The Q2 earnings season is typically a serving of ‘hard facts’ in the middle of the midsummer lull in the news cycle, and if you connect the dots, some real nuggets of insight can be gleaned.
This week saw the three-largest independent, publicly-traded, ad platforms – The Trade Desk, Magnite, and PubMatic – make their market disclosures. And while all continue to grow, it would appear that investors’ enthusiasm for the CTV narrative that has served this trio so well for the last 18 months is starting to plateau.
Firstly, it’s important to caveat such an observation by also pointing out there is an overall cooling of the market, for instance, the previous week saw WPP, the industry’s largest agency holding company reducing its 2023 revenue-growth forecast.
Additionally, CTV demand is still on the growth trajectory, just look at the $600 million price tag Cadent was able to command when private equity firm Novacap came knocking on its door earlier this week.
Now, let’s examine the individual results from this week’s ad tech trio with The Trade Desk, a demand-side platform with a $38 billion market cap as of this week, reporting revenues of $464 million in revenues, up 23% year-on-year for the period.
Of course, CTV continues to play a strong part in the demand-side platform’s narrative with The Trade Desk CEO Jeff Green relaying some insights on the company’s subsequent call with equities analysts, namely that advertisers are still happy to pay a premium.
“So, whatever incremental tax, as you put it comes, which is usually, in our case, the 20%-ish take rate, that take-rate is more than justified by the power of decisioning that comes to the table,” he said, according to a transcript of the call published by Motley Fool.
In his assessment of the earnings, Dan Salmon, an equities analyst at NewStreet Research, observed that CTV was a highlight of The Trade Desk’s earnings “by a wide margin” and that a soft upfront market may prove an upswing for this sector of its business in the second half of the year.
However, despite such positive-looking numbers, The Trade Desk’s stock price dipped (albeit gently) in the immediate aftermath of its August 9 disclosure, a sign that Wall Street is craving something more, especially as the countdown to cookie-deletion is underway.
Elsewhere, Magnite – a company that rebranded itself from Rubicon to underline its CTV rebirth – posted revenues of $152.5 million for the quarter, up 11% year on year, but similarly, it saw its stock price decline in the aftermath of its disclosure.
The decline is most likely down to Magnite’s flat revenue guidance when it comes to CTV’s contribution in Q3 with Seeking Alpha analyst Michael Wiggins De Oliveira claiming that even though its CTV revenues were up 8% year on year during the quarter “this figure is hardly commensurate with a new and exciting growth opportunity.”
Meanwhile, PubMatic claimed that CTV was a highlight of a quarter when revenues were largely flat – $63.3 million, compared to $63.0 million in the same period of 2022. Even though revenue from CTV grew over 30% during the period, this is compared to the same period last year when it grew over 140%.
“CTV continued to be a high-growth channel for us, driven by an increase in monetized impressions, partially offset by lower CPMs,” noted PubMatic CEO Rajeev Goel, according to a Motley Fool transcript of the company’s Q2 2023 earnings call, adding that overall video ad revenues (including CTV) declined 4% year over year.
Similarly, the markets punished these results with the company’s stock price down by more than 30% in the five days to August 10 – PubMatic’s market cap hovered around the $690 million range during the same period.
So, while growth in the sector is still apparent, a new narrative is required if ad tech stocks are to recover the verve they displayed in the halcyon days of 2021.