Risk-free interest rate

  1.9% - 2.7%   1.3% - 2.7%   1.1% - 2.4%

Expected life

  5 - 5.9 years   5 - 6.1 years   5.5 - 6.1 years

Expected volatility

  47% - 49%   46% - 47%   44% - 54%

Dividend yield

  0%   0%   0%

Weighted-average grant date fair value

  $0.33   $0.33   $1.46

        We have assumed no dividend yield because we do not expect to pay dividends in the future, which is consistent with our history of not paying dividends. The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities consistent with the expected life of our employee stock options. The expected life represents the period of time the stock options are expected to be outstanding and is based on the simplified method. Under the simplified method, the expected life of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. We used the simplified method due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected life of the stock options. Expected volatility is based on historical volatilities for publicly traded stock of comparable companies over the estimated expected life of the stock options.

        Our estimate of pre-vesting forfeitures, or forfeiture rate, is based on our analysis of historical behavior by stock option holders. The estimated forfeiture rate is applied to the total estimated fair value of the awards, as derived from the Black-Scholes model, to compute the stock-based compensation expense, net of pre-vesting forfeitures, to be recognized in our consolidated statements of operations.

56


Table of Contents

        The following table summarizes by grant date the number of shares of common stock subject to stock options granted from January 1, 2010 through the date of this prospectus, as well as the associated per share exercise price and the estimated fair value per share of our common stock on the grant date.

Grant Date
  Number of
Shares
Underlying
Options Granted
  Exercise Price
per Share
  Estimated Fair
Value per Share
 

February 12, 2010

    182,558   $ 0.76   $ 0.76  

July 21, 2010

    105,000     0.76     0.76  

August 30, 2010

    253,308     0.79     0.79  

September 3, 2010

    122,500     0.79     0.79  

October 15, 2010

    65,250     0.79     0.79  

March 22, 2011

    909,796     2.75     2.75  

July 20, 2011

    370,109     3.49     3.34  

September 2, 2011

    248,482     3.49     3.34  

November 14, 2011

    308,025     4.02     4.02  

January 24, 2012

    106,250     6.00     6.00  

    Determination of the Fair Value of Common Stock on Grant Dates

        We are a private company with no active public market for our common stock. Therefore, in response to Section 409A of the Internal Revenue Code of 1986, as amended, and related regulations issued by the Internal Revenue Service, we have periodically determined for financial reporting purposes the estimated per share fair value of our common stock at various dates using contemporaneous valuations performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid, "Valuation of Privately-Held Company Equity Securities Issued as Compensation," also known as the Practice Aid. We performed these contemporaneous valuations as of November 30, 2009, July 31, 2010, December 1, 2010, May 6, 2011, June 30, 2011, September 30, 2011 and December 31, 2011. In conducting the contemporaneous valuations, we considered all objective and subjective factors that we believed to be relevant for each valuation conducted, including management's best estimate of our business condition, prospects and operating performance at each valuation date. Within the contemporaneous valuations performed by our management, a range of factors, assumptions and methodologies were used. The significant factors included:

    the fact that we are a privately held technology company and our common stock is illiquid;

    our historical operating results;

    our discounted future cash flows, based on our projected operating results;

    valuations of comparable public companies;

    the potential impact on common stock of liquidation preference rights of preferred stock for certain valuation scenarios;

    our stage of development and business strategy;

    the prices paid in recent transactions involving our securities;

    the likelihood of achieving a liquidity event for shares of our common stock, such as an initial public offering, or IPO, or a sale of our company, given prevailing market conditions; and

    the state of the IPO market for similarly situated privately held technology companies.

        The dates of our contemporaneous valuations have not always coincided with the dates of our stock-based compensation grants. In such instances, management's estimates have been based on the most

57


Table of Contents

recent contemporaneous valuation of our shares of common stock and our assessment of additional objective and subjective factors we believed were relevant as of the grant date. The additional factors considered when determining any changes in fair value between the most recent contemporaneous valuation and the grant dates included, when available, the prices paid in recent transactions involving our equity securities, as well as our stage of development, our operating and financial performance, current business conditions, and the market performance of comparable publicly traded companies.

        There are significant judgments and estimates inherent in these contemporaneous valuations. These judgments and estimates include assumptions regarding our future operating performance, the time to completing an initial public offering or other liquidity event, and the determinations of the appropriate valuation methods. If we had made different assumptions, our stock-based compensation expense, net loss and net loss per common share could have been significantly different.

    Common Stock Valuation Methodologies

        For the contemporaneous valuations of our common stock, our management estimated, as of each valuation date, our enterprise value on a continuing operations basis, primarily using the income or market approaches, which are both acceptable valuation methods in accordance with the Practice Aid, or the pricing of recent transactions involving our equity securities, which we view as a strong indicator of the value of illiquid securities such as our common stock. Within the income approach, we used the discounted cash flow method based on management's financial forecasts and projections, as described in further detail below. Within the market approach, we used the guideline company and precedent transaction methodologies based on inputs from comparable public companies' equity valuations and comparable acquisition transactions, as described further below.

    Income Approach

        The discounted free cash flow method is based on the premise that our enterprise value as of the respective valuation date is equal to the projected future free cash flows and expected terminal value of the business, discounted by a required rate of return that investors would demand given the risks of ownership and the risks associated with achieving the stream of projected future free cash flows. The calculation of our enterprise value using the discounted free cash flow approach required the following steps:

    the determination of our projected future free cash flows;

    the determination of our terminal value as of the end of the last period for which projections are available; and

    the selection of an appropriate discount rate reflecting our estimated cost of equity capital to be applied to the projected free cash flows and terminal value.

For each valuation in which we used the income approach, we selected a discount rate reflecting our estimated cost of equity capital, as follows:

Date of Valuation
  Cost of
Equity Capital
 

July 31, 2010

    33.8 %

December 1, 2010

    26.3  

May 6, 2011

    27.6  

June 30, 2011

    27.7  

September 30, 2011

    28.5  

December 31, 2011

    28.5  

58


Table of Contents

    Market Approach

        The guideline company methodology involves the selection of publicly-traded guideline companies, whose operations are considered to be similar to ours, in order to measure the relative values being accorded by the investing public to the earnings, book values, and revenue of those comparable companies. These measures are then applied to our operations to derive a value. In selecting the guideline companies used in our analysis, we applied several criteria, including companies in the online advertising industry, companies displaying economic and financial similarity in certain aspects of primary importance in the eyes of the investing public, and businesses that entail a similar degree of investment risk. Basic criteria for consideration also included the following:

    the business makes its financial statements available to the public;

    the common stock of the business is outstanding in the hands of the public;

    the market for the common stock is sufficiently active to obtain a true value of the business; and

    the business is of a size that is, in some degree, comparable with the magnitude or potential of ours.

        The valuation methodology then consists of developing ratios of the per-share market price of each selected similar company to its revenue volume, to various measures of its profitability, and to its book value. These ratios or pricing multiples are then used to derive our enterprise value.

        The precedent transaction methodology is based on the use of publicly-disclosed data from arm's-length transactions involving similar companies to develop relationships or value measures between the prices paid for the target companies and the underlying financial performance of those companies. These value measures are then applied to our applicable operating data to arrive at our enterprise value.

        For the valuation performed as of July 31, 2010, we weighted the income and market approaches, each described below, as follows:

Valuation Approach
  Weight in Estimating
Enterprise Value
 

Income approach: discounted cash flow methodology

    50.0 %

Market approach: guideline company methodology

    40.0  

Market approach: precedent transaction methodology

    10.0  

        Beginning in December 2010, we did not rely on the precedent transaction methodology, due to the small number of precedent transactions for which multiples were publicly available in our industry. We also began to attribute more weight to our board of directors' 2011 budget and internal financial projections as part of the income approach. Accordingly, for the valuations performed as of December 1, 2010, May 6, 2011 and June 30, 2011, we weighted the income and market approaches as follows:

Valuation Approach
  Weight in Estimating
Enterprise Value
 

Income approach: discounted cash flow methodology

    80.0 %

Market approach: guideline company methodology

    20.0  

Market approach: precedent transaction methodology

     

        For our contemporaneous valuation as of September 30, 2011, we exclusively used the income approach to estimate our enterprise value. In addition, we used the guideline company analysis within the market approach as a reasonableness test for the value estimated using the discounted cash flow method.

        For our contemporaneous valuation as of December 31, 2011, we estimated our enterprise value using both an IPO scenario and a private company scenario. Under the IPO scenario, we estimated our pre-IPO enterprise value based on preliminary discussions with our investment bankers and review of public company valuations and other transactions involving companies in our industry. The valuation

59


Table of Contents

methodology employed in connection with the private company scenario was consistent with the valuation methodology we used in our contemporaneous valuation as of September 30, 2011.

        Each of our contemporaneous valuations beginning with December 1, 2010 also reflects a marketability discount resulting from the illiquidity of our common stock, as follows:

Date of Valuation
  Lack of
Marketability
Discount
 

December 1, 2010

    15.7 %

May 6, 2011

    22.4  

June 30, 2011

    20.9  

September 30, 2011

    20.0  

December 31, 2011 (private company scenario)

    20.0  

December 31, 2011 (IPO scenario)

    15.0  

    Methods Used to Allocate Our Enterprise Value to Classes of Securities

        Once we determined our enterprise value, we then used one of three methods for allocating across our various security classes to determine the fair value of our common stock as of each valuation date. These methods included the option-pricing method, the current value method or the probability-weighted expected return method, all of which are acceptable methods in accordance with the Practice Aid.

        The option-pricing method treats common stock and preferred stock as call options on the enterprise value, with exercise prices based on the liquidation preference of the preferred stock. Under this method, our common stock has value only if the funds available for distribution to stockholders exceed the value of the liquidation preference of our convertible preferred stock at the time of the liquidity event. The characteristics of each class of stock, including the conversion ratio and any liquidation preference of the convertible preferred stock, determine the class of stock's claim on the enterprise value. Essentially, the rights of the common stockholders are equivalent to a call option on any value above the preferred stockholders' liquidation preferences. Thus, the common stock can be valued by estimating the value of its portion of each of these call option rights. The option pricing method, as applied under the Black-Scholes model, is appropriate to use when the range of possible future outcomes is so difficult to predict that forecasts would be highly speculative.

        The current-value method involves a two-step process, which distinguishes it from the options-pricing method described previously that combines valuation and allocation into a single step. The current-value method of allocation is based on first determining enterprise value and then allocating that value to the various series of preferred stock based on the series' liquidation preferences or conversion values, whichever would be greater.

        The probability-weighted expected return method is based upon the premise that the per-share fair value is equal to a probability-weighted analysis of the various per-share calculations done for a set of likely scenarios. Calculations of the future per-share values for the various scenarios are discounted by a required rate of return that investors would demand, given the risks of ownership. A probability is then assigned to each of the scenarios. The calculation of the fair value of our common stock using the probability-weighted expected return method requires the following steps:

    the determination of a set of likely scenarios;

    the determination of the terminal value (or exit value) for each of the scenarios;

    the determination of the per-share value of the appropriate security for each of the scenarios at the time of an exit;

    the selection of an appropriate discount rate for the future per-share values; and

60


Table of Contents

    the determination of the probability of achieving each scenario.

        As described below, we exclusively used the option-pricing method for our valuations as of November 30, 2009 and July 31, 2010. For valuations beginning as of December 1, 2010, we have largely used a combination of the current-value method and the option-pricing method to allocate our asset value to the common stock. We have not used the probability-weighted expected return method to value our common stock, due largely to the difficulty in projecting multiple scenarios and determining the respective probabilities.

