Fluent, Inc. is a leading player in the rapidly expanding commerce media industry, leveraging its 14-year track record of customer acquisition expertise to power new and innovative solutions for partners and advertisers. As the digital advertising landscape continues to evolve, Fluent has strategically pivoted its business model to capitalize on the significant opportunities presented by the burgeoning commerce media market.
Business Overview and History
Fluent, Inc. was founded in 2010 as a performance marketing company, specializing in customer acquisition solutions for a diverse range of clients across industries. The company's proprietary data-driven approach and expertise in digital marketing allowed it to establish a strong foothold in the industry, serving hundreds of clients over the past decade.
In 2015, Fluent underwent a transformative merger with Cogint, Inc., which significantly bolstered its capabilities and expanded its reach. This merger allowed Fluent to leverage Cogint's data and analytics capabilities to enhance its performance marketing offerings. Following the merger, Fluent went public and began trading on the NASDAQ exchange, marking a significant milestone in the company's history.
The company's growth strategy has included both organic expansion and strategic acquisitions. In 2016, Fluent acquired Q Interactive, LLC, which expanded its client base and media channels. This was followed by the acquisition of AdParlor Holdings, Inc. and its affiliates in 2019, which strengthened Fluent's social media advertising capabilities.
Throughout its history, Fluent has faced and overcome various challenges. In 2020, the company implemented a "Traffic Quality Initiative" to address regulatory changes and improve the quality of traffic and leads it was providing to clients. While this initiative was necessary, it temporarily put Fluent at a competitive disadvantage compared to less compliant competitors.
More recently, in 2022 and 2023, Fluent dealt with the impact of the FTC Consent Order, which required the company to make changes to its owned and operated digital media properties and programmatic advertising business. These changes negatively impacted Fluent's revenues and profitability during this period. Despite these challenges, Fluent remained focused on serving its clients and maintaining its position as a leader in performance marketing.
The Commerce Media Opportunity
According to a report by Boston Consulting Group, the commerce media industry is estimated to be valued at over $50 billion currently and is expected to reach over $100 billion in the next five years. This rapid growth is fueled by the increasing importance of personalized, performance-driven advertising within the e-commerce ecosystem.
Fluent's expertise in data-driven customer acquisition and its deep understanding of consumer behavior have positioned the company as a key player in this burgeoning market. By seamlessly integrating its technology and data assets into the e-commerce experiences of its partners, Fluent is able to deliver highly targeted and effective advertising solutions that drive measurable results for its clients.
Business Segments
Fluent operates in two main business segments: Owned and Operated Marketplaces and Commerce Media Solutions.
Owned and Operated Marketplaces
This segment represents the majority of Fluent's revenue, accounting for $130.2 million or 69% of total revenue for the first nine months of 2024. In this segment, Fluent operates its own digital media properties, attracting consumers through promotional offerings and leveraging its proprietary technologies to serve targeted, relevant offers to these consumers on behalf of its advertiser clients. Revenue is generated by delivering measurable marketing results, such as clicks, leads, calls, app downloads, or new customers, to clients.
Commerce Media Solutions
The Commerce Media Solutions segment generated $24 million or 13% of total revenue for the first nine months of 2024. This segment represents Fluent's syndicated performance marketing platform, where the company embeds its proprietary ad-serving technology on partner websites at key moments in the consumer experience, such as after checkout, to identify and acquire additional consumers for its advertiser clients. Fluent typically enters into agreements with these media partners for terms of at least one year and up to five years, remunerated on a revenue share or impression basis.
Other Revenue
Fluent's third revenue stream, categorized as "Other," generated $35 million or 18% of total revenue for the first nine months of 2024. This includes revenue from Fluent's call center-supported performance marketplace, which helps clients increase engagement and in some cases sell products and services directly on behalf of clients, primarily in the healthcare insurance sector.
Financial Performance and Outlook
Financials
In 2023, Fluent reported annual revenue of $298.4 million, with a net loss of $63.22 million. The company generated annual operating cash flow of $8.14 million and annual free cash flow of $2.27 million.
