10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2012

OR

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-35478

MILLENNIAL MEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-5087192
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
2400 Boston Street, Suite 201, Baltimore, Maryland	21224
(Address of principal executive offices)	(Zip Code)

(410) 522-8705

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No 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 definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of the close of business on October 31, 2012 was 78,337,477.

Millennial Media, Inc.

FORM 10-Q Quarterly Report

Table of Contents

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
Consolidated Balance Sheets as of December 31, 2011 and September 30, 2012 (unaudited)		2
Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2012		3
Unaudited Consolidated Statements of Comprehensive Loss for the three and nine months ended September  30, 2011 and 2012		4
Unaudited Consolidated Statement of Changes in Stockholders’ (Deficit) Equity for the nine months ended September 30, 2012		5
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2012		6
Notes to Unaudited Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	29
Item 4.	Controls and Procedures	29
	PART II. OTHER INFORMATION	29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 6.	Exhibits	51
	Signatures	53

1

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

Millennial Media, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share data)

	December 31,			September 30,
	2011			2012
				(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	16,707		$	122,404
Accounts receivable, net of allowances of $1,216 and $2,217 as of December 31, 2011 and September 30, 2012, respectively	34,986			51,176
Prepaid expenses and other current assets	1,417			2,119
Total current assets	53,110			175,699
Property and equipment, net	3,688			5,777
Goodwill	1,348			1,348
Intangible assets, net	1,179			980
Deferred offering costs	1,985			—
Other assets	575			634
Total assets	$	61,885		$	184,438
Liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity
Current liabilities:
Accounts payable and accrued expenses	$	2,883		$	3,176
Accrued cost of revenue	20,963			28,227
Accrued payroll and payroll related expenses	5,153			6,431
Deferred revenue	157			219
Total current liabilities	29,156			38,053
Series B warrant outstanding	183			—
Other long-term liabilities	299			267
Total liabilities	29,638			38,320
Redeemable convertible preferred stock:
Series A-1 preferred stock, $0.001 par value, 6,341,465 and 0 shares authorized, issued and outstanding as of December 31, 2011 and September 30, 2012, respectively	1,880			—
Series A-2 preferred stock, $0.001 par value, 9,448,220 and 0 shares authorized, issued and outstanding as of December 31, 2011 and September 30, 2012, respectively	7,033			—
Series B preferred stock, $0.001 par value, 12,737,605 and 0 shares authorized, 12,686,855 and 0 issued and outstanding as of December 31, 2011 and September 30, 2012, respectively	19,882			—
Series C preferred stock, $0.001 par value, 10,759,630 and 0 shares authorized, issued and outstanding as of December 31, 2011 and September 30, 2012, respectively	18,441			—
Series D preferred stock, $0.001 par value, 8,442,833 and 0 shares authorized, issued and outstanding as of December 31, 2011 and September 30, 2012, respectively	29,432			—
Total redeemable convertible preferred stock	76,668			—
Stockholders’ (deficit) equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding as of December 31, 2011 and September 30, 2012	—			—
Common stock, $0.001 par value, 250,000,000 shares authorized, 18,011,035 and 76,757,515 shares issued and outstanding as of December 31, 2011 and September 30, 2012, respectively	17			75
Additional paid-in capital	—			198,687
Accumulated other comprehensive loss	(25		)	(52		)
Accumulated deficit	(44,413		)	(52,592		)
Total stockholders’ (deficit) equity	(44,421		)	146,118
Total liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity	$	61,885		$	184,438

See accompanying notes.

2

Millennial Media, Inc.

Unaudited Consolidated Statements of Operations

(in thousands, except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2012			2011			2012
Revenue	$	25,189		$	47,366		$	69,129		$	119,707
Cost of revenue	15,293			28,005			42,536			71,683
Gross profit	9,896			19,361			26,593			48,024
Operating expenses:
Sales and marketing	3,203			5,922			10,179			16,561
Technology and development	1,518			4,667			3,316			10,084
General and administrative	5,382			10,491			13,946			28,428
Total operating expenses	10,103			21,080			27,441			55,073
Loss from operations	(207		)	(1,719		)	(848		)	(7,049		)
Interest and other expense
Interest expense	(1		)	(14		)	(2		)	(52		)
Other expense	(36		)	—			(62		)	(834		)
Total interest and other expense	(37		)	(14		)	(64		)	(886		)
Loss before income taxes	(244		)	(1,733		)	(912		)	(7,935		)
Income tax benefit (expense)	2			(36		)	495			(46		)
Net loss	(242		)	(1,769		)	(417		)	(7,981		)
Accretion of dividends on redeemable convertible preferred stock	(1,259		)	—			(3,728		)	(1,328		)
Net loss attributable to common stockholders	$	(1,501	)	$	(1,769	)	$	(4,145	)	$	(9,309	)
Net loss per share:
Basic and diluted	$	(0.09	)	$	(0.02	)	$	(0.25	)	$	(0.17	)
Weighted average common shares outstanding:
Basic and diluted	16,400,211			75,498,564			16,336,295			55,146,195
Stock-based compensation expense included above:
Sales and marketing	$	49		$	286		$	112		$	410
Technology and development	385			2,037			621			2,889
General and administrative	170			903			371			1,974

See accompanying notes.

3

Millennial Media, Inc.

Unaudited Consolidated Statements of Comprehensive Loss

(in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2012			2011			2012
Net loss	$	(242	)	$	(1,769	)	$	(417	)	$	(7,981	)
Other comprehensive loss:
Foreign currency translation adjustments	(5		)	(3		)	(2		)	(27		)
Total comprehensive loss	$	(247	)	$	(1,772	)	$	(419	)	$	(8,008	)

See accompanying notes.

4

Millennial Media, Inc.

Unaudited Consolidated Statement of Changes in Stockholders’ (Deficit) Equity

(in thousands, except share data)

							Accumulated
				Additional			Other						Total
	Common Stock			Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares	Amount		Capital			Loss			Deficit			(Deficit) Equity
Balance, December 31, 2011	18,011,035	$	17	$	—		$	(25	)	$	(44,413	)	$	(44,421	)
Exercise of a warrant to purchase common stock	46,760	—		—			—			—			—
Exercise of stock options	1,147,447	—		499			—			—			499
Stock-based compensation expense	—	—		5,273			—			—			5,273
Accretion of dividends on redeemable convertible preferred stock	—	—		(1,136		)	—			(192		)	(1,328		)
Accretion of issuance costs on redeemable convertible preferred stock	—	—		—			—			(6		)	(6		)
Conversion of redeemable convertible preferred stock to common stock	47,679,003	48		77,955			—			—			78,003
Conversion of Series B warrant to common stock warrant	—	—		1,017			—			—			1,017
Issuance of common stock in initial public offering, net of issuance costs	9,873,270	10		115,079			—			—			115,089
Net loss	—	—		—			—			(7,981		)	(7,981		)
Foreign currency translation adjustments	—	—		—			(27		)	—			(27		)
Balance, September 30, 2012	76,757,515	$	75	$	198,687		$	(52	)	$	(52,592	)	$	146,118

See accompanying notes.

5

Millennial Media, Inc.

Unaudited Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended September 30,
	2011			2012
Cash flows from operating activities
Net loss	$	(417	)	$	(7,981	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Stock-based compensation expense	1,104			5,273
Non-cash change in fair value of Series B warrant prior to conversion	62			834
Bad debt expense	101			1,123
Deferred income taxes	(483		)	—
Depreciation and amortization	456			1,593
Amortization of deferred financing fees	6			21
Changes in assets and liabilities, net of acquired balances:
Accounts receivable	(5,784		)	(17,312		)
Prepaid expenses and other current assets	(672		)	(695		)
Other assets	(175		)	(150		)
Accounts payable and accrued expenses	503			2,274
Accrued cost of revenue	2,754			7,264
Accrued payroll and payroll related expenses	537			1,263
Other long-term liabilities	211			62
Deferred revenue	(287		)	(34		)
Net cash and cash equivalents used in operating activities	(2,084		)	(6,465		)
Cash flows from investing activities
Payments for acquisitions, net of cash acquired	(2,060		)	—
Purchases of property and equipment	(2,262		)	(3,480		)
Net cash and cash equivalents used in investing activities	(4,322		)	(3,480		)
Cash flows from financing activities
Proceeds from issuance of common stock, net of offering costs	—			115,089
Payment of deferred offering costs	(614		)	—
Payment of deferred financing fees	(52		)	—
Proceeds from exercises of stock options	122			499
Repurchase and retirement of common shares	(827		)	—
Net cash and cash equivalents (used in) provided by financing activities	(1,371		)	115,588
Effect of exchange rates on cash and cash equivalents	(11		)	54
Net (decrease) increase in cash and cash equivalents	(7,788		)	105,697
Cash and cash equivalents, beginning of the period	27,803			16,707
Cash and cash equivalents, end of the period	$	20,015		$	122,404
Supplemental disclosure of noncash investing and financing activities
Issuance of common stock in connection with the Condaptive acquisition	$	75		$	—
Accretion of dividends on redeemable convertible preferred stock	$	3,728		$	1,328
Accretion of issuance costs on redeemable convertible preferred stock	$	25		$	6

See accompanying notes.

6

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

1.Description of Business

Millennial Media, Inc. (the ‘‘Company’’) was incorporated in the state of Delaware in May 2006. The Company is engaged in the business of providing mobile advertising solutions to advertisers and developers. Its technology, tools and services help developers to maximize their advertising revenue, acquire users and gain insight about their users. The Company offers advertisers significant audience reach, sophisticated targeting capabilities and the ability to deliver rich and engaging ad experiences to consumers on their mobile connected devices.

On April 3, 2012, the Company closed its initial public offering (“IPO”) of common stock in which the Company sold and issued 9,873,270 shares of common stock. Upon closing of the IPO, all of the redeemable convertible preferred stock outstanding automatically converted into 47,679,003 shares of common stock, based on the shares of redeemable convertible preferred stock outstanding as of April 3, 2012. In addition, the outstanding Series B warrant automatically converted into a warrant to purchase common stock, and the preferred stock warrant liability of $1.0 million as of April 3, 2012 was reclassified to additional paid-in capital.

2.Summary of Significant Accounting Policies

Principles of Consolidation

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying unaudited consolidated financial statements.

Interim Consolidated Financial Information

The accompanying unaudited consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations, changes in stockholders’ (deficit) equity and cash flows. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes presented in the Company’s prospectus filed with the Securities and Exchange Commission (“SEC”) on October 24, 2012.

Recently Adopted Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (“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 (‘‘IASB’’) to develop a single, converged fair value framework. While the ASU is largely consistent with existing fair value measurement principles in U.S. 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 the 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. The Company adopted ASU 2011-04 effective

7

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

January 1, 2012. This adoption did not have an impact on the Company’s 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 ASU 2011-08 is to reduce the cost and complexity of the annual goodwill impairment test by providing entities an 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. The Company adopted ASU 2011-08 effective January 1, 2012. This adoption did not have an impact on the Company’s financial position, results of operations or cash flows.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition and Deferred Revenue

The Company recognizes revenue based on the activity of mobile users viewing advertisements through developer applications and mobile websites. Revenues are recognized when the related advertising services are delivered based on the specific terms of the advertising contract, and are commonly based on the number of ads delivered, or views, clicks or actions by users on mobile advertisements. The Company recognizes revenue based on these terms because the services have been provided, the fees the Company charges are fixed or determinable, persuasive evidence of an arrangement exists, and collectability is reasonably assured.

In the normal course of business, the Company acts 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 the Company is acting as the principal or an agent in the transaction. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations. While none of the factors identified in this guidance are individually considered presumptive or determinative, because the Company is the primary obligor and is responsible for (i) identifying and contracting with third-party advertisers, (ii) establishing the selling prices of the advertisements sold, (iii) performing all billing and collection activities including retaining credit risk and (iv) bearing sole responsibility for fulfillment of the advertising, the Company acts as the principal in these arrangements and therefore reports revenue earned and costs incurred on a gross basis.

Deferred revenue arises as a result of differences between the timing of revenue recognition and receipt of cash from the Company’s customers. As of December 31, 2011 and September 30, 2012 there was $157,000 and $219,000, respectively, of services for which cash payments were received in advance of the Company’s performance of the service under the arrangement and recorded as deferred revenue in the accompanying unaudited consolidated balance sheets.

Cost of Revenue

Cost of revenue consists primarily of amounts due to developers for the advertising utilized in running mobile advertisements.  These amounts are typically either a percentage of the advertising revenue earned by the Company

8

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

based on mobile advertisements that are run on each developer’s application or mobile website or a fixed fee for the ad space.  The Company recognizes the cost of revenue as the associated revenue is recognized, on a developer by developer basis during the period the advertisements run on the developer’s advertising application or mobile website.  Costs owed to developers but not yet paid are recorded as accrued cost of revenue.

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalent accounts may exceed federally insured limits at times. The Company has not experienced any losses on cash and cash equivalents to date. To manage accounts receivable risk, the Company evaluates the creditworthiness of its customers and maintains an allowance for doubtful accounts.

During the three months ended September 30, 2011, one customer accounted for greater than 10% of revenue. During the three months ended September 30, 2012, no customer accounted for greater than 10% of revenue.

During the nine months ended September 30, 2011 and 2012, no customer accounted for greater than 10% of revenue.

As of December 31, 2011 and September 30, 2012, no customer accounted for greater than 10% of accounts receivable.

Accounts Receivable and Allowance for Doubtful Accounts and Sales Credits

The Company extends credit to customers without requiring collateral. Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of amounts due. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from the Company’s estimates. However, higher than expected bad debts may result in future write-offs that are greater than the Company’s estimates.

The Company also estimates an allowance for sales credits based on the Company’s historical sales credits experience. Historically, actual sales credits have not significantly differed from the Company’s estimates. However, higher than expected sales credits may result in future write-offs that are greater than the Company’s estimates. The allowances for doubtful accounts and sales credits are included in accounts receivable, net in the accompanying consolidated balance sheets.

Stock-Based Compensation

The Company accounts for share-based payment awards by measuring employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date.  The Company recognizes stock-based compensation expense on a straight-line basis over the awards’ vesting period, adjusted for estimated forfeitures.

The Company values 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.  The use of the option valuation model requires the input of assumptions, including the fair value of the Company’s common

9

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

stock, the expected life, and the expected stock price volatility based on peer companies.  Stock options are granted with exercise prices not less than the fair market value of the Company’s common stock at the date of grant.  Additionally, the recognition of expense requires the estimation of the number of options that will ultimately vest and the number of options that will ultimately be forfeited. Options generally vest ratably over a four-year period, except those options granted to non-employees, portions of which may vest immediately or ratably over two years. Options expire ten years from the date of grant.

3.Fair Value Measurements

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their respective fair values due to their short-term nature. Prior to its conversion to a common stock warrant on April 3, 2012, the Company’s preferred stock warrant was recorded at fair value.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value.  The three tiers are defined as follows:

·Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

·Level 2.  Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

·Level 3.  Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments. The following table summarizes the conclusions reached as of December 31, 2011 and September 30, 2012 (in thousands):

10

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

	Balance at December 31, 2011		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	10,909	$	10,909	$	—	$	—
	$	10,909	$	10,909	$	—	$	—
Liabilities:
Series B warrant (2)	$	183	$	—	$	—	$	183
	$	183	$	—	$	—	$	183

	Balance at September 30, 2012		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	108,414	$	108,414	$	—	$	—
	$	108,414	$	108,414	$	—	$	—

(1)Money market funds are classified as cash equivalents in the Company’s consolidated balance sheets. As short-term, highly liquid investments readily convertible to known amounts of cash, with remaining maturities of three months or less at the time of purchase, the Company’s cash equivalent money market funds have carrying values that approximate fair value. Amounts do not include $5.8 million and $14.0 million of operating cash balances as of December 31, 2011 and September 30, 2012, respectively.

(2)The Company used an option pricing model to determine the fair value of the Series B preferred stock warrant. Significant inputs included an estimate of the fair value of the Company’s stock, the remaining contractual life of the warrant, a risk-free rate of interest, and an estimate of the Company’s stock volatility using the volatilities of guideline peer companies.

4.Series B Warrant

The Company was a party to a derivative financial instrument in which it issued a Series B warrant allowing the holder to purchase 50,750 shares of Series B preferred stock. The warrant was issued in conjunction with a long-term debt borrowing in 2008. The warrant had a term of 10 years and a stated exercise price of $1.18 per share and could be exercised in whole or in part at any time. The warrant included a cashless exercise option which allowed the holder to receive fewer shares of Series B preferred stock in exchange for the warrant rather than paying cash to exercise. As of December 31, 2011, the warrant was classified as a liability in the accompanying consolidated balance sheet and adjusted to fair value due to the fact that it was exercisable into a redeemable security.

The fair value of the warrant was estimated to be $183,000 at December 31, 2011. On April 3, 2012, upon closing of the Company’s IPO, the warrant converted from a warrant to purchase Series B preferred stock to a warrant to purchase common stock and the liability at its then fair value of $1.0 million was reclassified to additional paid-in capital. Prior to this date, all changes in the fair value of the warrant were recorded in other income (expense) in the accompanying unaudited consolidated statements of operations. The Company recorded other expense of $36,000 and $62,000 for the three and nine months ended September 30, 2011, respectively, related

11

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

to the fair value adjustment of the warrant. The Company recorded other expense of $0 and $834,000 for the three and nine months ended September 30, 2012, respectively, related to the fair value adjustment of the warrant.

On September 24, 2012, the warrant to purchase common stock was exercised on a cashless basis, resulting in the issuance of 46,760 shares of the Company’s common stock.

5.Redeemable Convertible Preferred Stock (“preferred stock”)

The following table summarizes the Company’s issuances of preferred stock:

Issue Date	Name	Price per Share		Number of Shares	Conversion Price per Share
July 2006	Series A-1	$	0.21	6,341,465	$	0.21
December 2006	Series A-2	$	0.53	9,448,220	$	0.53
November 2007	Series B	$	1.18	12,686,855	$	1.18
November 2009	Series C	$	1.49	10,759,630	$	1.49
December 2010	Series D	$	3.26	8,442,833	$	3.26

Series A-1, Series A-2, Series B, Series C, and Series D are collectively referred to as the Series Preferred. Price per share above for each series of preferred stock excludes the cost of issuance.

Summary of Activity

The following table presents a summary of activity for the Series Preferred issued and outstanding for the nine months ended September 30, 2012 (in thousands):

12

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

	Redeemable Convertible Preferred Stock
	Series A-1			Series A-2			Series B			Series C			Series D			Total Amount
Balance, December 31, 2011	$	1,880		$	7,033		$	19,882		$	18,441		$	29,432		$	76,668
Preferred stock dividends accreted for Series A-1 preferred stock	32			—			—			—			—			32
Preferred stock dividends accreted for Series A-2 preferred stock	—			120			—			—			—			120
Preferred stock dividends accreted for Series B preferred stock	—			—			343			—			—			343
Preferred stock dividends accreted for Series C preferred stock	—			—			—			320			—			320
Preferred stock dividends accreted for Series D preferred stock	—			—			—			—			514			514
Accretion of issuance costs	—			—			1			3			2			6
Conversion of preferred stock to common stock	(1,912		)	(7,153		)	(20,226		)	(18,764		)	(29,948		)	(78,003		)
Balance, September 30, 2012	$	—		$	—		$	—		$	—		$	—		$	—

Upon closing of the Company’s IPO, all outstanding shares of convertible preferred stock converted into an aggregate of 47,679,003 shares of common stock. In addition, immediately following the closing of the IPO, the Company’s certificate of incorporation was amended to authorize 5,000,000 shares of undesignated preferred stock and 250,000,000 shares of common stock.

6.Stock-Based Compensation

There were options outstanding to purchase an aggregate of 6,537,943 shares of common stock as of September 30, 2012 under the Company’s 2006 Equity Incentive Plan, as amended. In March 2012, the Company established the 2012 Equity Incentive Plan (the “2012 Plan”) pursuant to which the Company has reserved an additional 3,250,000 shares of its common stock for issuance to its employees, directors, and non-employee third parties. As of September 30, 2012, options to purchase 456,750 shares of common stock and 420,107 restricted stock units (“RSUs”) were outstanding under the 2012 Plan. Each RSU represents the contingent right to receive one share of common stock. Upon adoption of the 2012 Plan, no additional awards under the 2006 Equity Incentive Plan are available to be issued. As of September 30, 2012, 2,373,143 shares are available for future grant under the 2012 Plan.

Stock Option Awards

For the three-month periods ended September 30, 2011 and 2012, the Company recognized total stock-based compensation expense associated with stock option awards of $231,000 and $734,000, respectively. For the nine-month periods ended September 30, 2011 and 2012, the Company recognized total stock-based compensation expense associated with stock option awards of $506,000 and $1.9 million, respectively.

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

13

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2011	2012	2011	2012
Risk-free interest rate	1.2% - 1.9%	0.8% - 0.9%	1.2% — 2.4%	0.8% — 1.3%
Expected life	5.9 — 6.1 years	6.0 years	5.7 — 6.1 years	5.7 — 6.1 years
Expected volatility	44% - 45%	55%	44% — 47%	53% — 55%
Dividend yield	0%	0%	0%	0%
Weighted-average grant date fair value	$1.36	$6.40	$1.35	$5.82

The following table summarizes by grant date the stock options granted from January 1, 2012 through September 30, 2012, as well as the associated per share exercise price, which was equal to the estimated fair value of the Company’s common stock at the grant date.

Grant Date	Number of Shares Underlying Options Granted	Exercise Price per Share
January 24, 2012	106,250	6.00
March 28, 2012	142,250	13.00
July 9, 2012	109,600	12.85
September 11, 2012	214,400	12.24

Prior to the IPO, the Company determined for financial reporting purposes the estimated per share fair value of its 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. In conducting the contemporaneous valuations, the Company considered all objective and subjective factors that it believed to be relevant for each valuation conducted, including management’s best estimate of the Company’s business condition, prospects and operating performance at each valuation date.

