U of Digital Newsletter: August 7, 2024 (Free Edition)

Outbrain acquires Teads for $1B to form new open-web advertising heavyweight
Source: Digiday
August 1st, 2024

Summary: After weeks of speculation, Outbrain and Teads have made it official. Outbrain, a content recommendation (native) ad company, will merge with Teads, a programmatic video supply-side platform (SSP) owned by European telecommunications giant Altice. The deal will create one of the largest ad supply sources across the open internet and CTV, the companies say. Outbrain and Teads have a combined 20K direct advertisers and more than 10K premium media environments, covering 50-plus markets and reaching more than 2B consumers per month. 

Outbrain will pay $725M in upfront cash, $25M in deferred cash, 35M shares of Outbrain common stock (currently valued at about $169M), and $105M in convertible preferred equity. Outbrain CEO David Kostman will be chief executive of the combined company. Teads co-CEOs Bertrand Quesada and Jeremy Arditi will be co-presidents. Altice bought Teads for $308M in 2017, but canceled a 2021 IPO after failing to attract enough interest. The deal is scheduled to close in Q1 2025. 

Deal Grades:
Outbrain: B
Teads: C-

Opinion: We've got TeadsBrain! 

There goes another video SSP off the market. Supply side platforms being bought out (often on the cheap) is officially a 2024 industry trend.

For Altice, and for Teads, this deal is a little depressing. Altice had to get off Teads in order to pay off some debt, but last year it was hoping to get as much as $3.2B for the company. Settling for $1B has got to hurt (despite salvaging a nice return from the $308M it paid for Teads in 2017). Teads now gets “bought” by a company that is technically worth a quarter of its value (Outbrain’s market cap is ~$230M as of this writing) and is known to be the second largest purveyor of dying, click-bait, chum-box advertising. Tough to swallow. 

On the flip side, this is a solid, opportunistic move for Outbrain. They got a great deal dollars-wise, given Teads brings in $600M+ in revenue per year and is profitable. They also bought their way into upper funnel, video / CTV budgets, an area that is very new for Outbrain and will bring a much-needed infusion of talent, new customers, and growth potential to their business. If you squint, you can see the outlines of a compelling, full funnel, scaled marketing platform here. 

There are downsides to the mashup, however. Neither company brings any proprietary data to the table. Their proprietary inventory (native and outstream) is not truly proprietary (in the sense that it’s not owned and operated, and the moat around these formats is thin). They don’t have much of a self-service offering. Integration between two large companies will be painful. Long term, it’s hard to see how they will compete against the big walled gardens, and even the large independents like Magnite and The Trade Desk

We’re not super bullish on the long-term outlook for TeadsBrain, but only time will tell...

Google loses massive antitrust case over its search dominance
Source: Associated Press
August 5th, 2024
 

Summary: A US District Judge has ruled that Google is a monopoly, because it has been illegally exploiting its monopoly position in online search to neutralize competitors and thwart innovation. There are three key aspects to the ruling: 

1. Google IS a monopoly in general search services

2. Google IS NOT a monopoly in general search advertising (which includes product listing ads that appear in search results on sites like Yelp and Amazon)

   1. There is plenty of competition in general search advertising that is thriving

3. Google IS a monopoly in text-based search advertising

At the center of the case are Google's payments to Apple, Mozilla, and Samsung to be the default search engine on software and devices. In 2021, Google paid device makers $26B to be the default search option (in 2020, Google payments to Apple accounted for 17.5% of Apple’s profit). These default agreements prevented other search engines from gaining scale, the judge found. Google Search has 89.2% of the general search market and 94.9% market share on mobile. 

The dominance enabled Google to charge artificially higher search ad rates, which helped to pay for the monopolistic default agreements. 

The judge will determine penalties and potential remedies in the next phase of the case, scheduled to begin Sept. 6. Alphabet, of course, will appeal the decision, so the next stop may be the Supreme Court. Google's antitrust case for its dominance in ad tech is scheduled to begin next month.

