PubMatic is preparing for the day when demand for advertising takes off again
PubMatic’s latest earnings point to continued weakness in the advertising market. But the company is betting on a bright future for CTV, retail media, and view path optimization (SPO).
On Wednesday, SSP reported a 1% decline in year-over-year revenues totaling $63.7 million. That was good enough to beat investors’ expectations.
Although the company sold more inventory than expected, that revenue — which represents 67% of its total portfolio — fell 4% year over year, CFO Steve Pantelek said. CTV revenue also declined 4% year over year. Pantelek blamed both declines on weak demand in July.
With a continued decline in ad spending last year, PubMatic sees itself playing the long game by innovating in CTV and retail media, leaning into the SPO trend and adopting cookieless technology in anticipation of the day when ad demand returns, CEO Rajeev Goel said.
SPO leads CTV
Some of these investments are already transforming PubMatic’s platform: SPO deals now represent 45% of its business, and multichannel video represents 33%.
PubMatic launched Activate, a live TV and video buying solution that cuts out DSP services, in May. It has already been used in 50 campaigns, and was recently launched in the Asia-Pacific region, Goel said.
SPO opportunities like Activate are the most exciting growth opportunities in the market right now, Joel continued, because they’re about “getting closer to buyers and getting a bigger share of their ad budgets in exchange for greater efficiency and control on their part.”
Activation is only compatible with Private Marketplace (PMP) and automated guaranteed trades, not open auction. Joel said PMP deals were up 10% during the quarter, though he didn’t address how much of that increase was due to Activate.
Although multichannel video revenues were down compared to last year, they were up 7% compared to the second quarter. And 252 publishers sold their CTV inventory through the company’s platform in the third quarter.
Yahoo’s influence on the show
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The demise of Yahoo’s SSP service contributed to the decline on the supply side.
In the third quarter, revenue from Yahoo’s owned and operated sites, which comes mostly from display inventory, represented 5% of PubMatic’s revenue, Pantelek said. But he said this stock is not effectively monetizing because Yahoo is transitioning to a new technology group.
Excluding Yahoo, PubMatic’s revenue actually increased by a low-single-digit percentage, he added.
When an investor tracked Yahoo’s impact on PubMatic’s revenue, Joel said it’s a growth opportunity that PubMatic sees as a close partner, “but there’s work to do over the next few quarters.”
Convert, the company’s retail media solution for displaying product listing ads, is also a growth opportunity, but it’s still early days for that solution and retail media in general, Joel said. However, Convert has grown its customer base by 40% since its launch in July.
The death of the third-party cookie also represents an opportunity for PubMatic to increase its market share, Joel said. It said it has integrated 29 alternative identifiers, and only a quarter of the impressions served on its platform have no alternative targeting signal other than a cookie attached. It’s also testing Google’s privacy sandbox.
PubMatic does stress the growing competition between DSPs and SSPs, according to Joel.
When an investor asked him if the company would consider working with The Trade Desk on the publisher’s direct OpenPath initiative, he didn’t rule it out. Instead, he pointed to TTD as a “great long-term partner” and pointed to PubMatic’s integration of its UID2.0 as a sign that the two can work together.
In short, PubMatic’s strategy is to read the first steps about where the industry is headed and adjust accordingly, Joel said. “Our goal is to be really well positioned with the fastest growing segments as we come out of this downturn, which we hope to start seeing in the next couple of quarters.”