You know those stock images that show two businesspeople in suits shaking hands, but one is hiding a knife behind their back?
Well, it would be a more accurate portrayal of the current DSP/SSP dynamic if both figures were holding knives.
During PubMatic’s Q3 earnings call on Monday, several investors pressed the company’s leadership about The Trade Desk’s new penchant for referring to supply-side platforms as “resellers” and whether PubMatic is seeing any impact from TTD’s push to go direct to publishers.
Rajeev Goel, PubMatic’s CEO and co-founder, demurred like a champ.
He dismissed the “reseller” label as “noise” and pointed to PubMatic’s recent collaboration with The Trade Desk on an API that helps publishers and advertisers share deal metadata between platforms in real time.
“PubMatic is a platform for direct inventory monetization – reselling is not our business,” Goel said. “We are a direct connection to publishers … and I think it’s pretty clear we provide value in ways that DSPs do not.”
Buyers, Activate!
One way PubMatic says it provides value is through yield optimization.
TTD, in particular, “has been very clear that they’re not in the yield optimization business,” Goel said, “and so a publisher needs to have a yield function in place in order to maximize their revenue, which is core to what we do.”
By the same token, PubMatic isn’t sticking strictly to its traditional lane either. It’s been striking more direct deals with midtier DSPs and buyers, much like how The Trade Desk has been connecting directly with publishers through OpenPath.
Specifically, PubMatic has been onboarding more buyers onto Activate, its direct-to-supply buying platform. During the first nine months of the year, the number of its customers using Activate grew by 35%, and the number of Activate campaigns on the platform increased more than 4x year over year.
“We think there’s a lot of benefit from vertical integration,” Goel said, acknowledging, in answer to an investor’s question, that this “is somewhat akin to what the walled gardens do.”
Summer squeeze
Despite what looks like all the right strategic moves, industry tensions can still take concrete shape, such as when one of PubMatic’s largest DSP partners scaled back spending over the summer, putting pressure on quarterly numbers.
In July, PubMatic said it experienced a sudden drop in ad spend from a “large” and unnamed DSP partner, a shift that dragged down overall revenue in Q3, which clocked in at $68 million, a 5% year-over-year decline.
According to PubMatic CFO Steve Pantelick, “spend stabilized from this DSP in August and September, resulting in a lower but steady run rate.”
This dip is unrelated to PubMatic’s $5 million revenue shortfall last year, which was caused by Google DV360’s switch to a fully first-price auction in mid-2024. On Monday, Pantelick told investors the company is managing through the impact by focusing on growth in CTV, apps and other “emerging revenue streams.”
The curious case of the disappearing DSP dollars
But who the heck is this mysterious DSP partner?
Neither Goel nor Pantelick identified the company by name during the call, referring to it only as a “large DSP partner” or simply “this DSP.”
But there was one big clue.
At one point, in response to an investor query about the impact that OpenPath and Kokai, The Trade Desk’s new buying platform, are having on PubMatic’s business, Goel acknowledged that Kokai evaluates and buys media “differently from what we have seen.”
He then described several moves PubMatic recently made to adapt to Kokai, including revising its machine learning algorithms to “ensure we’re sending an optimal mix of inventory to them” and working closely with supply-path optimization partners and agencies to help them reconfigure their settings in the DSP.
When talking about Kokai, these are the exact words Goel used: “We took two important steps over the course of Q3 resulting in spend stabilizing in August and September, as Steve mentioned.”
In other words, the mystery isn’t much of a mystery if you read between the lines.
So, case closed? 🕵️
