Yet Another Value Podcast - B. Riley's Dan Day describes Supply Side Platform (SSP), CTV + Magnite $MGNI thesis

Episode Date: September 27, 2023

Dan Day, CFA, Equity Research Analyst at B. Riley Securities, joins the podcast today to discuss the digital advertising business, SSPs and his thesis on Magnite, Inc. (NASDAQ: MGNI), the world’s largest independent sell-side advertising company (according the company's website). To get in touch with Dan Day, you can reach him via email here: [e-mail] Chapters: [0:00] Introduction + Episode sponsor: Stream by Alphasense [1:35] What is Magnite, Inc. (NASDAQ: MGNI) and why is it interesting to Dan [8:57] Take rate on SSP's (effectively the bear case on SSPs) [14:53] Adtech trends since early 2021 [19:11] Brand integrity - how much is that important amongst SSPs [20:25] $MGNI valuation upside [23:55] Programmatic recession vs. the stocks were overvalued in 2021 [25:48] CTV - what it means and how it works; why its important to $MGNI [29:24] Who is $MGNI working with on CTV / competitive landscape [32:55] $MGNI bear case on programmatic advertising - why don't publishers build out SSPs themselves? How are publishers thinking about building vs. buying SSPs? [44:25] Anything missed on the Bull or Bear case for $MGNI / stock compensation [50:07] Google antitrust case - what is the bull case for $MGNI [59:24] Odds that Google loses this trial and/or splits out SSP [1:03:58] One thing that market generalists miss regarding $MGNI [1:08:26] Channel checks on media industry Today's episode is sponsored by: Stream by Alphasense Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts, powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced buy-side analyst conduct the calls for you. But that's not all. Stream also provides the ability to engage with experts 1-on-1 and get your calls transcribed free-of-charge—all for 40% less than you would pay for 20 calls in a traditional expert network model. So, if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. For more information: https://www.streamrg.com/

Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced by-side analysts conduct the calls for you.

But that's not all. Stream also provides the ability to engage with experts one-on-one and get your calls transcribed free of charge, all for 40% less than you would pay for 20 calls and a traditional expert network model. So if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. All right, hello, and welcome to you another value podcast. I'm your host, Andrew Walker. If you like this podcast, it would mean a lot if you could rate, subscribe,

review wherever you're watching or listening to it with me today i'm happy to have dan day dan is an analyst at b riley dan how's it going good andrew how are you thanks for having me so you're hey really excited to have you on uh before i start this pot before we can start let me just remind everyone nothing on this podcast is investing advice always true maybe particularly true today dan covers a a wide swath of sectors actually where we initially connected because you cover some of the really small quirky cable companies we're going to spend most of the time today talking about the sps but you know just a reminder we'll talk about a lot of of things everybody should remember not investing advice so that out the way then the company we talked

about a lot of stuff but the companies i really want to talk about were particularly the ad tech companies and particularly the sps uh the one that i'm probably most interested in is magnate the ticker there is m g and i but they have a publicly turned to competitor that you probably need to talk about uh when we when you mention them podmatic the ticker ticker there is p u bm you cover both of them so i'll pause there i guess one more thing before i have a lot of friends who are along this I've looked at Magnite and they used to be Rubicon multiple times over the year. Every time I look at them, like, my eyes start to bleed a little. And I'm like, there's a lot of acronyms.

I know like the very basics of what they do, but how they do it, the business, everything kind of still remains a mystery to me. So I'll turn it over to you. What is Magnite? What are the SSPs and why are they so interesting? Yeah. So first of all, it's funny to say that because one of the rationales, we're sort of pushing my coverage into the ad tech space is that I feel like the buy. side needs a lot of help understanding an area where there was a bunch of IPOs and SPACs in 2021, a bunch of them are 70, 80, 90% off where they went public at. And a lot of people are

trying to kind of pick over it and see what deserves to be trading, you know, where it's trading at and what's interesting. So you're right. Tons of acronyms, you know, I started ramping on this space two, three years ago. It takes a lot to get going. but some really interesting names, and I'm sure we'll talk about the Google trial that's likely next year that's very relevant for the sector. But we'll start with, you mentioned the SSP.

So SSP is a supply-side platform, right? And in simple terms, let's say I'm browsing ESPN.com, and you see a banner ad, right? Yep. The banner ad gets typically sold programmatically, which is really just real-time, auction. So what happens is there's a demand side platform that represents the advertiser and there's a supply side platform or SSP that represents the publisher. This is all sort of dumbed down. It's a little

more complicated than this, but this is enough for now. So on the DSP side, demand side platform, the number one you think of is the trade desk. The ticker on that is TTD. They are far and away the largest player in ad tech. So if you're thinking DSPs, think the trade desk. The The other big one is Google has one called DV360. So you know, you're an agency, you know, you're representing Ford. They want to blast out a bunch of banner ads. You know, someone at your agency logs into the trade desk. They click, you know, they set a bunch of parameters for the campaign and they just get blasted

out to a bunch of websites. So in real time, the SSP is representing the publisher. So right, the DSP wants to get the best price for their advertiser. The SSP wants to get the best price for the publisher. They meet in the middle. They come in a price. And typically there are multiple SSPs involved in every auction. So the SSP that gets you the best price is going to win the auction.

And everybody has their own take rate. So you start at a dollar, right? Let's say the DSP gets a 20% take rate. You know, the trade desks is about 20%. And then the SSP side typically is a little bit lower than that. In an open auction programmatic, it would call it $10. 15%. So off the top, that's, you know, 30, 35% of the dollars going to the programmatic intermediaries from $1 spent by an advertiser to a dollar received by a publisher. So, yeah, that sort of just

sets it up and what it does. And again, we're still talking about the open internet here. CTV is a whole other interesting game that's very different in the open internet, and it's very important for Magnite. So let's just stay on the open internet for a bit because Magnite has two distinct segments, right? There's their DV Plus segment, which is display, video and other. So, you know, think of like what I said, mostly banner ads and obviously also video ads. You know, if I'm on ESPN, again, I click on a video. And there's probably a pre-roll ad that comes up, you know, those get so programmatically. It's inescapable. I want to watch a seven second clip of a sports highlight from last night. ESPN insists, hey, you've got to watch this one

minute-long advertisement before the video, the clip will show. It's absolutely mistaken. It's like a 20-second clip I want to watch and you're going to get through a 45-second ad first. Yeah. It's absolutely insane. So the only wrinkle here is I keep saying the open internet. So just for somebody who's totally new to this, the open internet is sort of the contrast to what you usually call the walled gardens, right? And there's three big ones. There's Google, there's meta, and there's Amazon, and there's a couple what you call Challenger Gardens. You can throw Snap and, you know, Pinterest and those kind of names in there. But when I say Walg Garden, basically those guys want nothing to do with DSPs and SSPs.

Everything they do is through themselves. You know, if you want to get by Google Search, you're going to Google DV-360. You're going, you know, if you want it by YouTube, you're going through Google DV-360. And they're not using Magnite and Pubmatic to sell it. Everything is them. they put these walls up and we don't play nice with ad tech intermediaries because we have the scale to say it's all us so those are the two like so obviously youtube right is the juggernaut an online video you know i think 40 billion plus in ad revenue that's around 12 months so so just to

be clear on that there is no exposure to like youtube for for for magnate and pomatic so it's all effectively everyone else who says, I don't have the scale and heft to put these draconian rules up and say, you know, even like ESPN isn't, you know, their, their competitive advantage isn't selling banner ads on the internet, right? They're willing to play with the programmatic intermediaries. Pretty much everybody is, you know, outside of really those three to, I don't know, there's a call it three to ten smaller ones. So, and those three to ten control 70% of the ad spend. So I don't mean to minimize it, but that rest of the open internet is what we're talking

about with Magnite. And now, a quick word from our sponsor. Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are. And you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even

have an experienced by-side analysts conduct the calls for you. But that's not all. Stream also provides the ability to engage with experts one-on-one and get your calls transcribed free of charge, all for 40% less than you would pay for 20 calls in a traditional expert network model. So, if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. Let me just lob in a few questions.

