Supply-path optimization (SPO) is arguably the strongest growth driver for PubMatic’s connected TV (CTV) business.
And that’s because major CTV publishers are making more of their streaming inventory available programmatically in response to buy-side demands for better campaign automation, said PubMatic CEO and Co-Founder Rajeev Goel during the company’s earnings call on Tuesday.
The market opportunity for streaming explains why the company’s omnichannel video ad revenue (streaming and online video) rose 33% year over year, compared with 20% YOY growth for its overall revenue, which rose to $66.7 million.
But programmatic supply paths to CTV publishers are fragmented and plagued by bid duplication. Buyers are on the hunt for more direct supply paths that aren’t riddled with intermediaries.
PubMatic sets its sights on SPO
As a supply-side platform, PubMatic’s SPO strategy is to introduce more ways for advertisers to buy CTV and online video ads directly.
To do this, PubMatic launched an SPO product called Activate last year, which is just one of many SPO products that have recently spawned as part of a trend of DSPs and SSPs disintermediating each other.
PubMatic tries to differentiate itself from the crowd with programmatic buying options that more closely resemble direct buying methods for TV ads, Goel said, meaning programmatic guaranteed or private marketplace deals as opposed to open auction bidding.
The plan appears to be working. According to PubMatic, 50% of all activity on its platform was related to SPO last quarter, compared to roughly 35% at this time last year. That growth momentum is continuing into this quarter, said CFO Steve Pantelick, implying that the majority of the company’s video ad sales will soon come from SPO deals.
Repping both sides
But PubMatic is an SSP, which means publishers are its real bread and butter.
Its SPO initiative is attracting “new publishers who want access to unique demand on PubMatic,” Goel said.
Last quarter, its CTV publisher client base jumped 15% YOY, he said, touting recent deals with Vevo and Dish Media (which owns Sling).
Still, generally speaking, the push for SPO initiatives primarily comes from the buyers because of their “need to control how ad budgets are deployed” amid programmatic complexities, Goel said.
There’s a market opportunity for PubMatic to work more closely with the buy side, Goel added, which is why he said the company plans to increase the number of its buy-side-focused salespeople by 50% this year. With more resources to serve buyers, PubMatic expects to woo smaller and mid-tier agencies with the promise of cost efficiencies from direct programmatic buying.
That said, as an SSP, PubMatic’s primary duty is to publishers, and that’s also true of its SPO products.
Higher return on ad spend for buyers from direct access to supply helps publishers justify charging higher CPMs, Goel said. In that sense, he added, “our approach [to SPO] focuses on the interests of both buyers and content [owners].”
