Okay. All right. This is Omar Dessouky. I am senior analyst at Bank of America, covering U.S. internet, focusing on advertising technology and video games and consumer subscriptions. Some of the stocks that I cover in the ad tech space are Magnite, whose CEO we have today, Michael Barrett, AppLovin, Unity, DoubleVerify, and a couple of others. Magnite, we have been following Magnite for a long time. Well, actually, sorry, since 2024. We turned bullish sort of late 2024, and we have been bullish ever since, and it seems like much of the thesis that we had expected has just simply played out. One thing, for example, is CTV. They have two businesses, the CTV business and the DV+ business, which is focused on open web. We have always been looking at CTV as your business, as a business that could outgrow the CTV market in general.
CTV advertising seems to be growing, I think, kind of like mid to high teens expected long term, yet you grew 36% year-on-year in the third quarter. Your top 10 advertisers grew 40% year-on-year?
Yes.
Right. That is even faster than the rest of your business, probably because of upsells. Your upsell process is working.
Yeah, no question. One of the benefits we do are most of our clients are global in nature, and so when they expand to different countries, we get to go along for the ride and help them monetize their inventory in those areas. You find that it is kind of a land and expand with the big media owners.
Got it. I think what I am most interested in is you talked about the potential for 25% annualized growth long term, and I was hoping to double-click into that. Are you saying that it is going to be sort of like a 25% CAGR or a minimum 25% year-on-year growth, what you would look for even with years where there are tough comps?
Yeah, no, I think it is very fair. Again, it is a longer-term goal, but I do think that most of the industry experts peg the growth rates of streaming, the ad-supported streamers, in the mid to high teens. We have every expectation, given the breadth of the relationships that we have in streaming, that we would outpace the industry growth. I think if you look at a 25% growth rate compared to our 36% versus low to mid-teens growth rate for the industry, we feel very comfortable pegging that as a, not just aspirational, but something that we feel is very likely to occur.
Okay, got it. This year, I think, there is potentially a big political cycle coming up.
Correct.
To us, I think your guidance looks a little bit conservative. I still want to get back to that question. Even in the context of a big year, which, for example, could be this year, depending on how political does and other factors where you are doing well, are we supposed to look at that 25% as sort of more of a floor or like a CAGR?
Yeah, I think a CAGR. You mentioned political. Political is very interesting for us. We are new at it. We are not [Scripps], right? We have two cycles to go off of, a national election four years ago and a midterm most recently. The challenge is that it was so new. Streaming was so new as a medium mix for political advertisers that it is a little unknown what to expect this year. To date, we have been pleasantly surprised with the amount of spend, but we know it is heavily back-loaded, and it really does come down to are they competitive races? Are the races in the right market, et cetera. I do absolutely think we will be talking in 2027 about ex-political from a comp standpoint. I think we feel very good about where we have pegged it right now.
How penetrated are your services in the CTV TAM at this point? The reason I ask that is because there is this push and this pull where your more seasoned publishers, you have upsold them, and that is one of the reasons why, for example, your top 10 accounts are growing faster than the rest. You have talked about positive kind of pricing mix shifts very recently. The 40% growth on your biggest publishers, that is higher than the overall 36% growth. I assume you are still penetrating the market, right? The newly onboarded publishers are going to start off with lower take rate type services, which eventually will go up. There is probably some latent pricing mix in your model, which I think analysts have to think about further off. Eventually, the take rate will improve, right? While the total ad spend may moderate. How do we-
Yeah, it will be closer. To date, and again, our take rate is a contractual agreement with publishers. It is not as if we talk about scenarios by which there is lower take rates or higher take rates, sometimes people immediately go to, "Oh, they are under pressure. The market is forcing a collapse in take rates." What it is it is a product mix. Generally speaking, when someone that has a legacy advertising business gets into streaming and hires a Magnite, they are very much inclined to kind of go at it on a walking pace and say, "Hey, we have been selling advertising for 100 years. We are going to continue to sell the exact same way we sell linear. We are going to do the same with streaming. Because we want complete control, we have always had complete control, and we just want you, Magnite, to operate as our plumber.