        Details of the assumptions and judgments reflected in the contemporaneous valuations and the additional factors considered when determining changes in fair value between the most recent contemporaneous valuation and the grant or modification date are presented below.

        November 30, 2009 Valuation. We conducted a contemporaneous valuation of our common stock as of November 30, 2009. After careful analysis of the relevant factors, we chose to place full weight on the option-pricing method, since we had recently completed a private placement of our Series C preferred stock to a third party on November 13, 2009, which was the principal driver of the resulting enterprise value of $67.1 million. In addition, the option-pricing method considers the seniority of securities and conversion characteristics upon a liquidity event. After considering the liquidation preferences of the preferred stock, an aggregate equity value of $12.4 million was allocated to the common stock, for an implied equity value per share of common stock of $0.76 as of November 30, 2009.

        We did not consider the current-value method appropriate, as the liquidation preferences exceeded the implied equity value determined by utilizing traditional valuation methods. We also did not consider the probability-weighted expected return method appropriate, as we were not preparing for a liquidity event at the time of the valuation.

        February and July 2010 Stock Option Grants. In February and July 2010, we granted stock options with an exercise price of $0.76 per share. Our compensation committee and board of directors determined that the fair value of our common stock on these grant dates was $0.76 per share. In determining the fair value of our common stock on the grant dates, our compensation committee and board of directors placed significant emphasis on the November 30, 2009 contemporaneous valuation described above. While we continued to experience revenue growth during the period following the November 30, 2009 valuation, we also considered the substantial business uncertainties that we continued to face, as well as declines in the valuations of the equity securities of comparable public companies since the November 30, 2009 valuation. As a result, our compensation committee and board of directors concluded that the fair value of our common stock remained $0.76 per share as of the grant dates of these options.

        July 31, 2010 Valuation and August, September and October 2010 Stock Option Grants. We conducted a contemporaneous valuation of our common stock as of July 31, 2010. Consistent with the valuation performed as of November 30, 2009, we exclusively used the option-pricing method. We did not deem the current-value method to be appropriate, as the liquidation preferences continued to exceed the implied equity value determined by utilizing traditional valuation methods, and we did not deem the probability-weighted expected return method appropriate as we were not preparing for a liquidity event at the time of the valuation.

        As described above, the first step in performing a valuation using the option-pricing method involves estimating the present value of the total stockholders' equity, both preferred and common, which is used in the option analysis. For the valuation performed as of November 30, 2009, we had valued the equity based on our Series C preferred stock financing, which resulted in an enterprise value of $67.1 million. However, given that more than eight months had passed since that investment, we concluded that the Series C transaction value was no longer an appropriate indication of value. Therefore, for the purposes of this analysis, we calculated our enterprise value using a weighted average of a guideline company analysis

61


Table of Contents

applied to our current and projected financial results, a precedent transaction analysis applied to our current and projected financial results, and a discounted cash flow analysis.

        For the guideline company analysis, we analyzed the trading multiples of nine comparable public companies and used the median multiple of 1.6 times last twelve months' revenue. We then applied this multiple to our last twelve months' revenue as of June 30, 2010 and to our projected revenue for the year ending December 31, 2010. We then adjusted the implied enterprise values to add cash, subtract debt, and add theoretical proceeds from the exercise of stock options.

        For the precedent transaction analysis, we reviewed three merger and acquisition transactions in the online advertising industry for which metrics were publicly available. We selected the median multiple of enterprise value to net sales of the target companies, which was 0.9 times revenue, and applied this multiple to our last twelve months' revenue as of June 30, 2010 and to our projected revenue for the year ending December 31, 2010. We then adjusted the implied enterprise values to add cash, subtract debt, and add theoretical proceeds from the exercise of stock options.

        For the discounted cash flow analysis, as described above, we estimated our future free cash flows, determined a terminal value using a median multiple derived from the guideline company and precedent transaction analyses, and discounted the cash flows to their present values using a discount rate of 33.8%, reflecting our estimated cost of equity.

        Using the weighted-average methodology, we calculated an enterprise value of $71.4 million. Using the option-pricing method to allocate the enterprise value, and after considering the liquidation preferences of the preferred stock, an aggregate equity value of $14.4 million was allocated to the common stock, for an implied equity value per share of common stock of $0.79 as of July 31, 2010. In August, September and October 2010, we granted new stock options with an exercise price of $0.79 per share. Our compensation committee and board of directors determined that $0.79 per share was the fair value of our common stock on the August, September and October 2010 grant dates.

        December 1, 2010 Valuation. We conducted a contemporaneous valuation of our common stock as of December 1, 2010. For the purposes of allocating our enterprise value to each of the various classes of our securities, we determined that the option-pricing and current-value methods were the most appropriate methods as of the valuation date. We considered the probability-weighted expected return method but ultimately determined that this method was not suitable as of December 1, 2010. Through the course of 2009 and 2010, we made investments in infrastructure and personnel for future growth. We also refined our business model and growth initiatives such that we were then projecting significant growth through fiscal 2012. As a result, we concluded that these factors made it difficult to isolate specific liquidity events, which are necessary in order to effectively use the probability-weighted expected return method.

        For the December 1, 2010 valuation we calculated our enterprise value using a weighted average of a guideline company analysis applied to our current and projected financial results and a discounted cash flow analysis.

        For the guideline company analysis, we analyzed the trading multiples of the same nine comparable public companies and used the median multiple of 2.6 times last twelve months' revenue, noting that the valuations of all these companies had increased since July 31, 2010. We then applied this 2.6x multiple to our last twelve months' revenue as of November 30, 2010 and to our projected revenue for the year ending December 31, 2010. We then adjusted the implied enterprise values to add cash, subtract debt, and add theoretical proceeds from the exercise of stock options.

        For the discounted cash flow analysis, we estimated our future free cash flows and determined a terminal value using a median multiple derived from the guideline company and precedent transaction analyses, and discounted the cash flows to their present values using a discount rate of 26.3%, reflecting our estimated cost of equity.

62


Table of Contents

        Using the weighted-average methodology, we calculated an enterprise value of $201.5 million. Using the current-value method to allocate the enterprise value to the fully diluted capitalization of the company on an as-converted basis, we estimated an implied equity value per share of common stock of $2.77 as of December 1, 2010. Simultaneously, we used the option-pricing method to allocate the enterprise value, and after considering the liquidation preferences of the preferred stock, an aggregate equity value of $48.3 million was allocated to the common stock, for an implied equity value per share of common stock of $2.67 as of December 1, 2010.

        As part of its determination of the fair value of our common stock as of December 1, 2010, our board also considered the closing of our Series D preferred stock financing on December 23, 2010 in which we received proceeds of $27.5 million. In addition, we had also agreed to repurchase shares of common stock from three of our executive officers using the proceeds of the Series D financing. As of the December 1, 2010 valuation date, we had entered into a non-binding letter of intent with the Series D investors with a negotiated purchase price for the Series D preferred stock of $3.26 per share, and we had also agreed to repurchase the common stock from our executive officers at this price. As such, we determined that $3.26 per share was the fair value of our common stock on a liquid minority basis as of December 1, 2010.

        In order to value our common stock on an illiquid basis, we applied a discount for lack of marketability. To quantify the discount, we utilized a protective put calculation in which the cost of purchasing a put option to protect against downward price changes is used as a proxy for the value of marketability. When the cost of the put option is divided by the asset price, the result is a percentage, which can then be used as an estimate for the discount for lack of marketability. The protective put calculation results in an estimated discount for lack of marketability of 15.7%. We applied the lack of marketability discount to the implied per share value of the common stock on a liquid minority basis of $3.26 per share to reach an implied per share value of our common stock on an illiquid minority basis equal to $2.75 per share.

        Based on the consideration of the Series D financing and the repurchases of our common stock, our compensation committee and board of directors determined that $2.75 per share was the fair value of our common stock as of December 1, 2010. The primary factor resulting in the increase in valuation between July 31, 2010 and December 1, 2010 was the rapid growth in our business, as evidenced by the doubling of our revenue from $9.3 million for the quarter ended June 30, 2010 to $18.7 million for the quarter ended December 31, 2010. We also expanded internationally during this period, opening our office in the United Kingdom. Our compensation committee and board of directors believed that this increase in valuation of our common stock was supported by the implied valuation of our company in the Series D preferred stock financing, which was an arm's-length transaction with our investors.

        March 2011 Stock Option Grants. In March 2011, we granted new stock options with an exercise price of $2.75 per share. Our compensation committee and board of directors determined that the fair value of our common stock on the grant dates remained at $2.75 per share. In determining the fair value of our common stock on the grant dates, our compensation committee and board of directors placed significant emphasis on the December 1, 2010 contemporaneous valuation described in detail above, and also considered the following factors:

    the relatively short period of time between our December 2010 valuation and March 2011 stock option grants;

    the substantial business uncertainties that we continued to face as we expanded internationally; and

    the relative consistency of comparable public company valuations between December 2010 and March 2011.

        May 6, 2011 Valuation and Issuance of Restricted Common Stock. We conducted a contemporaneous valuation of our common stock as of May 6, 2011 in conjunction with the acquisition of a business. We used

63


Table of Contents

a combination of the current-value method and the option-pricing method to allocate our enterprise value to each of the classes of our securities.

        As with the December 1, 2010 valuation, for the May 6, 2011 valuation we calculated our enterprise value using a weighted average of a guideline company analysis and a discounted cash flow analysis.

        For the guideline company analysis, we analyzed the enterprise values of 11 comparable public companies and used the median multiple of 2.2 times last twelve months' revenue. We then applied this 2.2x multiple to our last twelve months' revenue as of April 30, 2011 and adjusted the implied enterprise value to add cash and subtract debt.

        For the discounted cash flow analysis, we estimated our future free cash flows and determined a terminal value using the perpetuity growth method assuming a long-term growth rate of 4%, and discounted the cash flows to their present values using a discount rate of 27.6%, reflecting our estimated cost of equity.

        Using the weighted-average methodology, we calculated an enterprise value of $288.3 million. Using the current-value method to allocate the enterprise value to the fully diluted capitalization of the company on an as-converted to common stock basis, we estimated an implied equity value per share of common stock of $4.05 as of May 6, 2011. Under the option-pricing method, we allocated the enterprise value among the holders of each class of securities, resulting in an implied equity value for the common stock of $69.1 million, or $3.89 per share. After weighting the current-value and option-pricing methods equally, we determined that $3.97 per share was the fair value of our common stock on a liquid minority basis.

        In order to value the common stock on an illiquid basis, we applied a discount for lack of marketability. To quantify the discount, we utilized a protective put calculation. In calculating the protective put, we estimated a time to liquidity of two years from the valuation date. The two-year Treasury bond yield as of May 6, 2011 was 0.6% and the volatility of the selected comparable companies was 41.5%. The protective put calculation resulted in an estimated discount for lack of marketability of 22.4%. We applied the lack of marketability discount of 22.4% to the implied per share value of the common stock on a liquid minority basis to reach an implied per share value of the common stock on an illiquid minority basis of $3.08 per share. In conjunction with the acquisition, we issued restricted common stock with a fair value of $3.08 to stockholders of the acquired company who became employees of our company on May 6, 2011.

        June 30, 2011 Valuation and July and September 2011 Stock Option Grants. We conducted a contemporaneous valuation of our common stock as of June 30, 2011. For the purposes of allocating our enterprise value to each of the various classes of our securities, we determined that the option-pricing method and the current-value method were the most appropriate methods as of the valuation date. In order to be consistent with prior valuations, we considered the stock transactions and the probability-weighted expected return method but determined that this method was not suitable as of June 30, 2011.

        As with our December 1, 2010 and May 6, 2011 valuations, for the June 30, 2011 valuation we calculated our enterprise value using a weighted average of a guideline company analysis and a discounted cash flow analysis.