The following is a summary of option activity for the nine months ended September 30, 2012:

	Number		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(in thousands)
Options outstanding at January 1, 2012	7,650,498		$	1.11
Granted	572,500		11.39
Exercised	(1,147,447	)	0.44
Forfeited	(66,390	)	4.65
Expired	(14,468	)	0.24
Options outstanding at September 30, 2012	6,994,693		$	2.03	6.96	$	86,171
Options vested and exercisable at September 30, 2012	4,699,100		$	0.78	6.16	63,782
Options vested and expected to vest at September 30, 2012	6,948,963		$	2.00	6.95	85,843

14

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

The total compensation cost related to unvested awards not yet recognized as of September 30, 2012 totaled $4.7 million and will be recognized over a weighted-average period of approximately 3.1 years.

The aggregate intrinsic value of all options exercised during the nine-month periods ended September 30, 2011 and 2012 was $1.1 million and $17.1 million, respectively.

Restricted Common Stock

In connection with the acquisition of Condaptive on May 6, 2011, the Company issued 1,448,080 shares of restricted common stock to the employee shareholders of Condaptive. Under the terms of the stock restriction agreements, a portion of the shares of common stock issued was released from restriction on May 6, 2012, the first anniversary of the issuance. Thereafter, shares of common stock will be released from restriction on a monthly basis over a period that expires between May 2013 and December 2014, depending on the individual award, so long as the shareholder remains an employee of the Company as of the date of each such release, until all of the common stock is released from restriction. If the shareholder’s employment terminates prior to the release of all shares from restriction, the shares not yet vested are subject to repurchase by the Company at the lower of $0.001 or the share’s then fair market value. As of September 30, 2012, a total of 964,495 shares had been released from restriction.

Stock-based compensation expense related to the restricted common stock is being recognized ratably over the restriction period based on the fair value of the individual awards. For the three and nine months ended September 30, 2012, the Company recognized stock-based compensation expense associated with restricted common stock of $2.0 million and $2.8 million, respectively. At September 30, 2012, unrecognized compensation expense relating to the restricted stock awards was $2.4 million and the aggregate intrinsic value of the unvested restricted stock was $6.9 million. The unrecognized compensation expense will be amortized on a straight line basis for the remaining 2.4 years.

Restricted Stock Units (RSUs)

In connection with the Company’s IPO, the Company granted 17,307 RSUs under the 2012 Plan all of which vested in October 2012. In September 2012, the Company granted an additional 402,800 RSUs under the 2012 Plan, which RSUs are scheduled to vest in quarterly installments over a four-year period ending in August 2016. For the three and nine months ended September 30, 2012, the Company recognized stock-based compensation expense associated with the RSUs of $501,000 and $612,000, respectively. At September 30, 2012, unrecognized compensation expense related to the RSUs was $4.5 million. The unrecognized compensation expense will be amortized on a straight-line basis through August 2016.

7.Net Loss Per Common Share

The Company uses the two-class method to compute net loss per share because the Company has issued securities, other than common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Each

15

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

series of the Company’s redeemable convertible preferred stock on an as-if-converted basis (prior to their conversion to common shares) as well as the restricted common stock issued in the Condaptive acquisition are entitled to participate in distributions, when and if declared by the board of directors, that are made to common stockholders and as a result are considered participating securities.

Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current year earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the year’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses. Diluted net loss per common share is computed under the two-class method by using the weighted-average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options and warrant. In addition, the Company analyzes the potential dilutive effect of the outstanding participating securities under the “if-converted” method when calculating diluted earnings per share, in which it is assumed that the outstanding participating securities convert into common stock at the beginning of the period. The Company reports the more dilutive of the approaches (two class or “if-converted”) as its diluted net income per share during the period. Due to net losses for the three- and nine-month periods ended September 30, 2011 and 2012, basic and diluted loss per share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

The following securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive:

	Three and Nine Months Ended September 30,
	2011	2012
Redeemable convertible preferred stock:
Series A-1	6,341,465	—
Series A-2	9,448,220	—
Series B	12,686,855	—
Series C	10,759,630	—
Series D	8,442,833	—
Unvested restricted common stock	1,448,080	483,585
Warrant to purchase Series B preferred stock/common stock	50,750	—
Stock options	7,488,450	6,994,693
RSUs	—	420,107

8.Income Taxes

The benefit for income taxes for the three and nine months ended September 30, 2011 includes $0 and $495,000, respectively, of discrete tax benefits.  The Company recorded a discrete tax benefit in the second quarter of 2011 due to a change in judgment about the realizability of the Company’s deferred tax assets as the result of a future taxable temporary difference established in connection with the acquisition of Condaptive, Inc.

16

Millennial Media, Inc.

Notes to Unaudited Consolidated Financial Statements

9.Geographic Information

Substantially all assets were held in the United States at December 31, 2011 and September 30, 2012.  The following table summarizes revenues derived from the sales activity of U.S. and non-U.S. subsidiaries (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2012		2011		2012
Revenue:
Domestic	$	21,495	$	41,119	$	62,363	$	104,856
International	3,694		6,247		6,766		14,851
Total	$	25,189	$	47,366	$	69,129	$	119,707

10.Subsequent Event

On October 29, 2012, the Company closed a registered public offering of its common stock in which the Company issued and sold, and certain selling stockholders sold, a total of 11,500,000 shares of common stock (including the full exercise of the underwriters’ option to purchase additional shares) at a public offering price of $14.15 per share. The Company received net proceeds from this offering of approximately $11.7 million (after deducting underwriting discounts and estimated offering expenses), from the issuance and sale of 921,952 shares of common stock in the offering. The selling stockholders sold the remainder of the shares sold in the offering, and the Company did not receive any proceeds from the sale of such shares.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below and elsewhere in this Quarterly Report on Form 10-Q, particularly in “Risk Factors,” and our other filings with the Securities and Exchange Commission, or “SEC”. Statements made herein are as of the date of the filing of this Form 10-Q with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes for the fiscal year ended December 31, 2011 appearing in our prospectus filed with the SEC on October 24, 2012.

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 38,000 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.

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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.

	Three Months Ended September 30,
	2011			2012
	(in thousands, except percentages)
Revenue	$	25,189		$	47,366
Gross margin	39.3		%	40.9		%
Net loss	$	(242	)	$	(1,769	)
Adjusted EBITDA	$	582		$	2,138

	Nine Months Ended September 30,
	2011			2012
	(in thousands, except percentages)
Revenue	$	69,129		$	119,707
Gross margin	38.5		%	40.1		%
Net loss	$	(417	)	$	(7,981	)
Adjusted EBITDA	$	650		$	(1,017	)

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 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.

Adjusted EBITDA is not a measure calculated in accordance with GAAP, and 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. Adjusted EBITDA eliminates the

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impact of stock-based compensation expense as we do not consider the inclusion of stock-based compensation expense to be indicative of our core operating performance.

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 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:

	Three Months Ended
	September 30,
	2011			2012
	(in thousands)
Net loss	$	(242	)	$	(1,769	)
Adjustments:
Interest expense, net	1			14
Income tax (benefit) expense	(2		)	36
Depreciation and amortization expense	220			631
Stock-based compensation expense	605			3,226
Total net adjustments	824			3,907
Adjusted EBITDA	$	582		$	2,138

	Nine Months Ended
	September 30,
	2011			2012
	(in thousands)
Net loss	$	(417	)	$	(7,981	)
Adjustments:
Interest expense, net	2			52
Income tax (benefit) expense	(495		)	46
Depreciation and amortization expense	456			1,593
Stock-based compensation expense	1,104			5,273
Total net adjustments	1,067			6,964
Adjusted EBITDA	$	650		$	(1,017	)

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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 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 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.

When we discuss new advertising clients for any period, we are referring to clients who first advertised on our platform after the end of the prior-year comparative period.  When we discuss existing advertising clients for any period, we are referring to all other clients, specifically those who had advertised on our platform at any time before the end of the prior-year comparative period.  If an existing client advertises a new brand on our platform, or a subsidiary of an existing client begins advertising on our platform, we also categorize those as existing clients.

Our revenue 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.

Cost of Revenue

Cost of revenue consists primarily of payments we make to developers for their advertising space on which we deliver mobile ads. These payments are typically either a percentage of the advertising revenue we earn from mobile ads placed on the developer’s app or 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 119 employees at December 31, 2010 to 323 employees at September 30, 2012, and we expect to continue to hire new employees in order to support our anticipated revenue growth. We include stock-based

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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 costs for our advertiser-focused sales and marketing employees, including stock-based compensation, commissions and bonuses. Developer support salaries and personnel costs are included in general and administrative expenses. Additional expenses include marketing programs, consulting, travel and other related overhead. The number of employees in sales and marketing functions grew from 44 at December 31, 2010 to 107 at September 30, 2012, 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 personnel costs for development employees, including stock-based compensation and bonuses. Technology and development employees are focused on new product and technology development. 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. Other general IT costs are included in general and administrative expenses. 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 19 at December 31, 2010 to 73 at September 30, 2012. 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 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, bad debt expense, insurance and other corporate expenses. The number of employees in general and administrative functions grew from 56 at December 31, 2010 to 143 at September 30, 2012, and we expect our general and administrative expenses to increase in the foreseeable future as we further increase the number of general and administrative personnel and expand our organization as a public registrant.

Other Expense

Other expense consists primarily of interest income, interest expense and changes in the fair value of our preferred stock warrant liability prior to its conversion to a common stock warrant on April 3, 2012. Interest income is derived from interest received on our cash and cash equivalents. Interest expense consists primarily of the fees incurred on the unused portion of our credit facilities.

Prior to our IPO in April 2012, the fair value of our preferred stock warrant liability was re-measured at the end of each reporting period and any changes in fair value were recognized in other income or expense. Upon the closing of our IPO in April 2012, the preferred stock warrant was automatically converted into a warrant to purchase common stock, which resulted in a reclassification of the preferred stock warrant liability to additional paid-in capital. Upon reclassification of the preferred stock warrant, no further changes in fair value will be recognized in other income or expense.

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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 three and nine month periods ended September 30, 2011 and 2012.

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

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statements presentation, financial condition, results of operations, and cash flows will be affected. During the nine months ended September 30, 2012, there were no material changes to our critical accounting policies and use of estimates, which are disclosed in our audited consolidated financial statements for the year ended December 31, 2011 included in our prospectus filed with the SEC on October 24, 2012.

Results of Operations

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

	Three Months Ended September 30,
	2011					2012
	(in thousands)										Period-to-Period Change
				Percentage of					Percentage of
Consolidated Statement of Operations Data:	Amount			Revenue		Amount			Revenue		Amount			Percentage
Revenue	$	25,189		100.0	%	$	47,366		100.0	%	$	22,177		88.0	%
Cost of revenue	15,293			60.7		28,005			59.1		12,712			83.1
Gross profit	9,896			39.3		19,361			40.9		9,465			95.6
Operating expenses:
Sales and marketing	3,203			12.7		5,922			12.5		2,719			84.9
Technology and development	1,518			6.0		4,667			9.9		3,149			207.4
General and administrative	5,382			21.4		10,491			22.1		5,109			94.9
Total operating expenses	10,103			40.1		21,080			44.5		10,977			108.7
Loss from operations	(207		)	(0.8	)	(1,719		)	(3.6	)	(1,512		)	730.4
Other income (expense):
Interest expense	(1		)	0.0		(14		)	0.0		(13		)	1,300.0
Other income (expense)	(36		)	(0.1	)	—			0.0		36			(100.0	)
Total other income (expense)	(37		)	(0.1	)	(14		)	0.0		23			(62.2	)
Loss before income taxes	(244		)	(1.0	)	(1,733		)	(3.7	)	(1,489		)	610.2
Income tax benefit (expense)	2			0.0		(36		)	(0.1	)	(38		)	(1,900.0	)
Net loss	$	(242	)	(1.0	)%	$	(1,769	)	(3.7	)%	$	(1,527	)	631.0

Revenue. Revenue increased by $22.2 million, or 88.0%, from $25.2 million for the quarter ended September 30, 2011 to $47.4 million for the quarter ended September 30, 2012. 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 141.6% during the quarter ended September 30, 2012 as compared to the quarter ended September 30, 2011 and represented 75.6% of

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our total revenue for the quarter ended September 30, 2012. 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 quarter. Revenue from new advertiser clients increased by 13.5% during the quarter ended September 30, 2012 as compared to the quarter ended September 30, 2011 and represented 24.4% of our total revenue for the quarter ended September 30, 2012.

Our revenue from international operations increased from $3.7 million, or 14.7% of total revenue, for the quarter ended September 30, 2011, to $6.2 million, or 13.2% of total revenue, for the quarter ended September 30, 2012. The revenue growth in our international operations during the quarter ended September 30, 2012 as compared to the quarter ended September 30, 2011 was primarily attributable to an increase in the size of our international sales force focused on generating revenue, principally in Europe.

We also increased the size of our overall sales force during the quarter ended September 30, 2012 compared to the same period in the prior year, 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 $12.7 million, or 83.1%, from $15.3 million, or 60.7% of revenue, for the quarter ended September 30, 2011, to $28.0 million, or 59.1% of revenue, for the quarter ended September 30, 2012. 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 quarter ended September 30, 2012 was primarily the result of more favorable pricing terms with developers and improved optimization of our ad delivery process. In addition, we experienced increased usage of our self-service portal for developers, which is the primary interface for our developers that do not require a full-service solution. Fees paid to developers for ads placed through this portal are generally lower, especially for 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 $2.7 million, or 84.9%, from $3.2 million, or 12.7% of revenue, for the quarter ended September 30, 2011, to $5.9 million, or 12.5% of revenue, for the quarter ended September 30, 2012. The increase in sales and marketing expense was primarily attributable to a $2.0 million increase in salaries and personnel-related costs associated with an increase in headcount and stock-based compensation expense, 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. For the three months ended September 30, 2011 and 2012, the number of full-time sales and marketing employees increased from 61 to 107. The decrease in sales and marketing expense as a percentage of revenue for the quarter ended September 30, 2012 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 $3.1 million, or 207.4%, from $1.5 million, or 6.0% of revenue, for the quarter ended September 30, 2011, to $4.7 million, or 9.9% of revenue, for the quarter ended September 30, 2012. The increase in technology and development expense was primarily attributable to a $1.3 million increase in salaries and personnel-related costs associated with an increase in headcount, as well as an increase of $618,000 in stock-based compensation expense resulting from the Condaptive acquisition and an additional $1.0 million in one-time stock-based compensation expense related to the departure of certain employees in technology and development functions. The number of full-time technology and development employees increased from 34 at September 30, 2011 to 73 at September 30, 2012. Additionally, for the three months ended September 30, 2012, we incurred an additional $212,000 in amortization expense primarily related to our internally developed software. The increase in technology and development expense as a percentage of revenue for the quarter ended September 30, 2012 was primarily attributable to our increase in headcount and the one-time stock-based compensation expense described above.

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General and administrative. General and administrative expense increased by $5.1 million, or 94.9%, from $5.4 million, or 21.4% of revenue, for the quarter ended September 30, 2011, to $10.5 million, or 22.1% of revenue, for the quarter ended September 30, 2012. The increase in general and administrative expense was primarily attributable to a $2.3 million increase in salaries and personnel-related costs associated with an increase in headcount, along with the associated stock-based compensation expense for equity grants to new employees, as well as approximately $1.0 million in one-time expense related to the departure of certain employees in general and administrative functions. Additionally, we experienced an additional $532,000 in bad debt expense, an additional $176,000 in increased business insurance expense as a result of becoming a public company, and an additional $1.1 million in overhead costs to support our growing employee base. The number of full-time general and administrative employees increased from 95 at September 30, 2011 to 143 at September 30, 2012. Additionally, over that same comparative period, we experienced higher overhead costs as a result of recently becoming a public company. The increase in general and administrative expense as a percentage of revenue for the quarter ended September 30, 2012 was also primarily attributable to our increase in headcount.

	Nine Months Ended September 30,
	2011						2012
	(in thousands)											Period-to-Period Change
				Percentage of						Percentage of
Consolidated Statement of Operations Data:	Amount			Revenue		Amount				Revenue		Amount			Percentage
Revenue	$	69,129		100.0	%	$		119,707		100.0	%	$	50,578		73.2	%
Cost of revenue	42,536			61.5		71,683				59.9		29,147			68.5
Gross profit	26,593			38.5		48,024				40.1		21,431			80.6
Operating expenses:
Sales and marketing	10,179			14.7		16,561				13.8		6,382			62.7
Technology and development	3,316			4.8		10,084				8.4		6,768			204.1
General and administrative	13,946			20.2		28,428				23.7		14,482			103.8
Total operating expenses	27,441			39.7		55,073				46.0		27,632			100.7
Loss from operations	(848		)	(1.2	)	(7,049			)	(5.9	)	(6,201		)	731.3
Other income (expense):
Interest income (expense)	(2		)	0.0		(52			)	0.0		(50		)	2,500.0
Other income (expense)	(62		)	(0.1	)	(834			)	(0.7	)	(772		)	1,245.2
Total other income (expense)	(64		)	(0.1	)	(886			)	(0.7	)	(822		)	1284.4
Loss before income taxes	(912		)	(1.3	)	(7,935			)	(6.6	)	(7,023		)	770.1
Income tax benefit (expense)	495			0.7		(46			)	—		(541		)	(109.3	)
Net loss	$	(417	)	(0.6	)%	$		(7,981	)	(6.7	)%	$	(7,564	)	1,813.9

Revenue. Revenue increased by $50.6 million, or 73.2%, from $69.1 million for the nine months ended September 30, 2011 to $119.7 million for the nine months ended September 30, 2012. 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 100.2% during the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 and represented 82.2% of our total revenue for the nine months ended September 30, 2012. 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 period. Revenue from new advertiser clients increased by 10.4% during the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 and represented 17.8% of our total revenue for the nine months ended September 30, 2012.

Our revenue from international operations increased from $6.8 million, or 9.8% of total revenue, for the nine months ended September 30, 2011, to $14.9 million, or 12.4% of total revenue, for the nine months ended September 30, 2012. The revenue growth in our international operations during the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 was primarily attributable to an increase in the size of our international sales force focused on generating revenue principally in Europe.

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We also increased the size of our overall sales force during the nine months ended September 30, 2012 compared to the same period in the prior year, 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 $29.1 million, or 68.5%, from $42.5 million, or 61.5% of revenue, for the nine months ended September 30, 2011, to $71.7 million, or 59.9% of revenue, for the nine months ended September 30, 2012. 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 nine months ended September 30, 2012 was primarily the result of more favorable pricing terms with developers, improved optimization of our ad delivery process, and increased usage of our self-service portal for developers.

Sales and marketing. Sales and marketing expense increased by $6.4 million, or 62.7%, from $10.2 million, or 14.7% of revenue, for the nine months ended September 30, 2011, to $16.6 million, or 13.8% of revenue, for the nine months ended September 30, 2012. The increase in sales and marketing expense was primarily attributable to a $4.3 million increase in salaries and personnel-related costs associated with an increase in headcount and stock-based compensation expense, 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 61 at September 30, 2011 to 107 at September 30, 2012. In addition, we experienced an approximately $600,000 increase in our marketing programs and consulting expense. The decrease in sales and marketing expense as a percentage of revenue for the nine months ended September 30, 2012 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 $6.8 million, or 204.1%, from $3.3 million, or 4.8% of revenue, for the nine months ended September 30, 2011, to $10.1 million, or 8.4% of revenue, for the nine months ended September 30, 2012. The increase in technology and development expense was primarily attributable to a $5.6 million increase in salaries and personnel-related costs associated with an increase in headcount and stock-based compensation expense related to the Condaptive acquisition. The number of full-time technology and development employees increased from 34 at September 30, 2011 to 73 at September 30, 2012. Additionally, for the nine months ended September 30, 2012, we incurred an additional $600,000 in amortization expense primarily related to our internally developed software. The increase in technology and development expense as a percentage of revenue for the nine months ended September 30, 2012 was primarily attributable to our increase in headcount.

General and administrative. General and administrative expense increased by $14.5 million, or 103.8%, from $13.9 million, or 20.2% of revenue, for the nine months ended September 30, 2011, to $28.4 million, or 23.7% of revenue, for the nine months ended September 30, 2012. The increase in general and administrative expense was primarily attributable to a $7.6 million increase in salaries and personnel-related costs associated with an increase in headcount and stock-based compensation expense. Additionally, we experienced $1.3 million in higher external consulting fees, a $1.5 million increase in IT costs to support our growing business, an additional $1.0 million in bad debt expense, an additional $0.5 million in increased business insurance expense as a result of becoming a public company, and an additional $2.6 million in overhead costs to support our growing employee base. The number of full-time general and administrative employees increased from 95 at September 30, 2011 to 143 at September 30, 2012. The increase in general and administrative expense as a percentage of revenue for the nine months ended September 30, 2012 was also primarily attributable to our increase in headcount.

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Liquidity and Capital Resources

Sources of Liquidity

Prior to our IPO, we funded our operations principally through private placements of our capital stock and bank borrowings. From 2006 through 2010, we raised an aggregate of $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 September 30, 2012, we had not yet drawn on this line of credit.

Public Offerings

On April 3, 2012, we closed our IPO in which we sold and issued 9,873,270 shares of common stock resulting in net proceeds of $115.5 million. Upon closing of the IPO, all of the redeemable convertible preferred stock outstanding automatically converted into 47,679,003 shares of common stock, based on the shares of redeemable convertible preferred stock outstanding as of April 3, 2012. In addition, the outstanding Series B warrant automatically converted into a warrant to purchase common stock, and the preferred stock warrant liability of $1.0 million as of April 3, 2012 was reclassified to additional paid-in capital.

On October 29, 2012, we closed an offering of our common stock in which we sold and issued 921,952 shares of common stock resulting in net proceeds of approximately $11.7 million to us, after deducting underwriting discounts and estimated offering expenses.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Nine Months Ended September 30,
	2011			2012
	(in thousands)
Cash provided by (used in):
Operating activities	$	(2,084	)	$	(6,465	)
Investing activities	(4,322		)	(3,480		)
Financing activities	(1,371		)	115,588

Operating Activities

For the nine months ended September 30, 2012, our net cash used in operating activities of $6.5 million consisted of a net loss of $8.0 million and $7.3 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,

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offset by $8.8 million in adjustments for non-cash items. Adjustments for non-cash items primarily consisted of stock compensation expense of $5.3 million, non-cash change in the fair value of our Series B preferred stock warrant of $834,000 which was reclassified to additional paid-in capital on April 3, 2012 upon the closing of our IPO, depreciation and amortization expense of $1.6 million and bad debt expense of $1.1 million. 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 $17.3 million, primarily driven by increased revenue during the period as we continue to expand our operations both domestically and internationally. These decreases in working capital were partially offset by increases in operating cash flow due to a $7.3 million increase in accrued cost of revenue, driven primarily by an increase in developer-related charges.

