Where Are the Ad Dollars Going?
A few weeks ago I wrote about the impact the iOS 14.5 privacy update has had on the digital ad industry. You can check it out here. TL: DR:
Facebook, Snap, and any other iOS-based targeted-ad platform have been significantly weakened by the privacy update.
Customer acquisition costs have shot up.
Advertisers are being forced to look for alternative delivery methods.
I also threw in a theory that Apple’s next great expansion could be ads.
Today’s piece will be a follow-up to look at who are going to be the main benefactors, and when we consider that Facebook alone took in $84 billion in ad revenue last year, it gives us an idea of how much ad spend has been put up for grabs.
Now I’m not saying that Facebook’s ad business is on the verge of going under — half of the planet still uses its apps religiously! What I am saying is that the duopoly it shared with Google for so long has been put under pressure as it can’t offer the same value to its advertisers as it once did. This may only be a temporary situation until the company finds a new way to leverage its engagement, but right now, the sharks are circling.
So who are the sharks in question?
Unsurprisingly, it’s still the big boys who are likely to profit from this shift in the ad landscape. Front and center we have Google. The world’s largest ad platform took in over $53 billion in ad revenue in its most recent quarter, with a whopping $38 billion of that coming from Search, and over $7 billion from YouTube. Largely unaffected by the iOS update — it claims YouTube revenue saw a modest impact — Google’s offering will only become stronger as Facebook’s weakens.
Next in line is Apple and its burgeoning ad business. At a much lower level of volume than Google or Facebook — researchers expect it to take in ~$5 billion in ad revenue this year — Apple Search Ads have become the go-to for app developers on iOS in the wake of the new developments. Something we know all too well at MyWallSt. In fact, Apple’s share of the mobile app advertising market has tripled in the six months since the privacy update.
The third in line isn’t any one player, but rather an industry that I feel will be looked upon more favourably going forward: programmatic advertising. It’s also a way of playing this trend without investing in a $2 trillion company, which I know isn’t to everyone’s taste. Now many of you will already be familiar with programmatic advertising and in particular one of our top performing stocks, The Trade Desk.
For those who need a quick catch-up, programmatic advertising is the business of buying and selling ad space on the open web, i.e. publishers that fall outside the walled gardens of social media sites and other closed environments. Advertisers who want to buy ad space are paired with publishers who want to sell it in an automated process. Advertisers use a demand-side platform (DSP) to purchase, while publishers use a sell-side platform (SSP) to sell, with the process overseen by ad exchanges. Jeff Green, the CEO of The Trade Desk, was actually inspired by the transparency of the stock market in forming the company. While it sounds like a complex process, all of this happens in the time between a user clicking on a link and the website loading.
Now you only need to look at The Trade Desk’s returns near the top of our Shortlist to figure out that programmatic is a growing industry, but I feel that with all these ad dollars up in the air right now, growth in the industry may accelerate in the next 12-18 months. With that, and in lieu of a regular First Look, I’m going to share with you a top-level view of the three programmatic platforms that have caught my eye lately:
Taboola is an ad-tech company specializing in native advertising. This is when an ad is delivered in the same format as the content already being consumed — essentially an ad that doesn’t look like an ad. Its business model is pretty simple: advertisers buy ad space from Taboola, who will then pay the publishers on which the ad appears.
Taboola’s USP is its recommendation engine that helps publishers keep users on their websites by recommending relevant content based on their recent behavior. Interspersed within these recommendations are sponsored articles and advertisements. Taboola is great for publishers because it allows them to keep visitors on their sites for longer while also allowing them to monetize through ads.
Magnite is the largest independent omnichannel sell-side advertising platform. It’s to publishers what The Trade Desk is to advertisers, albeit at a much smaller scale. Through acquisitions of Telaria and SpotX, it has established itself as one of the preeminent names in the nascent Connected TV advertising landscape, a key growth driver for the wider programmatic industry.
With a focus on high quality publishers like Disney, Hulu, AMC, and WarnerMedia, Magnite is banking on the future of streaming and that future being ad-supported.
3. Tremor International
Tremor operates an end-to-end ad-tech platform with a focus around video — which makes up 82% of revenue — that encapsulates a demand-side platform, a data management platform, and a supply-side platform called Unruly. Similar to Magnite, it is also a specialist in Connected TV, and has just launched its Programmatic TV Marketplace in the US, with plans for international expansion in 2022.
Its DSP boasts 1,200 advertisers including Sony, BMW and McDonald’s, as well as 400 agencies. Its SSP boasts 1,450 publishers across a number of mediums, including GQ, Barrons and WSJ on the web, MyFitnessPal on mobile, and Pluto Tv on CTV.
This is just a taste of some of the ad-techs that are currently on the public market that could climb the ladder of chaos brought about by Apple. If we’ve any ad experts, I’d love to hear your thoughts on the industry and what happens from here.
*I’d like to give a shout out to our CMO Rob and User Acquisition Manager Bharat who answered all my questions and saved me from my own ignorance in writing this piece.