So I think a lot of people, when they look at this, they start thinking about the video segment. That's the sexy segment. As you said, a lot of it is still coming from, I think more than 50% of the revenue is still coming from the kind of older banner-added questions. Let me just says the first question, the SSP. Like, if I'm ESPN, I work with multiple SSPs, right? I'm going to work with Dan's SSP. I'm going to work with Andrew's SSP. And it's all happening in real time.

But basically, it says, hey, you know, Andrew's visiting the website. Whoever is giving me the highest value ad, the ad I'm getting the most for is the thing that's going to go on the website. So I guess the question there is, why is that, why is the take rate for SSPs not a complete race to the bottom? Right? Because the serving the marginal ad there is pretty costless. And, you know, if you have an ad at a dollar, if we're both got a bit at a dollar and you just said, oh, I'll drop my take rate from 10 to 8%. Then ESPN would go to you. And then I'm incentivized to say, oh, well, I'll go from 8 to 7 because there's no marginal cause. So why don't I know the take rates are lower than the demand side here, but why haven't they just kind of race all the way to zero? out. So, yeah, it's a fair question. This is effectively the bear case on SSPs is that they're just a commodity. And so, like, you contrast the SSP side from the DSP side. Like, the DSP side has fragmented down to three that matter and then sort of a longer tail. The three that matter are the trade desk, Google DV360, and Amazon has a large DSP. And then there's like, I don't know, five or six

others, Yahoo. Is Amazon's DSP, does that, is that only on their website and sites that are kind of taking Amazon or is that is that all across like are they actively bidding could I turned on you know advertisements on my website could I start getting Amazon in certain DSP ads okay yeah and they all have their own sort of quirks right you know you have to use Google DV 360 to buy you yep you have to use Amazon to buy Amazon so they they almost have this lock really the only like independent one is the trade desk yep okay cool so so you know on the DSP side you've got these three and this is why the trade desk in my opinion gets a massive valuation premium to the SSPs because this side has fragmented down

to call it an oligopoly. The SSP side, right, and again, this, this, we'll get into this with Google, Google still has 40 to 50% of the SSP side on market share. So they actually have more market share on the SSP side than they do on the DSP side. So outside of Google as an SSP, everybody else is just so fragmented. Magnite's probably the largest at less than 10%. Butmatic is the second largest publicly traded with under 5% market share. And market shares for SSPs are pretty tough to back into. So take these with a grain of salt, but they're fairly rough numbers, but they're directionally

accurate. And there's a handful of others. Cridio has an SSP with mid-single digits. And then there's like a million SSPs that are less. Like, I'm good at monetizing mobile inventory in Germany and, you know, just things like that. So it just totally fragmented. And there's no reason that a publisher wouldn't just add one more SSP. Yep.

That's been the case to date. So really this programmatic header bidding auction started to gain traction around 2016. And, you know, initially it wasn't too bad for the SSPs because there was only a handful of them. and then more and more and more, and every publisher that, yeah, sure, we'll add one more SSP. Yeah, sure, we'll add one more SSP. What's the, you know, if you win some auctions and give us a higher bid, what's the problem? So you've got publishers probably on average using five to ten different SSPs plus other things like Tabula and Outbrain and, you know, some other ways that they monetize, but it's probably too many. And this has been an issue for

them, and it's why the take rates have been depressed. There's other reasons. The DSPs get a bigger take rate because they're also selling data. Like, typically the data is bought on the DSP side. So Trade Desk's actual take rate was 12%. They're brokering data for another 8%. Right. So the take rate's actually kind of the same in an open programmatic.

It's just the data tends to get transaction on the DSP side. But SSPs used to be like 20% plus take rates 10 years ago, five years, not five years ago, but 2016 call it, and that's sort of gone down to more like 10, 10, 15% in most. Part of my thesis on why Magnite and Pubmatic are interesting for opening. That was actually going to be my next question. And just before you hop in there, there is a big Google antitrust case, break up, huge yolo upside there. Let's set that case to the side because it is there.

It is interesting. But, you know, I think there's a debate on the probability and everything. And if that was your only thesis, I think you're, in YOLO mode. I'm not saying it can't be a good part of the thesis, but you're in yellow mode if that's the only thesis. So let's just put that to the side and say, why are the SSPs interesting excluding that huge bulkcase? Because that long tail should die of SSPs. And there's a couple of reasons for that. One, they all sort of, so the very simple, nice way I put of it is an advertiser goes DSP to SSP to publisher is actually not,

it's actually like way more complicated than that and for no other reason than a bunch of companies like figured out how to sort of wedge their way in a middle and take like a tiny fraction usually it goes DSP to an SSP who sells to another SSP who might sell to another SSP who might sell to a publisher and so I'll go back to 2021 when it was just a crazy year for digital advertising everything was bonkers everybody was growing 20 30 40 50 percent. Look at the stock prices for any of these guys. I'll use Magnite was 40 to 60 at the start of 2021. They could do no wrong. They were buying SSPs. And as you and I were talking, Magnet is in the seven to eight range. So not that stock price is the indication of business value, but this was

like ground zero for, oh my God, things were so good early 2021. Everyone spent all their time online. Things were going great. And now, you know, there's a lot of other things, but partly COVID hangover, things have gotten worse. So yeah, absolutely. Yeah, if you were in the digital advertising business and you didn't have a banner year in 2021, you need to do something else because it was pretty hard to, it's pretty hard to not. So the point being is that like this got like way too complicated. And now you're talking that 35% of every dollar going into ad tech intermediate years. It's suddenly like 50, 60%.

And in 2021, there was this, you know, the ad tech people called it the FIFO that we were finding out. They kind of knew this was happening. but they were like, oh, it's fine. Everything's great, right? You know, I know like there's probably way too many intermediaries. When things went bad and things started to get worse, all of the agencies suddenly said, I need to figure out exactly which of these intermediaries

are adding value in which ones are. So there's this trend called supply path optimization, another fancy ad tech acronym that will get thrown around a lot, or SPO. Basically what that is is just making sure I understand from spending a dollar to that going to, the publisher who's getting a cut of it and so this is what's going to cut out all of these guys who sort of wedge themselves in the middle and what it should do is kill the long tail of

ss that frankly don't add any value they just popped up to sort of arbitrage and you know and none of them are public people are always like oh who's public that i can short on this they're all very tiny like like i said some guy who popped up to sell you know um i don't know some some some very niche type of inventory in Germany, like that kind of thing. So Magnite and Pubmatic, if you look at any SPO announcement by Group M, any of the, and again, the programmatic pipes are, you know, they're bought by agencies on behalf of advertisers for the most part. Agencies are the ones logging into the trade desk, Google DV360, and they're the ones saying, like, you know what, I trust Magnite and Pubmatic. I know what I'm getting. I know the fee structure.

