Farfetched Takes a Look at PubMatic as it Goes Public, What it all Means

Revealing possible setbacks for the company during its S-1 filing

The supply-side platform which started back in 2006 known as PubMatic has officially gone public.

It has been a month since PubMatic has filed its S-1 and the company is now trading on Nasdaq under the acronym PUBM. Opening share value started at $20 a share. Incorporated in Delaware but operating in California’s Bay Area, PubMatic is looking to procure $118 million.

This move comes on the heels of rumors that similar ad-tech companies, like DoubleVerify and AppLovin, are preparing their own IPOs. The new wave of publicly traded ad tech will be judged with the same scrutiny that the programmatic companies that went public back in the early and mid 2010s received with mixed results of success.

When a company files for S-1 status, it creates an opportunity for financial markets observers to understand the breadth in which the company operates. Below you will find some of PubMatic’s Management’s disclosures in regards to the company and possible investors.

PubMatic’s company operations have led to positive cash-flow for the past 6 years

With a 33% growth year-over-year, PubMatic posted $92.5 million in revenue for the first three quarters of 2020. Which came to a total gross profit for the first nine months of $62.77 million.

More than a handful of key players account for a lot of that money 

On PubMatic’s selling side of its platform, Verizon Media Group accounts for at least one-fifth of its revenue and has been its largest publisher partner since 2018.

The buying side shows a significant portion of ad impressions purchased by The Trade Desk and Google’s DV360 from the supply-side platform. PubMatic holds signed deals with both The Trade Desk and Google that have been active since 2011 and 2012.

There is not a required minimum spend commitment for buyers to use PubMatic’s platform. Both sides deals on buying and selling renew annually, unless one of the signed partners states otherwise.

The growing identity issue

 PubMatic has been forced to manage the changes with Google’s decisions to eliminate third-party cookies from Chrome, and Apples giving its mobile identifier, IDFA, an opt-in option. Both of these choices by Google and Apple limits the ability for PubMatic to track its users across the web and mobile apps. This ultimately reduces the value of each ad impression it serves on its platforms.

“Although we believe our platform is well positioned to adapt and continue to provide key data insights to our publishers without cookies, this transition could be more disruptive, slower or more expensive than we currently anticipate, and could materially affect our ability to serve our customers, and our business, results of operations and financial condition could be adversely affected,” says PubMatic in its S-1 filing.

Connected TV is going to grow 

CTV has seen incredible growth this year with more people staying home and streaming more content throughout their day. The shift of customers from linear television to streaming services is expected to continue its growth throughout next year.

Connected TV does not rely on tracking data such as Googles cookies or Apples IDFA, it holds to ability to target a larger yet fragmented audience. PubMatic recently developed new offerings for streaming impressions to help acquire the massive inflow of money into CTV. These developments included a practice called potting, or the option to limit the number of ads displayed to a viewer during a commercial break.

“We have invested significant time and resources cultivating relationships with CTV publishers to establish best practices and evangelize the benefit of programmatic CTV,” said PubMatic.

Private Markets to Open Auction Options

Direct buying relationships and partnerships are growing more common within CTV in slots where impressions are scarce or highly sought after. The traditional broadcasters that have made the switch into streaming want a higher level of control of their ad spot inventory and audience data, a standard in traditional television ad buying. But is hard to accomplish across the growing medium with open auction being the standard across web platforms.

From this Private Marketplaces (PMPs) were developed. This provided private ad auctions where publishers are limited to a select number of advertisers available within the marketplace. There is a “significant growing demand” for PMPs according to PubMatic, which may pose a larger challenge.

“PMPs may involve lower fees than we can charge for our real-time bidding services, which may not be fully offset by anticipated higher pricing. In some cases, we have experienced fee pressure as we have built out our PMP offering, and we expect this fee pressure to increase as more competitors, including new entrants as well as publishers themselves, build their own technology and infrastructure to enter this business,” PubMatic disclosed in its S-1.

The company continues on in its disclosure that, “Even if publishers and buyers embrace our offerings, the positive effect of our PMP offerings on our results of operations may be offset or negated if PMPs cannibalize our open marketplace transaction volumes, by similar offerings from our competitors or other adverse developments.”

PubMatic’s disclosures in it’s S-1 paints a picture of what can be expected on the buying end of CTV and the difficulties and cost that the shift from linear TV may incur. We can use this information at Farfetched Studios LLC to develop a programmatic buying plan based on individual spend, targeting segments and overall reach goals for our clients.