For the nine months ended September 30, 2011, our net cash used in operating activities of $2.1 million consisted of a net loss of $417,000 and $2.9 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. The decrease in cash resulting from changes in working capital primarily consisted of an increase in accounts receivable of $5.8 million, primarily driven by increased revenue during the period as we continue to expand our operations both domestically and internationally. These decreases in working capital were partially offset by increases in operating cash flow due to a $2.8 million increase in accrued cost of revenue, driven primarily by an increase in developer-related charges.

Investing Activities

Our investing activities have consisted primarily of purchases of property and equipment.

For the nine month periods ended September 30, 2011 and 2012, net cash used in investing activities was $2.3 million and $3.5 million, respectively, for purchases of property and equipment. Additionally, net cash used in investing activities for the nine-month period ended September 30, 2011 included $2.1 million paid for the acquisition of Condaptive, Inc., net of cash acquired.

Financing Activities

For the nine months ended September 30, 2012, net cash provided by financing activities was $115.6 million, consisting primarily of $115.1 million in net proceeds from our IPO. In addition, we received net cash of $500,000 upon the exercise of stock options.

For the nine months ended September 30, 2011, net cash used in financing activities was $1.4 million, consisting primarily of $827,000 in cash used to repurchase common stock from one of our executive officers and $614,000 in cash used to pay deferred offering costs.

Recent Accounting Pronouncements

See Note 2 of the unaudited consolidated financial statements included in this report for a discussion of FASB’s recent accounting pronouncements and their effect on us.

Off-Balance Sheet Arrangements

As of September 30, 2012, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

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Item 3.   Quantitative and Qualitative Disclosures about Market Risk

No material changes in our market risk occurred from December 31, 2011 through September 30, 2012. Information regarding our market risk at December 31, 2011 is contained in Management’s Discussion and Analysis, “Quantitative and Qualitative Disclosures About Market Risk,” in our prospectus filed with the SEC on October 24, 2012.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is  recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2012 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

Augme Technologies, Inc. v. Millennial Media, Inc.  On April 5, 2012, Augme Technologies, Inc. filed a complaint in the U.S. District Court for the District of Delaware, alleging patent infringement against us.  Plaintiff alleges that we are infringing U.S. Patent No. 7,783,721 entitled “Method and Code Module For Adding Function To A Web Page,” U.S. Patent No. 7,269,636 entitled “Method and Code Module For Adding Function To A Web Page,” and U.S. Patent No. 6,594,691 entitled “Method and System For Adding Function To A Web Page.”  We answered the complaint on July 5, 2012.  Among other things, we filed counterclaims asking for a declaratory judgment of non-infringement and invalidity of the patents in question.  The case is in the early stages of discovery.

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. The plaintiff alleged that each of the defendants has infringed, and continues to infringe,

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plaintiff’spatentOnSeptember12,2011,thecourtgrantedthedefendants’motiontotransferthecasetotheU.S.DistrictCourtfortheNorthernDistrictofCalifornia.OnSeptember15,2011,thedefendantsjointlyfiledarequesttoreexamineplaintiff’sclaimedpatentwiththeU.S.PatentandTrademarkOffice.OnNovember18,2011,thePatentandTrademarkOfficegrantedthedefendants’request,orderedareexaminationoftheplaintiff’spatent,andrejectedalloftheplaintiff’spatentclaimsinthefirstofficeaction.ThedefendantsalsofiledamotiontostaythecaseintheNorthernDistrictofCalifornia,pendingthereexamination.ThecourtgrantedthemotiontostayinFebruary2012.OnJune4,2012,thePatentandTrademarkOfficeenteredanActionClosingProsecutionrejectingallclaims.PlaintifffileditsamendedresponseinthepatentreexaminationonSeptember25,2012.Thecaseiscurrentlystayed.

EvolutionaryIntelligence,LLC.v.MillennialMedia,Inc.OnOctober17,2012,EvolutionaryIntelligence,LLCfiledacomplaintintheU.S.DistrictCourtfortheEasternDistrictofTexas,TylerDivision,allegingpatentinfringementagainstus.TheplaintiffallegesthatweareinfringingU.S.PatentNo.7,010,536,entitled‘‘SystemandMethodforCreatingandManipulatingContainerswithDynamicRegisters’’andU.S.PatentNo.7,702,682,entitled‘‘SystemandMethodforCreatingandManipulatingContainerswithDynamicRegisters.’’Thecomplaintseeksdeclaratoryjudgment,unspecifieddamagesandinjunctiverelief.Wehavenotyetansweredthecomplaint.

Item1A.RiskFactors

Investinginourcommonstockinvolvesahighdegreeofrisk.Beforeyouinvestinourcommonstock,youshouldcarefullyconsiderthefollowingrisks,aswellasgeneraleconomicandbusinessrisks,andalloftheotherinformationcontainedinthisreport.Anyofthefollowingriskscouldhaveamaterialadverseeffectonourbusiness,operatingresultsandfinancialconditionandcausethetradingpriceofourcommonstocktodecline.

RisksRelatedtoOurBusinessandOurIndustry

Wehaveincurredsignificantnetlossessinceinception,andweexpectouroperatingexpensestoincreasesignificantlyintheforeseeablefuture.Accordingly,wemayneverachieveprofitability.

Weincurrednetlossesof$8.0millioninthefirstninemonthsof2012,andwehadanaccumulateddeficitof$52.6millionasofSeptember30,2012.Wedonotknowwhenorifwewilleverachieveprofitability.Althoughourrevenuehasincreasedsubstantiallyinrecentperiods,itislikelythatwewillnotbeabletomaintainthisrateofrevenuegrowth.Historically,ouroperatingexpenseshaveincreasedinproportiontoourrevenue.Weanticipatethatouroperatingexpenseswillcontinuetoincreaseintheforeseeablefuturetotheextentthatourrevenuegrowsandasweincreaseheadcount,particularlyoursalesandtechnology-relatedheadcount,incurgeneralandadministrativeexpensesassociatedwithbeingapubliccompanyandexpandourfacilities.Althoughweexpecttoachieveoperatingefficienciesandgreaterleverageofresourcesaswegrow,ifweareunabletodoso,wemaybeunabletoachieveprofitability.Ifwearenotabletoachieveandmaintainprofitability,thevalueofourcompanyandourcommonstockcoulddeclinesignificantly.

Weoperateinanintenselycompetitiveindustry,andwemaynotbeabletocompetesuccessfully.

Themobileadvertisingmarketishighlycompetitive,withnumerouscompaniesprovidingmobileadvertisingservices.WecompeteprimarilywithGoogleInc.andAppleInc.,bothofwhicharesignificantlylargerthanusandhavemorecapitaltoinvestintheirmobileadvertisingbusinesses.They,orothercompaniesthatoffercompetingmobileadvertisingsolutions,mayestablishorstrengthencooperativerelationshipswiththeirmobileoperatorpartners,brandadvertisers,appdevelopersorotherparties,therebylimitingourabilitytopromoteourservicesandgeneraterevenue.Competitorscouldalsoseektogainmarketsharefromusbyreducingthepricestheychargetoadvertisersorbyintroducingnewtechnology

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toolsfordevelopers.Moreover,increasedcompetitionformobileadvertisingspacefromdeveloperscouldresultinanincreaseintheportionofadvertiserrevenuethatwemustpaytodeveloperstoacquirethatadvertisingspace.

Ourbusinesswillsuffertotheextentthatourdeveloperclientsandadvertiserclientspurchaseandsellmobileadvertisingdirectlyfromeachotherorthroughothercompaniesthatareabletobecomeintermediariesbetweendevelopersandadvertisers.Forexample,weareawareofcompaniesthathavesubstantialexistingplatformsfordeveloperswhohadpreviouslynotheavilyusedthoseplatformsformobileadvertisingcampaigns.Thesecompaniescouldcompetewithustotheextenttheyexpandintomobileadvertising.Othercompanies,suchaslargeappdeveloperswithasubstantialmobileadvertisingbusiness,maydecidetodirectlymonetizesomeoralloftheiradvertisingspacewithoututilizingourservices.Othercompaniesthatofferanalytics,mediation,exchangeorotherthird-partyservicesmayalsobecomeintermediariesbetweenmobileadvertisersanddevelopersandtherebycompetewithus.Anyofthesedevelopmentswouldmakeitmoredifficultforustosellourservicesandcouldresultinincreasedpricingpressure,reducedprofitmargins,increasedsalesandmarketingexpensesorthelossofmarketshare.

Themobileadvertisingmarketmaydeteriorateordevelopmoreslowlythanexpected,whichcouldharmourbusiness.

Advertisingonmobileconnecteddevicesisanemergingphenomenon.Advertisershavehistoricallyspentasmallerportionoftheiradvertisingbudgetsonmobilemediaascomparedtotraditionaladvertisingmethods,suchastelevision,newspapers,radioandbillboards,oronlineadvertisingovertheinternet,suchasplacingbanneradsonwebsites.Futuredemandandmarketacceptanceformobileadvertisingisuncertain.Manyadvertisersstillhavelimitedexperiencewithmobileadvertisingandmaycontinuetodevotelargerportionsoftheiradvertisingbudgetstomoretraditionalofflineoronlinepersonalcomputer-basedadvertising,insteadofshiftingadditionaladvertisingresourcestomobileadvertising.Inaddition,ourcurrentandpotentialadvertiserclientsmayultimatelyfindmobileadvertisingtobelesseffectivethantraditionaladvertisingmediaormarketingmethodsorothertechnologiesforpromotingtheirproductsandservices,andtheymayevenreducetheirspendingonmobileadvertisingfromcurrentlevelsasaresult.Ifthemarketformobileadvertisingdeteriorates,ordevelopsmoreslowlythanweexpect,wemaynotbeabletoincreaseourrevenue.

Ourbusinessisdependentonthecontinuedgrowthinusageofsmartphones,tabletsandothermobileconnecteddevices.

Ourbusinessdependsonthecontinuedproliferationofmobileconnecteddevices,suchassmartphonesandtablets,thatcanconnecttotheinternetoveracellular,wirelessorothernetwork,aswellastheincreasedconsumptionofcontentthroughthosedevices.Consumerusageofthesemobileconnecteddevicesmaybeinhibitedforanumberofreasons,suchas:

·inadequatenetworkinfrastructuretosupportadvancedfeaturesbeyondjustmobilewebaccess;

·users’concernsaboutthesecurityofthesedevices;

·inconsistentqualityofcellularorwirelessconnection;

·unavailabilityofcost-effective,high-speedinternetservice;and

·changesinnetworkcarrierpricingplansthatchargedeviceusersbasedontheamountofdataconsumed.

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Foranyofthesereasons,usersofmobileconnecteddevicesmaylimittheamountoftimetheyspendonthesedevicesandthenumberofappstheydownloadonthesedevices.Ifuseradoptionofmobileconnecteddevicesandconsumerconsumptionofcontentonthosedevicesdonotcontinuetogrow,ourtotaladdressablemarketsizemaybesignificantlylimited,whichcouldcompromiseourabilitytoincreaseourrevenueandtobecomeprofitable.

Ifmobileconnecteddevices,theiroperatingsystemsorcontentdistributionchannels,includingthosecontrolledbyourprimarycompetitors,developinwaysthatpreventouradvertisingfrombeingdeliveredtotheirusers,ourabilitytogrowourbusinesswillbeimpaired.

Ourbusinessmodeldependsuponthecontinuedcompatibilityofourmobileadvertisingplatformwithmostmobileconnecteddevices,aswellasthemajoroperatingsystemsthatrunonthemandthethousandsofappsthataredownloadedontothem.Thedesignofmobiledevicesandoperatingsystemsiscontrolledbythirdpartieswithwhomwedonothaveanyformalrelationships.Thesepartiesfrequentlyintroducenewdevices,andfromtimetotimetheymayintroducenewoperatingsystemsormodifyexistingones.Networkcarriers,suchasVerizon,AT&TorT-Mobile,mayalsoimpacttheabilitytodownloadappsoraccessspecifiedcontentonmobiledevices.

Insomecases,thepartiesthatcontrolthedevelopmentofmobileconnecteddevicesandoperatingsystemsincludecompaniesthatweregardasourmostsignificantcompetitors.Forexample,Applecontrolstwoofthemostpopularmobiledevices,theiPhoneandtheiPad,aswellastheiOSoperatingsystemthatrunsonthem.ApplealsocontrolstheAppStorefordownloadingappsthatrunonApple’smobiledevices.Similarly,GooglecontrolstheAndroidoperatingsystemand,followingitsrecentacquisitionofMotorolaMobility,itnowalsocontrolsasignificantnumberofadditionalmobiledevices.Ifourmobileadvertisingplatformwereunabletoworkonthesedevicesoroperatingsystems,eitherbecauseoftechnologicalconstraintsorbecauseamakerofthesedevicesordeveloperoftheseoperatingsystemswishedtoimpairourabilitytoprovideadsonthemorourabilitytofulfilladvertisingspace,orinventory,fromdeveloperswhoseappsaredistributedthroughtheircontrolledchannels,ourabilitytogeneraterevenuecouldbesignificantlyharmed.

Wedonotcontrolthemobilenetworksoverwhichweprovideouradvertisingservices.

Ourmobileadvertisingplatformisdependentonthereliabilityofnetworkoperatorsandcarrierswhomaintainsophisticatedandcomplexmobilenetworks,aswellasourabilitytodeliveradsonthosenetworksatpricesthatenableustorealizeaprofit.Mobilenetworkshavebeensubjecttorapidgrowthandtechnologicalchange,particularlyinrecentyears.Wedonotcontrolthesenetworks.

Mobilenetworkscouldfailforavarietyofreasons,includingnewtechnologyincompatibility,thedegradationofnetworkperformanceunderthestrainoftoomanymobileconsumersusingthenetwork,ageneralfailurefromnaturaldisasterorapoliticalorregulatoryshut-down.Individualsandgroupswhodevelopanddeployviruses,wormsandothermalicioussoftwareprogramscouldalsoattackmobilenetworksandthedevicesthatrunonthosenetworks.Anyactualorperceivedsecuritythreattomobiledevicesoranymobilenetworkcouldleadexistingandpotentialdeviceuserstoreduceorrefrainfrommobileusageorreduceorrefrainfromrespondingtotheservicesofferedbyouradvertisingclients.Ifthenetworkofamobileoperatorshouldfailforanyreason,wewouldnotbeabletoeffectivelyprovideourservicestoourclientsthroughthatmobilenetwork.Thisinturncouldhurtourreputationandcauseustolosesignificantrevenue.

Mobilecarriersmayalsoincreaserestrictionsontheamountsortypesofdatathatcanbetransmittedovertheirnetworks.Wecurrentlygeneratedifferentamountsofrevenuefromouradvertiserclientsbasedonthekindsofadswedeliver,suchasdisplayads,richmediaadsorvideoads.Insomecases,wearepaidby

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advertisersonacost-per-thousand,orCPM,basisdependingonthenumberofadsshown.Inothercases,wearepaidonacost-per-click,orCPC,orcost-per-action,orCPA,basisdependingontheactionstakenbythemobiledeviceuser.Differenttypesofadsconsumedifferingamountsofbandwidthandnetworkcapacity.Ifanetworkcarrierweretorestricttheamountsofdatathatcanbedeliveredonthatcarrier’snetwork,orotherwisecontrolthekindsofcontentthatmaybedownloadedtoadevicethatoperatesonthenetwork,itcouldnegativelyaffectourpricingpracticesandinhibitourabilitytodelivertargetedadvertisingtothatcarrier’susers,bothofwhichcouldimpairourabilitytogeneraterevenue.

Mobileconnecteddeviceusersmaychoosenottoallowadvertisingontheirdevices.

Thesuccessofourbusinessmodeldependsonourabilitytodelivertargeted,highlyrelevantadstoconsumersontheirmobileconnecteddevices.Targetedadvertisingisdoneprimarilythroughanalysisofdata,muchofwhichiscollectedonthebasisofuser-providedpermissions.Thisdatamightincludeadevice’slocationordatacollectedwhendeviceusersviewanadorvideoorwhentheyclickonorotherwiseengagewithanad.Usersmayelectnottoallowdatasharingfortargetedadvertisingforanumberofreasons,suchasprivacyconcerns,orpricingmechanismsthatmaychargetheuserbasedupontheamountortypesofdataconsumedonthedevice.Usersmayalsoelecttooptoutofreceivingtargetedadvertisingfromourplatform.Inaddition,thedesignersofmobiledeviceoperatingsystemsareincreasinglypromotingfeaturesthatallowdeviceuserstodisablesomeofthefunctionality,whichmayimpairordisablethedeliveryofadsontheirdevices,anddevicemanufacturersmayincludethesefeaturesaspartoftheirstandarddevicespecifications.Althoughwearenotawareofanysuchproductsthatarewidelyusedinthemarkettoday,ashasoccurredintheonlineadvertisingindustry,companiesmaydevelopproductsthatenableuserstopreventadsfromappearingontheirmobiledevicescreens.Ifanyofthesedevelopmentsweretooccur,ourabilitytodelivereffectiveadvertisingcampaignsonbehalfofouradvertiserclientswouldsuffer,whichcouldhurtourabilitytogeneraterevenueandbecomeprofitable.

Ourlimitedoperatinghistorymakesitdifficulttoevaluateourbusinessandprospectsandmayincreaseyourinvestmentrisk.

Wecommencedoperationsin2006and,asaresult,wehaveonlyalimitedoperatinghistoryuponwhichyoucanevaluateourbusinessandprospects.Althoughwehaveexperiencedsignificantrevenuegrowthinrecentperiods,itislikelythatwewillnotbeabletosustainthisgrowth.Aspartofthenascentmobileadvertisingindustry,wewillencounterrisksanddifficultiesfrequentlyencounteredbyearly-stagecompaniesinrapidlyevolvingindustries,includingtheneedto:

·maintainourreputationandbuildtrustwithouradvertiseranddeveloperclients;

·offercompetitivepricingtobothadvertisersanddevelopers;

·maintainandexpandournetworkofadvertisingspacethroughwhichwedelivermobileadvertisingcampaigns;

·deliveradvertisingresultsthataresuperiortothosethatadvertisersordeveloperscouldachievedirectlyorthroughtheuseofcompetingprovidersortechnologies;

·continuetodevelopandupgradethetechnologiesthatenableustoprovidemobileadvertisingservices;

·respondtoevolvinggovernmentregulationsrelatingtotheinternet,telecommunications,privacy,directmarketingandadvertisingaspectsofourbusiness;

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·identify,attract,retainandmotivatequalifiedpersonnel;and

·manageourexpandingoperations.

Ifwedonotsuccessfullyaddresstheserisks,ourrevenuecoulddeclineandourabilitytopursueourgrowthstrategyandattainprofitabilitycouldbecompromised.

Wemaynotbeabletoenhanceourmobileadvertisingplatformtokeeppacewithtechnologicalandmarketdevelopments.

Themarketformobileadvertisingservicesischaracterizedbyrapidtechnologicalchange,evolvingindustrystandardsandfrequentnewserviceintroductions.Tokeeppacewithtechnologicaldevelopments,satisfyincreasingadvertiseranddeveloperrequirements,maintaintheattractivenessandcompetitivenessofourmobileadvertisingsolutionsandensurecompatibilitywithevolvingindustrystandardsandprotocols,wewillneedtoregularlyenhanceourcurrentservicesandtodevelopandintroducenewservicesonatimelybasis.

Forexample,advancesintechnologythatallowdeveloperstogeneraterevenuefromtheirappswithoutourassistancecouldharmourrelationshipswithdevelopersanddiminishouravailableadvertisinginventorywithintheirapps.Similarly,technologicaldevelopmentsthatallowthirdpartiestobettermediatethedeliveryofadsbetweenadvertisersanddevelopersbyintroducinganintermediatelayerbetweenusandourdeveloperclientscouldimpairourrelationshipswiththosedevelopers.Ourinability,fortechnological,businessorotherreasons,toenhance,develop,introduceanddelivercompellingmobileadvertisingservicesinresponsetochangingmarketconditionsandtechnologiesorevolvingexpectationsofadvertisersormobiledeviceuserscouldhurtourabilitytogrowourbusinessandcouldresultinourmobileadvertisingplatformbecomingobsolete.

Wedependondevelopersformobileadvertisingspacetodeliverouradvertiserclients’advertisingcampaigns,andanydeclineinthesupplyofadvertisinginventoryfromthesedeveloperscouldhurtourbusiness.

Wedependondeveloperstoprovideuswithspacewithintheirappsonwhichwedeliverads.Thedevelopersthatselltheiradvertisinginventorytousarenotrequiredtoprovideanyminimumamountsofadvertisingspacetous,noraretheycontractuallyboundtoprovideuswithaconsistentsupplyofadvertisinginventory.Thetoolsthatweprovidetodevelopersallowthemtomakedecisionsastohowtoallocateadvertisinginventoryamongusandotheradvertisingproviders,someofwhichmaybeourcompetitors.Athirdpartyactingasamediatoronbehalfofdevelopers,oranycompetingmediationtoolsembeddedwithinadeveloper’sapps,couldresultinpressureonustoincreasethepriceswepaytodevelopersforthatinventoryorotherwiseblockouraccesstodeveloperinventory,withoutwhichwewouldbeunabletodeliveradsonbehalfofouradvertiserclients.