        For the guideline company analysis, we analyzed the enterprise values of the same 11 comparable public companies and used the median multiple of 2.5 times last twelve months' revenue. We then applied this 2.5x multiple to our last twelve months' revenue as of June 30, 2011 and adjusted the implied enterprise value to add cash and subtract debt.

        For the discounted cash flow analysis, we estimated our future free cash flows and determined a terminal value using the perpetuity growth method assuming a long-term growth rate of 4%, and discounted the cash flows to their present values using a discount rate of 27.7%, reflecting our estimated cost of equity.

64


Table of Contents

        Using the weighted-average methodology, we calculated an enterprise value of $305.3 million. Using the current-value method to allocate the enterprise value to the fully diluted capitalization of the company on an as-converted to common stock basis, we estimated an implied equity value per share of common stock of $4.28 as of June 30, 2011. Under the option-pricing method, we allocated the enterprise value among the holders of each class of securities, resulting in an implied equity value for the common stock of $74.2 million, or $4.16 per share. After weighting the current-value and option-pricing methods equally, we determined that $4.22 per share was the fair value of our common stock on a liquid minority basis.

        In order to value the common stock on an illiquid basis, we applied a discount for lack of marketability. To quantify the discount, we utilized a protective put calculation. In calculating the protective put, we estimated a time to liquidity of two years from the valuation date. The two-year Treasury bond yield as of June 30, 2011 was 0.5% and the volatility of the selected comparable companies was 39.9%. The protective put calculation results in an estimated discount for lack of marketability of 20.9%. We applied the lack of marketability discount of 20.9% to the implied per share value of the common stock on a liquid minority basis to reach an implied per share value of the common stock on an illiquid minority basis of $3.34 per share. Our compensation committee and board of directors determined that $3.34 per share was the fair value of our common stock on June 30, 2011.

        In July and September 2011, we granted new stock options with an exercise price of $3.49 per share, which exceeded the fair value of our common stock at the dates of the respective grants. In determining the fair value of our common stock on the grant dates, our compensation committee and board of directors placed significant emphasis on the June 30, 2011 contemporaneous valuation described above. Given the relatively short period of time between our June 30, 2011 valuation and July and September 2011 stock option grants, as well as the volatility in comparable public company valuations during this time, our compensation committee and board of directors concluded that the fair value of our common stock remained $3.34 per share as of the grant dates of these options.

        September 30, 2011 Valuation and November 2011 Stock Option Grants. Due to our improving financial results, as well as an overall improvement in the capital markets in general, and the market for IPOs in particular during 2011, during the second half of 2011 our board of directors began to consider an IPO of our common stock as a possibility. As a result, beginning with a contemporaneous valuation of our common stock as of September 30, 2011, we began to determine the fair value of our common stock in the case of an IPO exit event and increased the frequency at which we plan to conduct contemporaneous stock valuations to quarterly.

        For the purposes of this analysis as of September 30, 2011, we calculated our enterprise value exclusively using the discounted cash flow method. Using a discount rate of 28.5%, reflecting our estimated cost of equity, we discounted our future free cash flows and estimated terminal value to their present values and calculated an enterprise value of $326.0 million. We then used the guideline company methodology within the market approach to confirm the reasonableness of our estimated enterprise value. We reviewed multiples of enterprise value to trailing revenue, projected revenue and projected EBITDA for three comparable public companies. When applied to our operating metrics and projections, our multiples were either within or exceeded the range for the comparable companies, which we considered reasonable based on our historical revenue growth, our forecast of improving adjusted EBITDA margins, our relatively smaller size and our competitive position within a growing industry.

        As of the valuation date, September 30, 2011, the most likely liquidation event was considered to be an IPO, as a result of which all shares of preferred stock would be automatically converted into shares of common stock. The expectation for timing of an IPO was no more than one year from the valuation date. Accordingly, we also determined the fair value of our common stock in the case of an IPO exit event. For an IPO event, we believe it is appropriate to view the value of all shares as common stock equivalents. We divided the enterprise value of $326.0 million by the 73.1 million common stock equivalents as of

65


Table of Contents

September 30, 2011 and calculated the fair value per share of our common stock to be $4.46 on a liquid minority basis.

        We also allocated the enterprise value using the option-pricing method, in the event of an alternate exit event. The option-pricing method resulted in an implied equity value for the common stock of $77.1 million, or $4.32 per share.

        Based on the results of the two valuation methods described above, and giving greater weight to the IPO scenario, we determined that $4.44 per share was the fair value of our common stock on a liquid minority basis. However, as of the valuation date, the shares continued to be privately held, and as a result we applied a discount for lack of marketability. To quantify the discount, we utilized a put option model. In calculating the put option, we estimated a time to liquidity of between one year and 15 months from the valuation date, which includes a holding period for insiders. We used the Treasury bond yield that corresponds with the term, and the volatility of the selected comparable companies was estimated to be 65%. The put option calculation resulted in an estimated discount for lack of marketability of 28% for the 15-month term and 25% for the one-year term. This method of hedging a stock during its period of illiquidity is typically thought of as a ceiling for a reasonable discount. As such, we selected a lack of marketability discount of 20% and applied the discount to the implied per share value of the common stock on a liquid minority basis to reach an implied per share value of the common stock on an illiquid minority basis of $3.55 per share. Our compensation committee and board of directors determined that $3.55 per share was the fair value of our common stock on September 30, 2011.

        In November 2011, we granted new stock options with an exercise price of $4.02 per share, which our compensation committee and board of directors determined was the fair value of our common stock on the grant date. In making these option grants, our compensation committee and board of directors considered several factors, including the continued growth in our revenue and our headcount, the time that had elapsed since the September 30, 2011 valuation date, our continued international expansion with the opening of an office in Singapore, and our continued increase in market share.

        December 31, 2011 Valuation and January 2012 Stock Option Grants. Following our September 30, 2011 valuation, we continued to make progress toward an IPO, including the selection of investment bankers and an organizational meeting in December 2011 and the filing of a registration statement on January 5, 2012. As a result, when conducting the contemporaneous valuation of our common stock as of December 31, 2011 we attributed a 37.5% probability to this IPO scenario. We also considered the scenario in which we remained a private company in the event we do not complete an IPO and placed a 62.5% probability weight on the private company scenario.

        As of December 31, 2011, we expected that an IPO, if it were to occur, would be completed between March 31, 2012 and December 31, 2012. Based on preliminary discussions with our investment bankers and a review of public company valuations and other transactions involving companies in our industry, we developed a range of estimated pre-IPO enterprise values. Upon an IPO, all outstanding shares of our preferred stock would automatically be converted into shares of common stock. Accordingly, we believe it is appropriate to view the fair value of all shares as common stock equivalents. As a result, we divided the estimated pre-IPO enterprise value range by the number of common stock equivalents as of December 31, 2011 and calculated a range of fair values per share of our common stock in the IPO scenario on a liquid minority basis. However, as these valuations were estimated as of the IPO date, which was not expected for at least three months, we believed it was appropriate to discount the expected future IPO fair value per share by our estimated weighted average cost of capital of approximately 30% for a three-month period to calculate the current fair value per share as of December 31, 2011. Further, if we were to complete an IPO, we believed the probabilities to be approximately two-thirds that it would be at the high end of this valuation range and one-third that it would be at the low end of the range, as we would likely consider alternative opportunities to maximize shareholder value if the IPO pricing was at the lower end.

66


Table of Contents

        For the purposes of estimating the fair value of our common stock under the private company scenario as of December 31, 2011, we calculated our enterprise value exclusively using the discounted cash flow method. Using a discount rate of 28.5%, reflecting our estimated cost of equity, we discounted our future free cash flows and estimated terminal value to their present values and calculated an enterprise value. We then used the guideline company methodology to confirm the reasonableness of our estimated enterprise value. We reviewed multiples of enterprise value to trailing revenue, projected revenue and projected EBITDA for the same three comparable public companies as was used in our September 30, 2011 valuation. When applied to our operating metrics and projections, our multiples were either within or exceeded the range for each of the comparable companies, and therefore we considered the stay private enterprise value to be reasonable.

        We allocated the enterprise value using the option-pricing method, in the event we remain private but elect to pursue an alternate exit scenario. The option-pricing method resulted in an implied equity value for the common stock of $4.70 per share.

        As of the valuation date, December 31, 2011, our shares continued to be privately held, and as a result we applied a discount for lack of marketability. To quantify the discount, we utilized a put option model. In calculating the put option, we estimated a time to liquidity of between 8 to 10 months from the valuation date, which includes a 6-month holding period for insiders. We used the Treasury bond yield that corresponds with the term, and the volatility of the selected comparable companies was estimated to be 65%. The put option calculation resulted in an estimated discount for lack of marketability of 21% for the 8-month term and 23% for the 10-month term. This method of hedging a stock during its period of illiquidity is typically thought of as a ceiling for a reasonable discount. Given the purpose of the valuation, we concluded on lack of marketability discounts of 20% and 15% for our common stock for our private company and IPO scenarios, respectively. The difference between the two discounts is due to the longer expected holding period under the assumption that we remain private. Considering the two different valuation scenarios, the range of per share fair value of our common stock on an illiquid minority basis as of December 31, 2011 was $3.76 per share under the private company scenario to $9.76 per share under the IPO scenario.

        After applying the 62.5% and 37.5% probability weights to the private company and IPO scenarios, respectively, we calculated a fair value of $6.00 per share of our common stock on an illiquid minority basis as of December 31, 2011. In January 2012, we granted new stock options with an exercise price of $6.00 per share. Our compensation committee and board of directors determined that $6.00 per share was the fair value of our common stock on the January 2012 grant date, giving significant weight to the December 31, 2011 valuation.

    Income Taxes

        We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for operating loss and tax credit carryforwards. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. We recognize the effect of a change in tax rates on deferred tax assets and liabilities in the results of operations in the period that includes the enactment date. We reduce the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that we will not realize some or all of the deferred tax asset. As a result of our historical operating performance and the cumulative net losses incurred to date, we do not have sufficient objective evidence to support the recovery of our net deferred tax assets. Accordingly, we have established a valuation allowance against our net deferred tax assets for financial reporting purposes because we believe it is not more likely than not that these deferred tax assets will be realized.

67


Table of Contents

        We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is "more-likely-than-not" that the position will be sustained upon examination. We recognize potential interest and penalties associated with unrecognized tax positions within our global operations in income tax expense.

Recent Accounting Pronouncements

        In October 2009, the FASB issued Accounting Standards Update, or ASU, No. 2009-13, "Revenue Recognition—Multiple Deliverable Revenue Arrangements," which amends the criteria for evaluating the individual items in a multiple deliverable revenue arrangement and how to allocate the consideration received to the individual items. This guidance was effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. We adopted this guidance effective January 1, 2011, and its adoption did not have an impact on our financial position, results of operations or cash flows.

        In May 2011, the FASB issued ASU No. 2011-04, "Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS." The ASU is the result of joint efforts by the FASB and the International Accounting Standards Board, or IASB, to develop a single, converged fair value framework. While the ASU is largely consistent with existing fair value measurement principles in GAAP, it expands existing disclosure requirements for fair value measurements and makes other amendments. Key additional disclosures include quantitative disclosures about unobservable inputs in Level 3 measures, qualitative information about sensitivity of Level 3 measures and valuation process, and classification within the fair value hierarchy for instruments where fair value is only disclosed in the footnotes but the carrying amount is on some other basis. For public companies, the ASU is effective for interim and annual periods beginning after December 15, 2011. We do not expect adoption of this ASU to have a material impact on our financial position, results of operations or cash flows.

