So, good morning, everybody. Welcome back to the conference. Welcome to San Francisco. Really pleased to have Magnite here with us this morning. CFO of Dave Day and SVP of Investor Relations, Nick Formaluk. So, welcome. Thanks for being here. Appreciate it. So, I wanted to start up with some of the recent news that we've been getting a lot of questions about. The new Dentsy partnership in Sweden. No, actually. So, maybe we can start there. Take us through the details there. you know, what made Magnite sort of stand out as the partner of choice to enable that data, and what do you think that partnership could mean? Yeah, no, great question. We're very excited
about, you know, that news that broke last week. I think, you know, for a bit of time, we've been, you know, pretty vocal that data, especially in CTV, is starting to move to, you know, starting to move to the sell side, right? So if you park your data within one, you know, one partner on the DSP side you have a fairly narrow aperture and it forces people to work through one party I think you know to the extent that we've seen that happen with a lot of our commerce media partnerships that we've announced over time I think was good traction and good evidence of that I think the fact that you know we've been a long-standing partner with Vizio prior to Walmart acquiring Vizio both on the ad serving side of CTV as well as a supply partner of theirs and CTV this is a natural extension for them to take their first party data move that from just being captive within one DSP and TAP US TO BE THE GATE KEEPERS BY WHICH TO PROTECT THAT DATA, YET UTILIZE THAT FIRST AND CROSS VISIO SCREEN INVENTORY, AND THEN EXPAND THAT TO YAHOO AS THE NEXT DSP. BUT, YOU KNOW, BY NO MEANS DO THEY PLAN ON LIMITING THAT TO JUST, YOU KNOW, THEIR CTV INVENTORY OR JUST ONE INCREMENTAL DSP THAT'S JUST THE BEGINNING. SO WE'RE PRETTY EXCITED. WE THINK THAT'S INCREMENTAL. THAT'S SOMETHING THAT WE'LL START TO HAVE SOME TRACTION TO IT THIS YEAR. SO, AGAIN, I THINK THE BIGGER VALUE IS THAT IT TRULY IS SOMETHING A VERY VISIBLE MOVE by a very large commerce media player in the market that's chosen Magnite by which to park their data.
Got it. So, extending over time to additional DSPs and then potentially also to additional inventory, right, beyond the Visio. Exactly, correct. And, you know, what do you think is enabling, and what maybe are you enabling in terms of data that's giving people, you know, the feeling, okay, I can begin to extend my data, make it purchasable, you know, for a variety of DSPs, variety of partners, and make sure it's still secure. You know, there's not going to be data leakage, and I'm going to get sort of full value for that.
Yeah, we've made a huge investment in our curation, what we call curation, you know, that whole data management. You know, we've, we actually acquired a couple of companies a handful of years ago to beef up our protection so that, you know, that data can't leak out to where it shouldn't belong. You know, we have to be trusted by, you know, not only do we manage data, you know, from Walmart and commerce media and retail, but also first-party data from, you know, all of our CTV clients, and so that's super critical. So, yeah, we've just established a track record and product capabilities, and that has just grown significantly and is a huge part of our story going forward.
Yep. But getting back to Dentsu, I mean, I think it's emblematic of when it seems like almost every time when I open my screen here, I'm seeing news about new magnite partnerships, new things that you're lighting up. Is that a function of what you just mentioned, the capabilities that you built up over time to for data and for secure data enablement or, you know, a function of additional focus that you applied there? What, you know, what is making Magnite partner of choice, if you will?
