How are energy investors positioned?
On Tuesday, 13 May 2025, Magnite (NASDAQ:MGNI) participated in the 20th Annual Needham Technology, Media & Consumer 1x1 Conference. The discussion, led by CEO Michael Barrett and analyst Laura Martin, highlighted Magnite’s strategic positioning in the ad tech sector. The company is navigating both opportunities and challenges, focusing on supply path optimization and the evolving landscape of connected television (CTV) advertising.
Key Takeaways
- Magnite is positioning itself as a key player in the supply side, emphasizing independence and value for publishers and advertisers.
- The potential divestiture of Google’s ad server presents a significant opportunity for increased win rates and revenue.
- Magnite is capitalizing on the growing demand for CTV advertising and live sports programmatic advertising.
Operational Updates
Magnite is focusing on curation, where data is attached to the supply side platform (SSP) rather than the demand side platform (DSP). This shift, accelerated by the deprecation of cookies, allows publishers and SSPs to access revenue streams traditionally dominated by DSPs. Magnite’s strategy involves simplifying the ecosystem by limiting the number of partners agencies and DSPs work with.
In the Retail Media Networks (RMNs) arena, Magnite acts as a supply partner, providing premium inventory while leaving data management to retailers. This approach results in higher CPMs, benefiting both Magnite and its publisher partners.
Google’s Ad Server Divestiture
The potential divestiture of Google’s ad server and SSP is seen as a major opportunity for Magnite. A fairer auction process could lead to increased win rates, substantially impacting revenue. Magnite’s existing infrastructure allows even small increases in win rates to be highly accretive, and the company could gain significant market share if Google’s share is redistributed.
Industry Structure and Competitive Advantage
Magnite benefits from supply path optimization (SPO) as advertisers consolidate partnerships. The company’s ability to offer a comprehensive platform for various ad formats, including display, mobile, digital out-of-home, and streaming, is a key competitive advantage. This creates a virtuous cycle, attracting more buyers and sellers to Magnite’s platform.
Live Television and Sports
Live television, particularly sports, is a significant growth driver for Magnite. With all sports now streamed, Magnite aims to bring programmatic advertising to live sports, opening new revenue streams. The company plans to aggregate smaller regional sports networks to create a larger, more attractive package for national advertisers.
Generative AI
Generative AI is central to Magnite’s product roadmap and strategy. The company uses AI for various purposes, including coding, transcribing notes, and summarizing proposals. Magnite is aware of the potential for smaller teams using AI to disrupt the industry and is actively working to stay ahead.
Future Outlook
Magnite is poised to benefit from the consolidation trend in the ad tech industry, with advertisers seeking fewer, more comprehensive platforms. The company’s focus on CTV and live sports, along with its strategic positioning in the open internet space, sets it up for future growth.
For a detailed understanding, readers are encouraged to refer to the full transcript below.
Full transcript - 20th Annual Needham Technology, Media & Consumer 1x1 Conference:
Operator: Thank you. It is your stage. Well done.
Laura Martin, Senior Internet and Media Analyst, Needham: So this is Michael Barrett. He’s the CEO of Magnite, and we have the CFO, David Day, and we have the head of SVP of IR.
Operator: And real estate.
Laura Martin, Senior Internet and Media Analyst, Needham: And real estate. And he keeps having titles. Like, who do keep up with this title? Empire under construction. Okay.
I’m Laura Martin of, Needham, the senior Internet and media analyst. I’m here with Michael Barrett on stage. And, so we just had Todd, who’s in the front row here on Criteo, and he said very nice things about Magnite. And, so I wanna start with this issue of curate curation because I think when I was at CES, at CES a year ago, not 2025, but ’24, the big, talking point was that Amazon had basically was gonna tie connected television ad units through Prime Video to, purchases, and we’ll get to that. But that isn’t the new thing.
The new thing is five months ago when you and I were in the barbershop at CES, this issue of curation, where we’re gonna take data and instead of having it attached to the DSP, data is now is moving to be attached to the SSP. And thank god you guys didn’t label it an acronym, but it’s called curation. And I think the idea is to take some of the fees away from DSPs and attach them to the SSPs to get a higher publisher economics and to protect the data. You get that more people are willing to attach data to the SSP because it feels like it’s protected and the SSP protects the data more. So let’s talk about that trend first and specifically, Michael, what it is because some people this is such a new trend.
Some people don’t know what creation is. But also how it adds to the economics of SSPs. Let’s start there.
Operator: Yeah. And I think it really it it got accelerated during the talk of cookies going away. Right? And so, you know, cookie audience creation, audience segmentation was really largely driven on the buy side at the DSP level largely with the use of cookies as signals. Right?