Wegenerateasignificantportionofourrevenuefromtheadvertisinginventoryprovidedbyalimitednumberofdevelopers,and,asanascentindustry,themarketformobileapplicationdevelopersisundergoing,andwilllikelycontinuetoundergo,rapidchangeandsignificantconsolidation.Inmostinstances,developerscanchangetheamountofinventorytheymakeavailabletousatanytime.Developersmayalsochangethepriceatwhichtheyofferinventorytous,ortheymayelecttomakeadvertisingspaceavailabletoourcompetitorswhoofferadstothemonmorefavorableeconomicterms.Inaddition,developersmayplacesignificantrestrictionsonouruseoftheiradvertisinginventory.Theserestrictionsmayprohibitadsfromspecificadvertisersorspecificindustries,ortheycouldrestricttheuseofspecifiedcreativecontentorformat.Developersmayalsouseafee-basedorsubscription-basedbusinessmodeltogeneraterevenuefromtheircontent,inlieuofortoreducetheirrelianceonads.

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Ifdevelopersdecidenottomakeadvertisinginventoryavailabletousforanyofthesereasons,decidetoincreasethepriceofinventory,orplacesignificantrestrictionsonouruseoftheiradvertisingspace,wemaynotbeabletoreplacethiswithinventoryfromotherdevelopersthatsatisfyourrequirementsinatimelyandcost-effectivemanner.Ifthishappens,ourrevenuecoulddeclineorourcostofacquiringinventorycouldincrease.

Ourbusinessdependsonourabilitytocollectandusedatatodeliverads,andanylimitationonthecollectionanduseofthisdatacouldsignificantlydiminishthevalueofourservicesandcauseustoloseclientsandrevenue.

Whenwedeliveranadtoamobiledevice,weareoftenabletocollectanonymousinformationabouttheplacementoftheadandtheinteractionofthemobiledeviceuserwiththead,suchaswhethertheuservisitedalandingpageorwatchedavideo.Wemayalsobeabletocollectinformationabouttheuser’smobilelocation.Aswecollectandaggregatethisdataprovidedbybillionsofadimpressions,weanalyzeitinordertooptimizetheplacementandschedulingofadsacrosstheadvertisinginventoryprovidedtousbydevelopers.Forexample,wemayusethecollectedinformationtolimitthenumberoftimesaspecificadispresentedtothesamemobiledevice,toprovideanadtoonlycertaintypesofmobiledevices,ortoprovideareporttoanadvertiserclientonthenumberofitsadsthatwereclicked.WealsocompilethedataderivedfromourplatformtopublishmonthlyreportsofkeymobileindustrytrendsintheformofourS.M.A.R.T.andMobileMixreports,whichweprovidetoadvertisersanddeveloperstoenablethemtoimprovetheirbusinessdecisionsaboutmobileadvertisingormonetizationstrategiesandtopromotetheiruseofourservices.

Althoughthedatawecollectisnotpersonallyidentifiableinformation,ourclientsmightdecidenottoallowustocollectsomeorallofthisdataormightlimitouruseofthisdata.Forexample,appdevelopersmaynotagreetoprovideuswiththedatageneratedbyinteractionswiththecontentontheirapps,ordeviceusersmaynotconsenttohavinginformationabouttheirdeviceusageprovidedtothedeveloper.Anylimitationonourabilitytocollectdataaboutuserbehaviorandinteractionwithmobiledevicecontentcouldmakeitmoredifficultforustodelivereffectivemobileadvertisingprogramsthatmeetthedemandsofouradvertiserclients.

Althoughourcontractswithadvertisersgenerallypermitustoaggregatedatafromadvertisingcampaigns,theseclientsmightnonethelessrequestthatwediscontinueusingdataobtainedfromtheircampaignsthathavealreadybeenaggregatedwithotherclients’campaigndata.Itwouldbedifficult,ifnotimpossible,tocomplywiththeserequests,andthesekindsofrequestscouldalsocauseustospendsignificantamountsofresources.Interruptions,failuresordefectsinourdatacollection,mining,analysisandstoragesystems,aswellasprivacyconcernsandregulatoryrestrictionsregardingthecollectionofdata,couldalsolimitourabilitytoaggregateandanalyzemobiledeviceuserdatafromourclients’advertisingcampaigns.Ifthathappens,wemaynotbeabletooptimizetheplacementofadvertisingforthebenefitofouradvertiserclients,whichcouldmakeourserviceslessvaluable,and,asaresult,wemayloseclientsandourrevenuemaydecline.

Ourbusinessdependsinpartonourabilitytocollectanduselocation-basedinformationaboutmobileconnecteddeviceusers.

Ourbusinessmodeldependsinpartuponourabilitytocollectdataaboutthelocationofmobileconnecteddeviceuserswhentheyareinteractingwiththeirdevices,andthentousethatinformationtoprovideeffectivetargetedadvertisingonbehalfofouradvertisingclients.Ourabilitytoeithercollectoruselocation-baseddatacouldberestrictedbyanumberoffactors,includingnewlawsorregulations,technologyorconsumerchoice.Limitationsonourabilitytoeithercollectoruselocationdatacouldimpacttheeffectivenessofourplatformandourabilitytotargetads.

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Ourbusinesspracticeswithrespecttodatacouldgiverisetoliabilitiesorreputationalharmasaresultofgovernmentalregulation,legalrequirementsorindustrystandardsrelatingtoconsumerprivacyanddataprotection.

Inthecourseofprovidingourservices,wetransmitandstoreinformationrelatedtomobiledevicesandtheadsweplace,includingadevice’sgeographiclocationforthepurposeofdeliveringtargetedlocation-basedadstotheuserofthedevice,withthatuser’sconsent.Federal,stateandinternationallawsandregulationsgovernthecollection,use,retention,sharingandsecurityofdatathatwecollectacrossourmobileadvertisingplatform.Westrivetocomplywithallapplicablelaws,regulations,policiesandlegalobligationsrelatingtoprivacyanddataprotection.However,itispossiblethattheserequirementsmaybeinterpretedandappliedinamannerthatisinconsistentfromonejurisdictiontoanotherandmayconflictwithotherrulesorourpractices.Anyfailure,orperceivedfailure,byustocomplywithU.S.federal,state,orinternationallaws,includinglawsandregulationsregulatingprivacyorconsumerprotection,couldresultinproceedingsoractionsagainstusbygovernmentalentitiesorothers.Weareawareofseveralongoinglawsuitsfiledagainstcompaniesinourindustryallegingvariousviolationsofprivacy-relatedlaws.Theseproceedingscouldhurtourreputation,forceustospendsignificantamountsindefenseoftheseproceedings,distractourmanagement,increaseourcostsofdoingbusiness,adverselyaffectthedemandforourservicesandultimatelyresultintheimpositionofmonetaryliability.Wemayalsobecontractuallyliabletoindemnifyandholdharmlessourclientsfromthecostsorconsequencesofinadvertentorunauthorizeddisclosureofdatathatwestoreorhandleaspartofprovidingourservices.

Theregulatoryframeworkforprivacyissuesworldwideisevolving,andvariousgovernmentandconsumeragenciesandpublicadvocacygroupshavecalledfornewregulationandchangesinindustrypractices,includingsomedirectedatthemobileindustryinparticular.ItispossiblethatnewlawsandregulationswillbeadoptedintheUnitedStatesandinternationally,orexistinglawsandregulationsmaybeinterpretedinnewways,thatwouldaffectourbusiness,particularlywithregardtolocation-basedservices,collectionoruseofdatatotargetadsandcommunicationwithconsumersviamobiledevices.

TheU.S.government,includingtheFederalTradeCommission,ortheFTC,andtheDepartmentofCommerce,hasannouncedthatitisreviewingtheneedforgreaterregulationofthecollectionofconsumerinformation,includingregulationaimedatrestrictingsometargetedadvertisingpractices.TheFTChasalsoproposedrevisionstotheChildren’sOnlinePrivacyProtectionAct,orCOPPA,thatcould,ifadopted,creategreatercomplianceburdensonus.COPPAimposesanumberofobligations,suchasobtainingparentalpermission,onwebsiteoperatorstotheextenttheycollectcertaininformationfromchildrenwhoareunder13yearsold.TheproposedchangeswouldbroadentheapplicabilityofCOPPA,includingthetypesofinformationthatwouldbesubjecttotheseregulations,andcouldapplytoinformationthatweorourclientscollectthroughmobiledevicesorappsthatisnotcurrentlysubjecttoCOPPA.

Asweexpandouroperationsglobally,compliancewithregulationsthatdifferfromcountrytocountrymayalsoimposesubstantialburdensonourbusiness.Inparticular,theEuropeanUnionhastraditionallytakenabroaderviewastowhatisconsideredpersonalinformationandhasimposedgreaterobligationsunderdataprivacyregulations.Inaddition,individualEUmembercountrieshavehaddiscretionwithrespecttotheirinterpretationandimplementationoftheregulations,whichhasresultedinvariationofprivacystandardsfromcountrytocountry.InJanuary2012,theEuropeanCommissionannouncedsignificantproposedreformstoitsexistingdataprotectionlegalframework,includingchangesinobligationsofdatacontrollersandprocessors,therightsofdatasubjectsanddatasecurityandbreachnotificationrequirements.TheEUproposals,ifimplemented,mayresultinagreatercomplianceburdenifwedeliveradstomobiledeviceusersinEurope.Complyingwithanynewregulatoryrequirementscouldforceustoincursubstantialcostsorrequireustochangeourbusinesspracticesinamannerthatcouldcompromiseourabilitytoeffectivelypursueourgrowthstrategy.

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Inadditiontocompliancewithgovernmentregulations,wevoluntarilyparticipateinseveraltradeassociationsandindustryself-regulatorygroupsthatpromulgatebestpracticesorcodesofconductaddressingtheprovisionoflocation-basedservices,deliveryofpromotionalcontenttomobiledevices,andtrackingofdeviceusersordevicesforthepurposeofdeliveringtargetedadvertising.WecouldbeadverselyaffectedbychangestotheseguidelinesandcodesinwaysthatareinconsistentwithourpracticesorinconflictwiththelawsandregulationsofU.S.orinternationalregulatoryauthorities.Ifweareperceivedasnotoperatinginaccordancewithindustrybestpracticesoranysuchguidelinesorcodeswithregardtoprivacy,ourreputationmaysufferandwecouldloserelationshipswithadvertiserordeveloperpartners.

Ourquarterlyoperatingresultshavefluctuatedinthepastandmaydosointhefuture,whichcouldcauseourstockpricetodecline.

Ouroperatingresultshavehistoricallyfluctuatedandourfutureoperatingresultsmayvarysignificantlyfromquartertoquarterduetoavarietyoffactors,manyofwhicharebeyondourcontrol.Youshouldnotrelyonperiod-to-periodcomparisonsofouroperatingresultsasanindicationofourfutureperformance.Factorsthatmayaffectourquarterlyoperatingresultsincludethefollowing:

·seasonalpatternsinmobileadvertisers’spending,whichtendtobecyclical;

·theadditionofnewadvertiserordeveloperclientsorthelossofexistingadvertisersordevelopers;

·changesindemandforourmobileadvertisingservices;

·changesintheamount,priceandqualityofavailableadvertisinginventoryfromdevelopers;

·thetimingandamountofsalesandmarketingexpensesincurredtoattractnewadvertisersanddevelopers;

·changesintheeconomicprospectsofadvertisersortheeconomygenerally,whichcouldaltercurrentorprospectiveadvertisers’spendingpriorities,orcouldincreasethetimeittakesustoclosesaleswithadvertisers;

·changesinourpricingpolicies,thepricingpoliciesofourcompetitorsorthepricingofmobileadvertisinggenerally;

·changesingovernmentalregulationoftheinternet,wirelessnetworks,mobileadvertisingorthecollectionofmobiledeviceuserdata;

·costsnecessarytoimproveandmaintainourtechnologyplatform;

·timingdifferencesattheendofeachquarterbetweenourpaymentstodevelopersforadvertisingspaceandourcollectionofadvertisingrevenuerelatedtothatspace;and

·costsrelatedtoacquisitionsofotherbusinesses.

Ouroperatingresultsmayfallbelowtheexpectationsofmarketanalystsandinvestorsinsomefutureperiods.Ifthishappens,evenjusttemporarily,themarketpriceofourcommonstockmayfall.

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Seasonalfluctuationsinmobileadvertisingactivitycouldadverselyaffectourcashflows.

Ourcashflowsfromoperationscouldvaryfromquartertoquarterduetotheseasonalnatureofouradvertisers’spending.Forexample,manyadvertisersdevotethelargestportionoftheirbudgetstothefourthquarterofthecalendaryear,tocoincidewithincreasedholidaypurchasing.Todate,theseseasonaleffectshavebeenmaskedbyourrapidrevenuegrowth.However,ifandtotheextentthatseasonalfluctuationsbecomemorepronounced,ouroperatingcashflowscouldfluctuatemateriallyfromperiodtoperiodasaresult.

Wedonothavelong-termagreementswithouradvertiserclients,andwemaybeunabletoretainkeyclients,attractnewclientsorreplacedepartingclientswithclientsthatcanprovidecomparablerevenuetous.

Oursuccessrequiresustomaintainandexpandourcurrentadvertiserclientrelationshipsandtodevelopnewrelationships.Ourcontractswithouradvertiserclientsgenerallydonotincludelong-termobligationsrequiringthemtopurchaseourservicesandarecancelableuponshortornonoticeandwithoutpenalty.Asaresult,wemayhavelimitedvisibilityastoourfutureadvertisingrevenuestreams.Wecannotassureyouthatouradvertiserclientswillcontinuetouseourservicesorthatwewillbeabletoreplace,inatimelyoreffectivemanner,departingclientswithnewclientsthatgeneratecomparablerevenue.Ifamajoradvertisingclientrepresentingasignificantportionofourbusinessdecidestomateriallyreduceitsuseofourplatformortoceaseusingourplatformaltogether,itispossiblethatwewouldnothaveasufficientsupplyofadstofillourdeveloperclients’advertisinginventory,inwhichcaseourrevenuecouldbesignificantlyreduced.Anynon-renewal,renegotiation,cancellationordeferraloflargeadvertisingcontracts,oranumberofcontractsthatintheaggregateaccountforasignificantamountofrevenue,couldcauseanimmediateandsignificantdeclineinourrevenueandharmourbusiness.

Oursaleseffortswithbothadvertisersanddevelopersrequiresignificanttimeandexpense.

Attractingnewadvertiseranddeveloperclientsrequiressubstantialtimeandexpense,andwemaynotbesuccessfulinestablishingnewrelationshipsorinmaintainingoradvancingourcurrentrelationships.Forexample,itmaybedifficulttoidentify,engageandmarkettopotentialadvertiserclientswhodonotcurrentlyspendonmobileadvertisingorareunfamiliarwithourcurrentservicesorplatform.Furthermore,manyofourclients’purchasinganddesigndecisionstypicallyrequireinputfrommultipleinternalconstituencies.Asaresult,wemustidentifythoseinvolvedinthepurchasingdecisionanddevoteasufficientamountoftimetopresentingourservicestoeachofthoseindividuals.

Thenoveltyofourservicesandourbusinessmodeloftenrequiresustospendsubstantialtimeandefforteducatingpotentialadvertiseranddeveloperclientsaboutourofferings,includingprovidingdemonstrationsandcomparisonsagainstotheravailableservices.Thisprocesscanbecostlyandtime-consuming.Ifwearenotsuccessfulinstreamliningoursalesprocesseswithadvertisersanddevelopers,ourabilitytogrowourbusinessmaybeadverselyaffected.

Ifwedonotachievesatisfactoryresultsunderperformance-basedpricingmodels,wecouldloseclientsandourrevenuecoulddecline.

Weofferourservicestoadvertisersbasedonavarietyofpricingmodels,includingCPM,CPAandCPC.Underperformance-drivenCPAandCPCpricingmodels,fromwhichwecurrentlyderiveasignificantportionofourrevenue,advertisersonlypayusifweprovidetheresultstheyspecify.Theseresults-basedpricingmodelsdifferfromfixed-ratepricingmodels,likeCPM,underwhichthefeeisbasedonthenumberoftimestheadisshown,withoutregardtoitseffectiveness.Asaresult,underourcontractswithadvertisersthatprovideforustobepaidonaCPCorCPAbasis,wemustbeabletodevelopeffectiveadcampaigns

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thatresultinthedesiredactionsbeingtakenbyconsumers.Ifwearenotabletoperformeffectivelyunderthesearrangements,itcouldhurtourreputationwithadvertisersanddevelopersandcouldcauseourrevenuestodecline.

Ifwecannotincreasethecapacityofourmobileadvertisingtechnologyplatformtomeetadvertiserordeviceuserdemand,ourbusinesswillbeharmed.

WemustbeabletocontinuetoincreasethecapacityofourMYDAStechnologyplatforminordertosupportsubstantialincreasesinthenumberofadvertisersanddeviceusers,tosupportanincreasingvarietyofadvertisingformatsandtomaintainastableserviceinfrastructureandreliableservicedeliveryforourmobileadvertisingcampaigns.Ifweareunabletoefficientlyandeffectivelyincreasethescaleofourmobileadvertisingplatformtosupportandmanageasubstantialincreaseinthenumberofadvertisersandmobiledeviceusers,whilealsomaintainingahighlevelofperformance,thequalityofourservicescoulddeclineandourreputationandbusinesscouldbeseriouslyharmed.Inaddition,ifwearenotabletosupportemergingmobileadvertisingformatsorservicespreferredbyadvertisers,wemaybeunabletoobtainnewadvertisingclientsormayloseexistingadvertisingclients,andineithercaseourrevenuecoulddecline.

Ifwefailtodetectclickfraudorotherinvalidclicksonads,wecouldlosetheconfidenceofouradvertiserclients,whichwouldcauseourbusinesstosuffer.

Ourbusinessreliesondeliveringpositiveresultstoouradvertiserclients.Weareexposedtotheriskoffraudulentandotherinvalidclicksorconversionsthatadvertisersmayperceiveasundesirable.Becauseoftheirsmallersizesascomparedtopersonalcomputers,mobiledeviceusagecouldresultinahigherrateofaccidentalorotherwiseinadvertentclicksbyauser.Invalidclickscouldalsoresultfromclickfraud,whereamobiledeviceuserintentionallyclicksonadsforreasonsotherthantoaccesstheunderlyingcontentoftheads.Iffraudulentorothermaliciousactivityisperpetratedbyothers,andweareunabletodetectandpreventit,theaffectedadvertisersmayexperienceorperceiveareducedreturnontheirinvestment.Highlevelsofinvalidclickactivitycouldleadtodissatisfactionwithouradvertisingservices,refusalstopay,refunddemandsorwithdrawaloffuturebusiness.Anyoftheseoccurrencescoulddamageourbrandandleadtoalossofadvertisersandrevenue.

Systemfailurescouldsignificantlydisruptouroperationsandcauseustoloseadvertiserclientsoradvertisinginventory.

Oursuccessdependsonthecontinuinganduninterruptedperformanceofourowninternalsystems,whichweutilizetoplaceads,monitortheperformanceofadvertisingcampaignsandmanageourinventoryofadvertisingspace.OurrevenuedependsonthetechnologicalabilityofourplatformtodeliveradsandmeasurethemonaCPM,CPCorCPAbasis.Sustainedorrepeatedsystemfailuresthatinterruptourabilitytoprovideservicestoclients,includingtechnologicalfailuresaffectingourabilitytodeliveradsquicklyandaccuratelyandtoprocessmobiledeviceusers’responsestoads,couldsignificantlyreducetheattractivenessofourservicestoadvertisersandreduceourrevenue.Oursystemsarevulnerabletodamagefromavarietyofsources,includingtelecommunicationsfailures,poweroutages,malicioushumanactsandnaturaldisasters.Inaddition,anystepswetaketoincreasethereliabilityandredundancyofoursystemsmaybeexpensiveandmaynotbesuccessfulinpreventingsystemfailures.

Failuretoadequatelymanageourgrowthmayseriouslyharmourbusiness.

Wehaveexperienced,andmaycontinuetoexperience,significantgrowthinourbusiness.Ifwedonoteffectivelymanageourgrowth,thequalityofourservicesmaysuffer,whichcouldnegativelyaffectourreputationanddemandforourservices.Ourgrowthhasplaced,andisexpectedtocontinuetoplace,asignificantstrainonourmanagerial,administrative,operationalandfinancialresourcesandour

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infrastructure.Ourfuturesuccesswilldepend,inpart,upontheabilityofourseniormanagementtomanagegrowtheffectively.Thiswillrequireusto,amongotherthings:

·implementadditionalmanagementinformationsystems;

·furtherdevelopouroperating,administrative,legal,financialandaccountingsystemsandcontrols;

·hireadditionalpersonnel;

·developadditionallevelsofmanagementwithinourcompany;

·locateadditionalofficespace;

·maintainclosecoordinationamongourengineering,operations,legal,finance,salesandmarketingandclientserviceandsupportorganizations;and

·manageourexpandinginternationaloperations.

Moreover,asoursalesincrease,wemayberequiredtoconcurrentlydeployourservicesinfrastructureatmultipleadditionallocationsorprovideincreasedlevelsofcustomization.Asaresult,wemaylacktheresourcestodeployourservicesonatimelyandcost-effectivebasis.Failuretoaccomplishanyoftheserequirementscouldimpairourabilitytodeliverourmobileadvertisingplatforminatimelyfashion,fulfillexistingclientcommitmentsorattractandretainnewclients.

Ourincreasinginternationaloperationssubjectustoincreasedchallengesandrisks.

