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As SSPs Shut Down, PubMatic Details Plans To Grow Market Share

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PubMatic sees opportunity in SSP consolidation.

The company’s long-term goal is to capture a fifth of the SSP market. And with Yahoo’s SSP shutting down and EMX filing for bankruptcy, there’s plenty of business up for grabs.

So PubMatic plans to continue investing in supply-path optimization (SPO) partnerships and retail media to grow its market share.

Total 2022 revenue was $256.4 million, up 13% year over year, the company reported to investors Tuesday. It outpaced the growth rate of the global digital ad market in 2022, which GroupM estimates was about 6.5%. But the company missed investor expectations, sending the stock sliding nearly 8% in after-hours trading.

And PubMatic grew its estimated market share to about 4.5% last year en route to its ultimate goal of 20%. It currently works with more than 1,600 publisher partners. And it highlighted new partnerships with Roku, TiVo and Kroger as essential to growing its slice of the pie.

But its Q4 numbers reflected the same pain affecting the entire digital advertising industry. Q4 revenue was $74.3 million, down about 1.7% from $75.6 million in Q4 2021.

That drop in Q4 revenue was the result of sharp declines in ad spend in November and December, said PubMatic CEO Rajeev Goel. In fact, 2022 saw the largest sequential drop in November revenue PubMatic has seen for the past 10 years.

An 11% year-over-year drop in display revenue had an outsized effect on PubMatic’s overall numbers, since display is still roughly two-thirds of its business. Display revenue was down 15% in December alone.

However, PubMatic sees a silver lining in omnichannel video, which grew 25% year over year. CTV revenue in particular more than doubled compared to Q4 2021.

2023 road map

PubMatic expects ad spending will remain sluggish through the first half of 2023. “We anticipate a challenging next couple of quarters, but we’re laying the groundwork for margin expansion later this year and into 2024,” said CFO Steve Pantelick.

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PubMatic’s strategy for 2023 is to make investments to capitalize on any eventual resurgence in ad spending, Goel said. And he anticipates that the current economic environment will accelerate programmatic growth as publishers seek more efficient alternatives to managing a direct sales business.

PubMatic’s first priority will be growing its SPO business. Currently, SPO deals with agencies including GroupM, Havas and Horizon Media account for more than 30% of activity on PubMatic’s platform, up from 21% in Q4 2020.

As marketers look to cut unnecessary costs from their ad supply chains, PubMatic’s direct SPO deals could benefit from a shift in spending. “It’s quite possible that this economic environment will accelerate our SPO penetration in 2023,” Goel said.

PubMatic’s second priority is growing its retail media business. The company has spent the past several quarters adapting its existing capabilities in onsite monetization, data management and audience targeting for the retail media market, Goel said. And it plans to roll out a series of new products designed to increase automation scale and efficiency for retail media throughout the year.

PubMatic also sees opportunity in advertisers and publishers seeking alternatives to the Big Tech walled gardens. Growing antitrust regulatory focus on Google and Meta could be another tailwind that propels its business forward.

But its biggest opening to expand its market share is continued consolidation of the SSP market, including the closure of Yahoo’s SSP and EMX’s bankruptcy filing.

“The industry is consolidating down to fewer, bigger platforms,” Goel said. “And we certainly see ourselves as a winner in that process.”

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