Essential Third-Quarter Stats for Ad Tech and Platforms

The ups and downs of various industry leaders

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How ad-tech companies and platforms performed in Q3 2019. Getty Images
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Editor’s note: Adweek worked with Matthew Scott Goldstein, a consultant with a deep knowledge of the media industry, to craft his quarterly newsletter into an Adweek article. Through his findings on various industry earnings calls, we’re bringing you insights about how your favorite brands, agencies, media companies, publishers and tech companies are performing on a quarterly basis. His goal was to go past what the trades were focusing on, which mostly revolved around revenue, and tap into the nitty-gritty data shared on these calls.

This iteration focuses specifically on ad tech and platforms in the 2019 third quarter.

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  • Criteo: Revenue ex-TAC, our key metric to monitor the business, was flat at constant currency at $221 million. New client business drove our performance, especially in the midmarket, offsetting a limited decline in our existing client business, despite continued adoption of our new solutions across the client base. Among the third-quarter highlights, our quarterly net client additions were again positive, with 240 net new clients, in line with our expectations. As in the prior quarter, this was again driven by focused execution and productivity improvements in our midmarket sales teams. Most exciting result for the third quarter is the momentum of our new solutions, which, as a reminder, include all our solutions outside of retargeting. They grew 57% on a revenue ex-TAC basis and now account for 11% of our total business, up from 7% a year ago. Over the past year, identity graph has also grown both in size—we have over 2 billion unique Criteo IDs—and in density: Over 95% of our Criteo IDs now contain long-term persistent identifiers rather than just basic cookies. Announced a new partnership with LiveRamp on IdentityLink. By combining LiveRamp’s identity solution with ours, we offer marketers additional capability to reach their customers in a privacy-by-design manner. We believe this enhanced identity solution is quite unique in the industry and very competitive compared to walled gardens’ own proprietary approach. This combination also broadens our reach by providing access to additional cookieless inventory, including connected TV. Over 4,200 publishers now connect to our direct bidder both on the web and app inventory. Regarding our legacy retargeting business, we saw a decline in the mid-single-digit range on a revenue ex-TAC basis. The softness was mainly concentrated in the large customer segment and is driven by two main factors: first, the much higher penetration we have reached here compared to midmarket; and, second, their delayed investment in mobile app marketing that doesn’t fully compensate for the slow erosion of browser usage yet. As discussed about retail media, we are seeing some of our most sophisticated retailers seek more control over their ad-tech stack. Sometimes, this appetite for control becomes even more important than campaign performance itself.  Google’s first-price: This is important. Google was the last large exchange, plus at a speed to move from second-price to first-price. And we were very well equipped for this transition, because we’ve been developing first-price bidding engines for a long time now. And as a result, their overall impact was likely positive for us because as we believe our first-price bidder is, all things equal, relatively speaking, better than the competition. We could take advantage of this change of Google to first-price to increase our bidding competitiveness. So, all in, it’s been a positive change for us. Second, to evolve from what was perceived as a narrow point solution to an actual tech platform, we made huge efforts migrating our managed services into self-service tools that can be operated directly by our clients, large and small, and their agencies. Regarding CTV, it’s an early market. It’s a very fragmented market today. And it’s a bit like the web, I would say, 15 years ago. So eventually one day it might consolidate into a handful of a super strong walled gardens—where was the web landscape 15 years ago? You had no walled gardens at all. You had a bunch of publishers that are all trying to better monetize inventory. And you mentioned Roku and others: They all looking to increase the value of their inventory and maximize the opportunities to monetize the inventory. And this is high-quality inventory, where you don’t have the typical flow that you have on the web. So this is what it’s promising. Right now, it’s a small market. We are testing the waters there, but I mentioned that as a midterm area of interest for us.
