Two views of CTV

A lot of industry news last week, I’ll try to put it in some context.

The Vendor Interview: Mathieu Roche of ID5

We talked to Mathieu about identity and probabilistic solutions at the IAB Tech Lab Summit in London.

Marketecture Podcast: Rich Greenfield of Lightshed

Rich, Eric, and Ari spend the whole pod talking news. Trade Desk’s OS, Comcast’s spin-out, the possibility of a Chrome spin-out and Mediaocean-Innovid. Overall an epic conversation.

Two views of CTV

Last week there were two big ad tech announcements which at first blush do not seem related. The Trade Desk finally revealed it’s long-rumored operating system, Ventura, while agency software leader Mediaocean announced its acquisition of publicly-traded Innovid for roughly $500 million.

These two deals may seem largely unrelated, but I’m here to tell you they represent opposite views of the future of CTV, and maybe of digital advertising in general.

A quick set of disclosures: a) The Trade Desk has generously been sponsoring my podcast, thank you; b) I am a shareholder and long-time advisor to Innovid; c) I helped out with some work on this deal. No conflict, no interest, as they say.

Why did programmatic beat direct?

A quick trip down memory lane. The breakthrough of the early ad exchanges, and later RTB, were primarily aimed at remnant inventory. The early buyers of inventory were ad networks, who were becoming more efficient by matching their demand to supply they wouldn’t have ordinarily had access to when using a waterfall or daisy-chain method.

At the time, there were companies sniffing around the idea of bringing real buyers, like agencies and advertisers, into this new world of data-driven performance. When RTB hit, companies like Turn quickly morphed from ad networks to DSPs and the original purpose of programmatic (helping optimize remnant) quickly became far less important that this new idea — letting buyers access inventory on a spot basis.

Why was it compelling for buyers to move from a direct world to a spot world, whereas in other media, like TV, buyers mostly committed “upfront” and bought direct. Two factors mattered for this transition:

• Putting quality aside, there was far more supply than demand on the web, so prices would go down if you could get scale on the open market vs buying direct;

• Cookie-based data could be utilized in spot buying, in a way that was impossible in direct.

I’m doing a “Rachel Maddow” and just pontificating for paragraphs and paragraphs before getting to my point. Bear with me!

The Trade Desk’s Vision for CTV

The two deals we are here to talk about represent opposite points on view on whether CTV will be more like the web, and purchased programmatically using data, or will it be more like traditional TV with direct relationships between the parties.

In The Trade Desk’s view, the glass in your living room should be like a web browser (not Safari, the other one!). The content and ad experience should be neutral. You, as a consumer, should choose what to watch, and the content owners should have a glide path to monetization, using some form of persistent identity.

In a world of an open TVOS, there is not a disproportionate amount of power accruing to any one distributor or programmer. An OEM like Samsung or LG cannot “gate keep” your TV experience, and also crucially, cannot be co-opted by a deep pocketed partner like Google or Amazon.

The Trade Desk’s vision lends itself to the two criteria I listed above that drove the web market to spot/programmatic buying. While there is probably not the supply/demand imbalance of the web, there is a greater degree of fragmentation of supply. And with identity baked into the user experience, data-based targeting works at scale. Wide scale adoption of something like Ventura would encourage programmatic spot buying over direct.

Mediaocean-Innovid’s Vision for CTV

We do not really need to speculate about Innovid’s vision for CTV because they announced it quite loudly earlier this year with the launch of “Harmony.” We covered this extensively in this newsletter in April. The short version, for those of you too lazy to read, is that most digital TV and CTV is currently “unbiddable” — bought either direct or through programmatic guaranteed deals. These transactions are much more efficiently transacted using an ad server than a DSP, both in terms of take rate and workflow.

Mediaocean potentially accelerates this strategy as their Prisma workflow software is the primary tool for planning billions in TV spend from many, if not all, of the leading agencies around the world. You can imagine agency buyers executing orders from Prisma directly into publisher ad servers, or SSPs, given MO’s existing deal with Magnite.

I would portray the worldview of Mediaocean-Innovid on CTV as:

• Video publishers and broadcasters remain powerful and concentrated. There is more demand than supply for quality;

• Data remains of secondary importance in the market, and is more useful for performance measurement than targeting (note, Innovid owns TVSquared for analytics);

• As the industry shifts from linear/traditional to CTV, much will remain direct and un-biddable. Data overlays will be primarily executed by publishers based on their login data.

Which view is right?

They both may be right, to some degree, but they also have different stakes. For The Trade Desk, the continued growth of the company is highly tied to growth in CTV. Ventura is a pawn in their overall approach to the chessboard, but they need for some of their assumptions to be correct to avoid being shut out or squeezed on take rates.

The core business of Mediaocean is not in jeopardy no matter what. But it is also a longer term trend that buy-side ad serving is less strategically important than it was before DSPs became so dominant in the marketplace. So while the combination of FlashTalking and Innovid will create a powerful #2 player to Google’s GCM (f/k/a DFA), it will only really matter strategically if it also becomes an engine for their customers to transact.

Reading list

• MediaOcean to buy Innovid for $500 million! (link)

• TTD rolls out Ventura - CTV OS (link)

• X signs partnership deal w/ Pubmatic (link)

• Tony Katsur from the IAB Tech Lab goes on a Twitter rant about Curation (link)

• Zeta rebut short-seller allegations (link video)

• FTC commentary on clean rooms (link)

• DOJ to ask judge to force sale of Chrome browser (link), stop payments to Apple, stop requirements for using Google services in Android