If I'm only going through them, I'm going to, you know, turn those up. And I'm going to say I'm going to spend X percent of my budgets just through those SSPs and I'm going to turn all the other ones off because I don't know if they're doing all these weird reseller agreements and suddenly, you know, there's also this, this may be two in the weeds. But are you familiar with the made for advertising ecosystem? No. Okay.

this is a i'll get to it because i do think it's important so there are basically these clickbait sites that exist for no other reason than to get people to click on them and the content is awful i'm sure you've seen them there yeah absolutely yeah it'll be like here's what jane brady looks like now and it'll be like 50 slideshows and the ad density will be insane you know i've i've had sometimes on this podcast i'll click in my computer will like somebody would be saying something and I'll be looking it up and I'll click on a site and it'll be one I know exactly what you're saying you know it's at the bottom of like every Yahoo article it's like you won't you won't believe what Jan Brady looks like now or and you do it and your computer goes slow just

advertisements everywhere absolutely so yeah this is a big debate in the ad tech or whether they should be turning these off because you can get they they actually love them because like if you're at group em and your goal is to get super cheap reach you're like oh you go to your boss and you say I got a million impressions for like 25 cents CPMs. Isn't that awesome? And it was like it showed up on one of those crappy major advertising sites and nobody even saw it or as a video. That actually relates to another question I was going to ask. So you mentioned like there's a huge long tale of, you know, Dan and Andrew have 10 niche websites in Germany that that they're serving as the SSP for. How much is like when you're going through Magnite or POMatics, how much is there a brand integrity

question where like, hey, I'm a buyer. I go through them. I, I, I, sure everybody's got a little bit of but you know it's not going to be next to if i go through them my stuff's not going to be next to porn or that type of stuff like it obviously the jan brady like that's not something you love your content to be but it's ultimately harmless you could imagine a much more harmful version of it how much is working with the big guys maybe it's not quite in the number but you're getting a little bit brand safety there yeah there's two companies that are actually this is their job double verify dv and they both went public in 2021 iAS integral ad science um the brand safety suitability thing is sort of their problem um like

that's that's their job is like when you you know i'm a group m i want to make sure you know and they do they do work with the walled gardens too so like you know if there's some sort of crazy video on youtube you would not like to show up before um their job is to sort of block that from happening so outside of the SSPs there is this whole ecosystem of brand safety and suitability um that almost all large advertisers are using one of DV or IAS to make sure that that stuff and when it goes wrong, which it does go

wrong, they're sort of the throat that gets choked, not that DSP is necessary. Let's turn a little bit more to the opportunity, right? Why this is, and part of the opportunity I think as you said, hey, all of these have been cut down 80% right? And there's still a lot of growth to come where as you said,

we'll probably talk about the video segment in a second and that's a really interesting potentially sexy gross story. But let's just talk on valuation, because I think people look at these on a headline valuation. I'm looking at your initiation. So the numbers might be slightly stale. But, you know, your initiation from, I think was April, has, hey, you know, I've got a near-term price target of about $15, you know, 10x, 20,000 for EBDA. I've got about $15.

But longer term, if you look at the growth and you look at like, I could do a DCF and say $30 per share. So could you just help me frame the upside? And then I want to provide a little pushback on the valuation. Yeah, sure. So, really, it's like I said, a lot of the long-tailed SSPs die and, you know, the big ones that have the SPO agreements with the agency buyers eat up that share. Like, there's so much, there's so much upside just for meeting up share. And then, you know, obviously you layer on a potential ability to take share from Google and it's like turbocharged. Yeah.

But I think that's where a lot of the growth comes from. And then second, it's like right now we're in sort of a downturn. And I put a note out the other day that was. tried to frame that up because some people are like oh i see i see meta at 10% growth i see google search at solid growth what are you talking about a downturn um so so there's kind of two if you if you think about it there's brand advertising and then they're sort of performance marketing and performance marketing is what's holding up really well the brand advertising side which is what a lot of the programmatic stuff is it's just sort of like it's not

even really meant to be clicked on it's just meant to like i'm scrolling through an article i see oh this shows on HBO Max, hits me, hits me, hits me every time. Like, it's, you know, it's just get it. The performance is, it's the famous stuff Google got, right? You search for life insurance. The top thing is life insurance. Somebody will pay $50 if you get that click because they're likely to buy life insurance. As you're saying, the brand advertising is the traditional, if you're watching TV and you see

an ad for Jeep. You're probably not going to go buy an ad for, you're probably not going to go buy Jeep tomorrow. You can't really track that, but you're building that brand. So when you are ready to buy a car, like Jeep is top of mine. And we mentioned ESPN multiple times, anybody who goes on ESPN, like the front page is generally brand building, not, you know, smash this monkey and go buy this thing because that doesn't really work unless you're actively searching for it. That's why Google's got such a good business. But yeah.

Yeah, yeah. And so you mentioned TV, like obviously the big like brand advertising mediums, TV, you know, radio podcasts, CTV, people talk about a lot. So programmatic is often like complementary to that. It's like, hey, you want two things. You want reach and you want frequency. You want to hit a lot of people and you want to hit them multiple times. So what a lot of advertisers think about programmatic is like TV is pretty expensive. Let's get some really incremental, pretty cheap reach and frequency.

So when those TV budgets draw down, which they have, you know, and it's not just because of people who are cutting the cord and stuff, it's CTV is also significantly decelerated on the growth rate. I see radio and podcasts have also pretty meaningfully. Radio is in decline. Podcast growth is decelerated. So, so was programic. So I think people are mistaking that. And it's like, oh, I look at the walled gardens growing again.

I look at the programmatic schmose back in declines. Like what's going on there? I think it's more the brand versus performance economy that people underappreciate on that. That's a question. So just to lay out the question a little further, it is a question I had. Like, how much of the stocks going down 80% from 2021 to 2023? Obviously, there was a little bit of mania and results were probably like two turbo, charged by every SPAC getting money in and growth at all costs and stuff.

But how much is simply 2022 and 2023 performance marketing is held up great. If you've got something that's going to drive sales, there's still a budget for that. There's probably always going to be budget for that. But companies were worried about recession. You know, a lot of things are in flux. People were over-inventoryed. How much of the drawdown do you think is just, hey, like we are in a, not a economic recession, but a programmatic recession for all of those reasons versus,

hey, the stocks were way overvalued, the competitive of environments, a disaster, or that type of stuff. I think it's a combination. I don't know. I think that there's a lot of bare cases on the SSPs that feel like they're playing out right now. And that's why you saw them

you saw them sell off after the last journey's called both Maguire and POMAT or like that. Let's talk about it because I do think my friends, a lot of my friends who are long get are kind of like, hey, you need to look at this as a cyclical, right? And the time to buy a cyclical is when things are worse, at their worst. And this is probably the Nadir. Like nobody can call the absolute bottom, but it seems like this is in the near. It doesn't seem like we're going into a recession. It

seems like the brand building should come back. Like if you're a brand, you can cut brand building off for a little bit and not hurt yourself, but eventually you hurt your long term results. So I think a lot of my friends who are long and kind of think, hey, this is the near. You want to buy the Nadir versus, you know, I guess Magnites down 40 to 50% on their Q2 earnings, on their Q2 earnings results. Right. So what, what's going on? What's going on? on that's driving that versus is it just cyclical, I guess? That's a good time to get into CTV. Okay, great, great.