And so they would compile the audiences whether it’s third party information, first party information. And what we have seen during that period of time when there are like other rule books changing, we saw a whoosh in activity on the supply side because the signal strength from the end user, the publisher, and their relationship with their, you know, subscriber or visitor. That was a stronger signal, so the first party data started to be utilized as audience creation. And when you decorate a, you know, audience that generally speaking didn’t have a signal and you make it more valuable by saying these are auto intenders or these are young moms that shop at, you know, big box stores and have kids under the age of four that need diapers. When you do that, you add value to the inventory.
And the economics of that can be somewhat substantial and you’ve seen that generally speaking on the DSP side where, you know, folks will say, well I don’t pay 20%, I pay 8%. That’s my fee for the DSP and yet generally speaking it all winds up to be around 20% because when you put your audience segment into your shopping cart and you go to checkout, if you layer on data on top of it to make it more valuable and to make the advertising more effectatious, you wind up paying economics on that. And generally speaking on the buy side, that’s where the economics have always been. And now you’re starting to see through our curation tools, or curation in general, the publisher and the supply side partner participating in those economics that really have been outside of the realm. It’s pretty Why
Laura Martin, Senior Internet and Media Analyst, Needham: not Michael? Couldn’t we have done this three years ago? Why now?
Operator: Yeah, again, I think the acceleration was we were facing as an industry a radical change in the deprecation of cookies and so folks were incented to want to try it. There’s also another underlying aspect to it and that is simplifying the ecosystem. A lot of the curated partners that we work with, partners that come and bring different units or different data and put them on our platform for buyers to get access to, used to try to sell those direct to the buyers and little by little agencies and DSPs have been saying over the course of the last several years, I want to limit the number of partners I work with. I want to limit the platforms I buy from. So, I like your stuff, but why don’t you put it in a Magnite because Magnite is my primary partner and I’ll buy it through the Magnite exchange.
There’s been, you know, supply path that you them
Laura Martin, Senior Internet and Media Analyst, Needham: on Trade Desk too? Mean, wouldn’t those people be using Trade Desk and the data would be similar?
Operator: Well, they’re more supply side oriented. So, if you have a unique unit on it, you know, if you have, you know, you think of Ateez, you think of folks that have unique ad units. Publishers that’s part of curation, right? You have a cool ad unit and so instead of trying to sell that yourself on your platform, it now generally speaking is more available on Magnet.
Laura Martin, Senior Internet and Media Analyst, Needham: Okay. That’s interesting. Yeah. Well, we’ve seen this long term willingness to go to fewer and fewer players.
Operator: Right.
Laura Martin, Senior Internet and Media Analyst, Needham: And then Magnite keeps winning in that. Just when Todd was on stage, said really there’s like two ad servers for CTV. It’s FreeWheel and Magnite. And you guys say that all the time, but it’s nice to have a completely
Operator: Well, we say we say, Spring Service and FreeWheel, not FreeWheel.
Laura Martin, Senior Internet and Media Analyst, Needham: I think it’s Magnite. Totally fair. Totally fair. But I was quoted. So you still have some more There
Operator: you go.
Laura Martin, Senior Internet and Media Analyst, Needham: I’m sure. Right? No. Let’s do RMNs. So RMNs are retail media networks, and it’s really this tying of ad units to purchase and outcomes.
And I would say we’re going back one CES to the day that Amazon announced that it was going to make all of Prime Video connected television units. And of course that sort of created a new benchmark of performance television. Right? So we’ll have a performance TV guy later on today. But that’s a whole new area.
And Wall Street’s decided that this is like the pole position, highest ARPU, highest CPM is somebody that can tie connected television to performance. So when you think about the future and your connected television ad units, how are you tying them to performance or to specifically purchase? I’d like to hear more. Can you talk about this trend?
Operator: Yeah. And I think where we draw the line on our role in that nascent but growing trend is we’ll just be the supply partner. So in other words, let’s take an example like Walmart, okay? A lot of the inventory that Walmart owns, you know, pre Vizio, but even with Vizio, right, is, you know, it’s more display oriented, you know, on the Walmart app or the walmart.com site. And a lot of their partners like Procter are big TV spenders.
And so they’d prefer to have their ad unit through the retail media network to be, you know, broadcast quality. And they’d also like it to be on Disney or on Netflix or so in other words, they’ll still have the data because they may be using a Walmart DSP, but to get to the supply they’ll come to Magnite to buy those thirty second spots, those fifteen second spots. The data is still within the DSP so they’re able to track the performance of it and look at the, you know, what have the impact is on Walmart because they are tracking a Walmart user on Disney. But they use us as a supply partner because we have the inventory that they’re looking to to buy from. And so we participate in retail media networks as a principle like in the case of, you know, we announced, you know, some of our hotel and travel partners, United, etcetera.