You know, I'll start and then you can hit it. We're really hitting kind of a little network effect, a little escape velocity. You know, we've got exclusive access to, you know, almost every CTV provider out there with the exception of one. we've got these relationships on the buy side and so we're kind of you know and we have exclusive relationships with running marketplaces for certain folks on the buy side so if you want access to certain demand you need to to work with us if you want access to certain supply you need to work through us and so it's just you know kind of created this virtuous cycle and it's super
exciting I mean I think you're really starting to see you know a change in a shift and what AGENCIES ARE DOING TO TRULY DIFFERENTIATE THEMSELVES AND CREATE VALUE BOTH TODAY AND IN THE FUTURE, RIGHT? YOU SEE THAT IN THEIR DATA PLAYS, OBVIOUSLY WITH WHAT PUBLICIS DID, YOU KNOW, YOU ALSO SEE IT FROM THEIR AGENCY MARKETPLACES, WHICH IS ESSENTIALLY THEIR TECH OFFERING, WHICH IN A FAIRLY CONCENTRATED AMOUNT OF PUBLISHERS OR MEDIA CONTENT OWNERS, THEY CAN STILL PLAY A VERY, VERY SIGNIFICANT ROLE IN HOW CTV AD SPEND IS CONTROLLED, DEPLOYED, AUDIENCE AND DATA AGAINST IT, AS WELL AS, YOU KNOW, THE PREFERRED PATH FOR HOW TO TRANSACT. they want the first path for their partners customers brand buying to come to is to their page they want them to come to their marketplace they don't want to relinquish that to go through a demand side platform they would rather keep that captive themselves give them decisioning allow them to pick and choose select or deselect you know where and what platforms you want to advertise which ones they don't bring in their own data without having to pay a markup fee for transacting against it so we are the ones that are lighting up those marketplaces for them. There are several that are announced. Sweden was one that was announced recently. Spain was announced last year. They tend to be a little more decentralized. You have kind of region by region buy-in versus a corporate kind of mandate. Some operate in more of a centralized function. Some have kind of both a decentralized and a centralized control point. So we see agency marketplaces leaning into connected TV buying as well as DV plus non CTV buying being a trend that doesn't back off in the future. It's something that truly is an area where they think they can, you know, impart, you know, value in the, you know,
ad tech ecosystem and value chain. Got it. So, you've had the agency marketplaces up and running for a few years now, I think, but maybe you could talk a little bit about, you know, the shift to agentic transactions, if you will, and is that sort of supercharging that trend in programmatic, or is that really just bringing something new to bear in terms of the market, in terms of the automation of, you know, the more traditional I.O. type business? Yeah. So, on the agentic side,
You know, we came out with, you know, some news on kind of three product fronts about a month ago. And I think everybody's trying to scramble and figure out who has what on the agentic world. You know, it makes sense that we would have a seller agent that helps you be able to create, you know, and replace what audience graphs used to be historically to be able to across publishers, figure out what audiences you want to reach across their different taxonomies. You also have, you know, mediation agents that help a specific publisher or media content owner better manage their inventory yield manage optimize price floor latency who's included an auction what source of demand to include how to mix that out together so those are things that you expect a traditional you know partners you know supply side partner to be able to have especially one that's got an ad server what's new and novel that we really announce as part of that announcement is our buyer agent right some of a buyer agent perspective what we announced and we've started doing some kind of stealth demos of of what we offer there on the buyer agent side This is specifically targeted towards agencies to start with, and it's targeting insertion order business. So on the front end today, what still happens to a very, very large degree for a manually placed insertion order is a brand comes to an agency, and they come with a proposal for what they would like to accomplish. Then you have either an intern or first or a second year employee at an agency that then takes that and develops a media plan. a media plan is effectively what inventory they should buy where it should run how it should perform to accomplish the goals of what the brand came to them with against executing fairly simple and easy to understand if you take a document that's a proposal and load it into an llm an agency or we can create and turn that into a media plan what gets complicated is if you don't have that connected to supply real-time supply you might not know where pricing is you might know not know how it performs so the step that happens afterwards is you take that media plan you test you analyze you refine and you rerun tests you do that a couple of different times and that may take as many as two weeks each time you retest so if you think there's three cycles of test analyze and refine before you actually get to what you think a campaign should be refine your audience refine your placements version your ad for that we do all of that the front end from proposal to versioning to test all within about 10 minutes, including building your own creative and versioning your creative. So we think it's something that's very, very powerful. We are not interested in our buyer agent being the end-all, be-all of buyer agents, and we need to compete with others. We welcome people to use ours. We would use anybody else's to connect to our seller agent. But what our goal here is, and what we think agentic does on the buying side, is dramatically reduces friction, time, and energy spent to be able to go from a proposal to actually deploying ad spend. So that's what we're encouraged by, and we do very, very well in the economics that we have in either marketplaces or in ad spend across take rates we charge, without this being something more than just an accelerant for how more and more ad spend transacts through our systems. Got it. And maybe
you could help us sort of think about, you know, the scale of that opportunity. You know, via programmatic guarantee, we've thought about, you know, a lot of the business, which is still sort of offline negotiated, now sitting already on the programmatic rails. How big is the remaining I know, you know, there are various estimates out there, but what do you see out there? Do you think that's a pretty big slug of business potential?