CTV is very important for Magnite. Can you describe it before we hop into it? Sure. So connected TV, right. So basically it's the same thing I explained on the open internet. It's just selling for connected TV publishers. And this spans from your, you know, Fast and Avod channels, Pluto TV, and the random long-tail ones that you'll see on like the Roku channel, anything to, you know, Hulu and, and, you know,

HBO max, not HBO next. You know, so they do everything. And it's, I can't emphasize enough because people kind of think of them as the same. CTV is very different than the open internet. Think about what a typical commercial ad break looks like versus when you're browsing the internet, right? And an ad break on TV, Coke and Pepsi can't be in the same pod. McDonald's and Wendy's can't be in the same pod. You have to normalize the sound, you know, don't you hate it when like the ad comes on and it's like 10 times louder than the show you were watching like this is a problem in ctv because the ad tech isn't frankly all that built out yet um and then there's the problem of i hear this all the time you see the same ad

every time and i'm watching bulu and it's the same ad every single time and like it's a frequency capping problem so a lot of these people just tried to take programmatic advertising and just port it into ctv and it's like there's a it's a very different ecosystem over here is a very different way you need to advertise. You need to understand that hitting people too many times as an ad is going to turn them off. And, you know, publishers need to do things with their ad server and SSPs that limit that if you're going to sell programmatically. So Magnite, which was formerly the Rubicon project, as you mentioned, Magnite was formed with the merger of Rubicon projects, which was all open internet stuff. And Talaria, which was a CTV specialist. They were purpose-built

for CTV, really premium video, but eventually sort of pivoted to connected TV. It's like, this was 2019, the two of those got together. And I actually think, so people will quibble on the, it was kind of an all-stock merger, so it wasn't really a price paid, but talk about the dilution. I think that was smart to go after someone who designed their SSP specifically for CTV. And I think that was the right move rather than other SSPs that just said, hey, we're going to take what we do on the open internet and try to do it for CTV publishers. And two, that there's a lot of people who know CTV ad tech well at Tilaria.

What they then did was they bought SpotX in 2021. SpotX was similar to Tilaria, a CTV focused SSP. It was kind of Tilari and SpotX were the two that had emerged as like the best independent SSPs for CTV. So they effectively cornered, you know, the independent SSP market for CTV with those two acquisitions. And now we again, we can quibble, they paid too much for SpotX. They probably did. Everybody who did an ad tech acquisition in 2021 probably paid too much. They did do it with some of their own stock, which was over, I think, 45 bucks at the time. So that helps. Their stock

was arguably overvalued. Probably, you know, right. So just to frame it up, this is how Magnite became like, hey, 40% plus of our revenue is CTV is they merged with Talaria and then they bought spot X. So part of my thesis again on Magnite is that in order to win as a CTV SSP, you need to have been purpose built for it. And you need to have the ad tech talent, which by buying Thalari and SpotX, they effectively have cornered. Two questions on C2.

Go ahead. So two questions on CTV. So CTV is, you know, you're watching, you mentioned many of them, everybody knows, Hulu, Max, Netflix, Netflix, Apple. supported you're watching them and this is going to programmatically insert the ads right so i guess on magnate who who are they working with right now on the ctv side so they actually had so so they effectively helped disney build their programmatic ad tech stack and that goes back to hulu right disney plus only has ads since 20 since recently uh very recently um so they they worked

very closely with hulu when they were to laria to help them build their programmatic ad tech them. They pretty much work with everyone. I don't know. I'm probably not Peacock. And the reason that they don't do Peacock is because their biggest competitor is Freewheel, who's owned by NBC. Freewheel is probably the biggest SSP competitor out there. And their argument against them all the time is why they're not possible in them is we're independent and they're not, right? Can you say that one more time? You just cut out for a second. So, sorry. NBC, by Comptain. podcast, obviously, owns SSP and ad server called Freewheat. And so, no, I just was making it.

So the magnet argument is why work with free will when they're owned by your competitor, work with us, yeah, okay. So I think people can see why this would be a huge business, right? Every single Netflix is rolling in the past year, Netflix roll out the ad support. And everyone's rolling out the ad support ad. And everyone, when they roll out the ad support it, they said, hey, we are, you know, I don't follow it quite as close as used to, but everyone who's rolled out on ad support is basically said, hey, like the results from the ad supported are great. People love it. People come in.

They save money. Our rates on ad supported are better than we thought. Our engagement are better. Like everyone's focusing on the ad support it. You look at the Disney Charter dispute that just ended, right? Which I know you and I have talked about offline for different reasons, but you look and one of the results is Charter gets to wholesale Disney's ad supported thing, right? So obviously everyone's pushing people into the ads support bundle. So you see this huge growth. I guess the question, I've got a lot of questions here, but the, first, they do seem to have advantage, like they are custom focus and everything you said with programmatic makes sense, but you know, it's not like there are no competitors. Like Netflix, I

think, is working with Microsoft on their thing. Who are there other competitors who kind of actually matter on this side? Yeah, it's free wheel really is the big one. Okay. And then there are a couple of others, like Putmatic does see TV. You know, all the SSPs do

see TV. They're all going to say they do it. It's, you know, like for example, and Popmatics done a decent job, for example, but they don't even break out their CTV revenue. And, you know, it's hard to tell exactly how big it is. And it was like doubling year over year last year, but it's kind of like, oh, I'm not sure exactly what the base is on that. And now, you know, putmatic on a piece of revenue that's not large enough to specifically break out is actually declining in CTV revenue. So the thought there is there's kind of been a first

mover advantage for the guys who specifically built it for CTV. So Tilaria's Bodex, there's one, three wheel was another. There's a smaller one called Unruly that was bought by a company called Tremor. I've heard there. I know Tremor, yeah. Tremor, re-branding is Nexon. So they have an SSP and they're going to rebrand Unruly. And I think that had a, that was actually previously owned by Fox.

So I'm sure that Fox does, you know, a lot of there. Let me ask a beer. So it does make sense, right? Everybody's pushing to ad support. These guys have worked with Disney. They've worked with big guys. You can see the upside as everyone goes ad-supported. And, you know, I do think cable one to unwinding,

like there's just going to be a lot of growth in the sector. So I think you could frame that really easily as a bull case. Let me push it back with a bear case. Look, there's going to be six online video services that matter. I mean, take YouTube out of it. But if you're really thinking about the programmatic, hey, we make high-end quality, and then we sell it. It's going to be Netflix.

It's going to be Disney. Amazon Prime, you're probably not getting. I don't know. Do you know who's doing Amazon? I don't think they have full ad support of yet. I imagine they do it themselves. I have a hard time to believe they're using it. Well, that transition. There's going to be sex, right? NBC, Netflix, Amazon, you name it. There'll be a few. And I do wonder, like, you mentioned in your note, Netflix will face a buy versus build decision. It doesn't seem like Netflix really likes the Microsoft thing that they've done. I don't know too much about that. But if I'm the six of them, why am I going to work with Magnite instead of just say, hey, why don't I build

this myself. Like, you know, if I'm going to have 10 to 20% of the advertising market, no matter what advertisers are going to work with me, I'm going to have a great brand product, build it myself. I don't have to give Magnite this thing. I can control it all internally. I can get, I can work with the advertisers directly on maybe more bespoke things. Like, why don't all of them just look at it and say, I've got the budget. This is important to me. Ad supported is the future for my thing. I can't have someone else controlling kind of my ads, just cut out the middleman and build it myself. Yeah, no, it's another, I'd say one of the more. common bear cases I hear is just one that they just build it themselves. It's a lot harder to

build it themselves than you'd think. And it takes a lot longer and it hasn't worked for open web publishers that have kind of tried to build some of these themselves. And you kind of just some of them have tried to build SSPs themselves and they end up just doing that and having their own thing with monetization from the others on the side and kind of realizing, you know, it's worth it to pay to take rate. So it's been tried before. And for a lot of these guys who have new ad supported tiers, it's going to take you a while to build it. You're going to have some bugs when you build it. And I don't know. I just, they're under pressure to see results there. Magnite can come in and say, hey, right now today, we'll start monetizing it for you programatically.