But usually speaking, we’re the vendor that they come to buy the supply from and so the economics of that are higher CPMs and we participate in our take rate with our publisher in that respect.
Laura Martin, Senior Internet and Media Analyst, Needham: Okay. So so what’s interesting, Michael, is that you must not think that this is where the world goes. You must not think that this drive to purchase is where the world goes because you don’t even have you don’t have a product for this.
Operator: Well, I definitely think it’s heading in that direction. It’s hard to believe that every ad that’s sold will be attributable to a shopping cart. But we are big believers in shoppable ads on TV. We just don’t feel as though it’s Magnite’s role to create the data to support the effectiveness of it. That that is a first party role with the retailer.
It’s a first party role with the commerce partner. If you’re a travel partner like United, they have all the data. That’s they are the ones that are going to put it together. We’re their media partner. They come by the media from us, attach the data to it and they’re able to explain to their client how it was effective and why it increased the, you know, the purchase cycle of that individual.
But we don’t feel as though it’s our job to be a principal in that data, creation because it’s data that’s owned by the advertiser.
Laura Martin, Senior Internet and Media Analyst, Needham: Okay. Okay. So one of the things that Todd made the point, and I think Wall Street agrees, that the sides are softening where it used to be trade just says we only do demand. Well, they’re doing a lot of stuff that looks like supply. And you guys with your clear line are doing stuff you used to be.
We’re just supply, and now you’re softening as you move towards direct integrations to some of the ad holding companies. So let’s say the ecosystem is becoming more fluid and we’re and so my question is, is that good for you or bad for you over time?
Operator: Well, I think it’s important to kind of pan back and see what the market wants. And so advertisers have been pretty clear that they don’t necessarily want their partner at the DSP level to also own their inventory so that they are convinced that they’re getting the best possible deal and they’re not working through a trading partner that owns the supply as well and and, you know, double dipping per se. So that’s been a they’ve been very vocal about that like the big agencies, know, one of the biggest complaints about Google’s, you know, DSP DV three sixty is that 85¢ of every dollar that you put in goes to ad x. And so, you know, most folks don’t believe that that is the best use of their dollars. So I think that if you pan back, there is not a crying need from the the buy side, the advertiser, the one with the actual money, the marketer asking for a complete collapse that the same person that I buy from should be the supply side partner.
So I think that there’s we’re very happy with the position that we’re in. We think that folks value the independence and in the instance as you pointed out when folks want to do very simple buying and not use sophisticated DSP type capabilities, we have this buy side interface that folks increasingly are taking advantage of for CTV when the publisher, the media owner, someone like Warner Brothers Discovery, they create the audience segment, they price the audience segment, they know who the buyer is, they give that buyer permission to buy programmatically. That’s all very simple transaction kind of stuff. So using something like a clear line in that instance makes a ton of sense because we’re not talking about a huge auction, we’re not talking about multiple sites.
Laura Martin, Senior Internet and Media Analyst, Needham: Just an automation tool.
Operator: That’s exactly right.
Laura Martin, Senior Internet and Media Analyst, Needham: And let’s stay on Google, which is funny, you and I. So Todd call it Google instead of Alphabet. Even though they changed their name, no one calls it their building. But I would stay on Google. I would say it is controversial, and you guys come down on one side of the controversy very strongly about what it means.
So let’s assume that the government in September forces them to spin off their ad server and their SSP. You guys have said on your call you think that’s a big deal. I would say a lot of people think it’s not a big deal. But tell us why you think it’s a big deal and why it’s positive for Magnite.
Operator: Well, it is a big deal. And, you know, what’s more than likely going to happen is in the September trial, it’s been clear that the DOJ’s case is divestiture, so they want structural remedy. That will almost definitely lead to an appeal process. But in the lengthy appeal process, the judge has signaled that they will impose behavioral remedies in the interim. And Google themselves has come forward with a solution behavioral remedy that frankly is pretty fair.
All we’re asking for is a fair shot. We’re not asking for more inventory. We see all the same inventory Google sees. We’re just asking for a better shot at winning the auction. And in that case, the slightest change in win rate is incredibly accretive to our business because we are already processing the inventory.
We are already bringing that inventory to auction. We’re just saying that if the playing field was more level, we’d win more auctions. And in that case, everything is sunk cost and that’s just gravy on top of it. So it’s quite substantial when you look at Google’s market share of 60% plus. And we are by far and away this we are by far and away the second largest player.
And our market share could be as low as 5%, maybe as high as 8%. So if 50% of Google’s market share goes up for grabs, we feel really confident that we have a
Laura Martin, Senior Internet and Media Analyst, Needham: great on what he just said. What he’s implying is Google has always had the right of last bid, which means when they bid for an impression or when they’re selling an impression, they have the ability to look at all the other bids and then beat it by half of a penny or 1p. If behaviorally, they are prevented from doing that, Magnite would win more auctions because that really is unfair. Magnite would win more auctions and they only get paid if they win an auction because they get per se they get paid in their take rate a percent of ad revenue spent on their platform. Well, the winner was Google, Magnet doesn’t get paid.