Oh, it's huge. There's still, you know, one of our greatest areas of growth is really that transition from direct sold into programmatic. And the efficiency gains of Agentic are so interesting. Somebody just talked about when they're working with, you know, an agency and a publisher are working together for a manual I.O. They said on average they had 38 different touch points in that manual process of putting that I.O. together. And so, the ability for an agent to collapse the mundane components of that process and allow much more focus on strategic, you know, is going to help transition much more of that shift into programmatic. So, it's a huge tailwind for us, we think.
And the lines are blurring a lot, right? So it used to be that, you know, if we rewind four years ago, five years ago, the upfronts and any PG programmatic guarantee deal that got done, that was the enemy of programmatic, right? The lines have blurred such that if you make a commitment at the new fronts or the upfronts, you have the ability in any spend you do programmatically in the scatter in a private marketplace. That counts against your upfront commitments. So now the upfronts and the new fronts are a very, very good indicator of the strength and the health of the market. We've even indicated that this year, especially led by things like live TV and live sports, it's been a very, very strong start to the season for people indicating what spend they're going to deploy over the next year. Those things now are amorphous and really those lines are blurred. So it's really hard to say a commit is all PG, everything else then is in a scatter. It's a PMP or an open market deal. Those lines have really, really blurred in the last several years.
Got it. May I play devil's advocate for a moment here? You know, when you think about maybe the starting point motivation for ADCP and where it came from, right, people were talking about GHG, you know, reduction and reduction in energy use and why don't we blow up the entire programmatic supply chain and create, you know, sort of an automation of, again, what that intern or that young media planner does, which used to be, okay, I've got a rancor, I'll pick things off the rancor until I've got, you know, so many total rating points. so when you think about that what would what would be your sort of counter to that you know why do we still need the programmatic supply chain in all its glory you know as part of as a critical
part of this sort of new agentic workflow yeah you still need a trusted system of record if you think about you've got you know on the buy side and and the sell side and so you need someone And to validate that there isn't fraudulent traffic, you know, that's there, to our earlier discussion, that data is being protected and not leaked out. And you've got to have someone, you know, collect the money, and you've got a many-to-one challenge in all of this. And so, you know, think about maybe, you know, a NASDAQ or a stock exchange or something. you still have a centralized you know system of record um that's going to be critical this and so critical to this process and so you know we see agentic you know agents tapping in on the buy side tapping on the sell side but running through our ecosystem and we think we're you know really
well positioned for that future how about data protection side i mean if you think about all the privacy laws that have gone into place globally over the past decade if a publisher THE PUBLISHER ALL OF A SUDDEN, MILLIONS OF WEBSITES, MILLIONS OF APPS, EVERY CTV PUBLISHER ALLOWED UNFETTERED ACCESS FROM A BUYER AGENT THAT THEY DON'T KNOW AND TRUST HAVING ACCESS TO PERSONAL IDENTIFIABLE INFORMATION. THE PUBLISHER ARE THE ONES THAT ARE RESPONSIBLE FOR THOSE FINES AND FOR THOSE VIOLATIONS. SO FOR THAT REASON, THEY WANT TO MAKE SURE THEY REACH DEMAND. THEY WANT TO MAKE SURE THEY REACH IT AT SCALE AND PRESERVE ALL THE CHAIN OF COMMAND AND THE AUTHORIZATIONS AND THE CONSENTS THAT ARE REQUIRED TO UPHOLD ALL PRIVACY REGULATION. Not to mention they want to get paid for that inventory, and if they work with, you know, thousands of buyer agents, they have no idea whether they're going to get paid or not, right? So those are very, very important factors for why anytime somebody's running a test using, you know, agentic transactions, buyer and seller, we're the first ones they call because they have to transact somewhere.
Got it. All right, last devil's advocate question. So, when you see somebody like Netflix developing a Cappy, right, does that, you know, do you think that's the first move toward, you know, potentially the proliferation of walled gardens if you, sort of mini-walled gardens, where agents can transact across multiples of those? I mean, just to sort of play this out, is that a potential vision of the future that you're thinking through and, you know, thinking about Magnet's role in? What do you refer to by Cappy? They're convergence API. Netflix, you know, so this idea of potentially becoming a sort of mini-walled garden, if you will. Not mini, but, yeah, maxi-walled garden, maybe.