We will go find the advertiser, we will negotiate the price, and then we will just execute it automated, so programmatically." That carries with it a lower take rate. It is a product that we offer. It is publisher-sold programmatic, and not surprisingly, every large media company starts off that way because they are a little concerned. Is the programmatic ads going to ruin the consumer experience? I do not know that advertiser. Is it going to be cheaper CPMs? It is just this journey that most folks have to go along till they get comfort. Of course, at the same time, the buyer is coming at the media owner saying, "Go programmatic or you are going to lose dollars.
Yeah.
That accelerates the uptake of a service by which we bring the demand of which we get compensated higher.
This is super interesting because I remember speaking with you about a year ago after the Cannes conference, and I asked you, is the mega bull case here just simply the entire industry moving to biddable programmatic. I recall your response, which it's not necessarily the Holy Grail, right? Now, recently you did kind of cite that there was a shift towards biddable programmatic from, I think, programmatic guaranteed. Is that still how you think about it, or is adoption picking up, and can you kind of see a path to biddable programmatic, this very high value-added service being the majority or eventually the entire market? Has any of your thinking changed on that?
No, I think that definitely, I think biddable programmatic is where the whole market's moving to. I think sometimes when we say biddable programmatic, we think of the open web, which is trillions of ad requests, billions of impressions going to auction, and random advertisers winning and showing up, but no one really cares because it's ephemeral, it's a banner. What's the big deal? There's a big difference between a 30-second spot running and a million-dollar produced streaming series. I think what you're going to see as the majority for the top-tier streamers is invite-only auctions. So it'll still be biddable, it'll still be an auction, but they're going to want to know who those advertisers are. They still have two floors at Disney of people who review advertising creative.
So it's not for the faint of heart to be able to get an ad on TV and have it approved. So we've done this automated through technology that allows them to feel comfortable about the ad and the quality and whether it meets standards to appear on their shows. So I think invite only, and that's for what we think of as the centerpiece major streamers. As you go further afield and you talk about device manufacturers like Roku, LG, Vizio, Samsung, they have tremendous amounts of inventory. Even the Disneys have inventory and FAST channels that they don't consider the same as something like "The Handmaid's Tale" or whatever the case might be.
When you deal with that type of inventory, that will be much more democratic, much more open to biddable, and that is where you see the world of the small to medium-sized advertiser that is the bedrock of Instagram, the bedrock of Alphabet, start to come onto the CTV environment.
Got it. I should have been more clear. There is open auction biddable, and then there is invite only biddable-
Correct
which is clarified.
Yeah.
When you mentioned to me last year that it is not the Holy Grail, you were talking about open auction programmatic.
Correct. Yeah.
Okay.
Yeah.
That would be a very interesting world we would live in for Magnite if that were the case.
Yeah.
W ho knows, maybe it will happen someday. Then let's maybe move on to your margin profile, which has just basically continued to get better. Part of it, I think we already alluded to, was kind of the mix shift to higher value services. I think you had talked about potential for the. Obviously, you've always talked about 35%-40%?
Correct.
T here's-
Correct
potential to exceed 40% at some point.
Yeah, there's certainly not a cap.
Right. Is that mainly a function of all the businesses you have in place today, that potential to exceed that 40%, or is it mainly a function of what's going on with DOJ and DV+?
Yeah, no. All those statements about the aspirational margin profile of the company have been stated long before any DOJ Google investigation. Listen, seasonally, almost every fourth quarter, we exceed 40% in adjusted EBITDA. It's really a question of just revenue growth on top of a pretty consistent cost model. W here our biggest cost, like most technology companies, is people. I think we've done a very judicious growth in that area. We haven't outpaced what we needed. We'll always add on 50 or so bodies a year, but in order for us to drop another billion onto the platform, that doesn't require another thousand people added to the company. So we've had a very stable profile of employees. T hen the other cost is the serving cost, the cloud cost. Our volumes continue to surpass every expectation that we had going into budgeting.
Our teams have been doing a great job of processing three times the amount of impressions at the same cost that we did the previous year. In order to do that, we pulled forward some CapEx into last year, fourth quarter, to build out another data center, taking as much traffic as we can off the cloud onto our own boxes, and modulating cost that way. I think keeping our cost structure where it is and just dropping more revenue on top of it naturally just gets you a forehandle in terms of that margin profile.
Did the potential to have market share gains in DV+ factor into your decision to make that additional investment to move away from the cloud and build out more of your on-prem?