So that’s what he’s saying is if the behavioral remedy while awaiting the appeal on the structural remedy spin off or not spin off, If even the behavior remedy is to not have lost look for the Google, you’ll win more. And every hundred basis points they said on their call is 50,000,000 to them. And PubMatic said the same number. 50 to 75,000,000 is what PubMatic said. So because Google’s just so big.
Wanna push back something Todd brought up with I thought I had not thought of that I wanna bring up with you. Sorry. It just made me think. Google right now, ad tech, is this big. And what Google focuses on 90% of its time is search and YouTube.
Operator: Right.
Laura Martin, Senior Internet and Media Analyst, Needham: Right? That’s where its value is. And this ad tech thing doesn’t have the best people in Google, doesn’t have the most focus. I mean, it has unlimited resources because of search, but they really don’t care. Right?
Whether it even makes money. And it’s losing share, as you know. Every quarter for the last six quarters, ad tech for them has been losing losing revenue as they put it over in their first party YouTube or search. If it really is spun off, is that really better for you? I understand it would lose its data advantage of being tied to this excellent data.
But suddenly you would have people that for the first time, they only get paid on competing in that entity and it will be big. It will be a $30,000,000,000 entity. It will be three times the size of Trade Desk versus Magnite. So is that really a better outcome for you?
Operator: Well, you know, think, is it a better outcome for the industry? Like, I and what does spin off mean? Does that mean the ad server gets spun off? Does that mean the exchange gets spun off? And how does that work for the the publisher?
I I think this is what the judge is really wrestling with. Like, it might be given the findings of their monopolistic practices, a breakup might be the right thing in terms of a ruling. But is that the best thing for the publisher? Because that would really strand the publisher if all of a sudden they’re ripping out an ad server, having to find a new ad server. So I think she seems to be leaning into the idea that if it’s enforceable, behavioral might be the smartest way to go down.
We certainly feel that way as well.
Laura Martin, Senior Internet and Media Analyst, Needham: That’s the best case for you.
Operator: Well, think it’s the best case for the industry. But that said, if you spin off both the ad server and the exchange, one person can’t buy both because that’s the reason why you’re spinning it off. And so the question then becomes, they’re two separate entities, we really like our chances in that scenario. Yeah. So I I think any any way you spin it, it’s a it’s a generational opportunity for Magnite.
Laura Martin, Senior Internet and Media Analyst, Needham: Very interesting. Okay. Very interesting. Pricing power and differentiation. So we have the rise of these two new I’m gonna call them two new walled gardens.
For sure, Amazon is new. Walled Garden, CTV tied to purchase, all of your growth trajectory or a lot of it is CTV. So and then TikTok, I would say, is a big competitor in the let’s call it non CTV, the DV plus space. And those are to to me, two new new wild garden kind of opportunities. And then in the open Internet space, it feels like we’re getting more of this pressure to to limit the number of players.
And we’re getting, SPO, which is supply path optimization, is squeezing some of these intermediaries out. So I feel like even the open Internet a little bit is turning into a walled garden in the sense of scale. That the players in the open Internet are gonna be bigger and though and because they’re competing against they have to compete. All those guys also compete against the new TikTok and the new Amazon. Right.
So talk to me about industry structure and what competitive advantage you have to retain pricing power and differentiation.
Operator: Well, I think you’re you’ve seen in the numbers and in particular particularly our growth in the non streaming business, the DV plus business over the past year. You know, we put up great numbers in 2024 that far exceeded industry growth rates, So that shows that we’re benefiting from this supply path optimization because we’re gaining market share.
Laura Martin, Senior Internet and Media Analyst, Needham: That’s why it’s growing so fast and not No question. Connected television. No. Yes. Sellers have said we don’t wanna deal with 50 guys.
We want five guys because there’s so much fraud.
Operator: That’s exactly right. No, it’s just too complicated. Why why work with why work with more partners when if you can go to one partner like Magnite and everything that’s bought and sold programmatically is on our platform. Whether it’s a banner ad, whether it’s a mobile app, whether it’s mobile web, whether it’s digital out of home, whether it’s streaming, everything is there that you can buy. Correct.
Yeah. Exactly. Streaming and so therefore, you know, why deal with there was a time five years ago where maybe six players had to complete that portfolio for you, but little by little the scale players are just picking up
Laura Martin, Senior Internet and Media Analyst, Needham: used to be point solutions.