Wehaverecentlystartedtoexpandouroperationsinternationally,includingopeninginternationalofficesintheUnitedKingdominthefirsthalfof2010,launchingoperationsinSingaporeinthefourthquarterof2011andopeningofficesincontinentalEuropeandSoutheastAsiaduring2012.Weexpecttofurtherexpandourinternationaloperationsbyopeningofficesinnewcountriesandregionsworldwide.However,wehavealimitedoperatinghistoryasacompanyoutsidetheUnitedStates,andourabilitytomanageourbusinessandconductouroperationsinternationallyrequiresconsiderablemanagementattentionandresourcesandissubjecttotheparticularchallengesofsupportingarapidlygrowingbusinessinanenvironmentofmultiplecultures,customs,legalsystems,alternativedisputesystems,regulatorysystemsandcommercialinfrastructures.Internationalexpansionwillrequireustoinvestsignificantfundsandotherresources.Expandinginternationallymaysubjectustonewrisksthatwehavenotfacedbeforeorincreaserisksthatwecurrentlyface,includingrisksassociatedwith:

·recruitingandretainingtalentedandcapableemployeesinforeigncountries;

·providingmobileadvertisingservicesamongdifferentcultures,includingpotentiallymodifyingourplatformandfeaturestoensurethatwedeliveradsthatareculturallyrelevantindifferentcountries;

·increasedcompetitionfromlocalprovidersofmobileadvertisingservices;

·compliancewithapplicableforeignlawsandregulations;

·longersalesorcollectioncyclesinsomecountries;

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·creditriskandhigherlevelsofpaymentfraud;

·compliancewithanti-briberylaws,suchastheForeignCorruptPracticesActandtheUKAnti-BriberyAct;

·currencyexchangeratefluctuations;

·foreignexchangecontrolsthatmightpreventusfromrepatriatingcashearnedoutsidetheUnitedStates;

·economicinstabilityinsomecountries,particularlythoseinEuropegivenourrecentexpansionintheUnitedKingdom;

·politicalinstability;

·compliancewiththelawsofnumeroustaxingjurisdictions,bothforeignanddomestic,inwhichweconductbusiness,potentialdoubletaxationofourinternationalearningsandpotentiallyadversetaxconsequencesduetochangesinapplicableU.S.andforeigntaxlaws;

·thecomplexityandpotentialadverseconsequencesofU.S.taxlawsastheyrelatetoourinternationaloperations;

·increasedcoststoestablishandmaintaineffectivecontrolsatforeignlocations;and

·overallhighercostsofdoingbusinessinternationally.

Ifourrevenuefromourinternationaloperations,andparticularlyfromouroperationsinthecountriesandregionsonwhichwehavefocusedourspending,donotexceedtheexpenseofestablishingandmaintainingtheseoperations,ourbusinessandoperatingresultswillsuffer.

Ifwedonotretainourseniormanagementteamandotheremployees,orattractadditionalsalesandtechnologytalent,wemaynotbeabletosustainourgrowthorachieveourbusinessobjectives.

Ourfuturesuccessissubstantiallydependentonthecontinuedserviceofourseniormanagementteam,particularlyPaulPalmieri,ourchiefexecutiveofficer,ChrisBrandenburg,ourchieftechnologyofficer,StephenRoot,ourchiefoperatingofficer,MichaelAvon,ourchieffinancialofficer,andMollieSpilman,ourchiefmarketingofficer.Wedonotmaintainkey-personinsuranceonanyoftheseemployees.

Ourfuturesuccessalsodependsonourabilitytocontinuetoattract,retainandmotivatehighlyskilledemployees,particularlyemployeeswithtechnicalskillsthatenableustodelivereffectivemobileadvertisingsolutionsandsalesandclientsupportrepresentativeswithexperienceinmobileandotherdigitaladvertisingandstrongrelationshipswithbrandadvertisersandappdevelopers.Competitionfortheseemployeesinourindustryisintense.Asaresult,wemaybeunabletoattractorretainthesemanagement,technical,salesandclientsupportpersonnelthatarecriticaltooursuccess,resultinginharmtoourkeyclientrelationships,lossofkeyinformation,expertiseorknow-howandunanticipatedrecruitmentandtrainingcosts.Thelossoftheservicesofourseniormanagementorotherkeyemployeescouldmakeitmoredifficulttosuccessfullyoperateourbusinessandpursueourbusinessgoals.

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Acquisitionsorinvestmentsmaybeunsuccessfulandmaydivertourmanagement’sattentionandconsumesignificantresources.

Akeypartofourgrowthstrategyistopursueadditionalacquisitionsorinvestmentsinotherbusinessesorindividualtechnologies,includingadditionaltechnologytoolsforappdevelopersthatallowthemtogeneraterevenuefromtheirappsthroughadvertisingthatwecansupply.Anyacquisitionorinvestmentmayrequireustousesignificantamountsofcash,issuepotentiallydilutiveequitysecuritiesorincurdebt.Inaddition,acquisitionsinvolvenumerousrisks,anyofwhichcouldharmourbusiness,including:

·difficultiesinintegratingtheoperations,technologies,servicesandpersonnelofacquiredbusinesses,especiallyifthosebusinessesoperateoutsideofourcorecompetencyofdeliveringmobileadvertising;

·culturalchallengesassociatedwithintegratingemployeesfromtheacquiredcompanyintoourorganization;

·ineffectivenessorincompatibilityofacquiredtechnologiesorservices;

·potentiallossofkeyemployeesofacquiredbusinesses;

·inabilitytomaintainthekeybusinessrelationshipsandthereputationsofacquiredbusinesses;

·diversionofmanagement’sattentionfromotherbusinessconcerns;

·litigationforactivitiesoftheacquiredcompany,includingclaimsfromterminatedemployees,clients,formerstockholdersorotherthirdparties;

·inthecaseofforeignacquisitions,theneedtointegrateoperationsacrossdifferentculturesandlanguagesandtoaddresstheparticulareconomic,currency,politicalandregulatoryrisksassociatedwithspecificcountries;

·costsnecessarytoestablishandmaintaineffectiveinternalcontrolsforacquiredbusinesses;

·failuretosuccessfullyfurtherdeveloptheacquiredtechnologyinordertorecoupourinvestment;and

·increasedfixedcosts.

Activitiesofouradvertiserclientscoulddamageourreputationorgiverisetolegalclaimsagainstus.

Ouradvertiserclients’promotionoftheirproductsandservicesmaynotcomplywithfederal,stateandlocallaws,including,butnotlimitedto,lawsandregulationsrelatingtomobilecommunications.Failureofourclientstocomplywithfederal,stateorlocallawsorourpoliciescoulddamageourreputationandexposeustoliabilityundertheselaws.Wemayalsobeliabletothirdpartiesforcontentintheadswedeliveriftheartwork,textorothercontentinvolvedviolatescopyrights,trademarksorotherintellectualpropertyrightsofthirdpartiesorifthecontentisdefamatory,unfairanddeceptive,orotherwiseinviolationofapplicablelaws.Althoughwegenerallyreceiveassurancefromouradvertisersthattheiradsarelawfulandthattheyhavetherighttouseanycopyrights,trademarksorotherintellectualpropertyincludedinanad,andalthoughwearenormallyindemnifiedbytheadvertisers,athirdpartyorregulatoryauthoritymay

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stillfileaclaimagainstus.Anysuchclaimscouldbecostlyandtime-consumingtodefendandcouldalsohurtourreputationwithinthemobileadvertisingindustry.Further,ifweareexposedtolegalliability,wecouldberequiredtopaysubstantialfinesorpenalties,redesignourbusinessmethods,discontinuesomeofourservicesorotherwiseexpendsignificantresources.

Ourbusinessdependsonourabilitytomaintainthequalityofouradvertiseranddevelopercontent.

Wemustbeabletoensurethatourclients’adsarenotplacedindevelopercontentthatisunlawfulorinappropriate.Likewise,ourdevelopersrelyuponusnottoplaceadsintheirappsthatareunlawfulorinappropriate.Ifweareunabletoensurethatthequalityofouradvertiseranddevelopercontentdoesnotdeclineasthenumberofadvertisersanddevelopersweworkwithcontinuestogrow,thenourreputationandbusinessmaysuffer.

Ourinabilitytousesoftwarelicensedfromthirdparties,orouruseofopensourcesoftwareunderlicensetermsthatinterferewithourproprietaryrights,coulddisruptourbusiness.

Ourtechnologyplatformincorporatessoftwarelicensedfromthirdparties,includingsomesoftware,knownasopensourcesoftware,whichweusewithoutcharge.Althoughwemonitorouruseofopensourcesoftware,thetermsofmanyopensourcelicensestowhichwearesubjecthavenotbeeninterpretedbyU.S.orforeigncourts,andthereisariskthatsuchlicensescouldbeconstruedinamannerthatimposesunanticipatedconditionsorrestrictionsonourabilitytoprovideourplatformtoourclients.Inthefuture,wecouldberequiredtoseeklicensesfromthirdpartiesinordertocontinueofferingourplatform,whichlicensesmaynotbeavailableontermsthatareacceptabletous,oratall.Alternatively,wemayneedtore-engineerourplatformordiscontinueuseofportionsofthefunctionalityprovidedbyourplatform.Inaddition,thetermsofopensourcesoftwarelicensesmayrequireustoprovidesoftwarethatwedevelopusingsuchsoftwaretoothersonunfavorablelicenseterms.Ourinabilitytousethird-partysoftwarecouldresultindisruptionstoourbusiness,ordelaysinthedevelopmentoffutureofferingsorenhancementsofexistingofferings,whichcouldimpairourbusiness.

Softwareandcomponentsthatweincorporateintoourmobileadvertisingplatformmaycontainerrorsordefects,whichcouldharmourreputationandhurtourbusiness.

Weuseacombinationofcustomandthird-partysoftware,includingopensourcesoftware,inbuildingourmobileadvertisingplatform.Althoughwetestsoftwarebeforeincorporatingitintoourplatform,wecannotguaranteethatallofthethird-partytechnologythatweincorporatewillnotcontainerrors,bugsorotherdefects.Wecontinuetolaunchenhancementstoourmobileadvertisingplatform,andwecannotguaranteeanysuchenhancementswillbefreefromthesekindsofdefects.Iferrorsorotherdefectsoccurintechnologythatweutilizeinourmobileadvertisingplatform,itcouldresultindamagetoourreputationandlossesinrevenue,andwecouldberequiredtospendsignificantamountsofadditionalresourcestofixanyproblems.

Ourfailuretoprotectourintellectualpropertyrightscoulddiminishthevalueofourservices,weakenourcompetitivepositionandreduceourrevenue.

Weregardtheprotectionofourintellectualproperty,whichincludestradesecrets,copyrights,trademarks,domainnamesandpatentapplications,ascriticaltooursuccess.Westrivetoprotectourintellectualpropertyrightsbyrelyingonfederal,stateandcommonlawrights,aswellascontractualrestrictions.Weenterintoconfidentialityandinventionassignmentagreementswithouremployeesandcontractors,andconfidentialityagreementswithpartieswithwhomweconductbusinessinordertolimitaccessto,anddisclosureanduseof,ourproprietaryinformation.However,thesecontractualarrangements

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andtheotherstepswehavetakentoprotectourintellectualpropertymaynotpreventthemisappropriationofourproprietaryinformationordeterindependentdevelopmentofsimilartechnologiesbyothers.

WehavebeguntoseekpatentprotectionforcertainofourtechnologiesandcurrentlyhavetenU.S.andseveninternationalpatentapplicationsonfile,althoughtherecanbenoassurancethatthesepatentswillultimatelybeissued.Wearealsopursuingtheregistrationofourdomainnames,trademarksandservicemarksintheUnitedStatesandincertainlocationsoutsidetheUnitedStates.Effectivetradesecret,copyright,trademark,domainnameandpatentprotectionisexpensivetodevelopandmaintain,bothintermsofinitialandongoingregistrationrequirementsandthecostsofdefendingourrights.Wemayberequiredtoprotectourintellectualpropertyinanincreasingnumberofjurisdictions,aprocessthatisexpensiveandmaynotbesuccessfulorwhichwemaynotpursueineverylocation.Wemay,overtime,increaseourinvestmentinprotectingourintellectualpropertythroughadditionalpatentfilingsthatcouldbeexpensiveandtime-consuming.

Wehavelicensedinthepast,andexpecttolicenseinthefuture,someofourproprietaryrights,suchastrademarksorcopyrightedmaterial,tothirdparties.Theselicenseesmaytakeactionsthatdiminishthevalueofourproprietaryrightsorharmourreputation.

Monitoringunauthorizeduseofourintellectualpropertyisdifficultandcostly.Oureffortstoprotectourproprietaryrightsmaynotbeadequatetopreventmisappropriationofourintellectualproperty.Further,wemaynotbeabletodetectunauthorizeduseof,ortakeappropriatestepstoenforce,ourintellectualpropertyrights.Ourcompetitorsmayalsoindependentlydevelopsimilartechnology.Inaddition,thelawsofmanycountries,suchasChinaandIndia,donotprotectourproprietaryrightstoasgreatanextentasdothelawsofEuropeancountriesandtheUnitedStates.Further,thelawsintheUnitedStatesandelsewherechangerapidly,andanyfuturechangescouldadverselyaffectusandourintellectualproperty.Ourfailuretomeaningfullyprotectourintellectualpropertycouldresultincompetitorsofferingservicesthatincorporateourmosttechnologicallyadvancedfeatures,whichcouldseriouslyreducedemandforourmobileadvertisingservices.Inaddition,wemayinthefutureneedtoinitiateinfringementclaimsorlitigation.Litigation,whetherweareaplaintifforadefendant,canbeexpensive,time-consumingandmaydiverttheeffortsofourtechnicalstaffandmanagerialpersonnel,whichcouldharmourbusiness,whetherornotsuchlitigationresultsinadeterminationthatisunfavorabletous.Inaddition,litigationisinherentlyuncertain,andthuswemaynotbeabletostopourcompetitorsfrominfringinguponourintellectualpropertyrights.

Weoperateinanindustrywithextensiveintellectualpropertylitigation.Claimsofinfringementagainstusmayhurtourbusiness.

Oursuccessdepends,inpart,uponnon-infringementofintellectualpropertyrightsownedbyothersandbeingabletoresolveclaimsofintellectualpropertyinfringementwithoutmajorfinancialexpendituresoradverseconsequences.Themobiletelecommunicationsindustrygenerallyischaracterizedbyextensiveintellectualpropertylitigation.Althoughourtechnologyisrelativelynewandourindustryisrapidlyevolving,manyparticipantsthatown,orclaimtoown,intellectualpropertyhistoricallyhaveaggressivelyassertedtheirrights.Fromtimetotime,wemaybesubjecttolegalproceedingsandclaimsrelatingtotheintellectualpropertyrightsofothers,includingcurrentlypendingproceedingsrelatedtoallegedpatentinfringement,asdescribedin“Item1.LegalProceedings”ofPartIIofthisreport,andweexpectthatthirdpartieswillcontinuetoassertintellectualpropertyclaimsagainstus,particularlyasweexpandthecomplexityandscopeofourbusiness.

Futurelitigationmaybenecessarytodefendourselvesorourclientsbydeterminingthescope,enforceabilityandvalidityofthird-partyproprietaryrightsortoestablishourproprietaryrights.Someofourcompetitorshavesubstantiallygreaterresourcesthanwedoandareabletosustainthecostsofcomplexintellectualpropertylitigationtoagreaterdegreeandforlongerperiodsoftimethanwecould.Inaddition,patentholdingcompaniesthatfocussolelyonextractingroyaltiesandsettlementsbyenforcingpatentrights

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maytargetus.Regardlessofwhetherclaimsthatweareinfringingpatentsorotherintellectualpropertyrightshaveanymerit,theseclaimsaretime-consumingandcostlytoevaluateanddefendandcould:

·adverselyaffectourrelationshipswithourcurrentorfutureclients;

·causedelaysorstoppagesinprovidingourmobileadvertisingservices;

·divertmanagement’sattentionandresources;

·requiretechnologychangestoourplatformthatwouldcauseustoincursubstantialcost;

·subjectustosignificantliabilities;and

·requireustoceasesomeorallofouractivities.

Inadditiontoliabilityformonetarydamagesagainstus,whichmaybetripledandmayincludeattorneys’fees,or,insomecircumstances,damagesagainstourclients,wemaybeprohibitedfromdeveloping,commercializingorcontinuingtoprovidesomeorallofourmobileadvertisingsolutionsunlessweobtainlicensesfrom,andpayroyaltiesto,theholdersofthepatentsorotherintellectualpropertyrights,whichmaynotbeavailableoncommerciallyfavorableterms,oratall.

Ourbusinessinvolvestheuse,transmissionandstorageofconfidentialinformation,andthefailuretoproperlysafeguardsuchinformationcouldresultinsignificantreputationalharmandmonetarydamages.

Wemayattimescollect,storeandtransmitinformationof,oronbehalfof,ourclientsthatmayincludecertaintypesofconfidentialinformationthatmaybeconsideredpersonalorsensitive,andthataresubjecttolawsthatapplytodatabreaches.Webelievethatwetakereasonablestepstoprotectthesecurity,integrityandconfidentialityoftheinformationwecollectandstore,butthereisnoguaranteethatinadvertentorunauthorizeddisclosurewillnotoccurorthatthirdpartieswillnotgainunauthorizedaccesstothisinformationdespiteourefforts.Ifsuchunauthorizeddisclosureoraccessdoesoccur,wemayberequiredtonotifypersonswhoseinformationwasdisclosedoraccessed.Moststateshaveenacteddatabreachnotificationlawsand,inadditiontoFederallawsthatapplytocertaintypesofinformation,suchasfinancialinformation,FederallegislationhasbeenproposedinthepastthatwouldestablishbroaderFederalobligationswithrespecttodatabreaches.Wemayalsobesubjecttoclaimsofbreachofcontractforsuchdisclosure,investigationandpenaltiesbyregulatoryauthoritiesandpotentialclaimsbypersonswhoseinformationwasdisclosed.Theunauthorizeddisclosureofinformationmayresultintheterminationofoneormoreofourcommercialrelationshipsorareductioninclientconfidenceandusageofourservices.Wemayalsobesubjecttolitigationallegingtheimproperuse,transmissionorstorageofconfidentialinformation,whichcoulddamageourreputationamongourcurrentandpotentialclients,requiresignificantexpendituresofcapitalandotherresourcesandcauseustolosebusinessandrevenue.

Ifwefailtomaintainproperandeffectiveinternalcontrols,ourabilitytoproduceaccuratefinancialstatementsonatimelybasiscouldbeimpaired.

WearesubjecttothereportingrequirementsoftheSecuritiesExchangeActof1934,theSarbanes-OxleyActof2002,theDodd-FrankWallStreetReformandConsumerProtectionActof2010andtherulesandregulationsoftheNewYorkStockExchange.TheSarbanes-OxleyActrequires,amongotherthings,thatwemaintaineffectivedisclosurecontrolsandproceduresandinternalcontrolsoverfinancialreporting.CommencingwithourfiscalyearendingDecember31,2013,wemustperformsystemandprocessevaluationandtestingofourinternalcontrolsoverfinancialreportingtoallowmanagementtoreportonthe

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effectivenessofourinternalcontrolsoverfinancialreportinginourForm10-Kfilingforthatyear,asrequiredbySection404oftheSarbanes-OxleyAct.Thiswillrequirethatweincursubstantialadditionalprofessionalfeesandinternalcoststoexpandouraccountingandfinancefunctionsandthatweexpendsignificantmanagementefforts.PriortoourinitialpublicofferinginMarch2012,wewereneverrequiredtotestourinternalcontrolswithinaspecifiedperiod,and,asaresult,wemayexperiencedifficultyinmeetingthesereportingrequirementsinatimelymanner.

Wemayinthefuturediscoverareasofourinternalfinancialandaccountingcontrolsandproceduresthatneedimprovement.Ourinternalcontroloverfinancialreportingwillnotpreventordetectallerrorandallfraud.Acontrolsystem,nomatterhowwelldesignedandoperated,canprovideonlyreasonable,notabsolute,assurancethatthecontrolsystem’sobjectiveswillbemet.Becauseoftheinherentlimitationsinallcontrolsystems,noevaluationofcontrolscanprovideabsoluteassurancethatmisstatementsduetoerrororfraudwillnotoccurorthatallcontrolissuesandinstancesoffraudwillbedetected.

IfwearenotabletocomplywiththerequirementsofSection404oftheSarbanes-OxleyActinatimelymanner,orifweareunabletomaintainproperandeffectiveinternalcontrols,wemaynotbeabletoproducetimelyandaccuratefinancialstatements,andwemayconcludethatourinternalcontrolsoverfinancialreportingarenoteffective.Ifthatweretohappen,themarketpriceofourstockcoulddeclineandwecouldbesubjecttosanctionsorinvestigationsbytheNewYorkStockExchange,theSECorotherregulatoryauthorities.

Wearean“emerginggrowthcompany,”andifwedecidetocomplyonlywithreduceddisclosurerequirementsapplicabletoemerginggrowthcompanies,ourcommonstockcouldbelessattractivetoinvestors.

Wearean“emerginggrowthcompany,”asdefinedintheJumpstartOurBusinessStartupsAct,orJOBSAct,enactedinApril2012,and,foraslongaswecontinuetobean“emerginggrowthcompany,”wemaychoosetotakeadvantageofexemptionsfromvariousreportingrequirementsapplicabletootherpubliccompaniesbutnotto“emerginggrowthcompanies,”including,butnotlimitedto,notbeingrequiredtocomplywiththeauditorattestationrequirementsofSection404oftheSarbanes-OxleyActof2002,reduceddisclosureobligationsregardingexecutivecompensationinourperiodicreportsandproxystatements,andexemptionsfromtherequirementsofholdinganonbindingadvisoryvoteonexecutivecompensationandshareholderapprovalofanygoldenparachutepaymentsnotpreviouslyapproved.Wecouldbean“emerginggrowthcompany”throughtheyearendingDecember31,2017,althoughavarietyofcircumstancescouldcauseustolosethatstatusearlier.Wecannotpredictifinvestorswillfindourcommonstocklessattractiveifwechoosetorelyontheseexemptions.Ifsomeinvestorsfindourcommonstocklessattractiveasaresultofanychoicestoreducefuturedisclosure,theremaybealessactivetradingmarketforourcommonstockandourstockpricemaybemorevolatile.

UndertheJOBSAct,emerginggrowthcompaniesthatbecomepubliccandelayadoptingneworrevisedaccountingstandardsuntilsuchtimeasthosestandardsapplytoprivatecompanies.Wehaveirrevocablyelectednottoavailourselvesofthisexemptionfromneworrevisedaccountingstandardsand,therefore,wewillbesubjecttothesameneworrevisedaccountingstandardsasotherpubliccompaniesthatarenotemerginggrowthcompanies.

Wemayneedadditionalcapitalinthefuturetomeetourfinancialobligationsandtopursueourbusinessobjectives.Additionalcapitalmaynotbeavailableonfavorableterms,oratall,whichcouldcompromiseourabilitytomeetourfinancialobligationsandgrowourbusiness.