        In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income: Presentation of Comprehensive Income," which amends current comprehensive income guidance. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of stockholders' equity. Instead, it requires entities to report components of comprehensive income in either a single continuous statement of net income and comprehensive income or in two separate but consecutive statements. In October 2011, the FASB proposed a deferral of the requirement to present certain reclassifications of other comprehensive income on the face of the income statement. Companies, however, would still be required to adopt the other requirements of the ASU. The ASU, which should be applied retrospectively, is effective for annual or interim periods beginning after December 15, 2011, with early adoption permitted. We adopted ASU 2011-05 effective January 1, 2011, and its adoption did not have an impact on our financial position, results of operations or cash flows.

        In September 2011, the FASB issued ASU No. 2011-08, "Testing for Goodwill Impairment." The objective of this ASU is to reduce the cost and complexity of the annual goodwill impairment test by providing entities with the option to perform a "qualitative" assessment to determine whether further impairment testing is necessary. Specifically, an entity has the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test. If an entity believes, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. This guidance is effective for interim and annual financial periods beginning after December 15, 2011, although early adoption is permitted. We do not expect adoption of this ASU to have a material impact on our financial position, results of operations or cash flows.

68


Table of Contents

Quantitative and Qualitative Disclosures about Market Risk

        Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We are exposed to market risk related to changes in foreign currency exchange rates. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into exchange rate hedging arrangements to manage the risks described below.

    Interest Rate Sensitivity

        We maintain a short-term investment portfolio consisting mainly of highly liquid short-term money market funds, which we consider to be cash equivalents. These investments earn interest at variable rates and, as a result, decreases in market interest rates would generally result in decreased interest income. Any borrowings under our line of credit with SVB are at a variable rate and, as a result, increases in market interest rates would generally result in increased interest expense on our outstanding borrowings. As of the date of this prospectus, we do not have any borrowings outstanding under the line of credit.

    Foreign Currency Exchange Risk

        With international operations, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and if our exposure increases, adverse movement in foreign currency exchange rates would have a material adverse impact on our financial results. Historically, our primary exposures have been related to non-U.S. dollar denominated operating expenses in the United Kingdom and Europe. As a result, our results of operations would generally be adversely affected by a decline in the value of the U.S. dollar relative to these foreign currencies. However, based on the size of our international operations and the amount of our expenses denominated in foreign currencies, we would not expect a 10% decline in the value of the U.S. dollar from rates on December 31, 2011 to have a material effect on our financial position or results of operations. Substantially all of our sales contracts are currently denominated in U.S. dollars. Therefore, we have minimal foreign currency exchange risk with respect to our revenue.

Inflation

        We do not believe that inflation has had a material effect on our business, financial condition or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

69


Table of Contents


BUSINESS

Mission

        Our mission is to power the mobile app economy through innovative mobile advertising technology and solutions.

Overview

        We are the leading independent mobile advertising platform company. We help developers maximize their advertising revenue, acquire users for their apps and gain insights about their users. We offer advertisers significant audience reach, sophisticated targeting capabilities and the ability to deliver interactive, engaging ad experiences to consumers on their mobile connected devices. Our proprietary technology and data platform, known as MYDAS, determines in real-time which ad to deliver, to whom and when, with the goal of optimizing the effectiveness of advertising campaigns regardless of device type or operating system. In December 2011, our platform reached approximately 200 million unique users worldwide, including approximately 100 million unique users in the United States alone. More than 30,000 apps are enabled by their developers to receive ads delivered through our platform, and we can deliver ads on over 7,000 different mobile device types and models. In December 2011, we processed 40 billion impressions.

        As smartphones, tablets and other mobile connected devices become increasingly powerful and affordable, and mobile internet access becomes more widespread and faster, users are consuming more content on their mobile devices. Apps in particular are becoming a popular way for consumers to engage with and consume personalized digital content on their mobile connected devices. Gartner, a market research firm, forecasts that the total number of downloads from mobile application stores worldwide will increase from 17.7 billion in 2011 to 108.8 billion in 2015, representing a compound annual growth rate of 57%. As the number of apps has proliferated, however, it has become increasingly difficult for developers to differentiate their apps from competitors in overcrowded app stores. As a result, developers both large and small are competing for advertising budgets and visibility among users in order to realize their business objectives.

        Mobile advertising creates new opportunities for advertisers to reach and engage audiences. Mobile devices are inherently personal in nature, facilitate anytime-anywhere access to their users, allow for engaging app-enabled experiences and offer location-targeting capabilities. We believe that the combination of these factors has created a powerful opportunity for delivering highly targeted, interactive advertising through mobile connected devices. At the same time, several factors, including device and operating system diversity, as well as technological challenges, make it difficult and complex to deliver mobile advertising effectively.

        We help developers and advertisers remove complexity from mobile advertising. We provide tools and services to developers that allow their apps to display banner ads, interactive rich media ads and video ads from our platform. By partnering with us, developers gain access to advertising campaigns from leading advertiser clients as well as smaller performance-based advertisers. In return, developers supply us with space on their apps to deliver ads for our advertiser clients and also provide us with access to anonymous data associated with their apps and users. We analyze this data to build sophisticated user profiles and audience groups that, in combination with the real-time decisioning, optimization and targeting capabilities of our platform, enable us to deliver highly targeted advertising campaigns for our advertiser clients. Advertisers pay us to deliver their ads to mobile users, and we pay developers a fee for the use of their ad space. As we deliver more ads, we are able to collect additional anonymous data about users, audiences and the effectiveness of particular ad campaigns, which in turn enhances our targeting capabilities and allows us to deliver better performance for advertisers and better opportunities for developers to increase their revenue streams.

70


Table of Contents

        We have built relationships with developers and advertisers of all sizes. Our developer base includes large mobile web publishers, such as CBS Interactive and The New York Times, and large app developers, such as Zynga, Rovio and Pandora, as well as other developers, such as UberMedia and Gogii. Our advertiser clients include leading advertising agencies and brands, as well as smaller advertisers and often the developers themselves. In 2011, we delivered ads for 23 of the top 25 Ad Age advertisers. Our solutions are cross-platform, supporting all major mobile operating systems, including Apple iOS, Android, Windows Phone, Blackberry and Symbian. According to IDC, a market research firm, we are the second largest mobile display advertising platform in the United States, with a 16.7% market share. We are the only one of the three principal mobile advertising platform companies that is not affiliated with a particular mobile operating system or set of devices.

Industry Background

        The convergence of several factors is fundamentally changing the way mobile users consume content on their mobile connected devices and has created a significant opportunity for mobile advertising. These factors include:

    Adoption of faster and more functional mobile connected devices

        There has been widespread adoption of mobile connected devices, driven by intuitive user interfaces, increased functionality, faster processing speeds, better graphics processors and advanced display technologies with touch capabilities. It has become possible to deliver innovative, interactive and engaging consumer media experiences on a wide variety of mobile connected devices. A 2011 report by Cisco Systems, Inc. projects that the number of mobile connected devices will reach 7.1 billion by 2015. According to IDC, the number of smartphones shipped by vendors is expected to increase from approximately 305 million in 2010 to more than one billion by 2015, representing a compound annual growth rate of approximately 27%. IDC also estimates that nearly 63 million tablets will be shipped in 2011, growing to 135 million tablets in 2015, representing a compound annual growth rate of 21%.

    Widespread access to faster wireless networks facilitates consumer consumption of content

        With the growth of mobile connected devices, consumers increasingly expect to have a high-quality online experience everywhere. High-speed mobile networks are steadily expanding their footprint. According to Informa Telecoms & Media, a market research firm, worldwide 3G penetration approached 18% in 2011 and is expected to reach 50% by 2015. In addition, we believe the rise of next-generation networks such as 4G and the prevalence of Wi-Fi will further fuel mobile consumption of content. Gartner forecasts that Wi-Fi enabled devices will grow from less than one billion units in 2010 to over three billion in 2015. The combination of widespread network access and faster network technologies is enabling the proliferation of rich media content, presenting new opportunities in the mobile ecosystem.

    Mobile usage has disrupted how content is consumed

        Consumers are increasingly using their mobile devices instead of their personal computers and other traditional media to access content. For example, according to industry research conducted by Kleiner Perkins Caufield & Byers, a venture capital firm, 33% of the traffic on Facebook came from mobile devices in 2011, up from 1% in 2008. Consumers use their mobile devices in all aspects of their daily lives, such as reading the news, playing games, checking sports scores, shopping, checking the weather, banking, obtaining maps and directions and listening to the radio. According to eMarketer, Inc., an independent market research firm, the amount of time spent by consumers with their mobile devices is rising at a faster rate than is time spent viewing other kinds of media.

71


Table of Contents

    Growth of the mobile app economy

        The convergence of better mobile devices and faster connectivity has enabled developers to create, and consumers to interact with, content in new ways. Mobile apps have been created by developers as an easy, intuitive and interactive way to instantly deliver content on mobile devices. Mobile apps can either be native, meaning that they run directly on the operating system of the device, or they can run in an internet browser on the device. Native apps and emerging web technologies, such as the computer programming language HTML5, have allowed app developers to harness the increasing processing power and functionality of mobile devices and faster networks to deliver interactive and engaging media to users. Gartner forecasts that the total number of free and charged-for downloads from mobile application stores worldwide will increase from 17.7 billion in 2011 to over 108 billion in 2015.

        Developers have pursued a variety of approaches to monetize their apps, including charging users a fee for downloading their apps, offering the app for free to users but placing ads within the app, and selling virtual goods within the app. Developers that charge users a fee or sell virtual goods within an app often utilize advertising as well to supplement their revenue or to promote their apps.

    Advertising industry is being disrupted by mobile advertising

        As advertisers seek to maximize the effectiveness of their campaigns, the attractiveness of traditional advertising media, such as outdoor billboards, newspapers, magazines, radio and even television, is declining relative to digital advertising. This decline is due to several inherent limitations in traditional advertising, such as its limited ability to target specific audiences, its limited ability to measure audience reach and, in some cases, its limited geographic range. According to a December 2011 report by eMarketer, consumers are spending a larger proportion of their time with digital media, while there has been a concurrent decline in the share of time spent with traditional media. However, as summarized in the table below based on the eMarketer report, advertising spending is significantly lower on mobile than it is for other kinds of media, relative to consumer time spent with each kind of media. Although there is still significant spending on traditional advertising, advertisers are shifting their budgets to digital channels, both online and mobile.

Share of Average Time Spent per Day with Select Media by
U.S. Adults vs. U.S. Ad Spending Share

 
  2008   2011  
 
  Time spent share   Ad spending share   Time spent share   Ad spending share  

TV

    43.2 %   38.5 %   42.5 %   42.2 %

Internet

    23.3     14.9     25.9     21.9  

Radio

    17.3     11.2     14.6     10.9  

Mobile

    5.4     0.2     10.1     0.9  

Newspapers

    6.5     22.0     4.0     15.0  

Magazines

    4.3     13.2     2.8     9.7  

        As consumers spend more time online using their personal computers, digital advertising can be more effective than traditional advertising because it allows for user interaction, provides better measurement and achieves an expanded reach. However, even PC-based online digital advertising suffers from a number of significant limitations, including:

    Limited personalization.  Computers often have multiple users, thus yielding audiences with limited personalization. This limits advertisers' ability to target end users on an individual basis.

    Limited real-time accessibility.  Computers are typically used at home or in the office. Even laptops that can physically be with the user when traveling are usually used from a fixed location at their destination, where they are turned on and wirelessly connected to the internet. As a result, user

72


Table of Contents

      engagement with ads is generally limited to the time spent in front of the computer screen in a fixed location.