And they've been successful with that pitch. And I don't know, maybe outside of Amazon, who's, you know, they do everything themselves, unsurprisingly. YouTube does everything themselves, unsurprisingly. Outside of those, everybody's working with SSPs and CTB. And the reason for that is, and then the other piece of it, and this is, the layer behind the SSP is the ad server. So the ad server is the one that says, and again, not all CTTV inventory is sold programmatically. Some of it is sold direct, just like it's sold in linear TV. Actually, a lot of it is still sold direct.

and, you know, this shift from direct insertion orders to programmatic is a whole another tail when you can talk about. So the ad server is the one that says, okay, there's a direct ad you sold. Disney, you directly negotiated this with Ford. This goes here. You know, we're not even going to throw it to programmatic, right? Next ad slot, we've got another direct one. Next one, you know, okay, the next two are sort of open market and we'll just auction on.

Right. So the ad server piece of it is the infrastructure like. very like the ad server doesn't make much money but it's super strategic and magnate has one called spring serve that came at a very cheap valuation when they bought spot X um so this is i actually think spring serve is one of the more underappreciated assets within magnate's portfolio fubo uses spring serve there's there's a none of the big ones use it and again freewheel is really their their big competitor uh free wheel is also an ad server and sp so the ad server component of it. To me, in Magnite is not, it doesn't make a whole lot of money for them,

but it is a very strategic asset that they got at a very cheap price that helps lock in their SSP to a lot of these publishers. You said that none of the big ones. So Disney who has worked with Magnite on the, Disney's not using the spring serve ad serving product. They, because I guess I'm just wondering, I hear you on it's a strategic product, but if nobody's using it, then it seems like everybody else already built their own or using someone else's. Yeah, free wheel

is probably the one a lot of them are using. Okay. And now they're kind of regretting that from what I hear from some of them. Okay. Free wheel sort of plays a lot of games, so. Yeah, because I guess I do hear you on this just,

I know symbols, and I think you mentioned it, like Netflix seems unhappy with the Microsoft partnership they've got. Netflix, you know, when the Microsoft partnership ends next year, or it's up for renewal next year?

Yeah, next year, it may end earlier than that. Okay, but so let's just say next year it's up. And then Netflix will have an instant decision. Hey, if we're kicking Microsoft out, do we build our own ad server or do we buy? And I know a lot of people think, oh, buy Magnite. And then you've got a functioning ad server. You've got it across, like you've built out in advertising. And in the same way, Amazon kind of like, hey, when we launch a new business,

you know, Amazon retail is the core business for Amazon Web service. They are the core function. and then you start selling it to everyone else. Netflix can be the core demand load or the core, I guess, the supply side for the advertisements and then they can go sell it to everyone else. You could see the strategic there. I guess the other pushback would be, again, Netflix history is build versus buy, right? Like, I think they've done two acquisitions and they were very small IP acquisitions in their entire history.

So this is a tech-focused company with great tech. Why don't they just go build it themselves, you know? Yeah, they might. And I think they might build the ad server themselves. I think they'll still lean on SSPs to sell. sell inventory programmatically and like any big publisher that they'll sell out of it direct and and this is what i say to people direct is not the enemy programmatic okay you can run direct through the programmatic pipes it's going to be a lower take rate but the enemy of programmatic right now

is insertion orders in ctv insertion orders are just the exact same way you bought linear tv you're just buying it on on the connected tv stream inserts so as long as they can take some of those insertion orders and migrate them to some sort of programmatic, whether it's a programmatic guarantee, which is really just like a digitized insertion order. And then there's like private marketplaces, right? You know, I mentioned open is like, hey, anybody can bid. Private is like, hey, I'm Disney. I negotiated with 30 and you guys are the 30 that are going to bid in this, in this private marketplace. Right. So these are the kind of like lower take rate things that is mostly going to be in CTP. I've said like the open auction programmatic that you see in the

open web, the fast guys, the Avod services, they might use those and lean on those heavily because they don't have the heft to negotiate directly with advertisers. So it seems my concern was Disney and NBC, these guys, you know, with the, especially the sports content that drives huge things as they go online. My concern was, oh, they take it into house. They do it. The next thing I was going to say was, why doesn't Disney, you know, the top 50 advertisers, the top three beer companies, seven car companies are going to do. almost all that advertising. Why don't they go to negotiate direct? And it sounds to me like what you're saying is that is a threat. In fact, that might be the most likely thing that ends up happening.

If it doesn't, great for Magnite because they can land a big customer. But what you're saying is, hey, there is still a longer tale of companies that I maybe was discounting, but, you know, Roku's big, Fubu's big. There's going to be other services. There'll be niche streaming services. There'll still be a lot of services and a niche streaming service is not going to go to direct deals. They're not going to be able to build this. And Magnite, you know, they can build a serious business winning the, you know, maybe not the one through 20. It'd be nice if they land the 1 through 20, but running the 20 to 2000. Yeah, that's a good way to summarize it. I mean, they'll still win the 1 to 20. It's just going to come at a low take rate because they're doing

less for them. Like, that's the easiest way to put it is, you know, and again, it's so different than open web program at it because all of these big to top 8 CTV publishers, they've done ad sales forever. That's what they're good at. Like, you know, so they're, they're, they're, a lot of them have a lot of old ways of thinking, you know, on the buy and sell side, you know, advertisers are just like, hey, I just want to buy the bear on Hulu. And they're like, well, you can do all these cool targeting things. If you want to like pay a take rate, you can target here, you can target there. And they're like, no, I just used to buy shows on TV and that's what I want to do.

I do know. I do hear that. Like, so I did a lot of work on Shark Ninja recently. And one thing that I heard from people after I publishes, they were like, look, you don't understand Shark Ninja, which I don't know how familiar you are with them. they do the shark vacuum clean cleaners and the ninja uh if you heard of the ninja creamy the ice cream maker they do like innovative appliances basically right and my pushpages like hey like you can only vacuum cleaners have been around for a hundred years like how much can you really innovate you know

how much can you really innovate and not get cut out by chinese stockoffs basically that are going to copy them in 18 months and it's all going to go to zero and one point somebody made was like look a lot of their competitors are like the it's run by a middle manager who's 50 years old He's, you know, he's been there for 25 years. He's always bought advertisements on TV. He's always, like, done the same thing. And you've got Shark Ninja that's, like, young and hungry, and they're dominating TikTok advertising and everything. He's like, they're just competing with an older, slower breed.

And yeah, eventually, like, if you run this forward 20 years, eventually, yes, the middle manager will retire and everyone will be advertising on TikTok. But as you're saying, if you're, you know, the GM car media buyer, yes, your underlings are probably. experimenting with people. But right now, you're probably just like, I've always bought, I've always bought on TV. Like, I just go to my buddy at NBC and I say, I want 100 ads on Sunday night football and here you go. And, you know, it takes time, but it does evolve over time. Yeah. And it's all contextual. Like, right, you're just like making assumptions about the people that watch Sunday night football and saying like, okay, this is, you know, I'm a beer company and I want to do that. Whereas what programmatic is telling you is like, hey, now that it's not, you know, over a cable wire, now that it's through the

internet. We can do a lot of cool things in terms and targeting demos. We can target, you know, we can frequency cap. We can say, hey, you are hit with these ads on the open internet. You want to hit these people. You know, we can bring in purchasing data. We can do all sorts of cool things now that, now that TV is going from over cable to over the internet. You know, I think I'm about to have my first kid. And like, if you were advertising to me, I would watch football games and you'd see, you know, Huggies, diaper advertisements. Be like, guess what? Three years that was the stupidest advertisement you could ever you could ever serve me and today it makes a lot of sense or if you bought a car two months ago there's no need to hit the guy with a car advertisement whereas if you had hey he bought a car four years ago now is the time and you could imagine those types of things like it's one of the reason for a long time I was so bullish on podcast advertising like getting inserted programmatically because it's coming off your phone you know where the person is you can insert it time of day bait like it hasn't quite played up there but if you ran it really far forward eventually it will get there. Let me, I have, I want to talk ad backs and then I want to talk Google Antitrust, but

we've talked about it a lot. I just want to make sure, is there anything on the bull case or the bear case that we, aside from ad backs and Google, that we have in touch that you think people should be thinking about? I just think on the CTV side, the important point for Magnite is that most of it, CTV today is still in search and order, right? So people talk about the growth, as long as that's all insertion orders who cares because the programmatic guys don't see it. Magnite, put the product out called Clearline and Pubmatic had a similar one. It's basically like, listen, do that, just digitize it and they'll make the workflow easier, make the billing easier.