In the back of our minds, most of the investment that we are doing in taking cloud off is almost all streaming. Streaming was a 100% cloud business that we are now doing a hybrid model to. There are certain aspects from real-time reporting that cloud is absolutely essential, but there are other low-value things that we are doing in the cloud that can easily be done on boxes at a much less expense. To answer your question with the DOJ and the recent release of the opinion, or the closed opinion, there is no question that those boxes will come in handy for that. If there is any increased volume of bidding from a Google that we were not seeing previous, we are going to have to absorb that capacity, and those boxes will come in handy for that, for sure.
That is the whole idea of being able to burst to the cloud. If all of a sudden you have this profitable traffic coming in that is crimping your bandwidth on your own proprietary boxes, you can jump to the cloud and buy bandwidth there.
Got it. Right. I think if we just move really quickly, I do want to talk about mobile on DV+, but since we started talking about the DOJ and the potential outcome there. First of all, there is potentially a redacted version of the ruling coming out at some point.
Yeah. The ruling came out, the opinion came out this week. It was closed, sealed, only for DOJ and Google to look at. They have a 14-day window where they can redact any sensitive. They obviously can't redact the remedies. But they can redact any sensitive information that was used in the findings. That probably then leads to another 14-day journey with Judge Brinkema looking at it and saying, "You're a little heavy with the black pen there. Open that up." Then maybe in a 30-day window, it gets posted, and everyone knows what the remedies are. We know that the remedies aren't structural. We've known that for some time. The judge signaled that that wasn't going to be on the table. The behavioral remedies are real.
She said that most of them are going to be adopted, and in that case, it'll make a more fair and efficient auction at AdX. It'll make a more fair and open ad server from Google, their DFP. All that should benefit the ecosystem, including Magnite.
I think this is really interesting because, like I said, we at Bank of America have been bullish on your CTV business for a while now, and that's playing out. The DV+ business has kind of been a laggard, growing somewhat inconsistently and I think probably on average, like mid-single digits or so. Open web advertising is not known as a growth business. For us, we're interested in figuring out a couple of things. Obviously, you're not going to tell us all the answers, but let's talk about it a little bit. There's a margin impact and there's also a potential for this entire industry to become a growth industry again. Okay? Because of additional competition.
Similar to, I think, what happened in mobile when a lot of these kind of mobile ad tech players started innovating and improving their models to drive growth for mobile game developers. I think, first of all, maybe about a year ago, I remember putting out a piece where we sized the ad spend through the SSP market on open web around $25 billion, and this is all from research from 2025. We sort of estimated that a 1% market share gain, which would be like $250 million I guess, could result in a really significant increase in net revenue. I think it would increase EBITDA by 67%. Can you just walk us through your thinking on what that sensitivity in terms of market share gain, if you have kind of those numbers handy in your mind?
Sure. It was through the discovery process. It was estimated that Magnite had the second-largest share of programmatic open web spend. Google's share was close to 60%, and ours was 6%. We were by far and away the largest. We're the second. Everyone else after that way long. We estimated that for every one market share gain, so we eat into Google's 60%, that could represent $50 million in margin to the company. I think that it's safe to say that we're not going to lose share post-Remedy. I think it's safe to say that we'd win it based upon the share that we already enjoy in the market, so we'd be the outsized beneficiary of the ruling, given our second-place status. We have deep relationships.
One of the things we've always invested in, even in the early days when we were Rubicon and became Magnite, was our publisher sales team. It's incredibly well-respected, incredibly knowledgeable, and a lot of our peers have cut down their sales team in that area because in the open web, as you know, it's kind of commoditized. It's this header bidding. You're always going to get slotted in the head, so why do you have to have a deep relationship with the publisher anyway? We've always maintained those deep relationships, largely because of our streaming business also. Long story short, I think one of the biggest unlocks is going to be if they will be allowed. I can't imagine the judge wouldn't rule in this capacity. Right now, your data's locked within the ad server, the Google ad server. You can't bring it anywhere.
They desperately want to work with us to do their private marketplace deals. They don't want to have to put them in AdX. They don't want to have to keep them in GAM. They can't. It's just such a heavy lift. They've even tried it, and they've tried to cut and paste, and it's just a mess. We think that Magnite could really be an outsized beneficiary there because we have deep publisher relationships. They want to do more business with us. It's probably going to be at better terms than they're doing currently. We're sized to catch that business.