Operator: Oh yeah, there used to be the mobile guy you had to go to buy your mobile And there was the digital at home guy that you had to go to buy your digital
Laura Martin, Senior Internet and Media Analyst, Needham: at home. And then
Operator: there was this streaming guy. And then there was the the display video guy. And then there was the native guy. And all of a sudden, that’s kind of collapsing into mega platforms of which we’re deleting.
Laura Martin, Senior Internet and Media Analyst, Needham: Okay. And I so you’re saying that your DBplus business is benefiting I just wanna make sure I understand your answer. Is benefiting from consolidation outside of connected television or it’s benefiting from the fact you’ve added that you are the connected television player and therefore it benefits because people bring their DV plus business also.
Operator: No question at the big agency holding company level. Right? And you’re But
Laura Martin, Senior Internet and Media Analyst, Needham: you’re buyers. I’m talking about the sell side. I’m talking about
Operator: it’s just this virtuous cycle because if you have all the buyers gravitating to your platform, then the sellers are like well, that’s where the dollars are and when they go to a group m or WPP media and say, hey, I’d like you to buy my stuff, they turn to them and say, yeah, put it on Magnite, I buy through Magnite. So it just creates a cycle and it’s global in nature because our biggest streaming partners are all global. We go along for the ride and so when you go to those markets, little by little the local broadcasters go to the agencies, the agencies say hey, put it on the platform where Paramount is and so it really does create the cycle
Laura Martin, Senior Internet and Media Analyst, Needham: Okay. I’m going to go to questions next. I want to ask about live. Sure. Tell us what’s going on with live and why it’s a growth driver for Magnite, live television.
Operator: Well, it’s just fascinating and live television kind of almost equals sports, right? And you know, you’re going to see in the upfronts, we were with some folks last night at the Nick game. Yeah. And Sorry, Nick. And, you know, it’s it’s the upfronts are quickly becoming this kind of tale of two cities and that is if you have sports inventory, it’s going be a good upfront.
If you don’t have sports inventory, it’s going be a brutal upfront. And so the smart guys are bundling the sports with the entertainment and getting the deals that they’re looking for. The guys without sports are going to it’s gonna they probably won’t wrap up their upfronts until late June. It’s just everyone’s just looking at sports right now. And so all sports are streamed now.
Every major league has cut streaming deals. Consumers have voted. They like to have their sports streamed and it’s been a % the purvey of direct sold. There’s been no programmatic in it. In fact, even the stream stuff that you see, it’s pass through.
It’s it’s the direct sold ads on the linear broadcast that’s passed
Laura Martin, Senior Internet and Media Analyst, Needham: through. None of it’s decisioned.
Operator: None of the None it.
Laura Martin, Senior Internet and Media Analyst, Needham: None of the pricing is decisioned. It’s all sold by direct sales forces to, not only to a list of approved guys, it’s to cook or to That’s
Operator: exactly right.
Laura Martin, Senior Internet and Media Analyst, Needham: It’s so interesting to me.
Operator: And now, fast forward five years from now, it’d be inconceivable to believe that live sports would be so different that they wouldn’t want targeted advertising or data driven advertising or automated advertising. So it’s going to be a huge component of our media mix and it will be a big player in streaming. And one of the things that folks kind of, you know, they say, you know, they look at NFL games and they’re like, oh yeah, you guys should be doing NFL games and the reality is there’s only two eighty three NFL games a year.
Laura Martin, Senior Internet and Media Analyst, Needham: I think it was eighteen weeks time. I guess that probably doesn’t
Operator: And so therefore, you know, that’s really not
Laura Martin, Senior Internet and Media Analyst, Needham: Eighteen weeks.
Operator: Yeah.
Laura Martin, Senior Internet and Media Analyst, Needham: The whole fifty two weeks.
Operator: Yeah. And so, that’s that probably will never be programmatically available. But that’s fine. There’s so much sports out there that’s streaming. Every regional sports network that’s collapsing, all those teams are creating their own streaming services, own fast services.
And they all need help. And think about an SSP does in the open web. What we do is we take 10,000 little sites, bring them all together as one big site and buyers buy it because there’s scale there’s a price. All these little regional efforts, we’re going to bring together, make it look like one live event and buyers will buy that nationally. So these guys will benefit from national ad dollars that they’ll never be able to get on their own.
And the national advertisers will benefit because we just opened up a huge package for them in terms of sports.
Laura Martin, Senior Internet and Media Analyst, Needham: It’s lot cheaper than
Operator: national Bingo, that’s exactly right.
Laura Martin, Senior Internet and Media Analyst, Needham: Okay. Questions from the audience for for Magnet? No? Okay. Let’s go to SPO.
So supply path optimization so far has been really benefiting you because like you keep saying, people want simplicity. They want it all in one place on both the buy and the sell side. When do we end that? Like when do we get to hit stable state? When are all the intermediaries that aren’t adding value or weak siblings?
