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Rubicon Project Header Bidding Technology

The recent performance of ad tech stock prices underline the key issues in programmatic: viewability and header bidding


By Ronan Shields, Digital Editor

August 9, 2016 | 8 min read

Despite revenues rising 22 per cent year-on-year to hit $54.4m in the second quarter, TubeMogul missed its forecast for the period with the video ad tech outfit’s stock price dropping by almost a quarter in the immediate aftermath of the announcement, showing just how tough a time ad tech is having on Wall Street.

The viewability of ads bought using automated technology is increasingly a concern for advertisers

Viewability is likely to be a key issue as the industry shifts to serving ads on mobile devices

Again, one of the key culprits here was mobile, similar to how header bidding was the undoing of fellow ad tech outfit Rubicon Project (more on this later), with TubeMogul subsequently lowering its full year revenue forecast for 2016 from $229m to somewhere in the region of $217 to $221m.

Although other key growth trends such as programmatic TV (up 43 per cent year-on-year to $20m), increases in overall advertiser spend (up 33 per cent to hit $139.3m), plus healthy increase in mobile ad spend ($146 per cent) painted a more positive picture for TubeMogul.

In a release outlining its second quarter performance, Brett Wilson, TubeMogul, chief executive, said: "Total Spend in Q2 came in slightly below our expectations. The transition in ad spending from desktop to mobile is accelerating, and while this impacted our results, this is precisely the trend we anticipated, and we are well positioned over the long term as brands require multi-screen solutions."

Mobile disruption

Mobile now accounts for almost 30 per cent of total spend with TubeMogul, however during the earnings call with analysts, Wilson noted how this shift towards mobile during the quarter (while welcome) was accompanied by its first ever decline in desktop spend.

This trend poses another headache as advertisers don’t want to buy media which they cannot be sure will actually be seen by the audiences they’re paying for. Answering questions from financial analysts*, Wilson added: “In fact, the shift [to mobile] is something that that we’ve talked about a lot and we’ve invested in our mobile offering for quite some time.”

Viewability continues to be the bane of ad tech

He went on to highlight how TubeMogul’s relationships with Facebook and Twitter led to an “explosion” of mobile video inventory available via its platform, but viewability became a “ubiquitous metric” also, posing further issues.

He added: “which makes sense right? We’re selling primarily to brand advertisers. They care a lot about video, and they care whether or not their video ads have the opportunity to be viewed.

“So while it’s always been a key KPI, we saw a lot of demand for the same scarce high viewability inventory, which drove up viewable CPMs and desktop.”

Third-party verification is crucial to win advertiser confidence

Currently, only 5-to-10 per cent of mobile video inventory is measurable by independent third parties, according to Wilson, who further pointed out that “other advertisers have been reluctant to buy any type … until they can measure it with a third-party viewability provider”.

This echoed concerns raised by WPP chief Sir Martin Sorrell earlier in the year, who took to the Mobile World Congress stage earlier this year to warn the ‘walled garden’ players such as Facebook and Google, that third-party verification is needed to win advertisers’ confidence in the efficacy of spend with them.

‘Industry issue’

Wilson went on to raise his belief that this is an “industry issue”. He further explained that at the core of this is the ongoing shift from Flash-based online publishing, which basically doesn’t work on mobile, towards HTML5 (the industry’s major browser providers are also in the midst of this).

In addition, Wilson raised his belief that this is a transitionary issue due to the fact the Media Ratings Council has only just issued a standard for video viewability on mobile, and that many publishers had been waiting for this development before implementation.

“As mobile viewability works itself out in the near-term and as the non-desktop part of our business becomes a greater percentage of the business, we think we’ll return to normal growth rates in 2017,” he added.

The header bidding head winds

Wilson was also asked about header bidding, and how this may affect the fortunes of the company going forward, to which the chief executive of the demand-side platform (DSP) explained his opinion that this is more of a “supply-side issue” at present.

The fact the question was asked is quite telling when it comes to investor concerns over some of the developments in ad tech, and another key indicator Wall Street is mulling over the potential impact of header bidding. Incidentally, well-placed sources tip header bidding to become more of an issue for the buy-side in 2017, as its adoption grows among publishers.

Meanwhile, last week fellow publicly listed ad tech outfit Rubicon Project underwent a similar fate when it saw its stock price slashed by over 30 per cent in the immediate aftermath of its latest earnings call, where it similarly reported a healthy annual hike in revenues (33 per cent to hit $70.5m during Q2).

Rubicon Project’s leadership were also quick to highlight the growth of mobile and video describing them as “strategic business drivers”, but again it was on the company’s subsequent earnings call that Frank Addante, Rubicon Project, chief executive, said: “While we are reporting solid second quarter results in spite of some rapidly changing market dynamics. We are lowering our full year revenue guidance to reflect changes we're seeing in the marketplace.”

‘Slow to respond’

He later went on to concede that desktop spending with Rubicon Project has slowed due to its late entrance in to the header bidding market - it launched its FastLane product in December 2015, a considerable amount of time after the likes of Amazon, AppNexus, Criteo, OpenX, etc., got involved in this sector of the market.

“Desktop advertising spend on our marketplace is being impacted by the accelerated adoption of header bidding. We initially thought that header bidding was a solution that would have had a short existence based on historical trends we witnessed in early years of the business. This was a misread of the market on our part,” said Addante.

As a result, this has impacted Rubicon’s performance with “some leakage of impressions” leading to a decline in revenue. Addante added: “which we now attribute to competitive header bidding solutions that have filled premium impressions before they ever made it to our exchange.”

He was quick to highlight that FastLane’s ability to monetise both desktop and mobile app inventory would position it well in the future, but this did little to quell the instincts of investors.

“With FastLane we are also positioned to become a leader in the important header bidding markets internationally that are in the very early stages of development,” added Greg Raifman, Rubicon Project’s president.

*Transcription courtesy of Seeking Alpha

Rubicon Project Header Bidding Technology

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