Yeah. There are several levers I think that could potentially help your business. The one that I had pointed out a year ago was just simply improving your win rate because your infrastructure is already in place. I don't think there's much else to spend. But simply having a higher win rate because Google doesn't get first look or last look would flow directly through, like any kind of revenue there would flow directly to EBITDA, and you'd have 100% margin.
That would be the fastest win. Yeah. Because we do not have to process one more impression. We take 2 trillion ad requests a day.
It is simply a huge efficiency increase.
You are doing the exact same thing you were doing, you are just winning more. You are taking 500 billion to auction, you are auctioning 500 billion a day. Your win rate goes up at half a percent. It just drops to the bottom line.
That is just one lever, though. There are others.
Yeah. Correct. That's just, yeah. That's right.
Right. That kind of seems to be the lowest hanging fruit. But I think the one that I'm most interested in terms of potentially that the market may reprice the DV+ business is, can innovation kind of re-accelerate growth and help the open web grow again? Because if indeed Google is anti-competitive, then I would understand that they were probably under-serving their customers, the customers didn't get as much revenue, and they couldn't invest in content, and that virtuous cycle that we've seen in mobile gaming recently could potentially happen in the open web. What are your thoughts on that topic, in that breaking the monopoly could actually re-accelerate and rejuvenate this open web ecosystem?
Got it. Well, yeah, a couple of things.
... Innovation.
Yeah, a couple of things here. Just for the sake of everyone, DV+ is kind of this portfolio of non-streaming media, right? It is open web, browser-based traffic, which has, as we know, significant headwinds from these generative answer engines that are not sending search referral any longer. There was a time when, at the height of it, Google would scour your pages twice to feed their search engine, but send you one referral for every two times. A pretty fair balance. I think in Tropic now it is 900 x they scour your site, and they only send one referral. That is not going to change. Nothing the DOJ does, nothing. That is just consumer behavior changing, and the balance between sharing content and getting referral back is broken. Our business, that is a portion of our DV+ business.
As you pointed out, in that bucket is mobile app, which is not browser-based, which is not search referral based. So in-app. Digital out of home, that is not browser-based. Audio, which is a big growing piece of our business, podcasts, et cetera. None of that has anything to do with the open web. So it is a pretty healthy, diversified bucket. With the DOJ ruling and the change in growth profile of the open web, perhaps, it would change what you would think about as DV+ as a grower, because we have pretty much told everyone think of it as a flattish. Which a lot of people were elated about because they were afraid it might be going down 30%. So now all of a sudden, this could be a growth profile. It would change a lot of the dynamics of the company.
As this being a savior for the open web, as I cited before, those terrifying numbers about lack of referral, I personally would love to think that it could help. But I am not so sure if what we are talking about here is redistributing where the current money goes. In other words, the current money all sits with Google. If we reshuffle that current money and do not expand that money, the publisher is kind of left in the same plate that they are today in terms of the amount of revenue they are going to get. Their partners, their vendors, might have a different revenue profile, but I am not certain I have seen anything that changes the dynamics of the open web from that particular role.
Okay. Is, for example, the structure of open web changing? Obviously, it already sort of has changed because of how the LLMs direct traffic. But is potentially the sort of end state of that structure, does that change the market dynamics in favor of you? For example, in CTV, I think we have pointed out that whereas open web has traditionally been fragmented, CTV is highly concentrated, therefore the market power, in our view, is more on the supply side, which helps for you as a supply side partner. So would you potentially see something like that happening in the open web where it becomes more CTV-like, there is more concentration among publishers, which I think would ultimately sort of be better for your distribution model?
Yeah, I think what you're seeing is a real bifurcation in terms of the type of media sites that are doing okay on the open web, and the ones that are doing okay are, generally speaking, destination sites in and of themselves.
Like The New York Times.
So more well-known, more of a logged-in user base, bookmarked user base. T hose are the types of publishers that we thrive on, that we've always historically worked with. I think you're going to see a shrinking of the longer tail and a consolidation among more premium-type publishers in the open web.
Are you already engaged with all of those sort of-
We have deep relationships for decades with those players. That's the core profile of a Magnite publisher. Thus requiring the need for an expensive and super talented sales team to be able to work with them as their partner to increase their monetization.
