Ad tech's journey to public markets is approaching its awkward teenage years

Ad tech’s journey to public markets is approaching its awkward teenage years

The latest slice of earnings calls for digital or ad-tech companies whose stocks are traded on public markets were mixed. What is clear is that the days of unfettered growth are definitely over as the media industry prepares for austerity.

Some of the household names in the industry, such as Alphabet, Meta and Snap, fell short of Wall Street expectations, a potentially ominous harbinger of what is to come. Although many see the fortunes of the latter two companies as a hangover from Apple’s privacy measures, as advertisers, such as D2C vendors who flooded their coffers in the early days of Covid-19, press the pause in spending after the introduction of features such as SKAdNetwork made measuring ROI more difficult.

However, it could be argued that these negative results are offset by the fact that industry holding groups not only recorded growth for the same reference period, but also raised their forecasts for the period ahead, although Dentsu is an exception in this industry sector.

So what about the ad tech industry? This cohort had to contend with the sector’s tarnished reputation with (some) public investors, many of whom bore the scars of investors after making bets on companies like RocketFuel in the mid-2010s as they flocked to companies like the Nasdaq and the NYSE. in the post-pandemic period.

While it may be true that the share price of all ad tech companies in the public markets – including those that predate the “class of 2021” – are down from the highs of the Last year’s newly disclosed earnings point to mixed fortunes.

For example, The Trade Desk, a demand-side platform with a market cap larger than Ford at one point, generated $395 million in the three months to September 30. That revenue represented a 31% year-over-year increase with the company forecasting fourth-quarter revenue of around $500 million.

During the company’s subsequent call with stock analysts, CEO Jeff Green claimed that DSP was winning business because it was an alternative to walled gardens and cited CTV as one of its key drivers of new business – incidentally, YouTube’s revenue contracted over the same period.

Similarly, another public procurement ad tech veteran, Magnite, is positioning itself as the the independent supply-side platform for the CTV marketplace (and ad server, for that matter) posted revenue of $145.8 million for the period, albeit a more modest 11% increase.

Conversely, Criteo reported a 12% decline in revenue (which was $447 million during the period), with Criteo Chief Financial Officer Sarah Glickman noting how the company suffered a ” $14 million signal loss impact” as traditional identifiers such as Apple’s and third-party IDFA. cookies continue to erode.

While the company’s management has also been careful to point out how it aims to shed its roots as a retargeting business, pledging to triple revenue from its retail media business (which generated $41 million in revenue in the last reporting period) over the next three years. years.

Meanwhile, DoubleVerify and Integral Ad Science, two companies that rode the 2021 IPO wave and often struggle to position themselves as software providers, as opposed to “media” or “ad technology,” reported increases of 35% ($112.3 million). ) and 28% ($101.3 million) respectively.

LiveRamp, another company trying to convince the markets that it is a company that offers SaaS products to the media industry – a revenue model that investors often prefer to those more vulnerable to whims ad campaign spending – reported revenue of $147 million, a 16% increase.

Most members of this cohort gave expectations of double-digit revenue growth for the fourth quarter of the year, after all, the fourth quarter is generally considered the most profitable quarter of any given year, but all warned against easing market conditions.

For example, PubMatic (the SSP that arguably launched the latest wave of ad-tech ads) reported an 11% increase in revenue in the third quarter, bringing its total to $64.5 million, and further estimated $78 million in the last quarter of the year.

In their earnings report, PubMatic executives noted that while they expected SSP to outpace the market, “the myriad economic challenges” facing advertisers that are likely to limit their willingness to spend, will probably persist until 2023.

Elsewhere in ad tech, private and recently listed companies are tightening their belts and doing their best to manage market expectations by adopting tactics such as layoffs and lowering revenue forecasts with another extended pause in any future IPO in the sector most likely. results.

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