The Commerce Desk’s bumper quarter has some necessary caveats

Gross spend on the platform was $7.8 billion final yr whereas forecasted income through the coming quarter is “not less than $363 million,” in keeping with an organization assertion, an indication that the DSP expects to take care of the great instances.  

Throughout the firm’s subsequent earnings name, The Commerce Desk’s CEO Jeff Inexperienced cited printed figures from Insider Intelligence hinting at a rebalancing of entrepreneurs’ budgets away from walled gardens, and in direction of “the open web.”   

Talking with equities analysts, he cited the report asserting that 2023 is ready to be the primary yr that Meta and Google, a.okay.a. “the duopoly” represented lower than half of all (48.4%) digital promoting spend for the primary time in nearly a decade.

Moreover, Inexperienced additionally characterised CTV as “the kingpin of the open web” and the way this portion of the media panorama is “fragmented” to the purpose the place it should play into the DSP’s strengths. 

Specifically, The Commerce Desk is betting that as streaming companies reminiscent of Disney+ and NBCUnivesrsal’s Peacock develop into the first means for audiences to devour premium content material, and that advertisers’ spend will subsequently additional drift from the duopolu. “​​CTV is completely fragmented however collectively big,” he’s quoted as saying, “It’s fragmented sufficient that nobody has sufficient energy to be draconian and go it alone.”

The markets clearly authorized with The Commerce Desk’s inventory value leaping by greater than 25% on the identical day of its earnings disclosure with its market capitalization topping $30 billion. 

And whereas analysts have been eager to laud The Commerce Desk’s efficiency and execution, some hastened so as to add how there are some necessary caveats to contemplate, particularly how walled gardens are right here to remain, arguably proliferating.  

Measurement issues 

In his evaluation, Madison and Wall’s Brian Wieser acknowledged that whereas The Commerce Desk’s (comparative) objectivity means some entrepreneurs will favor the DSP’s providing to the walled gardens, the dimensions of Meta and Google stays enticing to media patrons. 

“If a person service or expertise supplier can reveal excessive ROIs (nevertheless outlined) in restricted volumes, entrepreneurs who may solely have the assets to spend with one or two media house owners are unlikely to shift away from these walled gardens any time quickly,” he added.

Additional nonetheless, whereas Insider Intelligence information does certainly depict a loosening of Meta and Google’s stranglehold on advertisers’ budgets, latest headlines round these numbers have been restricted to the U.S.   

“Insider Intelligence’s information is outlined on a web foundation, not a gross foundation. For the numerator, market management or dominance ought to solely be outlined in gross phrases,” he wrote. 

“On this foundation, Meta and Google probably accounted for about 70% of the US digital promoting market … Including Amazon, and the determine nearly actually would exceed 80%, and moderately than declining focus is rising.” 

The rise of CTV = extra walled gardens 

In the meantime, the assertion that the rise in “CTV advert spend” incorporates some nuance, in keeping with Wieser, with the previous GroupM exec counseling traders to ponder the definition of CTV.  

“First, I might not outline CTV as together with on-line video in a basic type — as an alternative I believe most manufacturers will solely consider CTV as referring to premium content material, and never embrace YouTube nor on-line video promoting that isn’t related to premium video content material,” he wrote.

And whereas some entrepreneurs could undertake a extra conservative interpretation of CTV — amid “the waning attain potential of conventional ad-supported tv” — a lot of the market just isn’t there but and unlikely to get there any time quickly, in keeping with Wieser. 

In the meantime, regardless that legacy broadcasters reminiscent of Disney, NBCU, and Paramount have opened stock entry to third-party DSPs — The Commerce Desk has partnerships with all of those gamers — some analysts consider the rise of CTV will result in much more walled gardens. 

Based on analysts at Arete Analysis, premium, household-name properties account for 70-to-80% of CTV consumption, all of which (reminiscent of Amazon Prime or Roku) have their very own proprietary advert tech. 

Others are more likely to emulate this development, in keeping with a number of Digiday sources with such a situation lending weight to the speculation that The Commerce Desk can be an excellent candidate to buy fellow advert tech firm Criteo. 

The rationale? Uniting two of the main impartial advert tech firms would buttress The Commerce Desk’s pitch to Wall Road, which has (largely) rested on its CTV narrative for the previous two years however has a notable downtick in the case of retail media, in keeping with some.   

‘Fren-zoned’? 

In the meantime, it’s additionally necessary to contemplate how The Commerce Desk negotiates its ever-evolving relationship with its core buyer base (media businesses) with some speculating that the publicly traded DSP’s want for progress may result in pressure.  

Earlier this yr, a number of sources from the advert trade’s largest holding teams informed Digiday the DSP was approaching shoppers extra instantly with one supply, who declined to be named, characterizing this as a direct menace.  

Though, it’s value mentioning {that a} spokesperson for The Commerce Desk informed Digiday that “relationships and alignment on the buy-side that we have now with our company shoppers have by no means been stronger.”