When do they all go out of business? When do we hit steady state on what this industry is going to look like for the next decade?
Operator: I think you already see it in streaming. Right? So it’s obfuscated by the complexity of the open web DV plus and I don’t know if we’ll ever get there. It’s just so much supply Okay. And there’s just so much chicanery that goes on at the really tail end of it.
It hurts. Shenanigans. Shenanigans. I love it. Tomfoolery.
So, you know, you’re never going to police all of it. I mean, we curate our platform pretty well, like, we know every publisher on it. We know it’s high quality. So that other stuff we don’t really concern ourselves with even though you can make a buck at it. It’s not something we want to But if you look at streaming, you know, the vast majority of our clients work with two SSPs.
Laura Martin, Senior Internet and Media Analyst, Needham: But that isn’t where DV plus is going.
Operator: Oh no, no, no, no. So, but I’m saying, if you look at streaming, it’s already there in terms of SPO’d. It’s It’s It’s right. It’s well lit. They know exactly where their dollar is going through on the vast majority of the streaming players.
And so that’s the future. I
Laura Martin, Senior Internet and Media Analyst, Needham: have to push on this. So I’m sitting at Possible and one of the CEOs I was meeting with, not you, said, hey, the big problem right now in streaming is there’s a lot of fraud where people tell me, oh, I just bought a Hulu unit, a thousand Hulu loons for $10.
Operator: Somebody was a verification guy. For $10.
Laura Martin, Senior Internet and Media Analyst, Needham: So it can’t possibly be well lit, and there can’t possibly be two because otherwise guys wouldn’t be out there saying they’re selling Hulu.
Operator: It’s just a corner. Then you’re buying through the wrong people. You know, I have a relationship with Hulu. You can only buy Hulu from me. I’m the only guy that can sell Hulu.
So if you’re getting Hulu from someone else, you got a problem as a buyer. Got a problem as a buyer. Yeah.
Laura Martin, Senior Internet and Media Analyst, Needham: Buyer beware.
Operator: Yeah. There’s stupid people everywhere. Yeah,
Laura Martin, Senior Internet and Media Analyst, Needham: Not to put words together. Okay. So CTV done. Let’s talk about SPO, supply path optimization in DBplus, the open Internet. When?
If? Never?
Operator: You know, look at it’s when header bidding first started, the number of slots reserved for SSPs was probably north of 10, you know, South of 20. And these days I don’t think our normal publisher setup that we see in header bidding is six to eight. So does six to eight go to four? Possibly, but it’s never going to go to one. So there’s always going to be the need to want to have competition between, you know, a universal auction.
So it’s been severely rationalized but it’s always going to be a little messy. I mean, again the scale is enormous. We process a trillion and a half ad requests a day. Of which only 400,000,000,000 of those go to auction. So we are seeing the world’s inventory How
Laura Martin, Senior Internet and Media Analyst, Needham: many Of those auctions, how many actually get due to win?
Operator: Therein lies the secret of the business, right? Not a lot. That’s why it’s so attractive that if we were able to just move that needle by a tenth of a percentage point.
Laura Martin, Senior Internet and Media Analyst, Needham: Just do a Google thing.
Operator: Exactly. Okay.
Laura Martin, Senior Internet and Media Analyst, Needham: Right. And so one of the points you’re making is there a real capital barrier to entry here that a lot You. Don’t realize. Not only tech and you got other right people, like when you bought the CTV. Remind me what his name was.
Operator: Telari and Spadex. Spadex. SpringServe, yes.
Laura Martin, Senior Internet and Media Analyst, Needham: Spadex. You bought Spadex, you bought a bunch of people.
Operator: Yeah.
Laura Martin, Senior Internet and Media Analyst, Needham: You know, I think SpringServe arguably was your best tech investment, but the other two bought you people which are equally hard to
Operator: Yeah. It’s it’s it’s not to the liking of the folks that sold us SpringServe.
Laura Martin, Senior Internet and Media Analyst, Needham: I know. I met some of them.
Operator: Joe, they’re all wonderful. There’s no question. You know, a couple years from now, people look back and say, I can’t believe you were able to get SpringServe for a billion dollars.
Laura Martin, Senior Internet and Media Analyst, Needham: I think even at the time.
Operator: And they probably spent 30,000,000 on it.
Laura Martin, Senior Internet and Media Analyst, Needham: Well, at any price. But it’s still like the Iris I think now over at Viand. Everyone’s like,
Operator: this
Laura Martin, Senior Internet and Media Analyst, Needham: is such a smart thing. And that’s what people said even on the day of ad server. But you guys have turned look, it’s to me, it’s the WhatsApp problem of Mark Zuckerberg. Like, he turned 18 people. There were 18 employees at WhatsApp.