Wemayneedtoraiseadditionalcapitaltofundoperationsinthefutureortofinanceacquisitions.Ifweseektoraiseadditionalcapitalinordertomeetvariousobjectives,includingdevelopingfuturetechnologies

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andservices,increasingworkingcapital,acquiringbusinessesandrespondingtocompetitivepressures,capitalmaynotbeavailableonfavorabletermsormaynotbeavailableatall.Inaddition,pursuanttothetermsofourcreditfacility,wemayberestrictedfromusingthenetproceedsoffinancingtransactionsforouroperatingobjectives.Lackofsufficientcapitalresourcescouldsignificantlylimitourabilitytotakeadvantageofbusinessandstrategicopportunities.Anyadditionalcapitalraisedthroughthesaleofequityordebtsecuritieswithanequitycomponentwoulddiluteourstockownership.Ifadequateadditionalfundsarenotavailable,wemayberequiredtodelay,reducethescopeof,oreliminatematerialpartsofourbusinessstrategy,includingpotentialadditionalacquisitionsordevelopmentofnewtechnologies.

Ournetoperatinglosscarryforwardsmayexpireunutilizedorunderutilized,whichcouldpreventusfromoffsettingfuturetaxableincome.

WemaybelimitedintheportionofnetoperatinglosscarryforwardsthatwecanuseinthefuturetooffsettaxableincomeforU.S.federalincometaxpurposes.AtDecember31,2011,wehadfederalnetoperatinglosscarryforwardsof$27.0million,whichexpireatvariousdatesthrough2031.Ourgrossstatenetoperatinglosscarryforwardsareequaltoorlessthanthefederalnetoperatinglosscarryforwardsandexpireovervariousperiodsbasedonindividualstatetaxlaw.

Weperiodicallyassessthelikelihoodthatwewillbeabletorecoverournetdeferredtaxassets.Weconsiderallavailableevidence,bothpositiveandnegative,includinghistoricallevelsofincome,expectationsandrisksassociatedwithestimatesoffuturetaxableincomeandongoingprudentandfeasibleprofits.Asaresultofthisanalysisofallavailableevidence,bothpositiveandnegative,weconcludedthatavaluationallowanceagainstournetdeferredtaxassetsshouldbeappliedasofSeptember30,2012.Totheextentwedeterminethatalloraportionofourvaluationallowanceisnolongernecessary,wewillrecognizeanincometaxbenefitintheperiodsuchdeterminationismadeforthereversalofthevaluationallowance.Oncethevaluationallowanceiseliminatedorreduced,itsreversalwillnolongerbeavailabletooffsetourcurrenttaxprovision.Theseeventscouldhaveamaterialimpactonourreportedresultsofoperations.

RisksRelatedtoOwnershipofOurCommonStock

Anactivetradingmarketforourcommonstockmaynotcontinuetodeveloporbesustained.

PriortoourinitialpublicofferinginMarch2012,therewasnopublicmarketforourcommonstock,andwecannotassureyouthatanactivetradingmarketforourshareswillcontinuetodeveloporbesustained.Ifanactivemarketforourcommonstockdoesnotcontinuetodeveloporisnotsustained,itmaybedifficulttosellshareswithoutdepressingthemarketpriceforthesharesortosellyoursharesatall.

Thetradingpriceofthesharesofourcommonstockhasbeenandislikelytocontinuetobevolatile,andpurchasersofourcommonstockcouldincursubstantiallosses.

SinceourinitialpublicofferinginMarch2012,ourstockpricehasexhibitedsignificantvolatility.Thestockmarketingeneralandthemarketfortechnologycompaniesinparticularhaveexperiencedextremevolatilitythathasoftenbeenunrelatedtotheoperatingperformanceofparticularcompanies.Asaresultofthisvolatility,investorsmaynotbeabletoselltheircommonstockatorabovethepricepaidfortheshares.Themarketpriceforourcommonstockmaybeinfluencedbymanyfactors,including:

·actualoranticipatedvariationsinquarterlyoperatingresults;

·changesinfinancialestimatesbyusorbyanysecuritiesanalystswhomightcoverourstock;

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·conditionsortrendsinourindustry;

·stockmarketpriceandvolumefluctuationsofotherpubliclytradedcompaniesand,inparticular,thosethatoperateintheadvertising,internetormediaindustries;

·announcementsbyusorourcompetitorsofnewproductorserviceofferings,significantacquisitions,strategicpartnershipsordivestitures;

·announcementsofinvestigationsorregulatoryscrutinyofouroperationsorlawsuitsfiledagainstus;

·capitalcommitments;

·additionsordeparturesofkeypersonnel;and

·salesofourcommonstock,includingsalesbyourdirectorsandofficersorspecificstockholders.

Inaddition,inthepast,stockholdershaveinitiatedclassactionlawsuitsagainsttechnologycompaniesfollowingperiodsofvolatilityinthemarketpricesofthesecompanies’stock.Suchlitigation,ifinstitutedagainstus,couldcauseustoincursubstantialcostsanddivertmanagement’sattentionandresources.

Ifsecuritiesorindustryanalystsdonotpublishresearchorpublishunfavorableresearchaboutourbusiness,ourstockpriceandtradingvolumecoulddecline.

Thetradingmarketforourcommonstockwillrelyinpartontheresearchandreportsthatequityresearchanalystspublishaboutusandourbusiness.Asanewlypubliccompany,wehaveonlylimitedresearchcoveragebyequityresearchanalysts.Equityresearchanalystsmayelectnottoinitiateortocontinuetoprovideresearchcoverageofourcommonstock,andsuchlackofresearchcoveragemayadverselyaffectthemarketpriceofourcommonstock.Evenifwedohaveequityresearchanalystcoverage,wewillnothaveanycontrolovertheanalystsorthecontentandopinionsincludedintheirreports.Thepriceofourstockcoulddeclineifoneormoreequityresearchanalystsdowngradeourstockorissueotherunfavorablecommentaryorresearch.Ifoneormoreequityresearchanalystsceasescoverageofourcompanyorfailstopublishreportsonusregularly,demandforourstockcoulddecrease,whichinturncouldcauseourstockpriceortradingvolumetodecline.

ProvisionsinourcorporatecharterdocumentsandunderDelawarelawmaypreventorfrustrateattemptsbyourstockholderstochangeourmanagementandhindereffortstoacquireacontrollinginterestinus,andthemarketpriceofourcommonstockmaybelowerasaresult.

Thereareprovisionsinouramendedandrestatedcertificateofincorporationandbylawsthatmaymakeitdifficultforathirdpartytoacquire,orattempttoacquire,controlofourcompany,evenifachangeincontrolwasconsideredfavorablebyyouandotherstockholders.Forexample,ourboardofdirectorshastheauthoritytoissueupto5,000,000sharesofpreferredstock.Theboardofdirectorscanfixtheprice,rights,preferences,privileges,andrestrictionsofthepreferredstockwithoutanyfurthervoteoractionbyourstockholders.Theissuanceofsharesofpreferredstockmaydelayorpreventachangeincontroltransaction.Asaresult,themarketpriceofourcommonstockandthevotingandotherrightsofourstockholdersmaybeadverselyaffected.Anissuanceofsharesofpreferredstockmayresultinthelossofvotingcontroltootherstockholders.

Ourcharterdocumentsalsocontainotherprovisionsthatcouldhaveananti-takeovereffect,including:

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·onlyoneofourthreeclassesofdirectorsiselectedeachyear;

·stockholdersarenotentitledtoremovedirectorsotherthanbya662/3%voteandonlyforcause;

·stockholdersarenotpermittedtotakeactionsbywrittenconsent;

·stockholderscannotcallaspecialmeetingofstockholders;and

·stockholdersmustgiveadvancenoticetonominatedirectorsorsubmitproposalsforconsiderationatstockholdermeetings.

Inaddition,wearesubjecttotheanti-takeoverprovisionsofSection203oftheDelawareGeneralCorporationLaw,whichregulatescorporateacquisitionsbyprohibitingDelawarecorporationsfromengaginginspecifiedbusinesscombinationswithparticularstockholdersofthosecompanies.Theseprovisionscoulddiscouragepotentialacquisitionproposalsandcoulddelayorpreventachangeincontroltransaction.Theycouldalsohavetheeffectofdiscouragingothersfrommakingtenderoffersforourcommonstock,includingtransactionsthatmaybeinyourbestinterests.Theseprovisionsmayalsopreventchangesinourmanagementorlimitthepricethatinvestorsarewillingtopayforourstock.

OuramendedandrestatedcertificateofincorporationalsoprovidesthattheCourtofChanceryoftheStateofDelawarewillbetheexclusiveforumforsubstantiallyalldisputesbetweenusandourstockholders.

Concentrationofownershipofourcommonstockamongourexistingexecutiveofficers,directorsandprincipalstockholdersmaypreventnewinvestorsfrominfluencingsignificantcorporatedecisions.

Ourexecutiveofficers,directorsandcurrentbeneficialownersof5%ormoreofourcommonstockandtheirrespectiveaffiliatesintheaggregatebeneficiallyownapproximately67%ofouroutstandingcommonstockuponthecompletionofourrecentOctober2012publicoffering.Thesepersons,actingtogether,areabletosignificantlyinfluenceallmattersrequiringstockholderapproval,includingtheelectionandremovalofdirectorsandanymergerorothersignificantcorporatetransactions.Theinterestsofthisgroupofstockholdersmaynotcoincidewithourinterestsortheinterestsofotherstockholders.

Ourmanagementmightapplythenetproceedsfromourrecentpublicofferingsinwaysthatdonotincreasethevalueofyourinvestment.

WeintendtousethenetproceedsfromourinitialpublicofferinginMarch2012andourrecentOctober2012publicofferingforworkingcapitalandgeneralcorporatepurposes,includingexpandingourinternationaloperationsandproductdevelopment.Wemayalsouseaportionoftheproceedsforthefutureacquisitionof,orinvestmentin,complementarybusinesses,productsortechnologies.Ourmanagementhasbroaddiscretionastotheuseoftheseproceedsandyouwillberelyingonthejudgmentofourmanagementregardingtheapplicationoftheseproceeds.Wemightapplytheseproceedsinwayswithwhichyoudonotagree,orinwaysthatdonotyieldafavorablereturn.Ifourmanagementappliestheseproceedsinamannerthatdoesnotyieldasignificantreturn,ifany,onourinvestmentofthesenetproceeds,itwouldadverselyaffectthemarketpriceofourcommonstock.

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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.

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, and particularly after we cease to be an “emerging growth company,” 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.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities

None.

(b) Use of Proceeds from Public Offering of Common Stock

On March 28, 2012, our Registration Statement on Form S-1, as amended (Reg. No. 333-178909) was declared effective in connection with the IPO of our common stock, pursuant to which we registered an aggregate of 11,730,000 shares of our common stock, of which we sold 9,873,270 shares and certain selling stockholders sold 1,856,730 shares, in each case including the full exercise of the underwriters’ over-allotment option, at a price to the public of $13.00 per share. The offering closed on April 3, 2012, and, as a result, we received net proceeds of approximately $115.1 million (after underwriters’ discounts and commissions of approximately $9.0 million and additional offering related costs of approximately $4.3 million), and the selling stockholders received net proceeds of approximately $22.4 million (after underwriters’ discounts and commissions of approximately $1.7 million). The joint managing underwriters of the offering were Morgan Stanley & Co. LLC, Goldman Sachs & Co., and Barclays Capital Inc.

The principal purposes of the offering were 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 currently have no specific plans for the use of a significant portion of the net proceeds of the offering. However, we anticipate that we will use the

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net proceeds from the offering for general corporate purposes, which may include working capital, capital expenditures, other corporate expenses and acquisitions of complementary products, technologies or businesses. We currently have no agreements or commitments with respect to acquisitions of complementary products, technologies or businesses. 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.

We intend to invest the net proceeds in a variety of short-term, interest-bearing, investment grade securities. There has been no material change in the planned use of proceeds from our IPO from that described in the final prospectus filed by us with the SEC pursuant to Rule 424(b) on March 29, 2012.

Item 6.   Exhibits

The following is a list of Exhibits filed as part of this Quarterly Report on Form 10-Q:

Exhibit No.	Description of Exhibit
3.1(1)	Amended and Restated Certificate of Incorporation of the Registrant.
3.2(2)	Amended and Restated Bylaws of the Registrant.
4.1(3)	Specimen Stock Certificate evidencing shares of the Registrant’s Common Stock.
31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of The Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of The Sarbanes-Oxley Act of 2002.
32*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a- 14(b) and 15d-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to section 906 of The Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase
101.DEF**	XBRL Taxonomy Extension Definition Linkbase
101.LAB**	XBRL Taxonomy Extension Label Linkbase
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase

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(1)            Previously filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-35478), filed with the Commission on April 3, 2012, and incorporated by reference herein.

(2)            Previously filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-35478), filed with the Commission on April 3, 2012, and incorporated by reference herein.

(3)           Previously filed as Exhibit 4.2 to Amendment No. 4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-178909), filed with the Commission on March 15, 2012, and incorporated by reference herein.

* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

**    Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files included in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

52

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Millennial Media, Inc.
	(Registrant)
Date: November 6, 2012	By	/s/ PAUL J. PALMIERI
		Paul Palmieri
		President and
		Chief Executive Officer
		(on behalf of the registrant)
Date: November 6, 2012		/s/ MICHAEL B. AVON
		Michael Avon
		Executive Vice President and
		Chief Financial Officer
		(Principal Financial Officer)

53

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
3.1(1)	Amended and Restated Certificate of Incorporation of the Registrant.
3.2(2)	Amended and Restated Bylaws of the Registrant.
4.1(3)	Specimen Stock Certificate evidencing shares of the Registrant’s Common Stock.
31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of The Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of The Sarbanes-Oxley Act of 2002.
32*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a- 14(b) and 15d-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to section 906 of The Sarbanes-Oxley Act of 2002.
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase
101.DEF**	XBRL Taxonomy Extension Definition Linkbase
101.LAB**	XBRL Taxonomy Extension Label Linkbase
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase

(1)            Previously filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-35478), filed with the Commission on April 3, 2012, and incorporated by reference herein.

(2)            Previously filed as Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (File No. 001-35478), filed with the Commission on April 3, 2012, and incorporated by reference herein.

(3)           Previously filed as Exhibit 4.2 to Amendment No. 4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-178909), filed with the Commission on March 15, 2012, and incorporated by reference herein.

54

* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files included in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

55

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

 PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul J. Palmieri, certify that:

1. I have reviewed this QuarterlyReport on Form 10-Q of Millennial Media, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2012

/s/ Paul J. Palmieri

Paul J. Palmieri

President and Chief Executive Officer

(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

 PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael B. Avon, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Millennial Media, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2012

/s/ Michael B. Avon

Michael B. Avon

Executive Vice President and Chief Financial Officer

(principal financial officer)

EX-32

Exhibit 32

CERTIFICATIONS OF

 PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

 PURSUANT TO 18 U.S.C. SECTION 1350,

 AS ADOPTED PURSUANT TO

 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Millennial Media, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul J. Palmieri, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.

Date: November 6, 2012	/s/ Paul J. Palmieri
	Paul J. Palmieri
	President and Chief Executive Officer
	(principal executive officer)

This certification accompanies the Report and shall not be deemed “filed” by the Company with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

In connection with the Quarterly Report of Millennial Media, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael B. Avon, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Report and results of operations of the Company for the period covered by the Report.

Date: November 6, 2012	/s/ Michael B. Avon
	Michael B. Avon
	Executive Vice President and Chief Financial Officer
	(principal financial officer)

This certification accompanies the Report and shall not be deemed “filed” by the Company with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.

XML

Subsequent Events (Details) (USD $) In Millions, except Share data, unless otherwise specified			1 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Oct. 31, 2012 Subsequent event	Oct. 29, 2011 Subsequent event
Subsequent event
Common stock issued and sold (in shares)	76,757,515	18,011,035		11,500,000
Public offering price (in dollars per share)				$ 14.15
Net proceeds from issuance and sale of common stock			$ 11.7
Portion of common stock issued and sold (in shares)				921,952

XML

Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		3 Months Ended
	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011 Revenue Customer concentration One customer customer	Sep. 30, 2011 Revenue Customer concentration One customer Minimum
Revenue Recognition and Deferred Revenue
Deferred revenue	$ 219	$ 157
Concentration Risk
Number of customers (customers)			1
Percentage of concentration of credit risk				10.00%
Stock-Based Compensation
Vesting period	4 years
Vesting period of options granted to non-employees	2 years
Expiration term of options	10 years

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2.Summary of Significant Accounting Policies

Principles of Consolidation

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying unaudited consolidated financial statements.

Interim Consolidated Financial Information

The accompanying unaudited consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations, changes in stockholders’ (deficit) equity and cash flows. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes presented in the Company’s prospectus filed with the Securities and Exchange Commission (“SEC”) on October 24, 2012.

Recently Adopted Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (“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 (‘‘IASB’’) to develop a single, converged fair value framework. While the ASU is largely consistent with existing fair value measurement principles in U.S. 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 the 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. The Company adopted ASU 2011-04 effective January 1, 2012. This adoption did not have an impact on the Company’s 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 ASU 2011-08 is to reduce the cost and complexity of the annual goodwill impairment test by providing entities an 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. The Company adopted ASU 2011-08 effective January 1, 2012. This adoption did not have an impact on the Company’s financial position, results of operations or cash flows.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition and Deferred Revenue

The Company recognizes revenue based on the activity of mobile users viewing advertisements through developer applications and mobile websites. Revenues are recognized when the related advertising services are delivered based on the specific terms of the advertising contract, and are commonly based on the number of ads delivered, or views, clicks or actions by users on mobile advertisements. The Company recognizes revenue based on these terms because the services have been provided, the fees the Company charges are fixed or determinable, persuasive evidence of an arrangement exists, and collectability is reasonably assured.

In the normal course of business, the Company acts 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 the Company is acting as the principal or an agent in the transaction. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations. While none of the factors identified in this guidance are individually considered presumptive or determinative, because the Company is the primary obligor and is responsible for (i) identifying and contracting with third-party advertisers, (ii) establishing the selling prices of the advertisements sold, (iii) performing all billing and collection activities including retaining credit risk and (iv) bearing sole responsibility for fulfillment of the advertising, the Company acts as the principal in these arrangements and therefore reports revenue earned and costs incurred on a gross basis.

Deferred revenue arises as a result of differences between the timing of revenue recognition and receipt of cash from the Company’s customers. As of December 31, 2011 and September 30, 2012 there was $157,000 and $219,000, respectively, of services for which cash payments were received in advance of the Company’s performance of the service under the arrangement and recorded as deferred revenue in the accompanying unaudited consolidated balance sheets.

Cost of Revenue

Cost of revenue consists primarily of amounts due to developers for the advertising utilized in running mobile advertisements.  These amounts are typically either a percentage of the advertising revenue earned by the Company based on mobile advertisements that are run on each developer’s application or mobile website or a fixed fee for the ad space.  The Company recognizes the cost of revenue as the associated revenue is recognized, on a developer by developer basis during the period the advertisements run on the developer’s advertising application or mobile website.  Costs owed to developers but not yet paid are recorded as accrued cost of revenue.

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalent accounts may exceed federally insured limits at times. The Company has not experienced any losses on cash and cash equivalents to date. To manage accounts receivable risk, the Company evaluates the creditworthiness of its customers and maintains an allowance for doubtful accounts.

During the three months ended September 30, 2011, one customer accounted for greater than 10% of revenue. During the three months ended September 30, 2012, no customer accounted for greater than 10% of revenue.

During the nine months ended September 30, 2011 and 2012, no customer accounted for greater than 10% of revenue.

As of December 31, 2011 and September 30, 2012, no customer accounted for greater than 10% of accounts receivable.

Accounts Receivable and Allowance for Doubtful Accounts and Sales Credits

The Company extends credit to customers without requiring collateral. Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of amounts due. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from the Company’s estimates. However, higher than expected bad debts may result in future write-offs that are greater than the Company’s estimates.

The Company also estimates an allowance for sales credits based on the Company’s historical sales credits experience. Historically, actual sales credits have not significantly differed from the Company’s estimates. However, higher than expected sales credits may result in future write-offs that are greater than the Company’s estimates. The allowances for doubtful accounts and sales credits are included in accounts receivable, net in the accompanying consolidated balance sheets.

Stock-Based Compensation

The Company accounts for share-based payment awards by measuring employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date.  The Company recognizes stock-based compensation expense on a straight-line basis over the awards’ vesting period, adjusted for estimated forfeitures.

The Company values 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.  The use of the option valuation model requires the input of assumptions, including the fair value of the Company’s common stock, the expected life, and the expected stock price volatility based on peer companies.  Stock options are granted with exercise prices not less than the fair market value of the Company’s common stock at the date of grant.  Additionally, the recognition of expense requires the estimation of the number of options that will ultimately vest and the number of options that will ultimately be forfeited. Options generally vest ratably over a four-year period, except those options granted to non-employees, portions of which may vest immediately or ratably over two years. Options expire ten years from the date of grant.