Opinion: This verdict is very significant. This is the first major antitrust ruling against Big Tech since Microsoft 20+ years ago. Ironically, Microsoft was also found guilty of monopolistically forcing their software onto users (in their case, Internet Explorer) as the default through anticompetitive deals with computer hardware manufacturers. 

The penalties will determine how the ruling impacts Google, its competitors, its customers, and the web, broadly speaking. The penalties will also set a very important precedent for the other, upcoming antitrust cases against big tech companies. 

Penalties could go in a number of directions:

1. Monetary penalties (who cares, it's just money)

2. Google can no longer pay to secure “default” status on operating systems and devices (impact would be significant, seems most likely)

3. Google is forced to divest products (e.g., Search Ads, Google Ads, Chrome, etc.) that allow it to abuse its monopolistic power (impact would be massive, seems unlikely, but you never know)

If the penalty is #2 (or worse), of course Google will take a huge hit. But companies like Apple and Mozilla are also going to take a major hit if Google can no longer pay them billions to be their default search engine. A company like Mozilla may not be able to recover from such a hit (in 2021, Google payments to Mozilla accounted for 83% of Mozilla’s revenue). On the other hand, search competitors like Microsoft Bing , Yahoo (powered by Bing), and DuckDuckGo, stand to benefit.

This ruling could also end up being a massive tailwind for generative AI. 

More downstream, Google’s entire ad ecosystem that’s propped up by search will take a hit. Seriously; their entire ad ecosystem. Google’s advertisers, who rely on Google ad inventory generated by search, their publishers, who rely on traffic from search, users of products like Google Analytics and DV360 who rely on search data, etc. But the idea here is, everyone takes a short-term hit in exchange for long-term gain, because the whole point of breaking up a monopoly is to breathe oxygen into the competition, which should lead to better products and prices for everyone. At least in theory.

Now we wait for the remedies and for the ad tech case (below are our thoughts on that case in <280 characters).
 

More Q2 Earnings!

Meta (👍): Revenue was up 22% to $39.07B, beating estimates. Ad revenue was up 22%, driven by AI; ad impression volume delivered across Meta's apps and average price per ad both increased 10%. AI costs are soaring, but Q3 guidance beat expectations. Shares popped 7% in extended trading.

Amazon (👎): Revenue was up 10% to $147.98B, missing estimates, as consumers shifted to cheaper products. Ad sales were up 20% to $12.77B, also missing estimates. But CEO Andy Jassy said that its ads business generated $50B in the last 12 months and has been a major driver of profitability. Amazon's cloud business was a bright spot, but growing slower than Google and Microsoft. Q3 guidance fell short of expectations, sending shares 6% lower in extended trading.

Snap (👎): Revenue was up 16% to $1.24B, missing estimates. Global monthly active users reached 850M, and Snapchat+ subscribers reached 11M. Analysts questioned its long-term prospects for scale compared to larger platforms. Q3 guidance fell short of expectations, sending shares 25% lower in extended trading.

Roku (👍): Revenue was up 14% to $968.2M, beating estimates. Streaming households were up 14% to 83.6M. Losses narrowed to $33.95M, compared to $107.6M last year. Platform business revenue, which includes advertising, was up 11%. Q3 guidance met expectations. Shares rose 4% in after-hours trading.

Criteo (👍): Net revenue was up 14% to $267M, beating estimates. Retail media spend grew 20%. Commerce Max DSP added 200 new brands. Criteo is well-positioned with a new strategic collaboration with Microsoft and Google's decision not to fully deprecate cookies. Criteo raised its full-year guidance. Shares rose by single digits.

Perion (👎): Revenue was down 39% to $108.7M, beating estimates. Perion attributed losses to weakness in open web standard formats and Microsoft Bing pricing changes and Microsoft’s decision to exclude some publishers from its sales distribution marketplace. Shares fell by single digits.

