PubMatic’s total Q3 revenue grew 11% to $64.5 million despite an industry-wide downturn, but the company doesn’t have high hopes for the rest of the year.
PubMatic told investors on Tuesday it expects ad spend will continue to trend down in Q4. Spending from advertisers in the shopping category is already looking flat YoY, while other categories, such as personal finance, are down 50% YoY, said CFO Steve Pantelick.
It’s not all doom and gloom, though. Certain categories, including travel and automotive, are looking strong for Q4.
But although ad spend is decelerating due to recession fears, PubMatic is planning to capitalize on the eventual rebound by focusing on video, retail media and particularly CTV, which continues to grow.
“We anticipate that ad spend will come back even bigger at some point in the future as it historically has, and we intend to be well-positioned to maximize further market share gains,” said PubMatic CEO Rajeev Goel.
Show me the money
Despite industry-wide softness in spending, some verticals are spending more.
Aggregate spending across the top 10 ad verticals increased roughly 90% YoY, Pantelick said. Travel, food and drink and business, for example, were each up 40% YoY, which helped offset weakness in the shopping, technology and personal finance verticals.
Political ad spending was also up, but that category doesn’t significantly factor into PubMatic’s revenue projections, Pantelick said.
The pullback in ad spending last quarter was most evident in the display category, which declined 3% YoY.
Display is likely to experience a high-single-digit decline in Q4, Pantelick said, and will continue to be under pressure for at least another quarter beyond that, although he predicted an eventual rebound, much like after the worst of the COVID-19 pandemic was over.
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But PubMatic’s investments in mobile, video and CTV saw significant returns. Its omnichannel video business grew 45% YoY and represented 34% of total revenue for Q3.
CTV was the biggest driver of this growth, with revenue up 150% YoY. Q3 was the sixth consecutive quarter during which PubMatic saw its CTV revenue grow by at least 100%.
All systems SPO
Supply-path optimization (SPO) will also continue to be a top priority for PubMatic, Goel said. Economic uncertainty prompts the buy side to consolidate down to fewer trusted partners, which means SPO-focused partnerships will be a source of market share growth, he said.
However, this consolidation dynamic tends to play out more on the buy side than the sell side. Publishers still tend to work with multiple SSPs, Goel said.
Goel pointed to PubMatic’s recent preferred SSP partnership with Havas and its acquisition of measurement and reporting platform Martin in September as examples of moves it’s made to support its SPO efforts.
SPO represented more than 30% of the total activity on PubMatic’s platform in Q3.
Further investments in SPO and addressability, as well as CTV and retail media, will be PubMatic’s priorities for the foreseeable future, Goel said, pointing to PubMatic’s partnership with Kroger.
PubMatic Connect, its audience addressability solution, is another top investment area. Connect, together with recent enhancements to OpenWrap OTT, PubMatic’s Prebid-powered CTV header-bidding solution, will fuel growth as CTV continues to move away from direct IO deals and toward programmatic auctions, Goel said.
“There’s no question that the open internet is gaining share of digital ad budgets at the expense of walled gardens, in part due to content quality and diversification,” he said. “This, along with the shift to fast-growing video and connected TV formats, is forcing buyers and publishers alike to seek greater transparency into and control over their advertising strategies.”