We'll take a three to five percent take rate for that. But start doing this programmatically. Like, and you can, you know, so that point about CTV and how old school it's still done is important because, you know, you've got the growth of CTV, you know, just generally budget shifting linear to digital. But then you've also got this tailwind of like the dollars now still just like aren't even or just linear insertion orders that need to migrate over. If I could put words in your mouth, your price target, you initiated with I think a 15 price target. I think your price target still in the mid-teens. If I could put words in your mouth,

the way your base case kind of plays out here is, again, the stock is under $8 per share. So we're talking almost a double of an interest stock price. But the way this would kind of play out is over the next 12 months, you get a little bit of, you get CTV, it continues to grow, people maybe digitize a little bit more. So you get the growth from CTV. And then the brand business basically stops declining, you know, because the recession fears have ended. People that, hey, we haven't advertised brand in 18 months. We've got to come back. We've got to start getting people. Brand business stabilizes, grows, whatever. And as that happens, people get confident. And, you know, again, you've got, I'm looking, it might be slightly

old numbers, but you've got about 250 million in EBIT on 2024, 10x multiple that gets you to the 15 all that happened to yeah again that number 250 is probably a little high now I'm probably lower than that now it was from April but you know I don't think I'm throwing out crazy number so that would get you to the 15 and that's 10x multiple like none of that's crazy and by the way they've been buying back that convertible debt at 80 cents on the dollar which so maybe your EBIT is lower but the debt is lower as well because that's it's always pretty accretive when you can buy back debt at 80 cents on the dollar okay so that would be kind of the base case and that frames why I've got friends who are interested in it,

why you've got a buy rating why you're... Let me start with the last bearcase I would have. And that would be the ad backs, right? I threw out the $200 million in EBITDA number. You can look at their reported EBIT numbers. You know, it sounds great when I say $200 million in EBIT, but if I look at their adbacks, you know, $40 million per year in DNA,

and that DNA does include they capitalize internal tech, which is always a pet peeve of mine when people capitalize their internal tech and then add it back on DNA. I guess that's fine, but then they also have $300 million plus in kind of annualized, amortized, acquireable. Yeah, we can talk about that. And I understand that, but it is just a big, big number. $80 million annualized run rate of stock comp. And then they also have some merger and restructuring charges in there.

So have I seen messier adbacks? Yes, absolutely. I use some work in private equity. I've seen way messyer adbacks. But, you know, this is not exactly a clean story. I think when you say $200 million in adjusted EBDA and just, just 80 million stock comp right there. People say, well, you know, that stock comp's a real expense,

especially when the stocks at eight, like that's, that's eating up a lot of the equity cap right there, the DNA. So I just want to ask about ADVACs real quick. Yeah, sure. So just the way I think about stock comp is like, one, when I do a five year DCF, I just kind of look at the five years of stock comp, assume a price and delete the count by that amount. Like, and I get that like, of course, stock comp is a real expense,

but it's also not a cash expense. As long as you dilute the share account, by an appropriate amount like I think you're you're capturing it no I hear you it's just it's one of those things you know 80 million of stock comp when you're a five billion dollar company is one thing but 80 million dollars to stock comp when you're an 800 million dollar market gap company all of a sudden that it gets a lot more dilutive yeah I'd like to I'd like to know how much of that stock comp is marked at 2021 prices and if you marked it at 12 bucks I don't know off the top of my head But I imagine it's inflated to an extent by options and RSUs granted when the stock was at $40, $50, $60, and, you know, the actual dilution is much less than that.

So, again, I don't have the numbers right there, but just I think everybody has that problem right now, right? So you look at SNAP's stock-based comp, it's egregious, but, you know, it's all at $80 a share, which is like, okay. What is SNAP now? I don't even know where they're trading now, to be honest. I think they're like $10 or something. Probably under that. not no okay okay cool so yeah i'd have to do the math it's not um it's certainly not the least stock-based comp of my coverage but um again i'd imagine that there is some impact from them granting

stock at prices and again how the accounting works is you grant it you don't change the price per share it's all it's all from the grant date yeah no though you know the the count of that would be hey if you're if you're paying your people in 2021 80 million a year and all the stock comp is at 20 and I've got friends in tech, you know, all the stock cop struck at 20 and then the stock goes to 10. Well, you know, investors hate stock option repricing and rightly so. But you know, if it's the CEO, it's one thing. He really is responsible for the stock price. If it's the, you know, the lead engineers and stuff, they're not really responsible for the stock. And if you don't make them whole, like I can tell you, my friends, they look to go elsewhere

real quick if you don't make them whole, right? Because you generally get bonuses when you leave. and it's just tough. Okay, let's turn. Go ahead. No, no, no. I was going to just say it's a fair point. Let's turn. That's add back.

You know, I do think it's like, hey, if you're going to get the growth, if you're going to get the, you will leverage all of this. I'm fine adding back the amortized acquisition intangibles. You know, I'm a little funky on the capitalized internal tech, but whatever. If you get the growth, I think that all of that's doable. Let's talk the big book case, right? The big thing that some of my friends get so excited about, and that's the Google antitrust. case, right? So for those you don't know, the Google antitrust case, it's about to go to trial. Is the trial March 24 or is the ruling March 24? I'm not sure if it's January or March of 24. I think it's

we don't know when the ruling will be, but people are saying it could be pretty quick, like six months is pretty quick. Yeah, so I think if I remember correctly, and stop me if I say anything wrong, because I'll ramble a little bit here. But right now, I said, is it right now because there's so much of the pretrial motions happening and all the discoveries coming out and everything. That's why I was a little confused. But I mean, it's March 2034. I believe it's in Virginia federal court. And this is called the Rocket Docket Court. So people think this ruling could come, as you said, very, very quickly. And a very quick ruling is actually interesting because there could be a change of administration in November. And I don't think a new administration, which, you know, if a new

administration came in would probably be a Republican administration, I don't think they're very friendly to tech, but it also would kind of be tough to have a administration less friendly to big tech than this one. So getting the ruling early could, like, influence there if there was a change. But anyway, big ruling can come. It's an antitrust case. Government suing Google, I'm basically saying you're an antitrust issue. And a lot of the things that Magnite is competing with Google in are, you know, square and focus here. So we don't have to opine on the specifics of the antitrust case.

But I do want to ask, you know, if Google loses this antitrust case, you know, there is a huge bulk case for Magnite. So maybe you can frame that. Yeah. So again, the bulk case is mostly on the open. internet stuff. I think Google intentionally is like, I think we should probably stay away from CTV ad tech. We're already kind of the 800 pound gorilla everywhere. They have an ad server that a lot of people use, and they have an SSP too, but I hear mostly Magnite and Freewheel is the big ones. So it would mostly be Magnite's DV Plus segment and Plymatic as sort of the big like

open internet resting Google's grip on their on the on the banner and video ads that you see when you're when you're browsing around the internet so um i mean look i think it's hard to ignore the fact that like right now we're in the search antitrust trial um next year is is the ad tech antitrust trial if google had to pick which one of these to win and lose there's not even a question they would lose the anti the ad tech antitrust one and they would win the search one because search YouTube. What do you think of anything at Google? Search YouTube, the cloud, you know, that's it.