Yeah, I mean, I think that from the perspective, and this is kind of thematic for a lot of the CTV players moving more down the path of more performance, right? They understand that they need to move down funnel. They need to prove more results. They really want, you know, DR more so than just, you know, branding sitting at the top of the funnel. So I think all of them are moving in that way. There are elements of that that they highly lean on and require of, you know, their demand, their ad serving partners, their, you know, yield management partners, their data encryption and audience creation partners, as well as connecting to the world's demand. So we don't think that's a, you know, that's an element that displaces us or, you know, is an element that hurts us. If anything, that's further along a very technical, difficult, programmatic journey where we think we can add value. and anytime things get more difficult more complex more expanded more programmatic those are music to our ears because those are our skill sets and that's really the strength that we play from and we like living on the edge of constantly being tested there are you know there are things that we started doing in this space 10 years ago that certain partners of ours today use but if you look at the life cycle that we've been in ever since we entered into ctv in 2019 we have not lost a single partner and in fact we've expanded every single relationship that we have with any partner out there that's a testament to we're constantly innovating we're constantly developing whether it's on live sports side whether it's marketplaces that they can white label and take to market on their own whether it's onboarding smbs and reducing friction they're giving them more features that they had to go to three or four vendors before on their own or ad serving capabilities all of those things are why we think we continue to win and it's not static got it so backing away from these
alternate realities and get back to the actual reality of the business which is going pretty well so you know i want to unpack a little bit the the uh recent acceleration in ctv contribution next tech um you know it seems like we've seen you know inflection point in terms of advertiser behavior maybe it's because of the changes in new fronts up fronts that you just talked about but what do you think is driving that shift where you know obviously you've seen a little bit of the moderation of decel and DBplus, but more than an offset for the acceleration CDB?
No, it's just a continued explosion of transition to programmatic, and it's sustainable. You know, as we mentioned, there's still a vast majority of activity that is direct sold and does not run across programmatic channels, and so you're seeing that adoption. You know, Disney has a stated goal of, I think, 50% of their activity being run programmatically by the end of this year, if not higher. And so, there's better targeting, better data usage. And as Nick mentioned, you know, performance was kind of the buzzword at this year's upfronts. And so, you can't get the performance and the targeting granularity that you want unless you're running programmatically and so um so i think all those factors are kicking in so it's it's a it's exciting time for us that growth rate that you're seeing of 25 to 30 percent uh year over year in in the last handful of quarters and ctv we think is is you know very sustainable and
is uh the new normal for us got it i think that you know i think you know we did see a shift of dv plus moving into ctv that's kind of resetting the investment calendar as you entered into 26 You saw a little bit of testing of that in Q4. Those budgets, those allocations as they were reset are holding. What we're seeing now is the improvement we're noticing in our DV plus business relative to where we started the year isn't a reversal of that. It isn't a reacceleration of that. What's happening is there's areas of our DV plus business that are very healthy and growing. Think of it as the mobile app side of the business, our commerce media side of the business, streaming over mobile and desktop, whether it's audio or video streaming over mobile and desktop. So there's some very healthy areas to that. Our number of commerce media partners continues to grow. Those that are in market scaling and ramping continue to grow. So I want to make sure that we're clear that there's a, call it half or more, of the non-CTV DV Plus business. It's now less than half of the total business. There are some very healthy elements to that that should continue to be growth drivers for us going forward.
I think you've said before that, you know, despite some of the traffic challenges that, you know, traditional display publishers are experiencing, Your QPS in that part of the business in general, TV plus QPS, continues to basically reach record highs. I mean, that trend continues?
We'll process almost two trillion, you know, ad requests a day, so there's a lot of volume out there still.
I think, you know, another thing that maybe surprised us, maybe some other people too, was just, you know, the maybe, you know, diminution of managed service, you know, that you could see in the reduction in the tech rate in the business. I think that probably speaks to even more so that the strength of CTB spend is probably not even fully reflected in the contribution next act. So, maybe you could speak to that, you know, a little bit. And then, you know, particularly given a political year, do you think that trend, we could see a little bit of trend reversal there where, you know, some of that business, more of that business has come in through managed service traditionally?
