Headwinds are blowing, but CTV is growing.
Sound familiar? That’s because it’s become an oft-heard refrain from ad tech CEOs this quarter, and Magnite is no different.
Magnite reported 20% year-over-year growth with $137.8 million in revenue for Q2.
But connected TV alone is growing on par with overall revenue – up 19% in Q2, or 52% if you don’t count the impacts of the SpringServe and SpotX acquisitions. CTV is now 42% of Magnite’s business, “up from zero percent in 2019,” CEO Michael Barrett told investors on the company’s Q2 earnings call on Tuesday.
Not bad. But it is a quarter-over-quarter plateau. (The company reported 97% YOY growth in Q1.)
Magnite also reported a $25 million profit loss in Q2, which the company blames on a combination of macroeconomic pressures and outstanding costs related to its $1.17 billion acquisition of SpotX in February.
“Our guidance is conservative, and doesn’t anticipate broad economic improvement through the end of the year,” CFO David Day told investors.
The contribution of Magnite’s desktop-related business to its overall revenue was down to 22% (from 26% last quarter), while mobile stayed stable at 36%.
For reference, PubMatic, which also reported Q2 earnings this week, generated $63 million in revenue, up 27% YoY, but its stock is down more than 32% year-to-date. PubMatic is being conservative with its guidance based on its “assessment of the uncertain economic environment,” according to the company’s CFO Steve Pantelick.
Roku is also blaming most of its slowdown on macroeconomics.
Magnite’s share price dropped 7% during after-hours trading. (Pubmatic’s stayed flat.)
Seas of CTV
Still, Magnite, like The Trade Desk, is optimistic about the streaming opportunity.
Magnite has been building a relationship with Disney for several years, and is hoping to cash in on the streamer’s new ad-supported tier, which Disney confirmed in March.
“We’ve had very good traction recently with a number of large publisher wins, like Disney,” Barrett said, “and we’re seeing larger, more complex publishers use Magnite for monetization and yield optimization.”
It also helps that Magnite has partnerships with big agencies, such as GroupM, for omnichannel campaign activation, he said.
And Magnite is also getting more involved with data.
Magnite recently partnered with LG for access to its automatic content recognition data, which can be used to plan and measure CTV campaigns at scale programmatically. LG is one of the only smart TV manufacturers that shares access to its unique first-party viewership data rather than “[reserving] the use of it against only their own inventory,” Barrett said.
He also noted that partnerships with smart TV OEMs and other FAST channel providers could be a springboard for SpringServe, Magnite’s CTV ad server.
Programmatic possibilities
Magnite is bullish on more CTV inventory becoming available programmatically as more streamers commit to incorporating ads – and it’s not the only SSP trying to ride that wave.
“Netflix’s move into AVOD will put pressure on more content owners to embrace an ad-supported model,” Rajeev Goel, CEO of PubMatic, said on the company’s earnings call earlier this week. “That’s something I expect us to benefit from, because it brings more supply to market.”
Goel also noted that the secular shift to AVOD is attracting budget away from linear.
When Needham analyst Laura Martin asked Barrett on Tuesday about the implications of Microsoft’s deal with Netflix, he predicted that the increase in demand for CTV inventory will push more supply out of walled gardens and into the open programmatic ecosystem.
The industry’s going to see an “expansion of biddable inventory,” Barrett said. At first, most of these programmatic transactions will likely be “invite-only auctions,” as in private marketplace deals, he said, “but that’s the first step to a true programmatic utilization of the premium streaming services.”
When publishers realize the potential of programmatic demand as opposed to direct deals, they’ll continue leaning into real-time biddable inventory, he added.
Especially because publishers will want to take advantage of the high CPMs premium video brings in.
“An open auction environment is really the only way to scale the tens of billions of dollars in the CTV industry,” PubMatic’s Goel said.