Nobody even talks about the Google's network segment. How long has the last time you had her cell site analysts to ask about Google's network segment on an earnings call? It's the DSP, it's the SSP, it's very esoteric. Nobody even cares. And by the way, most of their privacy problems are on the SSP and ad serving side. There's an argument that they might say,

you know what, we definitely don't want to lose searching each rest long. Maybe we should play nice and just split off the SSP and ad server and give them what they want on that one because when we really think about it, I don't think anybody's going to care that much if we have to spin this out to shareholders. That's, I think, something that can happen. I don't know, just me throwing things out there. But I do think that if there was a spin-out, which, by the way, nobody's buying Google's cell side. And I'm making a lot of assumptions here. I'm making the assumption that the preferred

remedy from the DOJ is to split off Google's sell side ad tech assets. So it's SSP and ad server. And they would get to keep the DSP in a very, in a very, in a worst case for them, they would try to split the DSP off. So YouTube would have to open up to other DSPs. That's, that's like something I think would probably be a bridge too far. And maybe something they're like, oh, man, what if they try to do that to us? Why don't we just split the sell side from the buy side? You know, if you read that, if you read that the DOJ filing, it's all like, oh, this is like if Goldman Sachs on the New York Stock Exchange, which is kind of, you know, shapples the oranges

to me, but, you know, it's a nice headline. But anyway, that's it, right? You split off the buy side from the sell side and, you know, theoretically that removes your conflict of interest. So I think there's the chance of this happening where the SSP and ad server gets split off from the rest of Google is higher than a lot of people think. And Pobatic and Magnite are easily the two biggest public beneficiaries of that. So let me just drive. Why are they the public beneficiaries of right?

Is it because, hey, when you split off the, if you're just splitting off the Google SSP, right, you've got another SEP? Yeah, previously they were tied into Google, but it's not like the competitor has. gone away. So is it a beneficiary of just, hey, we've, you know, there is, there is something to, if there's only kind of two publicly traded players in a market and they're small, not a lot of analysts, not on a lot of coverage, it could be more inefficient? Is it just, hey, it's bringing more eyeballs or when Google splits if, if and when Google splits off the SSP does the legacy business of Magnite have this huge beneficiary where, hey, you know, everybody had to work with Google because they wanted the DSP. Now it's free for all, you know, 30% of the

market's up in the area. And we're going to grab 10% of it. huge growth, margins go up. There's less competition. Like, is it just a free-for-all? So how do you look at that? Yeah, so the easiest way to frame it up is if you split DV-360 from the SSP and ad server, and DV-360 has the most market share among all the DSPs, go and go and look at Project Poirot from the DOJ filing.

Basically, what it was is Google intentionally turning on a function that forced all of that advertiser spent on DVC 360 through their own SSP and ads are i mean and they didn't tell them and it was just like a harmless looking little thing that was automatically turned on for everyone basically that would put better bids through their own sSP and win more um again these are the kind of things where people just don't trust them anymore to act in the best interest of these either an advertiser as a publisher because they play both sides and you kind of never know which side's getting screwed, but Google's always winning. So, you know, that's the easiest way to think about it is a significantly higher percentage of DB 360 spend would go through non-Google

SSPs. So that's one. And then, you know, two is that, again, I guess it would, I guess it would depend if you could, there would be a further, could you split the ad server away from the SSP? And I doubt it. But if you could split Google's ad server from its SSP as well, then it would be huge because like I mentioned how Magnite has an ad server in CTV, Google has like 90% ad serving share in the open web. And you can do a lot of things with the ad server that are kind of sneaky to make sure that your SSP is winning a lot of the auctions. So if we were to go further than that, which I think it's unlikely, that would be massive.

Because one, it would open up, you could pick who your SSP is, you know, Google. played all these games where you have to use their ad server to get access to their domain and illegal tying and this is the whole antitrust argument so there's a couple of ways it can win um and again i don't think the ss need this to happen uh but it's a huge call option and stuff google you know let's say march comes around google doj press released with the government hey we've settled we're splitting off our we're splitting off our sSP or you know ruling columns in sept google you legally must split off your SSP, what would you, it's tough because we don't know the impact, right? It's not one of those things where you can say, oh, Magnite signed a new customer. I think

they'll get 50 million. We literally don't know the impact, but what would your gut say the stock, Magnite stock would go up if, you know, Google agreed to do that? Well, I have to imagine the stock would have anticipated it if the trial is going well, but let's just say it didn't. Let's go with the March March of 2024, before the trial starts, you would get some filings and stuff, but before the trials starts, there's a settlement. Google says we're splitting off the SSP. Stock says, all right, it's happening game time. What do you think the stock does? Yeah, I think it would be most likely would have probably already run up. But I think Magnite could easily be where my price targets at in that scenario, at least over

10 bucks, right? I think it would rewrite considerably because, I mean, it would just be a lot of the bear argument coming out of the stock. What do you think the non-macro, you know, obviously there's the macro side and then there's sort of the more fundamental bear argument. If the macro is turning and some of that bare arguments coming out, we've seen what happens when ad tech re-rates. It can be very aggressive and very, very quick. What do you think the odds are that Google loses this trial and or splits out SSP?

Oh, man. I'd caveat this with, I haven't analyzed a whole lot of DOJ cases. All I would say, I don't know if I want to put a specific percentage. I think it's greater than 50%, which I think is a lot higher than people think. I get a lot of people who I talk to about this and are sort of generalists, and they almost dismiss it. It's almost just like Google never loses these things. They get fined all the time. They just sort of take it from all the regulators.

They're bulletproof. They're not going to actually lose any of these things. and I don't think they're going to lose the Search Bonopoly trial. I actually think they have a pretty bad argument on that. I think they have a very good argument on the AdTech antitrust trial because you can tie it specifically to acquisitions that they've made, double-click and ad meld and all of these different things. You can tie it specifically to illegal tying between products,

the ad server to the SSP to the demand side. I don't know. I think it's a very good argument that they have. have combined with the fact that Google's facing two big antitrust trials and there's one that they would far and away prefer to win and I don't know how this stuff works behind the scenes but like I said there's a scenario where it's like listen let's just come to terms on this other one we'll give you what you want on that one maybe we go we want on this one and you got a you got a big win here right you know chuck it up look I I have not read the DOJ complaint here so

I'm talking a little bit out of my butt, but I have a friend who has a big position magnet and his argument was, hey, even if you ignore the cyclicality stuff we talked about, everything that you and I have discussed currently, I think there is a really good chance Google loses this SSP trial. And my pushback was exactly what you said. I was like, Google's bulletproof. They don't. He was like, dude, read the complaint. Like there's a real theory of harm. It's very easy to cleave off. And if you think there's any chance of that magnet is going to win. And his other interesting point, and I'm talking about him loosely, he might come on the pod and talk about it at some point. But, you know, his other interest point is if you look at the history of companies getting broken up for antitrust, like all of a sudden, you know, you've got the Google engineers who've been very protected.

