Investors in ad-tech specialist Rocket Fuel have been on quite a thrilling ride. Drawn by the buzz of the company’s automated platform, which uses artificial intelligence and big data analytics to purchase ad spots on digital exchanges, traders last September rushed into the IPO: the stock was priced at $29 and opened at $59.95.

Rocket Fuel shares by late January were at a new post-IPO high of $71.89, a gain of 147 percent from the offering price. Today, they change hands at around $14.50.

So what caused Rocket Fuel to run out of gas?

Rage Against the Machine

On the surface, the company’s growth story appears to be intact, with 2013 revenue up 126 percent to $240.6 million. In the second quarter, revenue rose 70 percent to $92.6 million, with international revenue gaining 146 percent to $14.7 million, representing 16 percent of total revenue, up from 11 percent in the year-ago period.

Importantly, revenue from new channels (mobile, social and video) in the latest quarter jumped 317 percent to $40.8 million, representing 44 percent of total revenue, up from 39 percent in the first quarter. The supply of video ad space on the platform tripled. Revenue from the mobile category alone made up 31 percent of total revenue versus 26 percent in the first quarter and 19 percent in the fourth quarter of last year.

The company now has 1,445 active customers (up from 784 a year ago), including 60 of the Fortune 100 and 84 of the Ad Age 100. Customers seem to be satisfied, as the revenue retention rate for the trailing 12 months was 149 percent (although down from 161 percent in the first quarter). Rocket Fuel has 14 customers that have spent more than $5 million over their lifetime with the company, with one at more than $10 million.

But Rocket Fuel’s very success is rankling some on the ad agency side, with firms starting to push back against machines doing their jobs. Rocket Fuel shares earlier this month fell 31 percent in one session after the company lowered its revenue-growth outlook for the year, saying ad commitments for future campaigns had come in below its internal forecasts.

Quality Concerns

The reason for the guide-down: Agencies are deciding to maintain control of more of their clients’ ad dollars. That's mainly because they want to keep the business for themselves, but also based on concerns about ad-inventory quality on exchanges. The IAB estimates that between 25 percent and 50 percent of digital spending this year could be wasted on ads that humans will never see. As it turns out, the ad-buying robots might be too smart in that they’re a threat to the agencies, yet not smart enough.

Rocket Fuel maintains it's exploring ways to work more closely with ad agencies, potentially cutting a greater number of these firms in on its deals. It’s also focusing on making brands more aware of the positive return on investment (ROI) over time when it comes to automated buying.

Rocket Fuel’s argument: Agencies should have their brand customers’ best interests at heart and therefore want to use the latest and most promising technology.

A Potential Downside

The problem with increased agency licensing arrangements is they will hurt Rocket Fuel’s gross margin, which in the second quarter managed to hold steady at 49.4 percent on a sequential basis. Rocket Fuel CFO Peter Bardwick recently acknowledged the company needs to close larger deals at volume discounts, trading off margin for growth.