PubMatic is under pressure.
The SSP reported meager YOY revenue growth in Q2, up just a smidge to $63.3 million from $63 million in Q2 of last year.
Its revenue barely budged even as its number of active customers grew 13% YOY to more than 1,750 publishers and it increased the number of advertisers on the platform by almost 30%.
But it wasn’t all doom and gloom on the company’s earnings call Tuesday.
PubMatic touted its CTV partnerships with premium video partners like AMC Networks, DirecTV, Fox, TiVo and Warner Bros. Discovery.
It also talked up two recent product launches. In late July, PubMatic released Convert, a self-serve ad platform for commerce media that offers onsite and offsite monetization across multiple ad formats. And in May, it rolled out Activate, which lets brands and agencies purchase CTV and online video inventory directly.
Growing, growing, gone
Yet monetization was a challenge in Q2.
Although impressions were up – PubMatic’s monetized impressions grew 35% YOY to 48.8 trillion – more impressions don’t necessarily translate to more revenue.
For example, although mobile and desktop display impressions grew year over year, CPMs declined, and display revenue, which makes up 69% of PubMatic’s total revenue, sagged by 1% YOY.
In Q3, PubMatic expects approximately 20% lower CPMs for video and 10% lower CPMs for display, according to CFO Steve Pantelick. CTV revenues are expected to fall YOY as well.
Bad debt-related expenses from MediaMath’s June 30 implosion will also affect PubMatic in the short term, as MediaMath was one of PubMatic’s top 10 DSP buyers and owes the SSP $10.5 million.
It will take a few months to redistribute ad spend to buyers, according to Pantelick.
But Pantelick added that the MediaMath bankruptcy won’t “have any long-term effect” on PubMatic’s business, and those floating ad dollars won’t disappear completely. A couple million in revenue will be deferred as advertisers decide where to divert the spend that would have run on MediaMath, he said.
The long view
Meanwhile, the softer-than-expected CPMs will bounce back once ad spend stabilizes and grows again, Pantelick said.
In the near term, though, CEO Rajeev Goel noted that the substantial growth in ad inventory supply from the likes of Meta and YouTube, combined with “relatively muted” ad budget growth, will exert “downward pressure on CPMs.”
PubMatic is also lapping some tough comps, especially related to CTV. Its CTV revenue grew 150% during Q2 and Q3 last year, and CTV monetizable impressions grew by 300%.
“The point is that we’re not going to grow our CTV impressions 300% this quarter,” Pantelick said. “Let’s call it a very challenging comparable, but the underlying trends of CTV are very robust.”
Hello, SPO
There were some small bright spots in the quarter, though.
Pantelick pointed to PubMatic’s supply-path optimization relationships, for example, many of which are “directly linked to high-value formats, like online video and CTV.”
SPO comprised an all-time high of 40% of PubMatic’s activity last quarter, continuing a steady ascent from 30% a year ago and roughly 35% last quarter.
“Our long-term expectation has been that SPO would eventually reach 50% or more of total activity, and we are well on our way to reaching this milestone,” Goel said.
But what would an earnings call be without a mention of generative AI?
Although generative AI remains but a twinkle in PubMatic’s eye, the company is using the tech to execute tasks like building proofs of concept for future products and automating software testing. PubMatic has also adjusted its hiring plans accordingly, moving away from hiring software testing engineers to bringing on more feature development engineers.
“We are seeing gains in engineering productivity,” Goel said. “It’s still very early in the application of generative AI, and we continue to experiment with many different opportunities.”
