Three months ago, PubMatic outlined its bounceback plan to capitalize on the return of ad spend after an anemic year-plus for the ad market.
Well, it looks like advertisers are turning the spigot back on. And PubMatic’s investments are paying off.
The SSP reported 14% year-over-year revenue growth, with a total of $84.6 million in Q4. The Q4 advertiser demand was enough to bring PubMatic’s total 2023 revenue to $267 million, a narrow 4% YOY increase.
The biggest spenders are also the ones coming back strongest. PubMatic’s top 10 ad verticals increased spend by 26% compared to Q4 2022.
And, as a complement to budgets returning to hot channels like CTV, display advertising also saw a resurgence.
“The last 18 months has been a fairly weak ad spend environment,” said PubMatic CEO Rajeev Goel, “so our priorities focused on covering the largest customers in our base and innovating for where the growth opportunity is heading.”
Goel pointed to the company’s investments in supply-path optimization (SPO), addressability, omnichannel video and closed-loop attribution for performance marketers as instrumental in laying the ground for growth.
SPO & display
One of PubMatic’s biggest revenue turnarounds actually came from browser display campaigns.
PubMatic’s display ad growth was positive for the first time in 2023, increasing 9% YOY. In the previous quarter, display revenue was down 4%. On mobile alone, display revenue was up 20% from a year ago.
But while display advertising has long been PubMatic’s foundation, SPO is its future. SPO deals – such as spend directed through PubMatic’s Activate offering that facilitates direct connections to CTV and online video publishers – accounted for more than 45% of all the SSP’s activity this quarter. That’s up from 34% in Q4 2022, which puts the company closer to meeting its goal of deriving at least half of its business from SPO deals.
Direct publisher connections are also paying dividends. PubMatic’s 1:1 private marketplace revenue increased 50% for the full year.
PubMatic sees a wide green field it can continue to farm when it comes to SPO, Goel said. According to a recent ANA study, only a third of advertisers have engaged in SPO at all. The average advertiser works with between 15 and 20 SSPs. PubMatic plans to gain market share as advertisers consolidate to fewer, more trusted supply partners.
The revenue picture wasn’t all positive for PubMatic, however. The shuttering of Yahoo’s SSP and changes to how Yahoo monetizes its owned and operated properties have continued to drag PubMatic’s business, said its CFO Steve Pantelick. Discounting Yahoo inventory, PubMatic’s Q4 revenue would have been up by 19% rather than 15%.
Yahoo especially dampened PubMatic’s display rally. Without Yahoo’s inventory in the mix, display revenue was up 27%.
Video & impressions
Despite display revenue on the rebound, a critical metric for PubMatic is its video and CTV supply.
In Q4, 34% of its revenue came from omnichannel video ads. Omnichannel video revenue for the full year grew 7% compared to 2022.
One driver of video growth was the company’s aforementioned Activate offering, which it introduced last May. About 75 advertisers had active Activate campaigns in Q4, a 25% increase over the previous quarter.
PubMatic also grew its stable of programmatically monetized CTV publishers from 214 in Q4 2022 to 271 last quarter. Key additions include Dish Media and Vevo. PubMatic’s CTV impressions were up 39% for the full year.
PubMatic also grew its total number of impressions processed through its SSP to 59.4 trillion in Q4, up 23% YOY.
That’s impressive. Perhaps a bit too impressive, considering it means PubMatic processed about 7,333 ad impressions for each person on Earth – suggesting quite a bit of bid duplication on the platform.
Addressability, attribution & IDs
PubMatic also prioritizes addressability and attribution solutions that could ultimately help advertisers bypass bid duplication within its network.
The number of revenue-generating partners using PubMatic’s Connect audience addressability solution eclipsed 100 in Q4, up 20% from the previous quarter.
In addition, more than 80% of impressions processed by PubMatic’s platform carried some form of alternative ID. The inclusion of an alternative ID in the bid increased publisher revenue by 16% on average.
PubMatic is also working on its Convert commerce media solution, launched last summer. This type of closed-loop attribution with direct merchants or publishers makes the open web more appealing for performance marketers, Goel said. Otherwise, they have only walled garden conversion reports, which carry no user-level data or transparent attribution.
And what about the topic of the moment?
PubMatic is testing Google’s Privacy Sandbox APIs as part of the Privacy Sandbox Market Testing Grants program, Goel said. The company plans to focus more engineering time on the Privacy Sandbox, as well as to grow its Sandbox go-to-market team over the coming months.
Update 2/27/24: A previous version of this story inaccurately stated PubMatic’s full year 2023 revenue and 1:1 PMP revenue growth. Those have been corrected.