Good question. So Managed Service, just to expand on that a little bit, is a business that SpotX had. It focuses kind of mid-market on independent ad agencies, advertisers, think regional car dealerships, tourist boards, healthcare systems. And typically, those players have not had in-house programmatic expertise, and so we've basically acted as their in-house programmatic expertise. So, we would sling kind of a normal I.O., but then we would run that programmatically, and that had kind of higher take rates, you know, 40% plus. What you've seen is a rapid transition for those businesses to bringing their own programmatic businesses in-house, which is what we've expected. This managed service business has actually had a longer shelf life than we even expected. And to put it in context, a year ago, so Q1 of 2025, we had $7 million of contribution ex-tac and managed service, and Q1 of 26, we had $2 million. So, it's really become, it's a de minimis business for us now, and I don't expect we'll actually talk about it in the future. But to your point, if you actually strip that out on a pro forma basis, our CTV business, the programmatic CTV business actually would have grown 38% year-over-year in Q1 rather than 30%. So, you can see the health of the underlying programmatic CTV business in those numbers. Shifting to political, actually, it's actually we don't run a lot of that political through that mid-market group. Most of our political actually just runs directly programmatically. So, these midterms are going to be really interesting. I've read estimates that total spend will grow from 10 to 20 percent in this midterm versus last midterm. For us, we had about $11 million of contribution next tack in 2022. We expect that to be 20, 25 percent greater this year, at least that's what we built into our formal expectations and our guidance. That said, CTV and programmatic are the highest growing component of political. And so we could see, you know, I could see that growing, you know, even more than what we've incorporated into our results right now. So we'll be a little conservative until we actually see that happening. But there's certainly some potential upside there.
And I know it's early, but, you know, we've asked some people and they say, okay, we see a little bit of bookings so far. Any indication from the early bookings as to the strength is that you're basically consistent with the views?
Yeah. We have a dedicated team in Washington, D.C. that focuses there. It's a very unique ecosystem on this political spend. And so we've invested a lot in those relationships. And so the actual bookings, 90 percent of that political spend will run in September and October at the end of the year so so we'll you know so you don't have the specific bookings but from an interest perspective relationship perspective getting our agreements in place to work with folks who have money to spend it's
all looking you know very very positive okay great and I think that that as you've seen that the mix shift to CTV which has been you know it's your point very strong there historically has been a concern okay you'll see a reduction in blended take rate in the business it you know doesn't seem to be playing out strongly the offsets there in terms of you know okay you're doing more data enablement you're doing more with the publishers um you're going deeper on the ad serving side so just wondering if you could maybe sort of unpack some of those dynamics of of you know what support what appears from we're guessing supports the the
ctv take rate yeah well the other important side of that equation on take rate is a volume So, we got to keep that in mind. So, volume has been significant from a sort of, if we want to de-average our take rate, the downward pressure right now actually comes from the reduction in managed service. So, if you think about managed service, you know, with a 40% plus take rate and that dropped 70% year over year. So, that has a slight downward pressure. If you look at the rest of the business, it's actually stabilized pretty significantly. And so, you have a baseline lowest take rate business where we're the pipes and we don't really play a role in helping to bring demand into that process. And what you're seeing is still continued significant volumes at that layer, but you're seeing a growing component where we're playing a bigger role in bringing demand, and that's where we are in that higher take rate. And so, the mix effect, we'd have a lower mix effect from the higher volume at the lowest take rate is being offset to a large degree by some of that growth in playing a bigger role in demand. So, it's kind of holding equal right now from a mixed perspective. But, as you can see, with, you know, 38% growth ex-managed service, it's super healthy and take rate changes are not really impacting the trajectory of the CTV business.
So, I want to go back to Commerce Media. You had some comments there earlier. I just wanted to maybe ask you to unpack some of the drivers of the wins that you've had there and if you may talk about the growth path with those partners after you sort of light them up and launch them.
