The advertising industry is an important pillar of the economy. Many of the items you buy are inspired by an advertisement that first planted the concept in your head. With technology, the sector has moved from print and broadcast television to digital outlets like the internet and streaming services.

The worldwide digital ad market is worth $514 billion and is continually growing. PubMatic, a supply-side ad-tech platform ( PUBM -2.46% ), may thrive in this expanding industry. It’s somewhat unknown, but it could be a long-term winner if its potential is unlocked. It’s time to get started

What does PubMatic do?

On ad exchanges, digital advertisements are bought and sold like equities on the New York Stock Exchange. The Trade Desk, for example, is a demand-side platform that assists firms in buying advertising. Ad exchanges require both buyers and sellers. PubMatic is on the selling side of The Trade Desk. PubMatic, as a supply-side platform, assists publishers, content producers, and mobile app developers in selling ad space to brands. Both programs bring together purchasers and sellers from opposing sides of the transaction.

PubMatic has partnerships with giants like Verizon, Zynga, Electronic Arts, and more than 1,000 publishers, content producers, and developers. Revenue was $227 million in 2021, up 53% from the previous year but still only a 3% to 4% market share.

Competition comes from direct competitors like Magnite and “walled gardens” such as Meta Platforms and Google, which own the whole ad transaction and don’t provide advertisers with the same level of transparency or control.

I don’t think investors need to be concerned about the competition until sales begin to decline — the global advertising market is too big. PubMatic stated that connected TV revenue increased six-fold in the fourth quarter of 2021 compared with the same period a year ago. To put it another way, there are many options available.

In addition to the strong revenue growth last year, management expects $282 million to $286 million in 2022 revenue, representing a 25% increase at the midpoint. After 2021’s outstanding performance, the slowing growth is due to a hard comparison and the hangover from the Omicron variant affecting first-quarter results. However, I believe that slower near-term growth is acceptable in light of the long-term prospects in the ad-tech industry.

Author: Steven Sinclaire

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