    Limited location targeting.  Most location targeting through personal computers is limited to a broad geographic area based on the records of the user's internet service provider. This limits the ability to deliver highly targeted advertising that is relevant to a consumer.

Benefits of Mobile Advertising

        Mobile advertising provides significant benefits both to developers and to advertisers. For developers, mobile advertising provides the opportunity to make money, acquire users and gain insight into app usage. For advertisers, the combination of the personal nature of mobile devices, their enhanced functionality and the rise of app-enabled experiences creates a powerful platform for highly targeted and effective advertising.

        Mobile advertising provides advertisers and developers with a number of benefits over traditional advertising media and PC-based online digital advertising, such as the following:

    Anytime, anywhere access.  Mobile devices generally accompany users at all hours of the day and are typically turned on at all times. This provides advertisers the opportunity for nearly continual access to the user. An advertiser can reach audiences at all stages of the purchase decision—awareness, research, opinion, consideration and, ultimately, purchase—in order to increase the likelihood that the viewer will become a purchaser of the product or service being advertised. This ability to target audiences at all times of the day, regardless of location, makes mobile advertising an attractive opportunity for advertisers, especially compared to newspapers, magazines, television and radio or to digital advertising delivered through personal computers.

    Personalization.  Mobile devices are inherently personal and are most often used by one person. Users often download and use a variety of apps that reflect their personal preferences and interests. When a user downloads an app to his or her individual device, data is often exchanged that can provide information about the user's interests. As the user downloads and registers for more apps, more data can be collected about this user's preferences, which provides an opportunity to personalize the mobile advertising experience.

    Location targeting and relevance.  Data from mobile devices is often shared in a manner that can identify the device's location. This enables location-targeted advertising, which has the potential to increase the impact and relevance of an ad to the user. For example, in PC-based online advertising, firms can assess a user's browsing behavior to provide limited targeting of advertising to that user. With mobile advertising, on the other hand, an ad can be targeted to a consumer who is in close proximity to a specific location, such as a retail store, or to a consumer who recently visited that store. The ad also has the potential to influence the user to walk into a nearby store.

    More complete user engagement.  Apps on mobile connected devices typically show one or two ads on each page view. We believe this limited number of ads on a small device screen can often capture the attention of the user better than the many banner ads on a typical PC-based web page can. Furthermore, ads on a mobile device can take advantage of features of the device itself, such as the touch screen, swipe functionality and the accelerometer, which detects motion, to enable the user to manipulate and more deeply engage with the ad. Mobile device users can also act upon an ad immediately by, for example, downloading an app or other content, calling an advertiser directly from the mobile phone, or using the map on the device to find a nearby retail store or service provider. In some cases, mobile users can even take their device to a store to physically redeem an offer from an ad.

    Enhanced audience targeting.  Due to the significant amount of data collected from a mobile device, highly specific audiences can be created based on location and behavioral and demographic

73


Table of Contents

      preferences to match advertisers' objectives. The ability to create and deliver highly relevant audiences also enhances the value of advertising space for developers.

    Superior monetization opportunities for developers.  We believe that consumers are often willing to pay for content on mobile devices that they are unwilling to pay for on online PC-based websites. For example, many consumers will pay for magazine and newspaper content downloaded to an app on a mobile device, even though they would not pay for similar content accessed through a PC-based web page. To the extent that many consumers attach value to mobile content, we believe they are also willing to accept advertising to subsidize the cost of that content. As a result, developers have opportunities to generate revenue from their content in the mobile context that may be superior to monetization opportunities available on the PC-based web.

Market Opportunity

        Given the benefits of mobile advertising as compared to traditional offline advertising and PC-based online advertising, we expect that marketers will continue to shift their advertising budgets to mobile. Furthermore, as apps proliferate and consumers consume media and content in new ways, advertising will continue to be increasingly important to developers as a way to generate revenue from their apps. Gartner estimates that worldwide mobile advertising revenue, excluding advertising delivered in connection with search requests and maps, will expand from $1.8 billion in 2011 to approximately $13.5 billion in 2015, reflecting a compounded annual growth rate of 65%. We believe that we are well-positioned to capture a significant portion of this growing mobile advertising market.

Complexities of Mobile Advertising

        Despite the growing market opportunity for mobile advertising, it is complex and challenging to deliver effectively for the following reasons:

    Fragmented mobile ecosystem

        The fragmented mobile landscape makes it challenging to build and deliver advertising in a cost-effective manner. Several factors contribute to this challenge, including:

    Device diversity.  There are thousands of distinct mobile device types in use, of varying vintages, all with different screen sizes, screen resolutions, functionality and processing power.

    Multiple operating systems.  There are numerous mobile device operating systems, such as Apple iOS, Android, Windows Phone, Blackberry and Symbian. In addition, there are multiple variations of these operating systems tailored to specific device types, each offering different app capabilities and functionality.

    Varied delivery and user engagement mechanisms.  There are multiple mechanisms for delivering mobile advertising, including native in-app advertising and mobile web advertising delivered through an internet browser on the device. In addition, there are many different ways users are able to engage with advertising on different device types. For example, some devices allow swiping and shaking functionality, while others do not.

    Limitations in using traditional identification techniques

        On the PC-based web, "cookies" are typically used to identify a particular computer and therefore serve as a key mechanism for targeting ads. On mobile devices, however, cookies provide a less effective means of identification because mobile browsers are not routinely configured by cellular providers to accept cookies. Therefore, in order to target ads to, or optimize ads for, a particular user, mobile advertising providers must employ additional methods for identifying a unique user.

74


Table of Contents

    Difficulty in predicting user behavior

        It is difficult to predict when and where a user will be consuming content on a mobile device. Mobile users tend to use their devices during a number of short sessions throughout the day in different locations, unlike PC-based usage, which follows more predictable and continuous patterns. Rapidly changing context and location makes it challenging to plan relevant advertising content ahead of time and requires sophisticated, automated technologies to deliver ads in real time.

    Varying connection quality

        Due to the varying signal quality that a mobile device may have at any given time, a user may experience intermittent connection quality issues. Even the same device on the same network can have varying connection quality. In some cases, mobile devices must cache ads and deliver those ads when the device is offline, making it necessary to deliver advertising during intermittent connection windows and report back to the ad platform at a later time.

    Challenging to measure performance

        Tracking the performance of ads in apps and user interactions with those ads is difficult and requires significant technological capabilities and know-how.

The Needs of Mobile App Developers and Advertisers

        Mobile app developers aim to maximize their ad revenue, acquire users, and gain insight into the performance of their apps. Developers require a flexible, easy-to-use solution that enables the delivery of engaging advertising from various sources to the users of their apps, regardless of the mobile operating system or device being used. Small developers typically do not have their own sales forces and lack the audience size to attract advertising spending from major advertisers. While large developers may have their own sales teams, they often lack insight into the behavior and interests of their users. Developers of all sizes want to minimize the cost and effort associated with app monetization so that they can instead focus their resources on app development and enabling user experiences.

        As the number of apps has proliferated, it has become increasingly difficult for developers to differentiate their apps from those of competitors and to acquire users. Mobile app stores are overcrowded with hundreds of similar apps from developers, both large and small, within each app category, making it challenging for developers to achieve visibility for their apps. Therefore, developers are also seeking ways to increase awareness for their apps through advertising.

        Advertisers want to be able to conduct effective ad campaigns in order to achieve their business objectives. To do this in the mobile app context, advertisers require scale, reach and the ability to target and engage specific audiences. Advertisers need a solution that will enable them to optimize their advertising investment by delivering campaigns across multiple devices and operating systems and maximizing the number of potential consumers the campaigns can reach. Finally, advertisers require the ability to measure the effectiveness of their campaigns.

The Millennial Media Solution

    Our MYDAS Technology Platform

        At the core of our solutions is MYDAS, our technology and data platform. MYDAS is a comprehensive mobile advertising technology platform serving the needs of developers and advertisers. Each time an app makes a request to receive an ad, the MYDAS platform performs several tasks automatically and in real-time, including identifying unique users; targeting ads based on user interest, behavior and location; delivering those ads to millions of users through tens of thousands of apps, running

75


Table of Contents

on thousands of different device types; ensuring that the ads will work over wireless connections of varying quality and speed; and measuring user engagement and ad performance.

    Solutions for Developers

        Our solutions give developers the opportunity to maximize ad revenues from their apps by receiving ad campaigns from our advertiser clients. We also offer developers solutions that help them promote and distribute their apps, including the ability to run their own ads on their own apps at no cost to them or to reinvest their ad proceeds by becoming an advertiser and advertising their apps through our platform. Our solutions provide developers with insights into their user base along with data to help them enhance their apps and their business.

    Tools

        We provide an easy-to-use, turn-key solution for developers. Through our mmDev portal, developers can download and integrate our software development kits, or SDKs, into their apps at no cost to them. The SDK then becomes an integral part of the app. We have created SDKs for each major mobile operating system. Our SDKs allow the app to receive three kinds of ads—rich media, banner displays and video—and also allows developers to take advantage of advanced mobile device features, such as gestures, pinch-zoom, device orientation and movement. Together, these features enable a compelling interactive user experience with ads. We also offer mediation tools that allow developers to allocate ad requests among various advertising campaign sources, including ads from sources other than our platform, in order to maximize revenue from their ad space. Because our SDKs support all major operating systems and thousands of different mobile device models, developers can be confident that our ads can be delivered to their apps regardless of the operating system or device on which they will be used. We do not charge developers for our SDK because our goal is to have our SDK integrated into as many apps as possible so that we can deliver ads to these apps and maximize our platform reach and scale.

    Data and Analytics

        We offer developers sophisticated reporting and analytics through an integrated dashboard on our mmDev portal, which includes comprehensive ad revenue generation reports for their apps across all major mobile operating systems. These reports help developers gain insight into user interaction and behavior and the performance of their apps. We share this performance data with developers to help them improve their apps and their deployment of our SDKs in order to maximize their ad revenue. In addition, through the more than one billion ad requests that we receive each day, we are able to gain important insights about users that we are able to share with developers on an aggregated basis.

    Services

        We offer all developers support through our mmDev portal, as well as various webinars, blogs and, in some cases, support from account managers. We then use the insights we gain from our interactions with developers to enhance the tools we provide to our full developer base.

    Solutions for Advertisers

        We offer advertisers significant audience reach, access to a large volume of mobile ad space and sophisticated targeting of audiences. We enable advertisers to gain insights into the performance of their ad campaigns and to manage their campaigns with a view to maximizing return on their advertising investment. Our solutions are designed to address the needs of large brand advertisers and advertising agencies as well as smaller, performance-based advertisers. Large brand and performance advertisers typically buy ads on our platform through our sales teams. Smaller advertisers typically buy ads either through our sales team or through our self-service advertising portal, mMedia.

76


Table of Contents

    Significant audience reach and scale

        In December 2011, our platform reached approximately 200 million unique mobile users worldwide, including approximately 100 million in the United States. More than 30,000 apps are enabled to receive ads delivered through our platform. Our platform can deliver ads to more than 7,000 distinct mobile device types running all major mobile operating systems.

    Sophisticated targeting

        Our analytics technology, coupled with the data we continuously collect from our platform, enables us to offer advertisers the ability to run highly targeted advertising campaigns. Through our mmPlan campaign planning tool, we help advertisers develop their campaigns to reach specific audiences available through our platform.

        We have developed more than 150 audience categories to which advertisers can target their ads. Audience categories can be based on a variety of user attributes, including location, demographics, affluence, intent, gender and interests. For example, if a user is browsing the internet and clicks on a news story about a car, that does not necessarily mean the user is interested in purchasing a car. Without additional data points, it is unclear whether the user is interested in purchasing a car or just happened to be interested in the news article. However, if a user has been in a car dealership recently, based on information that can be derived from the location of his or her mobile device, we could place this user into an "in-market auto" audience category and target car ads to him or her. Delivering automotive ads to this user may continue to be very relevant, even after the user has left the car dealership.