Yeah, I think we're very excited about, you know, the fact that more and more folks are coming to us on the commerce media side and signing exclusive arrangements with us, right? Historically, when we'd add a publisher, we would add them. Google would get their fair share of it or unfair share of it, plus a whole bunch of other players that they would tag to be able to sell their inventory. What a lot of our commerce media partners have done is decided that they want one partner to be able to use their first-party data, share their data, and either use it across their screen inventory, where they hire us to sell ad units that they own themselves. or use that to be able to buy in other ad formats, but apply very, very rich first-party data. Think of a Pinterest wanting to transact in things like connected television is a good example. So, you know, you've seen that playbook really come out of people that saw our Netflix relationship and said, hey, wait a second, you're working for a walled garden. They have phenomenal data they don't want to share. They want one party to be able to manage it for them. So we've started playing that role, and having ad-serving capabilities has been a very important DISTINGUISHMENT, EVEN IN NON-CTV, TO BE ABLE TO HELP SERVICE, RUN, MANAGE ADS FOR THEM, YIELD, MANAGE AND DO A LOT OF THINGS WHERE MULTIPLE PARTIES, VERY TOUGH RELATIONSHIPS TO TRY TO PUT TOGETHER IN STRUCTURE, WE'RE ABLE TO DO IT AS A ONE-STOP SHOP FOR THEM AND EXECUTE AND BE THE MOST SCALED PLAYER TO ACCESS THE MOST DEMAND IN THE MARKET. SO WE'VE GONE FROM, YOU KNOW, 7 TO 10 TO 15 TO 23 PARTNERS NOW ON THE COMMERCE MEDIA SIDE. WE'VE GOT, YOU KNOW, 15-PLUS that are now, you know, ramping or have already launched. I think as you go forward, you know, could that number, you know, double two, three, four years from now in terms of our total number of partners? Certainly there's more and more coming. I think, you know, you saw Expedia and PayPal being some of the recent ones that we've recently signed. And I think that as you continue to move forward, you're going to have some of these that are very substantial, that are fully leaned in, that are very meaningful growers for us. I think there's half of those that either don't get it right, don't lean in, don't really fully participate, may not have the right resources or the tech in place, may not necessarily develop the businesses, but there will be a robust business if even our batting average is only 50% in the marketplace. So we feel really good about that business five years from now. That will be a significant part of our DV Plus business.
And you say any indications, well, maybe you open the door with off-site or audience extension, and then you begin, you know, there's potentially on-site opportunity as well with some of these partners?
Yeah, it's usually both, right? They usually want, you know, both help on their screen inventory as well as, you know, how they can leverage and use their data to be able to, you know, reach and advertise, you know, using, you know, very, very good
purchase intent. Got it. Now, you mentioned Google a moment ago, so that reminds me of something important. We're in June right now. I think we had closing arguments back in November. So, you know, pending, but hopefully soon we'll get some sort of remedies decision. You know, what's our, you guys have sized the sort of point of share, I think, and talked about the incrementality on the margin side. So, you know, happy to have you sort of, you know, summarize that again for us. But what's a reasonable way to think about, you know, the catalyst in total, you know, how much share, you know, depending upon the scale of the remedy, and how quickly does that emerge? I guess the final overlay is, you know, Google's competitive response. You know, they've traditionally charged a super competitive, supra-competitive take rate in that part of their business. How do you think they respond? Do they try to become more competitive? How are you guys sort of wargaming this or scenario planning this right now?
I'm happy to, yeah, why don't you start it all?
