Walmart-backed IPO makes brick-and-mortar AI pitch

Two for one. Ibotta is selling investors an artificial intelligence-powered vision of an age-old marketing playbook. The Walmart-backed company, which offers digital rebate coupons, is targeting a valuation of up to $2.6 billion in an initial public offering. Its data-gathering method is simple and profitable. But promised machine-learning savvy and technology-startup-like founder control could be a stretch.

Boss Bryan Leach’s business is simple. A customer snags a coupon on Ibotta’s app, buys the associated product, and then can upload scanned receipts to get a rebate. That’s low-tech, but directly ties a marketing expense to a purchase, without the complicated machinery of, say, Meta Platforms’ online tracking. The cashback might be $3 on a Peppa Pig toy. All told, though, customers have claimed $1.8 billion on Ibotta’s platform since 2011, through both online and in-store purchases; Ibotta says its strength is tracking brick-and-mortar spending, item-by-item. One of its most important partners is Walmart, the nation’s biggest traditional retailer.

Financial results indicate an advantage to being simple. Revenue increased 52% year-on-year in 2023, but sales and research costs are under control, up around 4% and 17%, respectively. E-commerce company Klaviyo, one of the few to make a public debut last year despite a tough market, increased selling and marketing expenses by 84% in 2023, while research spending rose 152%.

The thing is, Ibotta’s valuation hinges on whether investors believe it’s closer to listed commerce peers, or high-flying software companies. In favor of a headier tech aspirations, it’s profitable, sporting a 26% adjusted EBITDA margin. And its prospectus pushes as much of a bleeding-edge image as a coupon company can bear, mentioning AI and its enhancements 37 times.

Whether investors buy that story matters. Ibotta estimates it made as much as $82 million in revenue in 2024’s first quarter. Annualize that to nearly $330 million, and the top of its valuation target implies a multiple of nearly 8 times sales. Peers like Klaviyo and Braze trade on an average multiple of half that. But if Ibotta is compared to a purer advertising technology company, then an implied adjusted EBITDA multiple of 28 times looks staid versus, say, The Trade Desk’s 40 times.

Leach’s tech image extends to governance, too. Like Meta’s boss Mark Zuckerberg, he controls his company through super-voting shares, which can draw investor grumbles. Ibotta is pitching them a deal: buy into this marketing company, get AI-fueled upside. But it’s not offering much of a discount.