XML

Stock-Based Compensation (Details) (USD $)	9 Months Ended		9 Months Ended	3 Months Ended	9 Months Ended	1 Months Ended	9 Months Ended	1 Months Ended	3 Months Ended	9 Months Ended	1 Months Ended				3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012 2006 Plan stock options	Sep. 30, 2012 2012 Plan	Sep. 30, 2012 Restricted common stock	Sep. 30, 2012 Restricted common stock	May 31, 2011 Restricted common stock Condaptive	Sep. 30, 2012 Restricted common stock Condaptive	Apr. 30, 2012 2012 Plan RSUs	Sep. 30, 2012 2012 Plan RSUs	Sep. 30, 2012 2012 Plan RSUs	Sep. 30, 2012 Stock Option Plans	Jul. 31, 2012 Stock Option Plans	Mar. 31, 2012 Stock Option Plans	Jan. 31, 2012 Stock Option Plans	Sep. 30, 2012 Stock Option Plans	Sep. 30, 2011 Stock Option Plans	Sep. 30, 2012 Stock Option Plans	Sep. 30, 2011 Stock Option Plans	Sep. 30, 2012 Stock Option Plans Minimum	Sep. 30, 2011 Stock Option Plans Minimum	Sep. 30, 2012 Stock Option Plans Minimum	Sep. 30, 2011 Stock Option Plans Minimum	Sep. 30, 2012 Stock Option Plans Maximum	Sep. 30, 2011 Stock Option Plans Maximum	Sep. 30, 2012 Stock Option Plans Maximum	Sep. 30, 2011 Stock Option Plans Maximum
Stock-Based Compensation
Additional shares reserved for issuance			3,250,000
Options outstanding to purchase an aggregate shares of common stock at the end of the period (in shares)		6,537,943	456,750								6,994,693				6,994,693		6,994,693
RSUs outstanding at the end of the period (in shares)									420,107	420,107
Number of shares under contingent right to receive share of common stock									1
Shares available for future grants			2,373,143
Stock-based compensation expense				$ 2,000,000	$ 2,800,000				$ 501,000	$ 612,000					$ 734,000	$ 231,000	$ 1,900,000	$ 506,000
Assumptions used for estimating the fair value of stock options granted to employees
Risk-free interest rate (as a percent)																			0.80%	1.20%	0.80%	1.20%	0.90%	1.90%	1.30%	2.40%
Expected life															6 years					5 years 10 months 24 days	5 years 8 months 12 days	5 years 8 months 12 days		6 years 1 month 6 days	6 years 1 month 6 days	6 years 1 month 6 days
Expected volatility (as a percent)															55.00%					44.00%	53.00%	44.00%		45.00%	55.00%	47.00%
Dividend yield (as a percent)															0.00%	0.00%	0.00%	0.00%
Weighted-average grant date fair value (in dollars per share)															$ 6.40	$ 1.36	$ 5.82	$ 1.35
Number
Options outstanding at the beginning of the period (in shares)		6,537,943												7,650,498			7,650,498
Granted (in shares)											214,400	109,600	142,250	106,250			572,500
Exercised (in shares)																	(1,147,447)
Forfeited (in shares)																	(66,390)
Expired (in shares)																	(14,468)
Options outstanding at the end of the period (in shares)		6,537,943	456,750								6,994,693				6,994,693		6,994,693
Options vested and exercisable at the end of the period (in shares)											4,699,100				4,699,100		4,699,100
Options vested and expected to vest at the end of the period (in shares)											6,948,963				6,948,963		6,948,963
Weighted-Average Exercise Price
Options outstanding at the beginning of the period (in dollars per share)														$ 1.11			$ 1.11
Granted (in dollars per share)											$ 12.24	$ 12.85	$ 13.00	$ 6.00			$ 11.39
Exercised (in dollars per share)																	$ 0.44
Forfeited (in dollars per share)																	$ 4.65
Expired (in dollars per share)																	$ 0.24
Options outstanding at the end of the period (in dollars per share)											$ 2.03				$ 2.03		$ 2.03
Options vested and exercisable at the end of the period (in dollars per share)											$ 0.78				$ 0.78		$ 0.78
Options vested and expected to vest at the end of the period (in dollars per share)											$ 2.00				$ 2.00		$ 2.00
Weighted-Average Remaining Contractual Term (in years)
Options outstanding at the end of the period																	6 years 11 months 16 days
Options vested and exercisable at the end of the period																	6 years 1 month 28 days
Options vested and expected to vest at the end of the period																	6 years 11 months 12 days
Aggregate Intrinsic Value
Options outstanding at the end of the period											86,171,000				86,171,000		86,171,000
Options vested and exercisable at the end of the period											63,782,000				63,782,000		63,782,000
Options vested and expected to vest at the end of the period											85,843,000				85,843,000		85,843,000
Stock-based compensation, additional disclosures
Compensation cost related to unvested awards not yet recognized											4,700,000				4,700,000		4,700,000
Weighted-average period over which unrecognized compensation expense is expected to be recognized					2 years 4 months 24 days					3 years 10 months							3 years 1 month 6 days
Aggregate intrinsic value of options exercised																	17,100,000	1,100,000
Summary by grant date of the number of shares of common stock granted, exercise price and estimated fair value per share
Number of Shares Underlying Options Granted											214,400	109,600	142,250	106,250			572,500
Exercise Price per Share (in dollars per share)											$ 12.24	$ 12.85	$ 13.00	$ 6.00			$ 11.39
Restricted Common Stock
Number of shares issued to certain stockholders of acquiree entity who became employees of the Company						1,448,080		17,307	402,800
Period of anniversary of issuance on which portion of the shares were released						1 year
Maximum repurchase price of unvested shares (in dollars per share)						$ 0.001
Stock-based compensation expense				2,000,000	2,800,000				501,000	612,000					734,000	231,000	1,900,000	506,000
Number of shares on which restrictions were released							964,495
Fair value of restricted stock						4,500,000
Unrecognized compensation expense relating to the restricted stock awards and restricted stock units				2,400,000	2,400,000				4,500,000	4,500,000
Aggregate intrinsic value of the unvested restricted stock				6,900,000	6,900,000
Restricted Stock Units (RSU's)
Shares granted						1,448,080		17,307	402,800
Vesting period	4 years									4 years
Recognized non-cash stock based compensation expense				2,000,000	2,800,000				501,000	612,000					734,000	231,000	1,900,000	506,000
Unrecognized compensation expense relating to the restricted stock awards and restricted stock units				$ 2,400,000	$ 2,400,000				$ 4,500,000	$ 4,500,000
Weighted-average period over which unrecognized compensation expense is expected to be recognized					2 years 4 months 24 days					3 years 10 months							3 years 1 month 6 days

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Redeemable Convertible Preferred Stock ("preferred stock") (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	9 Months Ended			1 Months Ended	9 Months Ended			1 Months Ended	9 Months Ended			1 Months Ended	9 Months Ended			1 Months Ended	9 Months Ended			1 Months Ended	9 Months Ended
	Apr. 30, 2012	Sep. 30, 2012	Dec. 31, 2011	Dec. 31, 2008	Apr. 30, 2012 Series A-1	Sep. 30, 2012 Series A-1	Apr. 03, 2012 Series A-1	Dec. 31, 2011 Series A-1	Apr. 30, 2012 Series A-2	Sep. 30, 2012 Series A-2	Apr. 03, 2012 Series A-2	Dec. 31, 2011 Series A-2	Apr. 30, 2012 Series B	Sep. 30, 2012 Series B	Apr. 03, 2012 Series B	Dec. 31, 2011 Series B	Apr. 30, 2012 Series C	Sep. 30, 2012 Series C	Apr. 03, 2012 Series C	Dec. 31, 2011 Series C	Apr. 30, 2012 Series D	Sep. 30, 2012 Series D	Apr. 03, 2012 Series D	Dec. 31, 2011 Series D
Preferred stock
Price per Share (in dollars per share)							$ 0.21				$ 0.53				$ 1.18				$ 1.49				$ 3.26
Number of Shares		0	0			0	6,341,465	6,341,465		0	9,448,220	9,448,220		0	12,686,855	12,686,855		0	10,759,630	10,759,630		0	8,442,833	8,442,833
Conversion Price per Share (in dollars per share)				$ 1.18			$ 0.21				$ 0.53				$ 1.18				$ 1.49				$ 3.26
Redeemable convertible preferred stock:
Preferred stock						$ 1,880				$ 7,033				$ 19,882				$ 18,441				$ 29,432
Preferred stock dividends accreted for series	1,329	1,329			32	32			120	120			343	343			320	320			514	514
Accretion of issuance costs for series	6	6											1	1			3	3			2	2
Conversion of preferred stock to common stock	(48)	(78,003)				(1,912)				(7,153)				(20,226)				(18,764)				(29,948)
Conversion of preferred stock to common stock (in shares)	47,679,003
Preferred stock
Conversion of redeemable convertible preferred stock to common stock (in shares)	47,679,003
Undesignated preferred stock, shares authorized		5,000,000
Undesignated common stock, shares authorized		250,000,000

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Net Loss Per Common Share (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Redeemable convertible preferred stock: Series A-1
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding		6,341,465		6,341,465
Redeemable convertible preferred stock: Series A-2
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding		9,448,220		9,448,220
Redeemable convertible preferred stock: Series B
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding		12,686,855		12,686,855
Redeemable convertible preferred stock: Series C
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding		10,759,630		10,759,630
Redeemable convertible preferred stock: Series D
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding		8,442,833		8,442,833
Restricted common stock
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding	483,585	1,448,080	483,585	1,448,080
Warrant to purchase Series B preferred stock/common stock
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding		50,750		50,750
Stock options
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding	6,994,693	7,488,450	6,994,693	7,488,450
RSUs
Anti-dilutive securities
Anti-dilutive securities excluded from the calculation of weighted average common shares outstanding	420,107		420,107

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Income Taxes (Details) (USD $)	9 Months Ended
	Sep. 30, 2011
Income Taxes
Discrete income tax benefit	$ 495,000

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Description of Business

9 Months Ended

Sep. 30, 2012

Description of Business

Description of Business

1.Description of Business

Millennial Media, Inc. (the ‘‘Company’’) was incorporated in the state of Delaware in May 2006. The Company is engaged in the business of providing mobile advertising solutions to advertisers and developers. Its technology, tools and services help developers to maximize their advertising revenue, acquire users and gain insight about their users. The Company offers advertisers significant audience reach, sophisticated targeting capabilities and the ability to deliver rich and engaging ad experiences to consumers on their mobile connected devices.

On April 3, 2012, the Company closed its initial public offering (“IPO”) of common stock in which the Company sold and issued 9,873,270 shares of common stock. Upon closing of the IPO, all of the redeemable convertible preferred stock outstanding automatically converted into 47,679,003 shares of common stock, based on the shares of redeemable convertible preferred stock outstanding as of April 3, 2012. In addition, the outstanding Series B warrant automatically converted into a warrant to purchase common stock, and the preferred stock warrant liability of $1.0 million as of April 3, 2012 was reclassified to additional paid-in capital.

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Geographic Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 segment	Sep. 30, 2011
Geographic Information
Number of operating segments			1
Number of reportable segments			1
Revenue
Domestic	$ 41,119	$ 21,495	$ 104,856	$ 62,363
International	6,247	3,694	14,851	6,766
Total	$ 47,366	$ 25,189	$ 119,707	$ 69,129

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 122,404	$ 16,707
Accounts receivable, net of allowances of $1,216 and $2,217 as of December 31, 2011 and September 30, 2012, respectively	51,176	34,986
Prepaid expenses and other current assets	2,119	1,417
Total current assets	175,699	53,110
Property and equipment, net	5,777	3,688
Goodwill	1,348	1,348
Intangible assets, net	980	1,179
Deferred offering costs		1,985
Other assets	634	575
Total assets	184,438	61,885
Current liabilities:
Accounts payable and accrued expenses	3,176	2,883
Accrued cost of revenue	28,227	20,963
Accrued payroll and payroll related expenses	6,431	5,153
Deferred revenue	219	157
Total current liabilities	38,053	29,156
Series B warrant outstanding		183
Other long-term liabilities	267	299
Total liabilities	38,320	29,638
Redeemable convertible preferred stock:
Total redeemable convertible preferred stock		76,668
Stockholders' (deficit) equity:
Preferred stock
Common stock, $0.001 par value, 250,000,000 shares authorized, 18,011,035 and 76,757,515 shares issued and outstanding as of December 31, 2011 and September 30, 2012, respectively	75	17
Additional paid-in capital	198,687
Accumulated other comprehensive loss	(52)	(25)
Accumulated deficit	(52,592)	(44,413)
Total stockholders' (deficit) equity	146,118	(44,421)
Total liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity	184,438	61,885
Series A-1 preferred stock
Stockholders' (deficit) equity:
Preferred stock		1,880
Series A-2 preferred stock
Stockholders' (deficit) equity:
Preferred stock		7,033
Series B preferred stock
Stockholders' (deficit) equity:
Preferred stock		19,882
Series C preferred stock
Stockholders' (deficit) equity:
Preferred stock		18,441
Series D preferred stock
Stockholders' (deficit) equity:
Preferred stock		$ 29,432

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Consolidated Statement of Changes in Stockholders' (Deficit) Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Balance at Dec. 31, 2011	$ (44,421)	$ 17		$ (25)	$ (44,413)
Balance (in shares) at Dec. 31, 2011	18,011,035	18,011,035
Increase (Decrease) in Stockholders' Equity
Exercise of a warrant to purchase common stock (in shares)		46,760
Exercise of stock options	499		499
Exercise of stock options (in shares)		1,147,447
Stock-based compensation expense	5,273		5,273
Accretion of dividends on redeemable convertible preferred stock	(1,328)		(1,136)		(192)
Accretion of issuance costs on redeemable convertible preferred stock	(6)				(6)
Conversion of redeemable convertible preferred stock to common stock	78,003	48	77,955
Conversion of redeemable convertible preferred stock to common stock (in shares)		47,679,003
Conversion of Series B warrant to common stock warrant	1,017		1,017
Issuance of common stock in initial public offering, net of issuance costs	115,089	10	115,079
Issuance of common stock in initial public offering, net of issuance costs (in shares)		9,873,270
Net loss	(7,981)				(7,981)
Foreign currency translation adjustments	(27)			(27)
Balance at Sep. 30, 2012	$ 146,118	$ 75	$ 198,687	$ (52)	$ (52,592)
Balance (in shares) at Sep. 30, 2012	76,757,515	76,757,515

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Net Loss Per Common Share (Tables)

9 Months Ended

Sep. 30, 2012

Net Loss Per Common Share

Schedule of anti-dilutive securities excluded from the calculation of weighted average common shares outstanding

	Three and Nine Months Ended September 30,
	2011	2012
Redeemable convertible preferred stock:
Series A-1	6,341,465	—
Series A-2	9,448,220	—
Series B	12,686,855	—
Series C	10,759,630	—
Series D	8,442,833	—
Unvested restricted common stock	1,448,080	483,585
Warrant to purchase Series B preferred stock/common stock	50,750	—
Stock options	7,488,450	6,994,693
RSUs	—	420,107

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Description of Business (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	9 Months Ended
	Apr. 30, 2012	Sep. 30, 2012
Initial Public Offering
Common stock shares sold and issued under IPO	9,873,270
Conversion of redeemable convertible preferred stock to common stock (in shares)	47,679,003
Conversion of Series B warrant to common stock warrant	$ 1,000	$ 1,017

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities
Net loss	$ (7,981)	$ (417)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Stock-based compensation expense	5,273	1,104
Non-cash change in fair value of Series B warrant prior to conversion	834	62
Bad debt expense	1,123	101
Deferred income taxes		(483)
Depreciation and amortization	1,593	456
Amortization of deferred financing fees	21	6
Changes in assets and liabilities, net of acquired balances:
Accounts receivable	(17,312)	(5,784)
Prepaid expenses and other current assets	(695)	(672)
Other assets	(150)	(175)
Accounts payable and accrued expenses	2,274	503
Accrued cost of revenue	7,264	2,754
Accrued payroll and payroll related expenses	1,263	537
Other long-term liabilities	62	211
Deferred revenue	(34)	(287)
Net cash and cash equivalents used in operating activities	(6,465)	(2,084)
Cash flows from investing activities
Payments for acquisitions, net of cash acquired		(2,060)
Purchases of property and equipment	(3,480)	(2,262)
Net cash and cash equivalents used in investing activities	(3,480)	(4,322)
Cash flows from financing activities
Proceeds from issuance of common stock, net of offering costs	115,089
Payment of deferred offering costs		(614)
Payment of deferred financing fees		(52)
Proceeds from exercises of stock options	499	122
Repurchase and retirement of common shares		(827)
Net cash and cash equivalents (used in) provided by financing activities	115,588	(1,371)
Effect of exchange rates on cash and cash equivalents	54	(11)
Net (decrease) increase in cash and cash equivalents	105,697	(7,788)
Cash and cash equivalents, beginning of the period	16,707	27,803
Cash and cash equivalents, end of the period	122,404	20,015
Supplemental disclosure of noncash investing and financing activities
Issuance of common stock in connection with the Condaptive acquisition		75
Accretion of dividends on redeemable convertible preferred stock	1,328	3,728
Accretion of issuance costs on redeemable convertible preferred stock	$ 6	$ 25

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2012	Apr. 03, 2012	Dec. 31, 2011
Accounts receivable, allowances (in dollars)	$ 2,217		$ 1,216
Preferred stock, par value	$ 0.001		$ 0.001
Preferred stock, shares authorized	5,000,000		5,000,000
Preferred stock, shares issued	0		0
Preferred stock, shares outstanding	0		0
Common stock, par value (in dollars per share)	$ 0.001		$ 0.001
Common stock, shares authorized	250,000,000		250,000,000
Common stock, shares issued	76,757,515		18,011,035
Common stock, shares outstanding	76,757,515		18,011,035
Series A-1 preferred stock
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	0	0	6,341,465
Preferred stock, shares issued	0	6,341,465	6,341,465
Preferred stock, shares outstanding	0	0	6,341,465
Series A-2 preferred stock
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	0	0	9,448,220
Preferred stock, shares issued	0	9,448,220	9,448,220
Preferred stock, shares outstanding	0	0	9,448,220
Series B preferred stock
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	0	0	12,737,605
Preferred stock, shares issued	0	12,686,855	12,686,855
Preferred stock, shares outstanding	0	0	12,686,855
Series C preferred stock
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	0	0	10,759,630
Preferred stock, shares issued	0	10,759,630	10,759,630
Preferred stock, shares outstanding	0	0	10,759,630
Series D preferred stock
Preferred stock, par value	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	0	0	8,442,833
Preferred stock, shares issued	0	8,442,833	8,442,833
Preferred stock, shares outstanding	0	0	8,442,833

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Subsequent Events

3 Months Ended

Sep. 30, 2011

Subsequent Events

Subsequent Events

10.Subsequent Event

On October 29, 2012, the Company closed a registered public offering of its common stock in which the Company issued and sold, and certain selling stockholders sold, a total of 11,500,000 shares of common stock (including the full exercise of the underwriters’ option to purchase additional shares) at a public offering price of $14.15 per share. The Company received net proceeds from this offering of approximately $11.7 million (after deducting underwriting discounts and estimated offering expenses), from the issuance and sale of 921,952 shares of common stock in the offering. The selling stockholders sold the remainder of the shares sold in the offering, and the Company did not receive any proceeds from the sale of such shares.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Document and Entity Information
Entity Registrant Name	Millennial Media Inc.
Entity Central Index Key	0001372375
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		78,337,477
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Summary of Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying unaudited consolidated financial statements.

Interim Consolidated Financial Information

Interim Consolidated Financial Information

The accompanying unaudited consolidated financial statements and footnotes have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the Company’s financial position, results of operations, changes in stockholders’ (deficit) equity and cash flows. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes presented in the Company’s prospectus filed with the Securities and Exchange Commission (“SEC”) on October 24, 2012.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (“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 (‘‘IASB’’) to develop a single, converged fair value framework. While the ASU is largely consistent with existing fair value measurement principles in U.S. 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 the 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. The Company adopted ASU 2011-04 effective January 1, 2012. This adoption did not have an impact on the Company’s 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 ASU 2011-08 is to reduce the cost and complexity of the annual goodwill impairment test by providing entities an 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. The Company adopted ASU 2011-08 effective January 1, 2012. This adoption did not have an impact on the Company’s financial position, results of operations or cash flows.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition and Deferred Revenue

Revenue Recognition and Deferred Revenue

The Company recognizes revenue based on the activity of mobile users viewing advertisements through developer applications and mobile websites. Revenues are recognized when the related advertising services are delivered based on the specific terms of the advertising contract, and are commonly based on the number of ads delivered, or views, clicks or actions by users on mobile advertisements. The Company recognizes revenue based on these terms because the services have been provided, the fees the Company charges are fixed or determinable, persuasive evidence of an arrangement exists, and collectability is reasonably assured.

In the normal course of business, the Company acts 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 the Company is acting as the principal or an agent in the transaction. In determining whether the Company acts as the principal or an agent, the Company follows the accounting guidance for principal-agent considerations. While none of the factors identified in this guidance are individually considered presumptive or determinative, because the Company is the primary obligor and is responsible for (i) identifying and contracting with third-party advertisers, (ii) establishing the selling prices of the advertisements sold, (iii) performing all billing and collection activities including retaining credit risk and (iv) bearing sole responsibility for fulfillment of the advertising, the Company acts as the principal in these arrangements and therefore reports revenue earned and costs incurred on a gross basis.

Deferred revenue arises as a result of differences between the timing of revenue recognition and receipt of cash from the Company’s customers. As of December 31, 2011 and September 30, 2012 there was $157,000 and $219,000, respectively, of services for which cash payments were received in advance of the Company’s performance of the service under the arrangement and recorded as deferred revenue in the accompanying unaudited consolidated balance sheets.

Cost of Revenue

Cost of Revenue

Cost of revenue consists primarily of amounts due to developers for the advertising utilized in running mobile advertisements.  These amounts are typically either a percentage of the advertising revenue earned by the Company based on mobile advertisements that are run on each developer’s application or mobile website or a fixed fee for the ad space.  The Company recognizes the cost of revenue as the associated revenue is recognized, on a developer by developer basis during the period the advertisements run on the developer’s advertising application or mobile website.  Costs owed to developers but not yet paid are recorded as accrued cost of revenue.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalent accounts may exceed federally insured limits at times. The Company has not experienced any losses on cash and cash equivalents to date. To manage accounts receivable risk, the Company evaluates the creditworthiness of its customers and maintains an allowance for doubtful accounts.

During the three months ended September 30, 2011, one customer accounted for greater than 10% of revenue. During the three months ended September 30, 2012, no customer accounted for greater than 10% of revenue.

During the nine months ended September 30, 2011 and 2012, no customer accounted for greater than 10% of revenue.

As of December 31, 2011 and September 30, 2012, no customer accounted for greater than 10% of accounts receivable.

Accounts Receivable and Allowance for Doubtful Accounts and Sales Credits

Accounts Receivable and Allowance for Doubtful Accounts and Sales Credits

The Company extends credit to customers without requiring collateral. Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The Company utilizes the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of amounts due. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from the Company’s estimates. However, higher than expected bad debts may result in future write-offs that are greater than the Company’s estimates.