Yeah, I think, you know, you're right. We're in overtime on a decision, right? So, you know, the rocket docket, you know, we would have expected that a year past the verdict, guilty verdict decisions last April. You're being generous by saying closing arguments in November in this remedy hearings in September of last year. But we're a year past the verdict of guilty on Google on the ad server side and the exchange side of the business. So that verdict will not change. It's really now just about what remedies get put in place structurally and behaviorally to be able to address and undo or cure what a guilty verdict looks like in those markets. I think people have quickly tried to make correlations to search. In search, they weren't found guilty. They were found, you know, to have used monopolistic practices, but it wasn't as black and white clear with a guilty verdict that they were monopolistic, that they did run a monopoly and advantaged themselves. So a lot of people have asked us the question, have they started making some changes? There's some things in Europe that were changed with UPR and universal price rules for those that don't know the acronym. Have things started to change if you started seeing a nicer Google because they started playing ball, make some changes voluntarily? No. We've seen no impact in Europe. the fact that it is a monopoly and they treat their exchange with different data different rules different latency completely differently than they do any other exchange that competes that is the monopoly that if it is unwound will yield percentage points of market share seeding to the rest of the industry and the market becoming more fair even the win rates that were quoted during the trial in you know the case of all other non-google exchanges they were in the very very low single digit range you know you could think it has a one handle in front of it but there's nothing to the back side of the handle and then on their side it was in the 20s in terms of win rate you don't get there by naturally competing in an open and fair marketplace the way that market performs we think there's some elegant simple solutions by which to be able to play and to open up that inventory it's called pre-bid you run it through a certain piece of code that then distribute it to all parties including google fairly and evenly we think that would move the market but again we're i guess impatiently waiting just as you are and checking our phones you know even multiple times i should probably check if the news broke during this meeting because we're literally could happen at any minute yeah but to reiterate some of the sizing
on that as you mentioned uh you know google and db plus has 50 or 60 market share compared to you know we're the next largest with six or eight percent so there's quite a quite a divergence there um just a shift of one percent of 100 basis points of market share to us could represent 50 million dollars in revenue and because it's about win rate as as Nick has mentioned there's basically we basically have sunk costs with all of our activity and so we're already processing those several trillion of ad requests a day and so to the extent that your win rate goes up there's no incremental cost and so you know 90 plus percent of that incremental revenue would flow through to adjusted EBITDA margin and a free cash flow. So, it doesn't take a lot of market share gain to have a pretty significant impact for us financially.
And so, the EU has a say on this and, of course, what the EU says can impact what happens globally and what the U.S. says can impact what happens globally. But have you actually seen some changes on the ground just as they actually implemented the change to UPR which was proposed or have you seen any movement there one way or the
Not anything that's been significant. So that UPR takes, those publishers have to react to that and there's not been a significant impact from that at this point.
Now, just given the, I mean, potential, maybe the EU goes a little bit further over time or maybe they do actually make some more significant changes, you know, I think they've had that market mostly on sort of lockdown for a long time. Does that potentially become a more attractive investment target for you, more international growth?
You know, it's interesting. Because we're already processing all of those ad requests, we really don't need incremental investment into the market to actually, you know, we'd, given their market share in Europe, we would, you know, any shift in share would, you know, fall, you know, we'd get a nice take from that. that, but we don't really have incremental investment that would be needed. But if you pan back kind of globally, internationally, it's 25% of our business today, so it's not small. And where I think the real international growth opportunity lies is in CTV, and so we are actually making some investment internationally on the CTV side. And what you've got going on there is, you know, from a legacy perspective, you've had an often state-funded legacy broadcasters who've been semi-monopolistic in, you know, in Europe, Australia, and, you know, a whole bunch of places in Asia. Now you've had competition that's come in from all the global streamers. And so that has put those legacy broadcasters on the defensive. They have not been big adopters of programmatic, nor of streaming, and so now they've had to react to the Disney Pluses and Netflix expansion internationally and so forth. And so, we're getting great traction with those legacy broadcasters wanting to transition to programmatic, and they're also all launching their own streaming services that are advertising supported. And so, we're seeing quite a bit of traction on that front.
I would add that, you know, there's this this follows a couple of if then statements that would have to kind of prove true in order to put investment dollars behind it. But one of the reasons that this monopoly from Google exists and non CTV is that they've effectively taken their ad server, given it away for free, taken 99.9 percent market share and made it uneconomical for anybody to compete in the ad serving business. They then, without negotiating fees as an exchange, charge whatever they want, as well as on the DSP side can charge what they want without having to have a contractual relationship with a publisher to do so. So we've been asked repeatedly by publisher partners, would we be an ad server? At these economic levels, it makes no sense to become and get into the non-CTV ad serving business as a standalone entity. If you follow another if-then statement saying, hey, something changes, and now the ad server is starting to price fairly for what value that they create, and that is a good, healthy, standalone business, and that charges a reasonable nominal fee for what that business is on its own, and the exchange has to then become competitive to the other question you asked, do they become more competitive? or do they charge prices differently? And now there's a rebalancing of the types of fees charged. Could the ad serving business become something that now looks attractive to us if the pricing in the market environment has changed, where people have for a long time been looking for an alternative to Google, yet it hasn't made sense of how they've run the business?