And now they’re saying, oh, you bought it because you didn’t want to compete with them. It was 18 guys without Mark’s know, moving on. Okay. CTV. So let’s talk about one of the things you brought up with sports.
Oh, questions from the audience. No. Going. One of the things you brought up with live sports is this issue of programmatic guaranteed PG, so programmatic guaranteed private marketplace, all of which is priced ahead. There’s no decisioning.
So it’s really hard for you to make you have you have scales of take rates. Right? And the highest take rate is, let me call it, decisioned, which is you’re figuring out, you’re sending it out to the open web and getting the highest rate on an ad unit. What percent are we now of that and where do you see that going over three years?
Operator: So we kind of look at the way we’ve talked about our revenue buckets in CTV, we really talk about three buckets. It’s publisher sold programmatic.
Laura Martin, Senior Internet and Media Analyst, Needham: Okay, which I would call PG or PMP?
Operator: Yeah, I wouldn’t even worry about those terms. Just, if the publisher has a relationship with the advertiser, they cut a deal with the advertiser, they discuss price, they agree upon price, they agree upon the audience segment that they’re going to buy and then they turn to us and say, can you execute that for Obviously, we provided value in that but not ultimate value.
Laura Martin, Senior Internet and Media Analyst, Needham: Didn’t And that’s a three to 4% take rate.
Operator: That’s not an unfair range. Okay. And that publisher sold programmatic piece is of the business, have we given an updated numbers? Two thirds. Okay.
And then the one third is I go, I have relationship with the buyer, I said hey would you like some good streaming inventory? And then I turn to my publishers and I say to multiple publishers, hey, we’ve got a campaign, it’s a million dollars, would you like some of those dollars? And they’re like, awesome. And I’m like, okay, we’re all set up, we’re just going to flip the switch. I found the dollars, I brought the dollars to the publisher, I made the introduction, that carries with it a much higher take rate because I instituted the demand.
So that’s magnet sold programmatic. So publisher sold programmatic, magnet sold programmatic, that’s the vast majority of our business. We used have a slice of the business that was the managed service business and that’s drifting to zero. So in that equation, two thirds publishers sold, one third magnates sold, That’s not unusual at all in the early stages of programmatic. The big streamers want to have more control, they want to know who the advertiser is, they want to know what the customer experience is going to be like, the viewer experience.
But little by little, they start to look at the cogs and they’re like, woah. I’m having really expensive Made sales. Yeah. Cost of goods sold. I’m having these really expensive sales people go out and sell thirty second spots which can be bought and traded with data.
So little by little what you start to see is publishers relinquishing control. You’ll see an explosion of DSPs. You talked about shoppable ads. There’s all these specialty DSPs that are focused on the small to medium sized businesses that run on the Instagrams of the world, the TikToks of the world and they’re taking their creative through AI and making it a fifteen second spot, a thirty second spot in buying TV inventory from us because it’s cheaper now because CPMs have come down because supply has gone up. And so, all of those folks carry with it a much higher take rate because we’re making the introduction.
They’ve never had a relationship with those advertisers before and so they’re plugging into Magnite and we’re we’re we’re that partner that is the, you know, kind of Magnite sold programmatic in that scenario.
Laura Martin, Senior Internet and Media Analyst, Needham: So that’s totally fascinating. So I want to do take rates. So if three to 4%, which was my suggestion, in the ballpark, not unfair for a publisher sold, can I say 8%, which is the old Telaria is the take rate for Magnite sold?
Operator: Yeah. Eight would be the lower range of that.
Laura Martin, Senior Internet and Media Analyst, Needham: So eight to 10. Okay. Fine. And then the managed service today is of total, not take rate, but because I know that’s a huge take rate. But it’s like 2% to 4% on its way to zero.
Operator: Yeah, de minimis. Yeah.
Laura Martin, Senior Internet and Media Analyst, Needham: Minimis. Okay. So we’re going get new DSP demand because supply of connected television units is up thanks to Netflix and Amazon, which is driving CPMs cost per thousand down, allows more, let me call it, performance based CTV advertising.
Operator: Exactly. It’s allowing them to test it. Right.
Laura Martin, Senior Internet and Media Analyst, Needham: I have a really important question. So my opinion from being at the upfronts is that the guys that control the the most premium ad units are very focused on selling content, whether it’s sports or whether it’s Law and Order or whether it’s, you know, some new show they announced on stage this week, which is not an audience sold segment. It is a content sold segment. The only way for them to to protect content sold segment is to not make it audience based, which is commoditizable because audience is gonna be substituted. So when you say a third is magnite sold, I assume none of that is sold based on the content.
It’s all sold based on audiences.
Operator: That’s exactly right. Yeah.
