Gone are the days when agent-based ad tech was just for buying ads directly.
PubMatic runs more than 30 fully autonomous end-to-end agent campaigns through SSP’s AgenticOS platform, CEO Rajeev Goel told investors during the company’s first quarter earnings call on Thursday.
This is in addition to the more than 1,000 direct deals with publishers already running through AgenticOS as of Q1.
The expansion of AI trading drove PubMatic’s emerging revenue category to 80% year-over-year growth in the quarter, pushing the category to 14% of PubMatic’s total revenue.
This growth contributed to the company’s overall growth rate (13% year-over-year) in the first quarter, with revenue totaling $62.6 million. Additionally, PubMatic saw double-digit growth in monetized impressions year-over-year. Additionally, CTV as a standalone category grew 18% year over year, and mobile app revenue grew 25%.
Agent benefits
PubMatic’s AgenticOS doesn’t just help your bottom line. According to Goel, the product also improves campaign efficiency.
According to him, buyers have seen a 30% to 40% increase in CPM using the solution. And because no other ad tech intermediary charges more fees on end-to-end agent transactions, we can buy 40% more inventory from publishers.
“It’s a single-layer technology, very similar to what Walled Gardens leverages to improve advertising performance,” Goel said.
And when it comes to ad tech supply chain integration, PubMatic’s Activate direct buyer connections have tripled in business since the first quarter of last year, and the company’s Connect data platform now has more than 300 data and commerce media partners, including Walmart Connect and PayPal Ads.
Meanwhile, PubMatic’s mobile app business grew 25% year over year and contributed to 5% growth in SSP’s display advertising, another revenue driver for SSP. Combined revenue from mobile and omnichannel video accounted for 79% of PubMatic’s first quarter revenue. And PubMatic is currently integrated with three major mediation platforms in the mobile market: AppLovin Max, Google AdMob, and Unity LevelPlay, Goel said. Additionally, PubMatic now has access to over 90% of the world’s mobile SDK inventory.
Continuing on the mobile front, Goel also highlighted AgenticOS’ Creative Innovation Suite, which uses AI to generate consistent creative when targeting audiences across CTV, mobile and online display touch points. He cited Horizon Media, Crossmedia and Kelly Scott Madison as agencies that have adopted Creative Suite.
All of these capabilities provide PubMatic with a foundation for continued growth in AI, according to Goel. And the company reaffirmed its fourth-quarter forecast for double-digit growth in the second half of the year.
But investors remain skeptical that PubMatic’s agent AI business can sustain true revenue growth. One investor pointed out that even though AgenticOS runs more than 1,000 direct transactions and more than 30 end-to-end autonomous campaigns, it remains a “small percentage” of PubMatic’s overall business.
In response, PubMatic CFO Steve Pantelik said AI is also impacting other areas of PubMatic’s business, such as helping publishers set up and troubleshoot campaigns faster, and the company expects these improvements to continue to drive double-digit growth alongside mobile and CTV.
DSP sale
PubMatic is bullish on AI, but it’s also tackling the old problem of competition between DSPs and SSPs for direct advertisers’ business.
So, while PubMatic is still battling headwinds from a large, unnamed DSP (obviously The Trade Desk), PubMatic’s SSP spending is likely decreasing due to increased adoption of TTD’s direct-to-publisher OpenPath solution, which eliminates SSPs. As a result, PubMatic’s U.S. revenue fell 12% in the first quarter from a year earlier, Pantelic said. However, the decline in the US business was offset by 25% growth in Asia Pacific and 10% growth in Europe, the Middle East and Africa.
However, the exit of an unnamed DSP also weighed on second-quarter earnings, with PubMatic forecasting a 2% to 4% decline in next quarter’s revenue.
Several investors asked for clarification on the impact of DSP. And Pantelic responded that revenue from the DSP in question was actually better than the company expected in the first quarter, thanks to PubMatic’s efforts to “optimize our platform to meet the needs of this buyer.” He added that PubMatic expects to fully overcome the impact of this DSP exit by the third quarter.
To offset the loss of DSPs, PubMatic added more than 50 DSPs to its partner list last year and expanded its integration with mid-market DSPs by 20% in the first quarter.
PubMatic also signed a deal this quarter to integrate Amazon DSP with Amazon’s Dynamic Traffic Engine, and Goel said that since the integration began, publishers have seen up to a 10% increase in CPM.
Future plans
Looking ahead, one of PubMatic’s immediate priorities is replacing outgoing Americas CRO Kyle Dozeman and Chief Growth Officer Paulina Klimenko. Goel said PubMatic is exploring ways to consolidate some of that responsibility into a new global CRO position.
Goel added that PubMatic sees continued growth opportunities by serving mid-market, performance-focused DSPs and mid-sized indie agencies, which have proven to be faster to adopt AI solutions than larger Holdco competitors.
And, unsurprisingly, with ChatGPT opening up to advertising, PubMatic is keen to work with OpenAI. Goel said SSP is working with smaller AI players like Kontext and Dappier, who are “already innovating ad formats and the right signals to monetize that kind of inventory.”
Goel pointed to OpenAI’s ambition to generate $100 billion in advertising revenue by 2030 as a sign that it needs to work with platforms like PubMatic.
“It’s going to take an ecosystem-wide effort to get to that level,” he says.