JOHN MCCURRY, JR.: Got it. I want to spend a little time on some numbers. JOHN MCCURRY, JR.: All right. JOHN MCCURRY, JR.: We'll finally get to that. JOHN MCCURRY, JR.: Bring it on. JOHN MCCURRY, JR.: A little less theoretical. So I want to talk about the margin guidance for the full year. We raised that just a bit. I think it was about 50 bips. And just wondering, how is that coming a bit better than you expected? Any key savings or leverage drivers that surprised you versus your initial view? So maybe we'll start there.
Yeah, two drivers. The primary driver is in our tech stack costs. And so that margin expansion is all on the cost side. So that's assuming the revenue that we talked about at the beginning of the year for this year. And what's, we have a significant initiative to move some of our CTV activity from the cloud to on-prem. And so, we made some extra capex investment last year. And some of those data centers, our on-prem data centers are coming in online now. And to put it in perspective, you can run the same activity for about the third the cost in your own data center versus running it on the cloud. So what we're seeing is that our transition has, you know, come in on time or a little bit ahead of schedule, and it's working the way we thought it would work. So proof of concept is actually working out. So that's been super exciting, you know, and that's in the face of some additional head count investment that we've made this year. So we're, you know, we're really well set up for, you know, additional margin expansion, I think, you know, 2027 and beyond. And so just from a cost basis, you could expect even at current, you know, revenue growth levels, you know, I think 100, 150 basis points a year at a minimum of increase in the future. And then the second important point there is internal productivity. That's probably been my biggest surprise is it's not the primary driver but a secondary driver and using agentic You know AI tools We've been able to reduce a lot of like some offshore Contractors and other internal costs and that's been surprising to see The uptake in productivity gains that we've seen from that and so you know more to come on that front, but that's been That's been fun to see so you guys you have a token leaderboard? No. Because token is cost. We have a productivity factoring in cost of agentic use
that we're focused on. Got it. So we just got a few minutes left. Just want to check and see if we have any questions in the room. No, I guess we're good. So yeah, just maybe finally touch on capital allocation. So it seems like that move to on-premises, sounds like it's been successful And I think, you know, kind of maybe not nearing quite completion, but, you know.
We got some more, yeah, wood to chop on that.
Yeah, so with that, you know, obviously there's still some to go there, but, you know, probably we think, you know, transition to a lower gear, if you will. How should we be thinking about, you know, CapEx or, you know, maintenance CapEx, if you will, following that transition? And with the moderation, you know, going forward infrastructure requirements of the business, how do you think about your capital allocation?
Yeah, so on the CapEx front, we had an extra pop of an extra 20 million last year, but I think going forward, we'll kind of have a run rate of about 60 million a year, which will include additional transition to on-prem, but also replacement. You have a normal replacement rate of all of our other on-prem activity. And then, with free cash flow now that we're generating, currently, we've dedicated about 50% of that to share repurchases so we've announced 200 million program for share repurchases over the next couple of years and there's still 180 million remaining on that program in addition to when we have shares at Vest we have a withhold to cover process we're effectively repurchasing shares but we're keeping you know shares from coming on the market from from from from from that perspective. So, yeah, we're focused, we think we're really undervalued and wanna take advantage of that right now. And then we're setting aside some dry powder. We acquired last fall streamer.ai, which was a smaller acquisition, but it's had a huge impact on us. So we'll be on the lookout for additional tuck-ins or smaller acquisitions that could accelerate our product roadmap and you know and then just keep some dry powder if you know something interesting comes along from an M&A perspective okay sounds
great so David congratulations on the retirement aspect how's that well number one what are you planning to do yeah what are you planning to do next
and then any update on the CFO search yeah well I appreciate that I'm still actively in the seat until September so we have an active search going on we have some great internal candidates as part of that process and taught me to some great external candidates as well so you know we'll move forward with that over the next couple of months and yeah that's why I'm just walking around with a big smile on my face and I got we got our third grandkid in the family and looking forward to some family time a lot of mediocre golf and traveling so
Okay, that's great. And this will be your final investor conference?
Yeah. Well, I might have some in August and September, but...
Okay, well, we'll just say it's your final. Yes, we'll just go out with the bank with you and... Yeah, so we'll go with that. Well, anyway, thanks again. Congratulations, and thanks to both of you for being here. I really appreciate it. Thanks, Rob. Appreciate it.