IAS (👍): Revenue was up 14% to $129M, beating estimates. Social media revenue was up 34%, driven by expanded brand safety and suitability measurement for  Performance Max and Demand Gen campaigns on Google Ads. IAS raised full-year guidance. Shares rose as much as 17%.

Innovid (👎): Revenue was up 10% to $38M, missing estimates. Net losses narrowed. The CTV ad serving and measurement platform touted Harmony Frequency, the holistic frequency management solution for CTV and digital advertising unveiled last week with launch partner Yahoo DSP. Shares fell as much as 11%.

Stagwell (👎): Organic net revenue was up 1.2% to $554.4M. That's down sharply from 8% organic growth in Q1 due to increasing costs. The agency holding company had a record $113M in net new business deals in Q2 and reaffirmed full-year guidance of 5-7% organic growth. Shares fell 7%.

Apple (🤷): Revenue was up 5% to a record $85.8B, beating estimates, driven by strong iPad sales. Services, Apple's most significant growth category, which includes advertising and revenue from Google, was up 14% to $24.21B. Shares were flat following the report.

Opinion: From a macroeconomic perspective, it’s been a rough week amid growing concerns about a slowing US economy and potential recession. The markets are jittery, and investors haven’t responded positively to many recent earnings reports, even though most companies seem to be posting double-digit growth. Next week is another big week for earnings. Stay tuned.

Other Notable Headlines

Roku adopts Trade Desk’s UID2 to enhance audience targeting - Roku is expanding its partnership with The Trade Desk by integrating with Unified ID 2.0 (UID2), the DSP's alternative identifier. Roku will integrate UID2 into the Roku Exchange. Since UID2s are generated when users log in with their email address, the assumption here is that Roku will be sharing its login data into the UID2 identity co-op. Roku says that combining UID2 with its first-party data on 83.6M households will help advertisers expand reach, improve ad targeting, and drive better performance, which should increase demand for Roku's inventory. This is a big win for Roku, but an even bigger win for The Trade Desk and UID2, as the alternative ID snags login data from the largest connected TV device in the US, adding to its scale. 

Even though Google has abandoned its plan to deprecate cookies in favor of letting consumers choose, the market is still moving forward with cookie alternatives (which is the right move). 

Netflix Is Lowering Ad Prices to Below $30 🔒- Netflix CPMs are coming back down to Earth. Nearly two years after launching its ad-supported tier, the streaming giant will charge advertisers CPMs between $20 and $30 for some ad inventory—far below the $65 CPMs it launched with. As the streaming TV advertising space becomes more competitive, Netflix has steadily lowered its prices. It's also pushing heavier into programmatic, which it can sell directly or through DSPs like The Trade Desk. The Trade Desk is selling Netflix inventory through private marketplace deals only, including 30-second ads at a $25 CPM. Programmatic guaranteed inventory is coming to The Trade Desk in November. The lower prices make Netflix more competitive, buyers say, especially after Amazon Prime Video launched its own ad tier earlier this year with $26 CPMs for some inventory. Netflix has about 40M subscribers in its ad-supported tier, which grew 34% between Q1 and Q2. Netflix has also partnered with Google’s Display & Video 360 and Magnite, and it is testing its own homegrown ad server.

Reddit has acquired an AI startup to beef up its ad business in a deal worth around $40 million 🔒- The AI arms race continues, with Reddit scooping up Memorable AI to add firepower to its ad business. Memorable AI, founded in 2021, charges an annual fee for the use of its tools, which aim to boost creative effectiveness and drive return on ad spend. The startup uses AI to help advertisers choose images and videos with the greatest likelihood of catching people's attention and getting them to click. Advertisers can train Memorable AI's model with their own creative assets and data. The pace of AI startup acquisitions has accelerated in recent years. Apple alone, for example, has bought more than 20 AI startups between 2017 and 2023.