For the third quarter of 2024, Fluent reported revenue of $64.52 million, representing a 3% decrease compared to the same period in 2023. The company recorded a net loss of $7.94 million for the quarter.
In 2024, Fluent reported revenue of $254.6 million, with its Commerce Media Solutions segment accounting for $41.3 million, or 16% of the total. This represents a remarkable 284% year-over-year growth in the Commerce Media Solutions business, demonstrating the strong traction Fluent has gained in this strategic focus area.
The company's Commerce Media Solutions segment has also witnessed impressive margin expansion, with gross profit margins (excluding depreciation and amortization) reaching 35.1% in 2024, compared to just 8.5% in the prior year. This margin improvement underscores the inherent profitability of Fluent's commerce media offerings and the value they provide to partners and advertisers.
Liquidity
As of the third quarter of 2024, Fluent reported cash and cash equivalents of $6.59 million. The company's debt-to-equity ratio stands at 0.40, while its current ratio and quick ratio are both 1.02.
Fluent has a credit facility with SLR Credit Solutions that provides a $20 million term loan and a $30 million revolving credit facility, maturing on April 2, 2029. This available credit line provides additional financial flexibility for the company.
Geographic Performance
Fluent primarily operates in the United States, with some international revenue. In the third quarter of 2024, 66% of revenue came from the US market, while 34% was generated from international markets.
Guidance and Outlook
Looking ahead, Fluent expects the momentum in its Commerce Media Solutions segment to continue, with the company projecting strong year-over-year triple-digit revenue growth for this segment throughout 2025. As of December 31, 2024, the commerce media solutions business had surpassed an annual revenue run rate of over $60 million, up from $50 million as of September 30, 2024.
For the consolidated business, Fluent anticipates flat year-over-year revenue in the first half of 2025, primarily due to declines in discontinued businesses and seasonality in commerce media verticals. However, the company expects total revenue growth to accelerate in the second half of 2025, driven by strong performance in the Commerce Media segment.
For the full fiscal year 2025, Fluent projects double-digit year-over-year growth in consolidated revenue and gross profit. This growth is primarily driven by the company's expanding partner network, which includes renowned brands such as Fanatics, Vivid Seats, and Barnes & Noble College, among others.
Industry Trends
The digital advertising industry has seen significant growth, with Magna forecasting 11.4% growth in US ad spending to $377 billion in 2024. Within this broader trend, the commerce media industry is experiencing particularly rapid expansion, estimated to be worth over $50 billion currently and expected to reach over $100 billion in the next 5 years. This represents a significant opportunity for Fluent as it pivots its business model towards commerce media solutions.
Risks and Challenges
While Fluent's strategic pivot towards commerce media has been largely successful, the company is not without its risks and challenges. The highly competitive nature of the digital advertising industry, coupled with the evolving regulatory landscape, pose ongoing risks to Fluent's operations and growth.
Additionally, the company's historical reliance on its owned and operated digital media properties has left it vulnerable to changes in consumer behavior and the competitive dynamics of those channels. Fluent's ability to effectively transition its legacy business while scaling its commerce media solutions will be a critical factor in determining its long-term success.
The company continues to face substantial doubt about its ability to continue as a going concern, as it works to secure additional financing and implement cost-saving measures to address its declining financial performance and compliance with debt covenants.
Conclusion
Fluent, Inc. has demonstrated its agility and foresight in pivoting its business model to capitalize on the burgeoning commerce media opportunity. The company's deep expertise in data-driven customer acquisition, combined with its growing network of high-profile partners, positions it as a formidable player in this fast-growing industry.
As Fluent continues to execute on its strategic roadmap, investors will be closely watching the company's ability to maintain its momentum in the commerce media segment while navigating the broader challenges facing the digital advertising landscape. With a strong foundation and a clear vision for the future, Fluent appears well-positioned to ride the wave of the commerce media revolution, despite the financial and operational challenges it currently faces.