        Our targeting capabilities also allow us to deliver the type of ad we predict is most likely to engage the user. For example, we may show a video ad for a sports car to a 25- to 35-year-old affluent male or a rich media ad for a full-sized SUV or a sedan to a 45- to 55-year-old father.

    High level of engagement

        We enable advertisers to deliver several kinds of ads:

    display banners, which are a type of ad format that appears on part of the screen in an app and can be static, animated or expandable, meaning that the ad expands to a full page ad when a user clicks it;

    rich media, which refers generally to an interactive ad that exhibits dynamic motion over time or in direct response to user interaction, such as a streaming ticker or an interactive animated presentation. For example, ads can be delivered that expand when users click or touch a specified location on the device screen;

    launch prestitials, which are full screen rich media ads, either static image or video, that appear to users before the app loads;

    transition interstitials, which are full screen rich media ads, either static image or video, that appear to users at natural transition points in the app, such as between game levels or between the homepage and a unique content page; and

    interactive videos, which can also include buttons within the ad that allow a consumer to take an action and engage with the brand, such as visit a website, make a purchase or recommend on social media sites.

        We believe that these advertising formats, coupled with sophisticated targeting, increase user interaction and engagement with ads, which in turn drives better results for advertisers. Our mmStudio solution enables advertisers and advertising agencies to design rich media and creative ads using a set of templates that we have developed. This solution allows the advertiser to have full control over ad content

77


Table of Contents

while ensuring that the ads can be easily integrated and delivered through our platform. We also support the most popular third-party rich media creative formats. Our goal is to deliver the most engaging ad possible to a specific user, then to effectively measure the user's engagement with the ad and, finally, to report the user's engagement level back to the advertiser.

    Actionable insights and campaign management

        As a result of the amount and nature of the data we collect through our platform, our reporting to advertisers goes beyond traditional post-campaign analysis to provide actionable insights for current ad campaigns and future marketing strategies. We offer real-time reporting and analytics to help advertisers understand why some campaigns perform better than others.

        Our self-service interface also enables advertisers to plan and alter live campaign parameters, such as audience targeting and pricing. We also give our larger advertisers the option to work directly with our advertising account specialists, who help our clients manage their ad campaigns.

Our Competitive Strengths

        We believe that the following competitive strengths differentiate us from our competitors:

    Differentiated technology platform

        Our MYDAS technology platform is specifically architected to deliver mobile advertising at scale and is the result of almost six years of focused development. Some of our competitors have attempted to apply traditional online advertising technology to mobile, while others have built solutions focused on specific mobile operating systems. By contrast, we designed MYDAS for the mobile environment, where the delivery and targeting of ads must allow for a much larger number of variables than in traditional online advertising, such as the capability of the device, the operating system on which it operates and the strength of the wireless connection, as well as various audience variables. Our platform is capable of accounting for and analyzing these many variables in real-time. In addition, our technology is able to analyze the results of each ad placement that we make and feed that information back into the MYDAS platform to improve the ad targeting and delivery process in the future.

    Large and growing data asset

        We collect and analyze data from the billions of ads delivered on our platform each month to create and enhance unique user profiles on an anonymous basis. In order to maintain anonymity, we use a number of industry-standard methods, including hashing techniques, which obscures device identifiers that have been assigned by a manufacturer. We further obscure the hashed identifier by assigning it an internally generated identifier. We draw inferences about a user's demographic profile and preferences based partially upon locations that he or she has frequented and the interaction and response levels for previously shown ads. The data we receive can come from the mobile carrier, the app and the mobile device itself. This data can include information such as app usage and user location data. Location data, in particular, helps us better understand a user's actual behavior and preferences.

        With this data we have developed more than 150 million proprietary user profiles, all on an anonymous basis. As we deliver more ads to a user, we are able to collect additional information about that user. Our technology processes this information and is able to dynamically recognize and link new information to a particular user profile, allowing us to continuously refine and gain additional insight into that user's preferences and behavior. In addition, as we deliver more ads on our platform, we gain more insights as to which ads are most effective on particular devices and operating systems. As the volume and comprehensiveness of our data asset grows, we believe we will gain increasing insight into audience preferences and behavior, along with the effectiveness of ads delivered on various devices, thereby allowing us to deliver more targeted and effective ads.

78


Table of Contents

    Sophisticated audience targeting capabilities

        By leveraging the extensive data we collect through our platform, we are also able to create audience groups, or profiles, based on context and behavior. Our platform uses sophisticated location, context and behavioral analytics capabilities to match advertising campaigns with target audiences automatically in real-time. For example, we work with major motion picture companies to target specific audiences to coincide with new motion picture releases. These audiences may include parents with young children for animated films or male audiences for action movies. Our platform also allows us to target audiences within a specific geographic area to achieve the goals of the advertising campaign.

        Our audience profiles can be further refined based on our previous interactions with them to enhance the outcomes of future ad campaigns. We are also able to build new audiences on demand for unique campaign goals. Additionally, our targeting capabilities allow us to limit the specific campaigns that any individual user may see through our platform, in order to further enhance the effectiveness of the ads.

    Trusted partner for developers

        We believe we are a trusted and integral business partner to app developers, helping them to meet business objectives beyond simply generating revenue from their apps. Through our technology platform, data analytics and services, we help developers minimize the costs and distractions associated with the fragmented mobile app environment and allow them instead to focus their efforts on their core business of developing apps. Additionally, our extensive experience and data asset give us valuable industry insights and knowledge of successful developer business practices, which we share across our developer community through marketing events, blogs, improvements to our SDKs and, where appropriate, our account service representatives. We believe that this partnership approach helps to solidify our developer relationships and the important strategic role we play in their businesses, providing us with increased access to advertising opportunities.

    Trusted partner for advertisers

        We have built relationships with leading advertising agencies and brands, including 23 of the top 25 Ad Age advertisers. Our solutions help advertisers take the complexity out of ad campaign execution in the fragmented mobile market. We offer advertisers access to mobile advertising specialists who supervise and support advertising campaigns through all stages of planning and execution. We educate our clients on the latest mobile trends and help them plan and deliver engaging and effective advertising campaigns across multiple devices and operating systems. We are an independent advertising platform, not focused on any particular device or operating system, and we believe our advertiser clients select us because they value our independence, the sophisticated targeting capabilities and demonstrated effectiveness of our platform and the measurable results we provide to them.

    Mobile advertising industry pioneer and thought leader

        We believe that we are a recognized pioneer and that we have become the authoritative source for research and insight on the mobile advertising market. Since the mobile advertising industry is in its infancy, our sales and support teams help our advertiser clients and developers attain their business objectives by coaching them on best practices and helping them to shape their mobile advertising strategy. We aggregate data based on the billions of ad impressions delivered on our platform each month and deliver our research and insights to advertisers, developers and the market as a whole at no charge. We share regular market intelligence reports and publications, including our monthly Scorecard for Mobile Advertising Reach and Targeting, or S.M.A.R.T., report, which provides a comprehensive view of trends in mobile advertising, and our Mobile Mix report, which highlights monthly trends for connected devices, device manufacturers and mobile operating systems. Our employees are thought leaders in the industry and are often asked to speak at mobile advertising industry conferences and events.

79


Table of Contents

    Significant scale and reach

        According to IDC, we are the second largest mobile display advertising platform in the United States with 16.7% market share. We are the only one of the three principal mobile advertising platform companies that is not affiliated with a particular mobile operating system or set of devices. As the leading independent provider, we are unbiased and focus only on mobile advertising. In December 2011, our platform reached approximately 200 million unique mobile users worldwide, including approximately 100 million in the United States. More than 30,000 apps are enabled to receive ads delivered through our platform, including many of the most popular apps available through the Android Marketplace and the Apple App Store. Our platform is compatible with more than 7,000 distinct device types running all major mobile operating systems.

    Powerful network effects that connect our advertisers and developers

        We serve a strategic role in the advertiser and developer ecosystem, because both sides mutually benefit from the use of our advertising platform. As we deliver ads, our data asset grows and we are able to deliver even more targeted, more relevant and more engaging mobile advertising. As the targeting capability of our advertising campaigns increases, we believe advertisers will be willing to pay more for the ever more relevant and targeted advertising campaigns we can deliver, which in turn will attract developers to our platform since we can help them maximize their ad revenue.

Our Growth Strategy

        Our objective is to be the strategic independent platform partner of choice for developers and advertisers wanting to capitalize on the large and growing mobile advertising opportunity. The following are the key elements of our growth strategy:

    Innovate through continued investments in technology and data

        In order to continue to add value to our clients and differentiate ourselves from our competition, we will continue to invest in technology. Our innovation efforts are principally focused on enhancing our data analytics capabilities for audience targeting. We believe that a higher level of targeting and relevance for our advertising campaigns will increase the value proposition for existing and prospective advertising clients.

    Deepen our relationship with developers

        We intend to continue to deepen our relationship with developers by offering them better tools and services. We plan to harness emerging mobile technologies to allow developers to build increasingly interactive and immersive ad experiences for their app users. We believe that more engaging ad experiences will lead to greater app usage and greater monetization opportunities for developers, thereby enhancing our role as an integral business partner for them.

    Increase our share of advertising budgets from existing advertisers

        We plan to capitalize on opportunities to build on relationships with existing advertisers. Many of our advertisers sell products through numerous distinct brands. We believe we have the opportunity to run more and larger campaigns for our existing advertising clients and to expand our relationships with these advertisers by running campaigns for more of their brands.

80


Table of Contents

    Acquire new developers and advertisers

        We intend to continue to grow our developer base primarily through mmDev, our self-service developer portal, and through our developer sales team. We plan to grow our advertiser base through multiple channels. We plan to continue increasing our full-service sales team to enhance our success in capturing large-scale and strategic campaigns with major advertisers, and we also plan to continue to grow our inside sales team. In addition, we expect to increase the number of advertisers and campaigns that place ads through our self-service advertising portal, mMedia.

    Increase our global market penetration

        We aim to increase our presence in strategic international locations by increasing our direct sales force and international sales channels. We established an office in the United Kingdom in the first half of 2010 and recently launched operations in Singapore in the fourth quarter of 2011, our first presence in the Asia-Pacific region. We have made significant investments in our business to date that we believe have positioned us well for continued international expansion. We plan to leverage these investments to expand our presence in Europe, the Middle East, Africa and the Asia-Pacific region. We believe that international markets will increasingly experience many of the same factors that have driven proliferation of the mobile app economy in the United States, including rapid consumer adoption of connected devices and more powerful and increasingly affordable mobile networks. Accordingly, we believe international markets represent significant opportunities for growth.

    Expand partnership network

        We plan to pursue additional relationships with third-party providers of tools and services in order to attract additional developers and advertisers to our platform. We believe that expanding our network of third-party partners will enable us to provide enhanced services to both developers and advertisers. We believe our mobile advertising expertise positions us to help these parties develop complementary and innovative products and services by harnessing the scale and power of our platform.

    Pursue strategic acquisitions

        We plan to pursue acquisitions of complementary businesses and technologies that represent a strategic fit with us and are consistent with our overall growth strategy. We may also pursue future acquisitions to expand or add capabilities to our existing platform and to continue to build out innovative and effective app monetization and targeted advertising solutions.

    Continue to provide trusted insight into the app economy

        We plan to continue to be a thought leader and trusted independent provider of audience insight to the mobile advertising industry. The data and insight we provide helps developers build more engaging apps and helps advertisers create higher quality and more engaging advertising. We are committed to shaping the vision of the mobile advertising industry through thought leadership and actionable insights.