  • Rubicon: Revenue of $37.6 million, reflecting year-over-year revenue growth of 27%. Realized the first, albeit small, revenue from Demand Manager in the fourth quarter. Header bidding caused an explosion in ad requests over the past few years, and we’re focused on ingesting as many impressions as possible to really understand the new market dynamics of header. The third quarter started strong, followed by some volatility, which included: first, Google’s move to a first-price unified auction structure that included Google’s removal of last-look advantage, which had historically hurt win rates of others. Our long-term growth drivers remain unchanged: supply path optimization, video and Demand Manager. We are very pleased with our Demand Manager customer engagement with the additions of Business Insider, L.A. Times and Everyday Health among others. Fourth-quarter guidance: expect to post year-over-year revenue growth of approximately 25%. The year-over-year increase in revenue was once again driven by solid growth in both take rate and ad spend. Mobile revenue grew 26%, our desktop revenue grew 28% and video and audio revenue continued to be growth drivers in the quarter. Not updating our take rate guidance, but, at the beginning of the year, we talked about take rate being in the mid-13s and so we’ll stick with that. For the federal privacy initiative, which frankly we welcome, although we haven’t seen any details—I should be careful—but it sure beats having to do 50 different ones or in the states. Demand Manager: Instead of winning a small portion of a publisher’s inventory in our auction, we’re able to monetize 100% of their inventory, albeit at a much lower take rate. So we’re very excited about it; the traction has been terrific. Who’s their biggest competitor in market: Prebid itself.
  • Telaria: Revenue grew 23% year-over-year to $16.6 million with CTV growing 115%. CTV revenue grew to $7.3 million for the quarter and represents nearly 45% of our revenue, up from 39% of our revenue last quarter. CTV momentum has also driven an impressive 27% increase in platform eCPM, up year over year to $15.68 from $12.32. A recent report from advertising analytics and cross-screen media estimates political ad spend for the next election cycle could reach $6 billion in the U.S. with approximately $1.6 billion of that projected for digital video. With over 30% of U.S. households who are no longer reachable through traditional TV, CTV is becoming essential to reach and engage voters. Roku is a venue for which the vast majority of their ad sales have been direct, a pretty strong validation of that thesis around programmatic driving the future of CTV advertising. EMarketer came out with stats for CTV this year that grow at 40% for the year. The desktop business sees the most negative pressure on it. So if you look at industry statistics, desktop video will actually shrink over the next several years. Reaching a point of subscription fatigue, which we’ve talked about since day one, and there’s going to be a limited portfolio of subscription-based services that people are going to be willing to pay for and the rest of their viewing portfolio will really be made up of AVOD players. And I think that even with rumored transitions of even such things as the Peacock Network, which was supposed to be a fully SVOD network coming out as potentially an AVOD opportunity as well, you’re seeing the increase in advertising-supported platforms out there, actually creating a greater proliferation of opportunities for us as a company to help those guys monetize that inventory. So, again, I think these are great market tailwinds for us.
  • The Trade Desk: Revenue grew 38% year-over-year. Revenue was $164.2 million. Spend on our platform and connected TV was up 145% from Q3 of last year. We have seen strong growth in available CTV inventory, especially in live events. CTV is the most strategically important focus of our business going into 2020. Audio spend was up a stunning 162% year-over-year. Like CTV, audio is a large and growing market, about $3 billion according to PwC digital radio estimates. CTV and audio are two of the most effective forms of advertising because of high audience engagement. In the third quarter, almost half our revenue came from ads on mobile devices, which includes mobile video. In the third quarter, data was up 63% year-over-year. Content providers are not our direct customers. They are our partners. More and more, they are asking to work with us. It’s not just Amazon and Disney, as it’s other major global providers worldwide, including Channel 4 in England, ProSieben in Germany, TF1 in France and pretty much every other significant network and content providers. Seeing game-changing progress from other partners. For example, FreeWheel, the largest ad server in the CTV space, launched their version of header bidding, unified yield. With Amazon, the number of impressions on our platform increased 21 times during the quarter. 95%-plus retention rates. As the worldwide advertising market moves towards $1 trillion, The Trade Desk is perhaps the best-positioned company to win the largest share of the programmatic portion of that market, which is the fastest-growing segment. It’s an interesting move that Roku buys Dataxu. To just give a little bit of context in terms of size, this year, just round numbers, we’ll control a little over $3 billion in spend. They’ll do a little over $100 million in spend at dataxu. On the linear side, figures from Leichtman Research Group shows that the entire traditional linear TV industry lost about 1.53 million subscribers in the second quarter of 2019. Linear broadcasters are fighting for fewer viewers while content costs are going up. That’s a ticking time bomb. For advertisers, that means their ad-to-viewer ratio is worse than ever. Until recently, there’s been a sense that they have nowhere else to go. Expect CTV growth of over 100% again in 2020. Our investment also includes areas such as measurement, as advertisers look for the most precise information on campaign performance. Our measurement tools allow any agency or advertiser to use third parties for verification. This helps the ecosystem become more transparent and avoid the “grading your own homework” syndrome that advertisers experience with walled gardens.
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Matthew Scott Goldstein is a versatile and hands-on, data-driven consultant with deep knowledge of the media business.
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