Why some adtech companies are soaring even as the end of cookies threatens to crush the industry

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There’s a lot of doom and gloom in the digital ad industry, but a handful of adtech firms are showing surprising growth.

Adtech firms including The Trade Desk, AppLovin, PubMatic, and Magnite posted positive earnings for the fourth quarter of 2023 amid a tough market. PubMatic’s stock jumped 25% after reporting fourth-quarter earnings, while AppLovin’s stock bounced up 13 and The Trade Desk’s stock went up 18%. 

These companies help buy and sell digital ads, and they’re racing into new areas of growth like streaming TV and retail media. But advertisers are also bracing for Google to kill third-party cookies in Chrome browsers at the end of this year. And the earnings may not reflect strong revenue growth but rather a big year of cost-cutting with layoffs, slow hiring, and savings.

The strong adtech earnings also reflect how a smaller number of companies increasingly control digital advertising, said Mark Wright, the chief of the mergers and acquisitions advisory team at advertising firm Prohaska Consulting. And while digital advertising is growing, the growth is not equal across adtech firms.

For example, Unity Software recently issued weak guidance for its first-quarter revenue.

“Until recently, it’s very much been a cottage industry,” Wright said. “What’s happening now is that the industry is clearly consolidating around clear winners.”

Adtech firms are optimistic that ad spend is returning

Unlike a year ago when ad spending ground to a halt, some advertisers are ramping up spending in 2024, PubMatic CEO Rajeev Goel said. PubMatic reported a 14% year-over-year revenue increase during the fourth quarter, and the company’s top 10 categories of advertisers increased their spending by 26% year-over-year during the fourth quarter.

He said advertisers are expecting a soft landing with the economy.

“Nobody’s declaring victory quite yet, but it seems like the more likely case,” Goel said.

CTV and retail media are propping up adtech companies

The Trade Desk, the largest independent adtech company, credited its 23% year-over-year growth to buying more streaming TV and retail media ads.

Publisher-focused PubMatic also saw an increase in revenue from streaming TV and retail media, and 80% of the firm’s ad impressions are not attached to third-party cookies.

“The winners are able to focus on all of those channels in real time,” said Prohaska Consulting’s Wright.

The death of third-party cookies is looming

However, adtech firms are also bracing for the death of third-party cookies this year, and the loss of third-party cookies isn’t accurately shown in companies’ earnings yet. Google killed 1% of third-party cookies from Chrome in January and plans to stop supporting them by the end of the year.

For example, French adtech firm Criteo reported positive growth from retail media. Still, it warned that it expects to lose $30 million to $40 million in revenue in the second half of 2024 and potentially have greater losses in 2025 if Google kills third-party cookies.

Adtech firms including The Trade Desk and PubMatic haven’t estimated the potential impact of cookies, but both cite cookies as risk factors in their annual reports.

Unlike other adtech companies, a big chunk of Criteo’s business relies on retargeting ads to people who have looked at products through cookies — making Criteo uniquely exposed to Google’s privacy change.

Todd Parsons, the chief revenue officer at Criteo, said during its earnings call that Criteo had been testing cookieless technology, including Google’s own Privacy Sandbox products, since 2017.

“I look at the opportunity for us to build more quickly on what has been learned already and capture more market on the other side of cookie depreciation because we’ve already been there working the problem.”

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