Our Technology Platform

        Our solutions are built upon our core technology engine, MYDAS. MYDAS couples proprietary technology with our extensive data asset with the objective of delivering the right mobile ad to the right person at the right time in the right place. The MYDAS technology engine typically accomplishes the following sequences in under 50 milliseconds, while typically receiving over one billion ad requests daily:

    Ad request management.  Mobile apps or mobile websites that have our SDKs embedded send a request for an ad to MYDAS through the SDK. This ad request enters the MYDAS engine, along with associated data from the device, app and mobile carrier. MYDAS analyzes all of the available

81


Table of Contents

      data to categorize the ad request and to place it in context so that we can deliver the most relevant available ad to the specific user.

    Unique user identification.  MYDAS then runs a proprietary set of algorithms to analyze multiple data points from the device, carrier and app to statistically determine, on an anonymous basis, the likely unique user of the device and the app requesting the ad. MYDAS assigns an internal unique user identifier to the user profile developed for that individual, with the goal of delivering more relevant ads to that user across multiple mobile devices and maximizing advertising diversity for that user. We believe that many of our competitors rely only upon a device identification code to identify the device as opposed to the more robust analysis that MYDAS employs to identify the unique user. User identification is accomplished on a completely anonymous basis.

    Contextual analysis.  After identifying the unique user associated with a specific advertising request, MYDAS then determines the context around the ad request. This context answers one or more of the following questions:

    Where is the user?

    What site or app is the user currently using?

    What is the nature of the content on the site or app from which the request is coming?

    What type of device is the request coming from?

    What wireless network is the request coming through?

    Audience analysis.  Once MYDAS identifies the unique user associated with an ad request and its context, it then searches our databases to determine an appropriate audience category or categories based on prior information we have gathered about the user on a completely anonymous basis. For example, a user may belong to an audience of "moms" because she has downloaded or visited several apps focused on content for mothers, or she has identified herself as a "mom" in a registration form for an app. We may also place a user in a "moms" audience because she has opted to share location data with us and she has regularly visited retail establishments typically frequented by mothers. We might place another user in an "in-market auto buyer" audience because he or she has been in multiple auto dealerships in a short period of time, has opened and engaged with automotive ads and has used numerous apps with automotive-focused content. The ability to identify a user and then determine the audiences to which that user belongs is critical in order to deliver the most relevant ad possible to that user and deliver the best results for advertisers and developers. Each time that we see a unique user on our platform, we gain data that enables us to better determine the audiences with which that user should be associated.

    Real-time marketplace.  After MYDAS identifies the unique user associated with a specific ad request, the context around the ad request and the audiences to which the user belongs, MYDAS delivers the request to a real-time, bidded marketplace in which it matches available ads with available ad requests. MYDAS performs a sophisticated statistical analysis to automatically run an instantaneous virtual auction in which each qualified ad campaign bids on each available ad request. We call this process optimization and decisioning. As part of this decisioning process, we use an artificial intelligence concept called "agents," which are software programs designed to operate the ad marketplace efficiently and fairly, while at the same time optimizing results based on each campaign's goals. Each ad campaign is represented in the marketplace by one of these agents, programmed with specific goals for the particular campaign. The goals will usually include information such as price, audiences to be targeted and timeframe of the campaign, as well as target engagement metrics. When MYDAS enters an ad request into the marketplace, each agent bids on the ad request, and the platform then matches the best available ad to the specific ad request.

82


Table of Contents

    Cross-platform ad delivery.  After matching an ad to a request, MYDAS then delivers, or serves, the ad through the SDK integrated into the app on the specific device making the request. MYDAS can deliver a variety of different types of ads, including video ads, rich media ads and a variety of banner ads, to virtually any mobile connected device across all major mobile operating systems, both within mobile apps and through mobile web browsers.

    Reporting and analysis.  Once MYDAS has delivered an ad to a specific device, MYDAS analyzes the user's engagement with the ad, measuring whether the user clicked on the ad or engaged with the ad in some other meaningful way, such as swiping the ad, opening a video, sharing the ad with a friend or downloading an app in response to the ad. These results are then incorporated back into the MYDAS platform, which can use the data to analyze whether the specific ad served to the user was actually the best available ad to deliver to that user. This information about the user's engagement level with the ad is used to automatically refine various weightings and algorithms within MYDAS to further improve our ability to target and optimize future ad delivery.

        The MYDAS platform also includes a suite of enterprise web services that drive our client-facing tools and interfaces like mmDev and mMedia and our internal workflow tools and interfaces. Our web services layer enables us to build new offerings and scale our platform for developers and advertisers quickly and cost-effectively while also enabling us to integrate our solutions with those of third-party partners.

        MYDAS consists primarily of software incorporating our proprietary algorithms, database software and the data that we store. Our software and data are hosted in data centers in the United States, the United Kingdom and the Netherlands. We primarily lease space at data centers on a managed services basis, although we also co-locate servers and other equipment that we own at some data centers. In addition, we use third-party web services for some of our data and computing needs.

        We use techniques that we believe are standard in our industry to protect our MYDAS platform against unauthorized access. These techniques include password-controlled user access and authentication, secure hosting with firewalls, encryption, load balancers, switches, anti-virus software and use of physically secure and redundant facilities.

Our Clients

        The following sets forth a list of representative clients:

Advertisers   Advertising Agencies   Developers
Fox   Camelot Communications LTD   airG

General Motors

 

Carat

 

CBS Interactive

Patagonia

 

Omnicom Media Group

 

Gogii

Porsche

 

Razorfish

 

Handmark

Southwest Airlines

 

Starcom Mediavest Group

 

New York Times

Warner Brothers

 

 

 

Pandora

Zynga

     

Rovio


 

 

 

 

UberMedia

     

Weatherbug

     

Zynga

        The foregoing list is not intended to represent a comprehensive list of our client base. Our largest advertiser and developer clients are typically different from period to period. We believe our business is

83


Table of Contents

not substantially dependent on any particular client as no individual advertising client represented more than 10% of our revenue in 2010 or 2011.

    Advertiser Case Studies

        The following case studies illustrate how our advertiser clients have used our mobile advertising solutions:

        Top 100 Ad Age Advertisers. Throughout our history, we have worked with many of the top 100 advertisers as ranked by Ad Age. These are typically the largest brand advertisers, and many of them have multiple brands for which they run campaigns throughout the year.

        We have performed an analysis of the advertisers included in the top 100 Ad Age advertisers for 2010, which is the most recent Ad Age ranking and was released in January 2011, and the total activity and spending by that group of advertisers on our platform from 2008 through 2011. The results of this analysis are summarized in the table below.

Use of our Platform by Top 100 Ad Age 2010 Advertisers

 
  2008   2009   2010   2011  

Number of advertisers using our platform

    25     37     57     73  

Total spending by these advertisers (millions)

  $ 2.4   $ 5.9   $ 19.9   $ 48.2  

Average spending per advertiser

  $ 95,000   $ 160,000   $ 349,000   $ 661,000  

        From January 1, 2011 through December 31, 2011, 73 of these 100 advertisers have spent a total of $48.2 million through our platform, with an average of $661,000 per advertiser. We have increased the average annual spending from this group of advertisers by almost 600% during the period from 2008 to 2011. We attribute this growth in average spending among these advertisers to our success in capturing advertising campaigns from more brands per advertiser, running more campaigns for each brand per year and supporting larger campaigns from these advertisers. We believe our increased penetration of these 100 advertisers is attributable to increased sales and marketing efforts and our growing reputation for delivering results for large brand advertisers.

        Southwest Airlines. Through its outside advertising agency, Camelot Communications Ltd., Southwest has run multiple advertising campaigns through our platform with a goal of improving multiple advertising metrics, including brand awareness, registrations and bookings. By targeting a business traveler behavioral audience, as well as leveraging location data available through our platform, Southwest was able to grow its Rapid Rewards user base by advertising to target consumers while they were in an airport. Because audience reach is a critical component of its advertising campaigns, Southwest has run several takeover campaigns with us to drive awareness of its fare sales. In these campaigns, we have utilized rich media ads targeting customized behavioral audiences that exhibited potential interest in travel, as well as audiences near college football stadiums, to achieve higher engagement levels.

        Porsche Cars North America. Porsche, together with its advertising agency Omnicom Media Group Chicago, utilized our platform to create a cross-device campaign to drive affinity for the Porsche brand. Porsche and its agency, along with our creative services team, used our platform to build engaging rich media ad units for smartphone and tablet devices, highlighting real consumer videos about the experience of owning and driving a Porsche. Over a six-month campaign period, Porsche used our platform to reach a large mass of users across the major smartphone and tablet operating systems, including iOS, Android, RIM and Windows Phone 7. Our platform allowed Porsche to utilize a variety of audience targeting methods, including re-engaging consumers who had previously engaged with Porsche ads. These ads drove strong engagement with the featured videos and the ads demonstrated click-through rates that were significantly higher than other similar ads that were untargeted.

84


Table of Contents

        Leading global movie company. In 2007, during our first full year of operation, one of our customers, a leading global movie company, advertised four movies through our platform and spent less than $130,000. Over the years, this client has increased the number of individual movies and campaigns that it advertises through our platform, and has increased spending on our platform. In 2010, the client advertised 15 movies in 17 separate campaigns and spent over $1 million on our platform. In the eleven months through November 2011, the client utilized our platform for 30 separate campaigns, including campaigns for DVD and foreign releases, for total spending of $1.4 million. This customer has also utilized our international reach for global movie releases. Of the movies advertised in the eleven months through November 2011, a majority were advertised in two or more countries.

        Large "big box" retailer. This retailer has worked with us to increase foot traffic into its retail stores and to promote specialty products around key retail sale holidays, such as Labor Day, Black Friday and the week leading up to Christmas. The retailer has utilized our mobile circular ad, which is similar to customary retail print circulars. The new mobile circular ad promoted more than 14 separate products available at the retailer's stores in a single, interactive ad. We used the location-based and audience-targeting capabilities of our platform to target the ads to consumers who were near the retailer's stores nationwide or had been near other similar retail establishments.

    Developer Case Studies

        The following case studies illustrate how our developer clients have used our solutions:

        Rovio. Rovio, an entertainment media company that created the popular Angry Birds franchise, began working with us in May 2011 to monetize its most downloaded smartphone and tablet games, such as Angry Birds Classic, Angry Birds Seasons and Angry Birds Rio, on iOS and Android operating systems. The number of impressions that Rovio provided to our platform grew by 123% from the third quarter of 2011 to the fourth quarter of 2011.

        UberMedia. UberMedia, an independent developer of feature-rich social media products, including UberSocial, a twitter client, for iPhone, Android and Blackberry, has been working with us since December 2009. The number of impressions UberMedia provided to our platform increased by more than 150% from the fourth quarter of 2010 to the fourth quarter of 2011, and iOS impressions grew by nearly 200%. UberMedia has informed us that it considers us to be its top monetization partner, and it allows us to sell sponsorships within its properties. UberMedia now has a total of 13 apps that use our platform spanning the mobile web, Blackberry, iPhone, iPad and Android.

        One Louder. One Louder, a subsidiary of Handmark Inc., is an app developer with content across multiple categories including social, sports and weather. One Louder launched with us in August 2008, at which time it was primarily focused on the development and monetization of custom widgets. One Louder initially sought ways to monetize the homepage of the Sprint Instinct handset. Since then, One Louder has continued to expand its portfolio and has launched a total of 46 cross-platform sites and apps for which our platform enables advertising, including mobile web, iPhone and iPad apps, Android apps, Web OS and Java. One Louder works with over 20 different monetization partners and has advised us that we are currently its strongest monetization partner.