Magnite Tackles Fully Automated Prebid Wrapper Optimization - Magnite's Demand Manager, now generally available, can help publishers automate Prebid adjustments that were previously made manually. The tool can automatically adjust auction timeouts in real time to maximize winning bids and help publishers understand which SSPs are driving the most value for specific deal types or regions. Not only does this automation free up web development teams to focus on higher-value tasks, but it can also have a material impact on a publisher's bottom line. 

Google Ads hit by major reporting glitch, exposing competitor data - It's been a bad week for Google. Google Ads had a big outage, leaving advertisers unable to manage their campaigns or access their performance data. Specifically, Report Editor, Dashboards, and Saved Reports in the Google Ads web interface were unavailable, and the Products, Product Groups, and Listing Groups pages also went down across the web interface, API, and Google Ads Editor. Some advertisers reported being able to see competitors' sensitive information. Google was able to restore some features within hours, but paused access to some reporting features so it could restore accuracy for the impacted time period, according to Google Ads Liaison Ginny Marvin.
 

CNET to Be Sold to Ziff Davis in Sign of Possible Media Deals to Come - Digital media giant Ziff Davis will buy CNET from Red Ventures for over $100M. CNET has changed hands several times in its 30-year history: CBS paid $1.8B for the tech publisher in 2008 and later sold CNET to Red Ventures for $500M in 2020. Despite recent controversy over its use of AI to produce articles, CNET had 38M monthly visitors in June, according to Similarweb. The deal is part of Ziff Davis' larger strategy to scoop up digital-media businesses; it also owns Mashable, PCMag, and Lifehacker. Ziff Davis CEO Vivek Shah predicts more such deals on the horizon as Big Tech platforms continue to hoover up the lion's share of digital ad dollars, leaving media companies to battle over the scraps.

NewsPassID Is Building PMPs That Bypass Brand Safety Blockers - The Local Media Consortium (LMC) and its NewsPassID ad network have released the LMC Local News Taxonomy to help advertisers target local news contextually without using automated keyword blocklists. Advertisers can now buy inventory across 5K vetted news publishers, including LA Times, Cox Media Group, and E.W. Scripps. The taxonomy will begin with 10 popular content categories, including high school sports; women's sports; college sports; NFL sports; local politics and elections; national politics and presidential elections; and weather and climate. The tool aims to make pre-bid brand safety blocking obsolete, helping publishers recoup some of the revenue they lose to pre-bid brand safety block lists. LMC also launched NewsPassID PMP Segmentation to help brands set up custom PMPs with NewsPassID for display, video, native, and CTV inventory across its local news network.

Google Gives Buyers More Transparency and Controls for Performance Max 🔒- Google has made updates to its AI-powered, black-box ad-buying tool PMax following advertiser complaints and controversy over where their ads appeared. Advertisers will now be able to see which YouTube videos are running next to their ads. Brands can also leverage Google's content suitability filters to control which videos appear next to their ads based on their own risk tolerance. Brands will be able to use Integral Ad Science, Zefr, and other vendors to assess the brand safety of YouTube and display inventory in their Performance Max campaigns. Google will give advertisers detailed reporting on how their creative performed in their Performance Max campaigns.

PMax has always performed well but was criticized for giving advertisers too little control of their campaigns. The research firm Adalytics found that some PMax campaigns ran ads on sanctioned sites and porn sites.
 

Scoop: X files antitrust lawsuit against ad industry group GARM - X filed a federal antitrust lawsuit against the Global Alliance for Responsible Media (GARM), the World Federation of Advertisers (WFA), and GARM members CVS Health, Mars, Orsted, and Unilever, accusing them of using their influence over marketers and ad agencies to discriminate against X, triggering a major ad boycott. The lawsuit follows a House Judiciary Committee report that claimed GARM abused its market power to demonetize conservative platforms, news outlets, voices, and other content. X has also sued Media Matters for defamation after the watchdog group reported ads running next to hate speech. X had sued the Center for Countering Digital Hate too, another watchdog group that criticized hate speech on X, but a judge dismissed the case.

