Publicly traded firms have been disclosing their monetary efficiency for the opening quarter of the calendar 12 months in current weeks with traders anxious given the fragile international financial local weather.
Even Google-parent Alphabet fell in need of expectations with its 23% earnings enhance (down from 34% within the earlier 12 months) equating to $68 billion in income for the interval. It resulted in a downturn within the internet advertising big’s inventory value.
True, this downturn is consistent with the broader inventory market, however now some query the fortunes of the present crop of public advert tech firms — a cohort whose quantity elevated exponentially throughout 2021 — as valuations have cooled from their early heady heights.
Earlier this week, The Commerce Desk, simply the poster baby of the sector, posted Q1 revenues of $315 million, representing a 43% enhance. The demand-side platform was additionally keen to spotlight the rising prominence of high-growth sectors, similar to CTV, in its media combine, citing it as its “fastest-growing channel” throughout the interval.
Albeit, market circumstances have seen The Commerce Desk’s market capitalization halve from the lofty heights of its peak $40-plus billion valuation in current weeks. And, just like Alphabet, the DSP’s inventory value slipped after it issued Q2 steerage of $364 million, simply in need of analysts’ expectations, in its newest disclosure.
OpenPath strides forward
A giant a part of The Commerce Desk’s narrative for the reason that starting of 2022 has been the DSP’s effort to chop down on inefficiencies within the programmatic ecosystem, a.ok.a provide path optimization, a key manner for it to drive worth for advertisers, and traders.
Final week, The Commerce Desk introduced an extra 5 media house owners to its earlier SPO initiative OpenPath — BuzzFeed, Forbes, Los Angeles Occasions, MediaVine, and Purple Ventures — taking the overall variety of publishers concerned to greater than a dozen.
When it first unveiled OpenPath in February this 12 months, The Commerce Desk proposed direct integration with publishers with media house owners together with Condé Nast, Gannett, Hearst, and Tribune among the many preliminary cohort of members.
The Commerce Desk has claimed that “greater than 100 publishers have expressed an curiosity” within the scheme which has additionally seen the DSP swap off Google’s Open Bidding, an extra indication of the pair’s rivalry.
In a sequence of supporting statements from the publishers not too long ago inducted to OpenPath, the scheme was described as “progressive” and one that may “assist enhance transparency and efficiency” of programmatically traded media.
SMB publishers line up
Eric Hochberger, CEO and cofounder of Mediavine, added that his firm’s server-side integration with The Commerce Desk represented a primary for the trade. “OpenPath helps guarantee monetization alternatives for unbiased publishers throughout the online, together with the greater than 8,700 at the moment working with Mediavine,” he added.
Equally, Lulu Phongmany, a marketing consultant that helps publishers similar to Digital Developments combine advert tech to maximise revenues, described OpenPath as “a present from the advert tech gods,” significantly small-to-medium-sized gamers.
“Whereas giant publishers have greater budgets to spend on promoting expertise and employees, medium-sized publishers aren’t as fortunate [as the bulk of their budgets are invested in content production,” she said in an emailed statement.
“OpenPath would allow them to tap into premium programmatic dollars without as heavy a lift with regards to supply chain optimization. The publisher can focus on bringing a quality audience to the table and The Trade Desk can focus on bringing quality advertisers,” Phongmany said.
Global placement ID tests
However, the development of OpenPath is not without its critics with some interpreting it as a power move from The Trade Desk as demand- and supply-side players form (seemingly) divergent alliances.
“OpenPath aims to remove the inefficiencies often present in the programmatic supply chain for digital advertising, including opaque and harmful privileges of the walled gardens,” reads a press release promoting the latest round of inductees to the program.
Although, some point out that it would appear duplicative/competitive of some of the key relationships the industry’s agency holding groups are simultaneously forming with SSPs — a tier of the industry that stands to be disintermediated by DSPs integrating directly with publishers.
Since late 2021, The Trade Desk has been implementing an SPO policy known as “global placement ID”, or GPID for short, according to separate sources who requested anonymity due to client sensitivities, to assess the most efficient path to premium publishers’ inventory.
“Then, every month, The Trade Desk picks five high-efficiency paths to that publisher,” said one source, who noted how the cadence of The Trade Desk’s supply path reviews is becoming more rapid. “It works in a number of ways such as reducing the overhead costs of listening to the full bid stream but strategically, it also reminds the exchanges who’s in charge as it asserts their power in the supply chain,” added the source, noting that it can irk media agencies that have brokered preferential deals with SSPs.
Speaking with Digiday earlier in the year, Will Doherty, vp of inventory development at The Trade Desk, acknowledged the ad tech company’s GPID efforts were a “logical” means of performance comparison and that other DSPs were likely to emulate it.
Meanwhile, a separate source who requested to speak on background, further told Digiday how GPID has generated “probably more palace intrigue than it warrants” when explaining how the SPO method functions. Per the source, GPID “is still in its early days” and uses an identifier, which is not attached to an individual user, to enable The Trade Desk to assess the “object permanence”, a.k.a just how unique an SSP’s inventory is. “And then once you can compare like-for-like inventory, you can actually see which path level is the most performant for advertisers,” added the source.
Meanwhile, multiple holding group sources (all of whom requested anonymity) spoke of the umbrage some on Madison Avenue felt at how The Trade Desk’s SPO efforts were communicated to the market. Indeed, some SSPs noted that such an approach could potentially shortchange publishers.
It’s understood that the DSP has been meeting with clients in recent weeks to articulate the benefits of OpenPath. Meanwhile, SSP sources further highlighted how they help publishers maximize and yield for their inventory by optimizing their first-party data in a manner that provides balance to the ecosystem.
Speaking separately, Jeffrey Hirsch, chief commercial officer at PubMatic, noted that SPO demonstrates that buyers want choice and control over the way they buy digital media. “While there is benefit in providing buyers with alternative paths to supply, it is important that they ultimately remain in control,” he noted in an emailed statement. “We’ve partnered with many global agencies and advertisers to implement highly-integrated SPO deals designed to give buyers the level of control they want and drive better ROI for their campaigns.”
Romain Job, chief strategy officer, Smart AdServer, further added, “Publishers are increasingly prioritizing the activation of their own first-party and third-party data. They tell us this is the key reason they will stick with the SSPs that operate transparently and add value to the programmatic transaction.”
The industry’s second-largest DSP
In a recent note to investors, Tom Triscari, a programmatic economist at Lemonade Projects, concluded that The Trade Desk’s take rate, the fee it takes for every dollar spent with it, was in the region of 19%, after it reported net revenues of $1.2 billion, on gross spend of $6.2 billion last year.
He further noted how many in the industry used it as an alternative to Google, which owns the largest DSP in the industry in terms of spend, and that its relationships with media agencies helped generate “a good chunk” of its $1.2 billion in spend. “Another explanation is an ability to take on managed service work from overloaded and understaffed agencies,” wrote Triscari. “The money has to go somewhere.”