BARRETT: There isn’t huge customer overlaps for the businesses. But where there is an overlap is for giant media entities looking for a single solution. Companies like Disney or ViacomCBS have video, CTV, display, audio and every other medium. For Rubicon to be a true omnichannel and full-service option as an SSP, it would require massive work in CTV.
ZAGORSKI: Likewise, while we’re heavily invested in TV and video, we’re not, say, a leading provider of header bidding technology. The deal logic makes so much sense largely because we are in the same category, but unlike others SSPs there this massive overlap and duplication.
Expect separate exchanges, not a consolidated one
BARRETT: The header bidding programmatic world – with a business doing 180 billion transactions a day – is fundamentally different than the CTV business. There’s not even a tremendous overlap in how the platforms are used and the kinds of features we each have. And considering how CTV inventory is bought compared to with header bidding (which is to say, without a header integrated directly with OTT apps, smart TVs and broadcasters) you realistically couldn’t collapse it into one exchange even if you wanted to.
ZAGORSKI: I’d say this is an acceleration play across the board. It frees up Telaria to pursue the TV and CTV opportunity with more resources, not just work on integration.
The big benefits of scale and consolidation are really the unsexy, behind the scenes aspects like being on the same infrastructure and bid processing technology. That doesn’t get the attention like the marketplaces, but it makes a big difference and cost savings that drop straight to the bottom line.
Take rates will vary depending on media type and auction type
BARRETT: I think we’ve been clear that our take rate is a blend. Different media types and auction types carry different take rates, and the market has anointed that as the sane model.
ZAGORSKI: Even within our own business we see a huge difference between programmatic types like a direct guaranteed deal compared to an open auction where maybe we’re out bringing unique demand or technology to the table. The take rate may be different when we’re simply the pipes between a publisher and advertiser.
Another big consideration is that CPMs for CTV inventory can be $30-$50. A 15% take rate on a $45 CPM is a big chunk of change, so the economics of tech fees in the CTV space are different.
Rubicon-Telaria will leverage its newfound scale
ZAGORSKI: As markets evolve, scale advantages are increasingly brought to bear. And that’s where programmatic is.
At Telaria, we’ve seen how a unique product offering can help secure exclusive deals like we have with Hulu. As media companies and buyers shrink the platforms they work with, it means we’re a natural first look as an independent SSP.
And without that single scaled, independent platform [there was] a lack of transparency and higher fees since publishers had to work with many similar vendors.
BARRETT: I don’t know that there’s a magical number where we’ve reached scale. I think a company like The Trade Desk has shown that if you could generate that escape velocity and become the scaled, independent platform in the category, than little by little competitors wither away.
It becomes this vicious cycle for those that aren’t growing fast. With the number of vendors a publisher might work going from maybe 20 a few years ago to less than 10 and now often just a few, people stop making bets on companies across the board that they aren’t confident will even be around in a year or two.
So I don’t have a number in mind where we need to be. But being the big, omnichannel, profitable option in the space is the start of that flywheel.
Despite the benefits of scale, there won’t be an SSP roll-up
BARRETT: A strengthened balance sheet is part of the equation here. But I see a roll-up of SSPs through acquisition like that as foolish. The way to do it is to execute and have a superior offering, and the competition will atrophy.
ZAGORSKI: We certainly like their balance sheet. (Rubicon’s gross revenue is roughly quadruple that of Telaria, and creates product investment opportunities.) But yes it’s about being the first door any publisher comes knocking on if they’re looking for an independent provider.