I guess just getting back to the technology question, I think, for example, the agentic stack that you have recently commercialized is an example of stuff that's going on. But once again, just thinking about, and we'll move to mobile after this. Just thinking about how this sort of unlock where there can be competition again will spur innovation. What are some of those innovations that could have occurred in the past but haven't, that you maybe foresee over the next three years, let's say, that could really make open web and mobile, a better place to be for publishers? Any specifics.
Yeah, no. I think that discoverability will play a huge role in it. I think that when you're dealing with the current world that exists, and you're a buyer, and you're hopping through 18 different dashboards to try to find the profile that you're looking for, the young family with kids under the age of 4 that buy diapers at a big box store. It's sometimes not that easy. You're going through your DSP, you're bringing data, they're bringing data. Each publisher has a slightly different definition. You're going through an SSP to get that.
Now you think about an agentic world where you can just natural language put that in to the interface of your agent that already has your algorithm in it, that already has your data, your first-party data in it, and its ability to go through something like a Magnite and communicate with 10,000 seller agents to be able to pull all that together and make it easier to be able to target, make it more efficient, make it more working media going towards that. I think agentic really is a huge unlock in terms of the ease of use that a trader. What the trader has to go through today and what a seller has to go through today to make this all work, we think of programmatic as this easy button. It's anything but.
That really takes a lot of the operation frictions out of it, and I think you'll see more and more dollars going to that media.
I was struck by the, I think there were suggestions made by the DOJ, and then there were also suggestions made by Google themselves. One of them was to make auction data available, or data in general, available to rival SSPs. Right. I was kind of interested in how that specifically would lead to more innovation and a more efficient market, and basically drive yield and returns for publishers. Whereas it hasn't before because of that monopoly.
Yeah. Well, there's many ways to make it more available and make it more fair, but just essentially the dynamic that was hurting publishers was the fact that Google gave away the ad server for free. But in return, you had to use their ad exchange as your primary ad exchange, which was AdX. Then you had the Google buy side that had unfair advantage because they were getting all this information that other folks weren't getting. I wasn't getting the same information from the publishers. That AdX had that they were sharing with DV360 or Google Ads or whatever the case might be.
What it resulted in was a pattern of we have absolute knowledge about floor pricing, we have absolute knowledge about where the last bid came in, and now we can beat that bid by a penny if we want to win it, or we're the only bidder because there was a floor on it, and we could bid below the floor and the publisher's going to take it because they'd rather take a dollar than have it burn. There was all sorts of price manipulation that they had access to, that we didn't have access to that very same knowledge to be able to bid more fairly and accurately into it.
A lot of that's been taken away already, but by open sourcing the data, it would make our decisions far more informed about how we would go about through our bidding strategies to win this inventory. In theory, it should raise pricing on the margins for publishers.
Got it. I think Magnite made its own kind of statement to the DOJ public, I think last September or so. There's a pretty big document if investors want to read that. Quite interesting. Let's move on to mobile for DV+. Again, kind of thinking about how DV+ could be a long-term growth business. You said that mobile is bringing DV+ back to growth, I think, on your last call. We've covered mobile ad networks for quite a while now, for five years I guess, if that's a while. AppLovin, Unity, Moloco. Moloco is private. But definitely AppLovin, Unity. We used to cover Digital Turbine. In mobile ad tech space, first of all, what inventory do you work with on the mobile side? Is it mobile games or is it non-mobile games or both?
How specifically do you enhance the sort of mobile publisher and the mobile ad network efficiency and technology?
To be clear, there's two types, flavors of mobile, right? There's mobile web and there's mobile in-app.
Yeah.
When we talk about what excites us, it is not the browser-based mobile web, it is in-app. What has changed in in-app, for the longest while it was very difficult for brand advertisers to compete against mobile advertisers that were typically game download guys. They were super sophisticated. It was very performic. They could outbid a brand advertiser on an adjusted CPM basis because they knew the value better and they knew that downloading games, the lifetime value of that person that downloaded the game meant more to them than an ad from Procter & Gamble. That has changed. I think it has been the broadening of it is not just gamers anymore. Mobile app is much broader. Not surprisingly, some of the mobile apps that we are having the most success with are not games. They are more content driven, experience driven, more brand friendly.