The Company also estimates an allowance for sales credits based on the Company’s historical sales credits experience. Historically, actual sales credits have not significantly differed from the Company’s estimates. However, higher than expected sales credits may result in future write-offs that are greater than the Company’s estimates. The allowances for doubtful accounts and sales credits are included in accounts receivable, net in the accompanying consolidated balance sheets.

Stock-Based Compensation

Stock-Based Compensation

The Company accounts for share-based payment awards by measuring employee services received in exchange for all equity awards granted based on the fair value of the award as of the grant date.  The Company recognizes stock-based compensation expense on a straight-line basis over the awards’ vesting period, adjusted for estimated forfeitures.

The Company values 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.  The use of the option valuation model requires the input of assumptions, including the fair value of the Company’s common stock, the expected life, and the expected stock price volatility based on peer companies.  Stock options are granted with exercise prices not less than the fair market value of the Company’s common stock at the date of grant.  Additionally, the recognition of expense requires the estimation of the number of options that will ultimately vest and the number of options that will ultimately be forfeited. Options generally vest ratably over a four-year period, except those options granted to non-employees, portions of which may vest immediately or ratably over two years. Options expire ten years from the date of grant.

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Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenue	$ 47,366	$ 25,189	$ 119,707	$ 69,129
Cost of revenue	28,005	15,293	71,683	42,536
Gross profit	19,361	9,896	48,024	26,593
Operating expenses:
Sales and marketing	5,922	3,203	16,561	10,179
Technology and development	4,667	1,518	10,084	3,316
General and administrative	10,491	5,382	28,428	13,946
Total operating expenses	21,080	10,103	55,073	27,441
Loss from operations	(1,719)	(207)	(7,049)	(848)
Interest and other expense
Interest expense	(14)	(1)	(52)	(2)
Other expense		(36)	(834)	(62)
Total interest and other expense	(14)	(37)	(886)	(64)
Loss before income taxes	(1,733)	(244)	(7,935)	(912)
Income tax benefit (expense)	(36)	2	(46)	495
Net loss	(1,769)	(242)	(7,981)	(417)
Accretion of dividends on redeemable convertible preferred stock		(1,259)	(1,328)	(3,728)
Net loss attributable to common stockholders	(1,769)	(1,501)	(9,309)	(4,145)
Net loss per share:
Basic and diluted (in dollars per share)	$ (0.02)	$ (0.09)	$ (0.17)	$ (0.25)
Weighted average common shares outstanding:
Basic and diluted (in shares)	75,498,564	16,400,211	55,146,195	16,336,295
Stock-based compensation expense included above:
Stock-based compensation expense			5,273	1,104
Sales and marketing
Stock-based compensation expense included above:
Stock-based compensation expense	286	49	410	112
Technology and development
Stock-based compensation expense included above:
Stock-based compensation expense	2,037	385	2,889	621
General and administrative
Stock-based compensation expense included above:
Stock-based compensation expense	$ 903	$ 170	$ 1,974	$ 371

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Redeemable Convertible Preferred Stock ("preferred stock")

9 Months Ended

Sep. 30, 2012

Redeemable Convertible Preferred Stock ("preferred stock")

Redeemable Convertible Preferred Stock ("preferred stock")

5.Redeemable Convertible Preferred Stock (“preferred stock”)

The following table summarizes the Company’s issuances of preferred stock:

Issue Date	Name	Price per Share		Number of Shares	Conversion Price per Share
July 2006	Series A-1	$	0.21	6,341,465	$	0.21
December 2006	Series A-2	$	0.53	9,448,220	$	0.53
November 2007	Series B	$	1.18	12,686,855	$	1.18
November 2009	Series C	$	1.49	10,759,630	$	1.49
December 2010	Series D	$	3.26	8,442,833	$	3.26

Series A-1, Series A-2, Series B, Series C, and Series D are collectively referred to as the Series Preferred. Price per share above for each series of preferred stock excludes the cost of issuance.

Summary of Activity

The following table presents a summary of activity for the Series Preferred issued and outstanding for the nine months ended September 30, 2012 (in thousands):

	Redeemable Convertible Preferred Stock
	Series A-1			Series A-2			Series B			Series C			Series D			Total Amount
Balance, December 31, 2011	$	1,880		$	7,033		$	19,882		$	18,441		$	29,432		$	76,668
Preferred stock dividends accreted for Series A-1 preferred stock	32			—			—			—			—			32
Preferred stock dividends accreted for Series A-2 preferred stock	—			120			—			—			—			120
Preferred stock dividends accreted for Series B preferred stock	—			—			343			—			—			343
Preferred stock dividends accreted for Series C preferred stock	—			—			—			320			—			320
Preferred stock dividends accreted for Series D preferred stock	—			—			—			—			514			514
Accretion of issuance costs	—			—			1			3			2			6
Conversion of preferred stock to common stock	(1,912		)	(7,153		)	(20,226		)	(18,764		)	(29,948		)	(78,003		)
Balance, September 30, 2012	$	—		$	—		$	—		$	—		$	—		$	—

Upon closing of the Company’s IPO, all outstanding shares of convertible preferred stock converted into an aggregate of 47,679,003 shares of common stock. In addition, immediately following the closing of the IPO, the Company’s certificate of incorporation was amended to authorize 5,000,000 shares of undesignated preferred stock and 250,000,000 shares of common stock.

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Series B Warrant

9 Months Ended

Sep. 30, 2012

Series B Warrant

Series B Warrant

4.Series B Warrant

The Company was a party to a derivative financial instrument in which it issued a Series B warrant allowing the holder to purchase 50,750 shares of Series B preferred stock. The warrant was issued in conjunction with a long-term debt borrowing in 2008. The warrant had a term of 10 years and a stated exercise price of $1.18 per share and could be exercised in whole or in part at any time. The warrant included a cashless exercise option which allowed the holder to receive fewer shares of Series B preferred stock in exchange for the warrant rather than paying cash to exercise. As of December 31, 2011, the warrant was classified as a liability in the accompanying consolidated balance sheet and adjusted to fair value due to the fact that it was exercisable into a redeemable security.

The fair value of the warrant was estimated to be $183,000 at December 31, 2011. On April 3, 2012, upon closing of the Company’s IPO, the warrant converted from a warrant to purchase Series B preferred stock to a warrant to purchase common stock and the liability at its then fair value of $1.0 million was reclassified to additional paid-in capital. Prior to this date, all changes in the fair value of the warrant were recorded in other income (expense) in the accompanying unaudited consolidated statements of operations. The Company recorded other expense of $36,000 and $62,000 for the three and nine months ended September 30, 2011, respectively, related to the fair value adjustment of the warrant. The Company recorded other expense of $0 and $834,000 for the three and nine months ended September 30, 2012, respectively, related to the fair value adjustment of the warrant.

On September 24, 2012, the warrant to purchase common stock was exercised on a cashless basis, resulting in the issuance of 46,760 shares of the Company’s common stock.

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Geographic Information (Tables)

9 Months Ended

Sep. 30, 2012

Geographic Information

Schedule of revenues derived from the sales activity of U.S. and non-U.S. subsidiaries

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2012		2011		2012
Revenue:
Domestic	$	21,495	$	41,119	$	62,363	$	104,856
International	3,694		6,247		6,766		14,851
Total	$	25,189	$	47,366	$	69,129	$	119,707

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

Schedule of fair values of the assets and liabilities

	Balance at December 31, 2011		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	10,909	$	10,909	$	—	$	—
	$	10,909	$	10,909	$	—	$	—
Liabilities:
Series B warrant (2)	$	183	$	—	$	—	$	183
	$	183	$	—	$	—	$	183

	Balance at September 30, 2012		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	108,414	$	108,414	$	—	$	—
	$	108,414	$	108,414	$	—	$	—

(1)Money market funds are classified as cash equivalents in the Company’s consolidated balance sheets. As short-term, highly liquid investments readily convertible to known amounts of cash, with remaining maturities of three months or less at the time of purchase, the Company’s cash equivalent money market funds have carrying values that approximate fair value. Amounts do not include $5.8 million and $14.0 million of operating cash balances as of December 31, 2011 and September 30, 2012, respectively.

(2)The Company used an option pricing model to determine the fair value of the Series B preferred stock warrant. Significant inputs included an estimate of the fair value of the Company’s stock, the remaining contractual life of the warrant, a risk-free rate of interest, and an estimate of the Company’s stock volatility using the volatilities of guideline peer companies.

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes

Income Taxes

8.Income Taxes

The benefit for income taxes for the three and nine months ended September 30, 2011 includes $0 and $495,000, respectively, of discrete tax benefits.  The Company recorded a discrete tax benefit in the second quarter of 2011 due to a change in judgment about the realizability of the Company’s deferred tax assets as the result of a future taxable temporary difference established in connection with the acquisition of Condaptive, Inc.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation

Stock-Based Compensation

6.Stock-Based Compensation

There were options outstanding to purchase an aggregate of 6,537,943 shares of common stock as of September 30, 2012 under the Company’s 2006 Equity Incentive Plan, as amended. In March 2012, the Company established the 2012 Equity Incentive Plan (the “2012 Plan”) pursuant to which the Company has reserved an additional 3,250,000 shares of its common stock for issuance to its employees, directors, and non-employee third parties. As of September 30, 2012, options to purchase 456,750 shares of common stock and 420,107 restricted stock units (“RSUs”) were outstanding under the 2012 Plan. Each RSU represents the contingent right to receive one share of common stock. Upon adoption of the 2012 Plan, no additional awards under the 2006 Equity Incentive Plan are available to be issued. As of September 30, 2012, 2,373,143 shares are available for future grant under the 2012 Plan.

Stock Option Awards

For the three-month periods ended September 30, 2011 and 2012, the Company recognized total stock-based compensation expense associated with stock option awards of $231,000 and $734,000, respectively. For the nine-month periods ended September 30, 2011 and 2012, the Company recognized total stock-based compensation expense associated with stock option awards of $506,000 and $1.9 million, respectively.

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

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2011	2012	2011	2012
Risk-free interest rate	1.2% - 1.9%	0.8% - 0.9%	1.2% — 2.4%	0.8% — 1.3%
Expected life	5.9 — 6.1 years	6.0 years	5.7 — 6.1 years	5.7 — 6.1 years
Expected volatility	44% - 45%	55%	44% — 47%	53% — 55%
Dividend yield	0%	0%	0%	0%
Weighted-average grant date fair value	$1.36	$6.40	$1.35	$5.82

The following table summarizes by grant date the stock options granted from January 1, 2012 through September 30, 2012, as well as the associated per share exercise price, which was equal to the estimated fair value of the Company’s common stock at the grant date.

Grant Date	Number of Shares Underlying Options Granted	Exercise Price per Share
January 24, 2012	106,250	6.00
March 28, 2012	142,250	13.00
July 9, 2012	109,600	12.85
September 11, 2012	214,400	12.24

Prior to the IPO, the Company determined for financial reporting purposes the estimated per share fair value of its 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. In conducting the contemporaneous valuations, the Company considered all objective and subjective factors that it believed to be relevant for each valuation conducted, including management’s best estimate of the Company’s business condition, prospects and operating performance at each valuation date.

The following is a summary of option activity for the nine months ended September 30, 2012:

	Number		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(in thousands)
Options outstanding at January 1, 2012	7,650,498		$	1.11
Granted	572,500		11.39
Exercised	(1,147,447	)	0.44
Forfeited	(66,390	)	4.65
Expired	(14,468	)	0.24
Options outstanding at September 30, 2012	6,994,693		$	2.03	6.96	$	86,171
Options vested and exercisable at September 30, 2012	4,699,100		$	0.78	6.16	63,782
Options vested and expected to vest at September 30, 2012	6,948,963		$	2.00	6.95	85,843

The total compensation cost related to unvested awards not yet recognized as of September 30, 2012 totaled $4.7 million and will be recognized over a weighted-average period of approximately 3.1 years.

The aggregate intrinsic value of all options exercised during the nine-month periods ended September 30, 2011 and 2012 was $1.1 million and $17.1 million, respectively.

Restricted Common Stock

In connection with the acquisition of Condaptive on May 6, 2011, the Company issued 1,448,080 shares of restricted common stock to the employee shareholders of Condaptive. Under the terms of the stock restriction agreements, a portion of the shares of common stock issued was released from restriction on May 6, 2012, the first anniversary of the issuance. Thereafter, shares of common stock will be released from restriction on a monthly basis over a period that expires between May 2013 and December 2014, depending on the individual award, so long as the shareholder remains an employee of the Company as of the date of each such release, until all of the common stock is released from restriction. If the shareholder’s employment terminates prior to the release of all shares from restriction, the shares not yet vested are subject to repurchase by the Company at the lower of $0.001 or the share’s then fair market value. As of September 30, 2012, a total of 964,495 shares had been released from restriction.

Stock-based compensation expense related to the restricted common stock is being recognized ratably over the restriction period based on the fair value of the individual awards. For the three and nine months ended September 30, 2012, the Company recognized stock-based compensation expense associated with restricted common stock of $2.0 million and $2.8 million, respectively. At September 30, 2012, unrecognized compensation expense relating to the restricted stock awards was $2.4 million and the aggregate intrinsic value of the unvested restricted stock was $6.9 million. The unrecognized compensation expense will be amortized on a straight line basis for the remaining 2.4 years.

Restricted Stock Units (RSUs)

In connection with the Company’s IPO, the Company granted 17,307 RSUs under the 2012 Plan all of which vested in October 2012. In September 2012, the Company granted an additional 402,800 RSUs under the 2012 Plan, which RSUs are scheduled to vest in quarterly installments over a four-year period ending in August 2016. For the three and nine months ended September 30, 2012, the Company recognized stock-based compensation expense associated with the RSUs of $501,000 and $612,000, respectively. At September 30, 2012, unrecognized compensation expense related to the RSUs was $4.5 million. The unrecognized compensation expense will be amortized on a straight-line basis through August 2016.

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Net Loss Per Common Share

9 Months Ended

Sep. 30, 2012

Net Loss Per Common Share

Net Loss Per Common Share

7.Net Loss Per Common Share

The Company uses the two-class method to compute net loss per share because the Company has issued securities, other than common stock, that contractually entitle the holders to participate in dividends and earnings of the Company. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. Each series of the Company’s redeemable convertible preferred stock on an as-if-converted basis (prior to their conversion to common shares) as well as the restricted common stock issued in the Condaptive acquisition are entitled to participate in distributions, when and if declared by the board of directors, that are made to common stockholders and as a result are considered participating securities.

Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current year earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the year’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses. Diluted net loss per common share is computed under the two-class method by using the weighted-average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options and warrant. In addition, the Company analyzes the potential dilutive effect of the outstanding participating securities under the “if-converted” method when calculating diluted earnings per share, in which it is assumed that the outstanding participating securities convert into common stock at the beginning of the period. The Company reports the more dilutive of the approaches (two class or “if-converted”) as its diluted net income per share during the period. Due to net losses for the three- and nine-month periods ended September 30, 2011 and 2012, basic and diluted loss per share were the same, as the effect of potentially dilutive securities would have been anti-dilutive.

The following securities have been excluded from the calculation of weighted average common shares outstanding because the effect is anti-dilutive:

	Three and Nine Months Ended September 30,
	2011	2012
Redeemable convertible preferred stock:
Series A-1	6,341,465	—
Series A-2	9,448,220	—
Series B	12,686,855	—
Series C	10,759,630	—
Series D	8,442,833	—
Unvested restricted common stock	1,448,080	483,585
Warrant to purchase Series B preferred stock/common stock	50,750	—
Stock options	7,488,450	6,994,693
RSUs	—	420,107

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Geographic Information

9 Months Ended

Sep. 30, 2012

Geographic Information

Geographic Information

9.Geographic Information

Substantially all assets were held in the United States at December 31, 2011 and September 30, 2012.  The following table summarizes revenues derived from the sales activity of U.S. and non-U.S. subsidiaries (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2012		2011		2012
Revenue:
Domestic	$	21,495	$	41,119	$	62,363	$	104,856
International	3,694		6,247		6,766		14,851
Total	$	25,189	$	47,366	$	69,129	$	119,707

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation

Schedule of assumptions used for estimating the fair value of stock options granted to employees

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2011	2012	2011	2012
Risk-free interest rate	1.2% - 1.9%	0.8% - 0.9%	1.2% — 2.4%	0.8% — 1.3%
Expected life	5.9 — 6.1 years	6.0 years	5.7 — 6.1 years	5.7 — 6.1 years
Expected volatility	44% - 45%	55%	44% — 47%	53% — 55%
Dividend yield	0%	0%	0%	0%
Weighted-average grant date fair value	$1.36	$6.40	$1.35	$5.82

Schedule of summary by grant date of the number of shares of common stock granted, exercise price and estimated fair value per share

Grant Date	Number of Shares Underlying Options Granted	Exercise Price per Share
January 24, 2012	106,250	6.00
March 28, 2012	142,250	13.00
July 9, 2012	109,600	12.85
September 11, 2012	214,400	12.24

Schedule of summary of option activity

	Number		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value(in thousands)
Options outstanding at January 1, 2012	7,650,498		$	1.11
Granted	572,500		11.39
Exercised	(1,147,447	)	0.44
Forfeited	(66,390	)	4.65
Expired	(14,468	)	0.24
Options outstanding at September 30, 2012	6,994,693		$	2.03	6.96	$	86,171
Options vested and exercisable at September 30, 2012	4,699,100		$	0.78	6.16	63,782
Options vested and expected to vest at September 30, 2012	6,948,963		$	2.00	6.95	85,843

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Fair Value Measurements (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Liabilities:
Series B warrant		$ 183,000
Recurring
Liabilities:
Operating cash	14,000,000	5,800,000
Recurring | Fair value
Assets:
Money market funds	108,414,000	10,909,000
Total Assets	108,414,000	10,909,000
Liabilities:
Series B warrant		183,000
Total liabilities		183,000
Recurring | Level 1
Assets:
Money market funds	108,414,000	10,909,000
Total Assets	108,414,000	10,909,000
Recurring | Level 3
Liabilities:
Series B warrant		183,000
Total liabilities		$ 183,000

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Consolidated Statements of Comprehensive Loss (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net loss	$ (1,769)	$ (242)	$ (7,981)	$ (417)
Other comprehensive loss:
Foreign currency translation adjustments	(3)	(5)	(27)	(2)
Total comprehensive loss	$ (1,772)	$ (247)	$ (8,008)	$ (419)

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Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

Fair Value Measurements

3.Fair Value Measurements

The carrying amounts of certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their respective fair values due to their short-term nature. Prior to its conversion to a common stock warrant on April 3, 2012, the Company’s preferred stock warrant was recorded at fair value.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value.  The three tiers are defined as follows:

·Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

·Level 2.  Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

·Level 3.  Unobservable inputs for which there is little or no market data, which require the Company to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments. The following table summarizes the conclusions reached as of December 31, 2011 and September 30, 2012 (in thousands):

	Balance at December 31, 2011		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	10,909	$	10,909	$	—	$	—
	$	10,909	$	10,909	$	—	$	—
Liabilities:
Series B warrant (2)	$	183	$	—	$	—	$	183
	$	183	$	—	$	—	$	183

	Balance at September 30, 2012		Level 1		Level 2		Level 3
Assets:
Money market funds (1)	$	108,414	$	108,414	$	—	$	—
	$	108,414	$	108,414	$	—	$	—

(1)Money market funds are classified as cash equivalents in the Company’s consolidated balance sheets. As short-term, highly liquid investments readily convertible to known amounts of cash, with remaining maturities of three months or less at the time of purchase, the Company’s cash equivalent money market funds have carrying values that approximate fair value. Amounts do not include $5.8 million and $14.0 million of operating cash balances as of December 31, 2011 and September 30, 2012, respectively.

(2)The Company used an option pricing model to determine the fair value of the Series B preferred stock warrant. Significant inputs included an estimate of the fair value of the Company’s stock, the remaining contractual life of the warrant, a risk-free rate of interest, and an estimate of the Company’s stock volatility using the volatilities of guideline peer companies.

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Series B Warrant (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended	1 Months Ended	3 Months Ended	9 Months Ended		12 Months Ended
	Sep. 24, 2012	Apr. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2008	Dec. 31, 2011
Series B Warrant
Number of Series B preferred shares holder of warrant may purchase						50,750
Series B Warrant term						10 years
Series B Warrant exercise price (in dollars per share)						$ 1.18
Series B warrant outstanding							$ 183
Series B Warrant liability reclassified as additional paid-in capital		1,000		1,017
Series B Warrant other expense recorded			$ 36	$ 834	$ 62
Warrants exercised to purchase common stock on cashless basis (in shares)	46,760

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Redeemable Convertible Preferred Stock ("preferred stock") (Tables)

9 Months Ended

Sep. 30, 2012

Redeemable Convertible Preferred Stock ("preferred stock")

Schedule of the issuances of preferred stock prior to the completion of IPO

Issue Date	Name	Price per Share		Number of Shares	Conversion Price per Share
July 2006	Series A-1	$	0.21	6,341,465	$	0.21
December 2006	Series A-2	$	0.53	9,448,220	$	0.53
November 2007	Series B	$	1.18	12,686,855	$	1.18
November 2009	Series C	$	1.49	10,759,630	$	1.49
December 2010	Series D	$	3.26	8,442,833	$	3.26

Summary of activity for the Series Preferred issued and outstanding

	Redeemable Convertible Preferred Stock
	Series A-1			Series A-2			Series B			Series C			Series D			Total Amount
Balance, December 31, 2011	$	1,880		$	7,033		$	19,882		$	18,441		$	29,432		$	76,668
Preferred stock dividends accreted for Series A-1 preferred stock	32			—			—			—			—			32
Preferred stock dividends accreted for Series A-2 preferred stock	—			120			—			—			—			120
Preferred stock dividends accreted for Series B preferred stock	—			—			343			—			—			343
Preferred stock dividends accreted for Series C preferred stock	—			—			—			320			—			320
Preferred stock dividends accreted for Series D preferred stock	—			—			—			—			514			514
Accretion of issuance costs	—			—			1			3			2			6
Conversion of preferred stock to common stock	(1,912		)	(7,153		)	(20,226		)	(18,764		)	(29,948		)	(78,003		)
Balance, September 30, 2012	$	—		$	—		$	—		$	—		$	—		$	—