Sales, Marketing and Developer Relations

        As of December 31, 2011, we had a total sales and marketing staff of 69, with 62 based in the United States and the remainder based in the United Kingdom and Singapore. For the years ended December 31, 2009, 2010 and 2011, our total sales and marketing expenses were $4.6 million, $8.5 million and $14.3 million, respectively.

85


Table of Contents

    Advertiser Sales and Support

        We sell our mobile advertising solutions to large brand and performance advertisers through a number of channels:

    Full-service sales team.  Our full-service sales team focuses its efforts on the largest advertising brands, digital advertising agencies and traditional advertising agencies.

    Industry specialists.  Some of our sales representatives are devoted to advertisers in specific industries, such as automotive and entertainment, which have historically spent larger amounts on mobile advertising.

    Inside sales.  Our inside sales team targets mobile performance advertisers, mobile advertising agency networks and traditional online performance advertisers who have their own advertising capabilities but may need additional sales support.

    Self-service.  In addition to our sales staff, we have also recently launched a self-service advertising portal, known as mMedia, that allows smaller advertisers to launch and run their own mobile advertising campaigns with their own in-house staff.

        Our full-service sales team is divided into geographic regions in the United States, and internationally into regions consisting of the Americas, as well as Europe, the Middle East and Africa, collectively referred to as EMEA, and the Asia-Pacific region. Within each regional sales division, our sales team is organized based on a traditional digital media structure, with regional vice presidents, sales directors, account executives and account managers.

        In addition to sales support during the advertising campaign planning process, our sales representatives provide additional support to advertisers to ensure that their campaigns are launched and delivered within specified timeframes. Representatives assigned to specific advertisers review performance metrics and share feedback with the advertiser.

    Developer Acquisition and Support

        App developers provide us with the advertising space on which we deliver advertising campaigns on behalf of our advertiser clients. These apps carry our SDKs and, ultimately, our advertiser clients' ads. As a result, cultivating relationships with these developers is necessary for us to expand our business. To date, more than 30,000 apps and mobile websites have been enabled to receive ads delivered through our platform.

        Our developer acquisition and support effort is divided into segments based upon the degree of developer support needed:

    Self-service.  Through our self-service portal, known as mmDev, small developers have access to our SDKs and other technology and data tools that they can quickly and easily integrate into their apps on their own initiative in order to begin monetizing their advertising inventory.

    Full-service and hybrid self-service.  For large or mid-sized developers with a significant number of available advertising impressions, in addition to the mmDev self-service portal, we also assign account managers that are responsible for ensuring that we are meeting the ongoing needs of the developer.

86


Table of Contents

    Marketing

        Through our marketing efforts, we seek to position our company as an industry innovator and leader in the growing mobile advertising market and to become the authoritative source for research and insight on that market. We accomplish this by publishing industry data, including:

    our S.M.A.R.T. report, which delivers monthly insights on key trends in mobile advertising based on actual campaign and network data from our platform; and

    our Mobile Mix report, which highlights monthly trends for connected devices, mobile manufacturers and operating systems.

        Our reports are used by many of the largest mobile advertising agencies and traditional advertising agencies as an authoritative research source for mobile advertising.

        We also market the Millennial Media brand through other strategies, including the following:

    participation in and sponsorship of important developer and advertising industry events, such as Mobile World Congress and Advertising Week;

    presence at local meetings with developers to cultivate relationships in selected geographic markets;

    advertising our own brand over mobile as well as through social media channels, online, blogs and traditional print, such as industry magazines; and

    use of our website to provide information about us and our products and services, as well as learning opportunities for potential advertiser and developer clients.

Competition

        The mobile advertising market is highly competitive. The competitive dynamics of our market are unpredictable because it is in an early stage of development, rapidly evolving, fragmented and subject to potential disruption by new technological innovations.

        Several competitors provide mobile advertising solutions. Our primary competitors are the large advertising platforms offered by Google and Apple, both of which focus on advertising solutions built for their proprietary mobile operating systems, Android and iOS, respectively. We also compete with in-house solutions used by companies who choose to coordinate mobile advertising across their own properties, such as ESPN, The Weather Channel and Yahoo!, as well as new, smaller entrants into the mobile advertising market.

        We believe the principal competitive factors in our industry include the following:

    mobile advertising focus;

    proven and scalable technology;

    platform independence;

    size of the developer ecosystem;

    relationships with leading advertisers;

    quality and size of advertising inventory;

    brand awareness and reputation; and

    ability to integrate with third-party apps and technologies.

87


Table of Contents

        We believe that we compete favorably with respect to all of these factors and that we are well-positioned as an independent mobile advertising platform that can operate without regard to brand of mobile device or operating system.

Technology and Development

        Our technology and development efforts are focused on enhancing the architecture of our MYDAS technology platform and creating additional functionality for our developer customers. We are also developing additional self-service products to be available through our mmDev and mMedia portals. We are also continuously working to improve our audience intelligence capabilities in order to help our advertisers reach precise audiences developed through demographic and behavioral analysis. As part of our cross-platform SDKs that we provide to developers, we seek to include new capabilities, such as additional analytical tools, notification solutions, payment solutions and mediation tools.

        As of December 31, 2011, we had a total of 44 employees engaged in technology and development functions. For the years ended December 31, 2009, 2010 and 2011, our total technology and development expenses were $1.1 million, $2.2 million and $5.2 million, respectively.

Intellectual Property

        Our ability to protect our intellectual property, including our technology, will be an important factor in the success and continued growth of our business. We protect our intellectual property through trade secrets law, patents, copyrights, trademarks and contracts. Some of our technology relies upon third-party licensed intellectual property.

        We have two non-provisional patent applications pending, and three additional provisional patent applications pending, in the United States. We expect to apply for additional patents to protect our intellectual property. We also continue to review whether pursuing patent protection in other countries is appropriate.

        We own a U.S. trademark registration for Millennial Media and U.S. trademark applications for MYDAS and mmDev. We also continue to review whether pursuing trademark protection in other countries is appropriate.

        In addition to the foregoing, we have established business procedures designed to maintain the confidentiality of our proprietary information, including the use of confidentiality agreements and assignment-of-inventions agreements with employees, independent contractors, consultants and companies with which we conduct business.

Government Regulation

        We are subject to numerous U.S. and foreign laws and regulations that are applicable to companies engaged in the business of advertising on mobile devices. In addition, many areas of law that apply to our business are still evolving, and could potentially affect our business to the extent they restrict our business practices or impose a greater risk of liability.

        Given the nascent stage of mobile advertising, industry practices are rapidly evolving. We participate in the Digital Advertising Alliance and other industry groups that are working on establishing best practices for the mobile advertising industry.

    Privacy

        Privacy and data protection laws play a significant role in our business. In the United States, at both the state and federal level, there are laws that govern activities such as the collection and use of data by companies like us. Online advertising activities in the United States have primarily been subject to

88


Table of Contents

regulation by the Federal Trade Commission, which has regularly relied upon Section 5 of the Federal Trade Commission Act to enforce against unfair and deceptive trade practices. Section 5 has been the primary regulatory tool used to enforce against alleged violations of online privacy policies, and would apply to privacy practices in the mobile advertising industry.

        The issue of privacy in the mobile advertising industry is still evolving. Federal legislation and rule-making has been proposed from time to time that would govern certain advertising practices as they relate to mobile devices, including the use of precise geo-location data. Although such legislation has not been enacted, it remains a possibility that some federal and state laws may be passed in the future.

        There have been numerous civil lawsuits, including class action lawsuits, filed against companies that conduct business in the mobile device industry, including makers of mobile devices, mobile application providers, mobile operating system providers, and mobile third-party networks. Plaintiffs in these lawsuits have alleged a range of violations of federal, state and common laws, including computer trespass and violation of privacy laws.

        In addition, mobile services are generally not restricted by geographic boundaries, and our services reach mobile devices throughout the world. We currently transact business in Europe and Southeast Asia and, as a result, some of our activities may also be subject to the laws of foreign jurisdictions. In particular, European data protection laws can be more restrictive regarding the collection and use of data than those in U.S. jurisdictions. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

    Advertising

        Even though we receive contractual protections from our advertising business partners with respect to their ads, we may nevertheless be subject to regulations concerning the content of ads. Federal and state laws governing intellectual property or other third-party rights could apply to the content of ads we place. Laws and regulations regarding unfair and deceptive advertising, sweepstakes, advertising to children, and other consumer protection regulations, may also apply to the ads we place on behalf of clients.

Employees

        As of December 31, 2011, we had 222 employees, of which 72 were primarily engaged in product and technology and 69 were engaged in sales and marketing. Substantially all of these employees are located in the United States. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Facilities

        Our principal offices occupy approximately 37,000 square feet of leased office space in Baltimore, Maryland pursuant to lease agreements that expire between September 2013 and April 2016. We also maintain offices in New York, New York; London, England; San Francisco, California; and Washington, DC. We believe that our current facilities are suitable and adequate to meet our current needs. We intend to add new facilities or expand existing facilities as we add employees, and we believe that suitable additional or substitute space will be available as needed to accommodate any such expansion of our operations.

Legal Proceedings

        Streetspace, Inc. v. Google, Inc. et al. On August 23, 2010, plaintiff Streetspace, Inc. filed a complaint in the U.S. District Court for the Southern District of California, alleging patent infringement against a group of defendants including us. Plaintiff alleged that each of the defendants has infringed, and continues to infringe, plaintiff's patent. On September 12, 2011, the court granted the defendants' motion for change of

89


Table of Contents

venue and ordered the transfer of the case to the U.S. District Court for the Northern District of California. On September 15, 2011, the defendants jointly filed a request to reexamine plaintiff's claimed patent with the U.S. Patent and Trademark Office. On November 18, 2011, the Patent and Trademark Office granted the defendants' request, ordered a reexamination of the plaintiff's claimed patent, and rejected all of the plaintiff's patent claims from the first office action. The defendants filed a motion to stay the case, pending the reexamination, which motion was granted in February 2012.

        In re iPhone Application Litigation. On April 21, 2011, a class action complaint was filed in the U.S. District Court for the Northern District of California, on behalf of a putative class of plaintiffs made up of alleged Apple mobile device users. The complaint named Apple, Inc. as a defendant, along with eight other companies, including us. The plaintiffs alleged violations of the federal Computer Fraud and Abuse Act and included several California statutory and common law claims. The claims, in large part, were based upon allegations that the defendants collected, used or disclosed user information and data from Apple mobile devices, either without notice or consent, or that such activities lacked or exceeded authorization. On June 20, 2011, Apple, Inc. and the other defendants as a group each filed a motion to dismiss the complaint. On September 20, 2011, the court granted both motions to dismiss, granting the plaintiffs leave to file an amended complaint within sixty days. On November 21, 2011, the plaintiffs filed an amended complaint, and we were not named as a defendant.

        We may be subject to various other claims and legal actions arising in the ordinary course of business from time to time.

90


Table of Contents


MANAGEMENT

Directors, Executive Officers and Other Key Employees

        The following table sets forth information concerning our directors, executive officers and other key employees, including their ages as of March 1, 2012:

Name
  Age   Position

Executive officers:

         

Paul Palmieri

    41   President, Chief Executive Officer and Director

Chris Brandenburg

    37   Executive Vice President and Chief Technology Officer

Stephen Root

    43   Chief Operating Officer

Michael Avon

    38   Executive Vice President and Chief Financial Officer

Other key employees:

         

Matt Gillis

    39   Senior Vice President, Global Monetization Solutions

Andrew Jeanneret

    47   Senior Vice President, Accounting and Controller

Ho Shin

    43 &n