Laura Martin, Senior Internet and Media Analyst, Needham: Okay. But that also means to me that it does not include most of these big content players.
Operator: That’s that’s a fair assumption as well. Yeah. Because they’re very those guys are the ones that are the two thirds that are selling the stuff directly. They have the big sales teams. They have the legacy broadcast that they have to tie together.
So what you’re talking about in terms of access to inventory is probably a lot more like, you know, virtual MVPDs, the device guys, Roku, LG, Vizio, Samsung, they all have a ton of inventory themselves. So it could be winding up on a Hulu, but it’s not being sold to the buyer as a Hulu. Because the Dizzies of the world hate to play with the Paramounts of the world hate to play with Warner Brothers Discovery, so they don’t want multi publisher tags where State Farm buys them all and they regulate their reach and frequency and saying, whoops, too much frequency on Disney. I gotta move some over here. Disney wants a direct relationship with State Farm.
But there’s so much inventory out there from the streaming stuff that you’re able to do these multi publisher bundles and not disclose who the publishers are to the So
Laura Martin, Senior Internet and Media Analyst, Needham: you see all price points and I want to go to CPMs. You see all the price points for the for the two thirds that you’re seeing from Disney and Hulu. What’s the CPM premium that they get direct sold versus what you’re the third you’re selling magnets sold? Not on your take rate, but on the CPMs that’s going to the publisher.
Operator: Generally speaking, 50% higher. Wow. Yeah.
Laura Martin, Senior Internet and Media Analyst, Needham: And the reason I ask is, as you know, we’re having Jeff Green on stage later and he’s always said that once you apply data, the CPMs are gonna be higher, which has not been borne out, which is why right?
Operator: Because they haven’t been fairness to Jeff, TV guys haven’t they’ve been just worried about the 500 national advertisers on broadcast and making sure they catch every dollar that falls to streaming. So these guys have never really concerned themselves with targeting. Like Mercedes doesn’t care about advertising to a 14 year old because they believe in their mind that they’re creating a future customer at 14 and that it’s all about brand. And I’m not, you know, I’m not being derisive, that’s just the whole broadcast mentality. The new wave of advertisers are coming in, the new wave of brand managers, the new wave of CMOs a poor the idea of waste.
And so they’re going to be much more targeted. So we’re just early days and you know, it’s the same broadcast advertisers using the same broadcast playbook where the new guys come in. You see it with like a 2B and Pluto, if you talk to, you know, Halley at Paramount, they’re up to, you know, they’re up over 2,000 advertisers. Two thousand advertisers have never advertised on any Paramount products from a linear standpoint. Advertising on Pluto.
So you’re already seeing it with the made for the medium programs, like Tubi is the same. I think Fox touted during the Super Bowl Yeah. That was streamed live on Tubi that they had, like, 40 new advertisers that didn’t show up on their broadcast that were able to advertise on Super Bowl quality. So you’re already seeing it. It’s it’s happening.
Laura Martin, Senior Internet and Media Analyst, Needham: Okay. We have two minutes left. Anybody have a last question for okay. Then I’ll ask one more, and then we’ll call it. Let’s do GenAI.
Tell us how you’re using GenAI and AI in products, and how important you think the role of GenAI is over the next three years for Magnet.
Operator: Oh, it’s going to be, just like everyone else in this space, it’s going to be the heart and soul of everything we do. From a product roadmap, we have a product out right now, it’s the search tool, it’s Gen AI search for the curation. So one one of the things is our curation business has gotten so big, it’s kind of hard sometimes to find the audience that you’re looking for. And so, it’s able to generatively search the packages and create the package for you, so customize your package. We have three more products that we’ll be announcing next quarter.
So all of our efforts from that standpoint are taking, you know, generative AI front and center. Obviously, in our business, the core, I gave that stat before, trillion and a half impressions come in the front door and only 400,000,000,000 go to auction. That’s all machine learning as to determine which 400 are the most likely to be bought. 400,000,000,000 are most likely to be bought. So it’s it’s at the core of our business, machine learning, artificial intelligence.
And obviously, from a productivity standpoint, our coders are using it to program. Our sales team is using it to transcribe notes, record calls, summarize proposals, our marketing team is using it. And so we’re very nascent in it and we only know what we do know. But, you know, our default position is there’s someone out there right now with 12 guys that’s looking at Magnite saying we can take it down through AI. And we have to think like that internally to protect ourselves from those 12 guys.
Oh, we buy them. But Alright.
Laura Martin, Senior Internet and Media Analyst, Needham: That sounds great. Well, I will call
Operator: it Thanks
Laura Martin, Senior Internet and Media Analyst, Needham: a lot. Right against time.
Operator: Thank you
Laura Martin, Senior Internet and Media Analyst, Needham: so much. Appreciate it.
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