Brand advertisers also are seeing this decline in the open web and mobile web, and they are saying, "Hey, where am I going to put those dollars to work?" There is just kind of this confluence between the decline here, the rise here, and an awareness of brand advertisers that that is an attractive area to be in. What we contribute essentially is a profile of an advertiser that typically you will not find at an AppLovin or a Liftoff or a Moloco because they are very much focused on the performance-oriented brands. They are branching out too from gaming apps to direct to consumer advertisers. But the type of demand we bring is quite different. The mobile app owner is excited about the prospects of getting that type of demand in because they have never had it.
Got it. So it sounds like we are not really talking about arbitrage models that we are-
No. The tech lift on our part is we had to build an SDK and we had to get that SDK adopted. That has been going extremely well. We think that we are very early stages, but we think this is going to be a very attractive set of inventory in our DV+ portfolio.
Got it. Okay. Have you discussed outside of just based on mobile sort of acceleration, have you discussed how much of your business mobile is currently of the DV+ segment mobile is currently, and how much it could potentially grow to? It sounds like you are pretty early in the penetration curve there.
Yeah, we talk about, what is our mobile set? Two-thirds. Got you.
All right.
Got it.
Okay. So yeah, he said-
Two-thirds of DV+ is mobile, and then about half of that is app.
Okay. That's great. I think those are most of the questions that I have for now, Michael. I appreciate the time and obviously exciting times. The thesis continues to play out and we'll look to see in a couple of weeks what we learn about the DOJ and where you can enforce there. Just maybe one last question with the time here. In terms of enforcement, so there's a decision that comes out, we all learn about it. Are there any roadblocks to enforcement or, will whatever the judge says simply be enforced easily? Is there any risk down the road to that?
Yeah, I think that was a debate early on, before it started to look. Because the trial went on for some time, and so early on, I think one of the consistent objections of the DOJ to behavioral was just that. I think over the course of it, and with Google, by all means, playing relatively fair with their ideas on how behavioral could change. I think everyone's kind of on board now that there's not going to be any chicanery going forward, that these are enforceable, how Leonie Brinkema decides to enforce it, how the DOJ decides to enforce it. But, the other interesting aspect was none of it's real heavy lift. I think of all the behavioral remedies, only one, Google said that it would take more than 12 months to make the technical change.
Almost all of them were instant and/or policy driven, so it is not tech. Or if it were tech, six months of tech. So that was the other appeal to behavioral, because this thing was not going to go on for another 10 years and the open web vanishes. The idea is these are going to be enacted quickly, fairly, and hit the ground running.
Well, that brings me to another question, which is, since I think this has been brewing for maybe about a year now, have you seen publishers and customers prepare for this moment yet? What have you been hearing from them in reference to this and how they might change their practices?
Just in terms of all speculation, because keep in mind, at any given point, there were 20 behavioral remedies in play, so it was not one that everyone saw coming and that they are ready to flip the switch tomorrow on. Even in the ones where it is as simple as now I can port my deals from GAM to Magnite. Even that, in a normal way, you have to pick up the phone, the deals expire, there is probably a thousand deals in a deal library. Some of them expire in 15 days, some of them expire in 30 days. You got to call the buyer, tell the buyer to bid at Magnite, not bid here. So there is always going to be a lag associated with it.
Yeah. This sounds to me, and I will finish on this, it sounds to me, and tell me if you think differently, this is kind of typical reactive ad tech clients, that wait for the news to come out and then sort of react and change their business.
Like the GDPR deprecation of cookies. We have been through it.
Which for me, as an analyst, I think, that is quite interesting because it sounds like a lot is going to happen over the next 12 to 24 months, and it is going to be very interesting to analyze and see how it improves your business.
I think that is the key takeaway. It is a 12 to 18 month, 24 month story. No one should expect all of a sudden Magnite's share goes from 6% to 10% overnight. This is going to be a growth story for years to come, which I think is encouraging. It is not going to be all of a sudden, oh, no, Magnite has a comp issue because Q4 of 2026, they got that huge whoosh and now it is a one-time whoosh. It is just going to be a growth story going forward.
Sounds good. Well, we will end there. Thanks so much.
Sure.
We look forward to covering you.
Pleasure.