So X is essentially suing advertisers for not wanting to advertise on X. Lol. Here’s Linda Yaccarino, CEO of X, summarizing the strategy:
 

Other Notable Headlines (That You Should Know About Too)

Uber Ads just became a $1 billion business — and it has plenty of room to grow 🔒- Uber Ads launched in 2022. Growth areas include programmatic, measurement, and playable ads.

Exclusive: Disney and Spotify partner with Yahoo for audio ads 🔒- Yahoo DSP will now sell programmatic ads for some Disney and Spotify podcasts.

Disney Completes Upfront, Sales Rise 5% - Its streaming platforms saw a 10% increase in ad volume compared to last year.

InMarket Acquires MMM Startup ChannelMix (And Says Its Tech Is Up To Code After Settling With The FTC) - Terms of the deal weren't disclosed, but ChannelMix’s 25 employees will join location data company InMarket, bringing its headcount to nearly 340.

FTC and Justice Department sue TikTok over alleged child privacy violations - TikTok is a now repeat offender of the Children’s Online Privacy Protection Act (COPPA), according to the FTC and Justice Department.

Microsoft says OpenAI is now a competitor in AI and search - OpenAI is a long-term strategic partner of Microsoft, but it recently announced a prototype of a search engine.

TikTok is throwing $20 million a month at OpenAI via Microsoft - TikTok is forking over big bucks for OpenAI models through Microsoft, accounting for a quarter of Microsoft's AI revenue.

Taboola Integrates DoubleVerify's Authentic Marketplace Solution - Authentic Marketplace is a pre-bid activation tool that lets advertisers import their custom brand safety and suitability settings into Taboola campaigns.

iOS 18 has fulfilled my dream of destroying ads with a Thanos snap - Distraction Control lets users temporarily remove cookie prompts, ads, autoplay videos, and other elements from mobile websites.
 

Nielsen, Innovid To Collaborate on Simplifying Cross-Media Advertising - Innovid's cross-media ad-serving platform will integrate Nielsen One measurement, Nielsen's new product that aims to provide deduplicated measurement of ads across screens.

The Biggest CPGs Face New Pressures To Increase Ads While Somehow Spending Less - Retailers want CPGs to lower their prices and buy more ads.

Inside Google, Amazon and The Trade Desk’s DSP battle 🔒- To increase market share, Google and Amazon are offering more incentives, and The Trade Desk is highlighting Google's reversal on third-party cookies.

Inside SafeGuard Privacy’s $3.6M Fundraising Pitch Deck 🔒-  Privacy-compliance platform SafeGuard Privacy also raised $7M in 2022.

Comscore Introduces Comprehensive YouTube Audience Measurement Across All Digital Devices - Comscore says it can give advertisers a holistic view of YouTube traffic across desktop, mobile, and connected TV.

Paris Games Set Olympic Ad Record, NBCU Scores $1.25B+ - It only took four days to blow past the ad revenue generated during the entire 2021 Tokyo Summer Olympics. The 2024 Olympics are kicking ass!

Speaking of kicking ass, if you got to the end of this newsletter, give yourself a pat on the back. Or maybe a gold medal. Or 4! You deserve it.
 

That's it for this week's newsletter. Drop us a line with any questions / feedback.

The U of Digital Weekly Newsletter is intended for subscribers, but occasional forwarding is okay! 

To subscribe visit Uof.Digital/Newsletters or contact us directly for group subscriptions.

And remember, U of Digital helps teams drive better outcomes through structured education on critical topics like programmatic, privacy / identity, CTV, commerce media, AI, and more. Interested in learning more about how we can supercharge your team? Let's talk.

Thanks for reading!

Marketing & Advertising Technology Newsletters We Recommend

                    

www.Uof.Digital

#KnowledgeIsPower #LearningIsFun