Like they've got this, the search engine gushing, people have to work with them, all this sort of stuff. All of a sudden, they're subject to the really competitive whims of the open market that, you know, magnet has been subject to the whole time they've done. And the Google SSP, which, how much market share would you say the Google SSP has? 40 to 50%. It's got 40 to 50% and all of a sudden they're subject to the whims of the market and the things collapse

because it turns out they've gotten fat and lazy and the people who've always been scrappy take share really directly. Will that happen? I don't know. What he says sounds reasonable. Also everyone I know who works at Google is also really smart and really good. So maybe they haven't gotten fat and lazy

and they'll subside. But as you said, I think the market, if I had to guess, is pricing in a sub 5% chance of it happening. and I think it's a lot higher. You said over 50. I think my friend thinks over 50.

I don't know. It's something I'm going to have to work on, but I definitely don't think it's sub-5, and there is a lot of optionality there. I'd say it's better than you. And again, I'd say that is maybe a dumb better here. He's never bet on DOJ trial outcomes. But just, you know, talking to people, talking to a lot of people about this, I definitely think it's a much higher chance than generalist investors described to it.

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the ability to engage with experts one-on-one and get your calls transcribed free of charge, all for 40% less than you would pay for 20 calls in a traditional expert network model. So if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. for listening, and we'll catch you next time. You know, we could talk about DOJ all day. It's just, I think there is something where the DOJ, and particularly the FTC, have run up a string of antitrust losses.

So I think a lot of people are dismissive a little bit of the cases, you know, because it used to be the base rate for the DOJ bringing a case was very good. And I think, but this case, as I understand them, and again, not having done crazy amounts of work, this case has real merits to it. And, you know, I think I'm going to have to get smart on it. Maybe as a trial gets closer, we'll do some expert calls on and stuff. All right. Last question, and then I'll let you go because we run over time.

Ignoring the Google case, right? There's the bare case on cyclicality. There's the bull case on growth. What do you think the one thing is that the overall market, journalists who look at this kind of miss that you think is important to the story? It can be on the bull or bear side. Yeah. I think they think that the DSPs are just going to trample the SSPs

and you're going to have a world where SSPs don't exist. That's like, it's like they say the trade desk has kind of made all these crafty announcements, like going directly to publishers, undercutting SSPs take rates, there is this argument that the DSPs have all the power, that will trample the SSPs, that yeah, maybe put Magnet and Magnite down. My pushback on that and having talked to publishers is that at the very least for the open market internet, they very much value having someone on their side who's maximizing their yield that's separate from the trade desk, right?

One thing that they would absolutely hate is if Google gets broken up, and then all of a sudden the trade desk is the new Google. And, you know, the trade desk can say, oh, go to direct to us, we'll give you a better rate than the SSPs will get. Well, guess what? Maybe they can now, but in five to ten years, you just killed all the SSPs who are representing you. And now there's really nobody, you know, it's just the trade desk is kind of the new end-to-end. I don't think any publishers want to end up in an ecosystem where that's the thing. Do you think publishers are strategic enough for that? this is almost the predatory pricing thing where trade desk goes and says, hey, Dan and Andrews

SSP is yielding you a dollar, right? We'll yield you $1.25 and they can eat their take rate for years and years. And then once they bank for us, they say, hey, now you're getting 75 cents. And do you think, you know, media companies, internet company, are they strategic enough to say, hey, no, we need to make sure we're funneling some business towards Dan and Andrew to make sure we've got a competitor or you know managers run on a short term if they can boost their earnings in my example by 25% by going with by going with trade desk in this clearly predatory pricing scenario but go with that and you know let your let your replacement worry about the dealing with a monopolist three years down the line five years out of the line yeah so a couple of points there

one there's like considerations beyond that like cpm you're getting one and like for example it's pretty crazy we went over an hour without talking about third party cookies and an ad type of conversation, but anyway. Didn't do any ATT talking or anything. Look, I'm a generalist. I told you. You could tell me I was stupid at any point. Yeah, no, no, no. This is, it's just, it's actually, I think, a good thing.

But anyway, with third party cookies going away, everyone says, like, publishers have to have their own data, right? And publishers want to put that data in the SSPs. They don't want to hand it over to the DSPs. And so when you pass along that ad request, it's like, hey, you know, I'm someone who's logged into ESPN with my email. And then the teams I like, I don't want to pass that on to the trade desk. I want to keep that close to the vest with my SSP.

And I'll let them pass that on in the bidge stream. And then, you know, the DSPs can bid on that information as they'd like. But there are other considerations beyond just like the price you're getting that SSPs can add value. Why would you not want to pass it on to the DSP? There's a worry that they'll use the data to just create their own data lake and then they kind of won't need you. I hear you on Create Your Own Data Lake, but you're still the person who, you know, the consumer is getting served to add to, right? So even if they've got all the thing like, cool, you can build a better profile of the user, you still need to serve the user the ad through me, right? Yeah, I think that's fair.

I think there's also like a privacy argument that you're kind of not, you're kind of keeping it closer to an SSP that represents you specifically. and this came from a publisher that I talked to about open. You know, as somebody who uses the ESPN website all the time and thinks they're targeting and everything is terrible and they always forget my username, I almost wish they would be less sensitive with my privacy and just to remember things. Let me ask one more question.

Then I actually will let you go. You mentioned a lot of time you talk to publishers. I'm just curious because, again, I'm a journalist in this industry. Every time I looked at it, I started my eyes bleed. Who do you talk to for the most part? like obviously you talk to magna you talk to trade desk you cover them but who do you talk to in the industry when you're kind of getting industry scoops like are you talking to medium sized websites who are kind of some of your channel checks when you're developing your view of the industry

yeah so i go to the ad tech conferences and sort of you know next week i'll be at programmatic i which is the big one in new york so i just kind of build context out that way again as a as someone who two three years ago do nothing about ad tech and had to ramp up very quickly uh talking to the I use this term very nicely. The ad tech nerds has been very helpful. And if any of those ad tech nerds listen to this and feel like I misstated something, please read out to me. The nerds rule the world now.

And as a nerd, I mean, people who read the website know pretty much the only thing I read are hard fantasy books. So as a nerd, I'm very happy for the nerds to rule the world. No, yeah. And again, I've built out some context, you know, private SSPs at you know, they kind of give me some, and they can talk more candidly than... Oh, yeah. When there's no reg FD and there's no publicly traded stock price.

Just to sort of get the scoop on like, you know, what DSPs are doing and what their views on it are. And then, you know, just generally people at publishers are always helpful. And then obviously the agency buyers, the group Ms of the world who are the ones who are literally logging into their DSPs and doing these buys and just talking to. them about you know what they're doing and in how they're evolving the way that they spend and supply path optimization and all that so you're a little bit different than most of the people I have on the pod because you know I've had some sell side on before but you're a sell side so

there's no Twitter account the the how can people who are you know interested here obviously if they've got a be Riley account they can trade through you guys stuff but if people who are interested in following up with you asking questions about magnet everything how can they get in touch with you yeah sure so email is the best way unfortunate like so we can tweet but you know, you're pretty limited. I just stay away from it. I don't feel like dealing with compliance on social media. So I lurk and I find some value out of it,

but I stay away from actually tweeting anything about stocks just because I always worried compliance. It's going to be on me or something. So you can get me in my email. It's D-D-A-Y at B-R-I-L-E-Y-F-N-B-Riley-F-N-Riley-F-N.com. Cool. D-D-D-A-L-L-L-E-Riley-FIN. Cool. Dan, this was awesome.

We might have to have you back on because there is a, there are a small cable company or two that you and I have chatted about in the past, you might need to talk about at some point. I just, uh, wide open west. Let's, let's do it. Cool. We, maybe after Q3 earnings will follow up, but this has been really great. You can probably tell because we went to hour 15.

I really enjoyed this. And yeah, cool. Thanks for having me. Thanks, man. A quick disclaimer, nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advice.

Thanks.