The Commerce Desk reported This autumn 2022 earnings at present, revealing year-over-year income progress of 24% for the quarter (to $491MM) and 32% for the total 12 months (to $1.6BN). Notably, The Commerce Desk’s year-over-year progress fee in This autumn 2022 matched that of This autumn 2021, whereas web revenue grew by practically 8x from $8MM to $71MM and EPS grew from $0.02 to $0.14.
This efficiency stands in stark distinction with that of the most important social media promoting platforms: Meta noticed income decline by 4%; Snap noticed income improve by simply 0.15%; and YouTube noticed income decline by 8% in the identical interval. In The App Monitoring Transparency Recession, attribute the divergence in industrial realities between The Commerce Desk and the most important social media platforms to the results of Apple’s App Monitoring Transparency (ATT) privateness coverage, which was launched in April 2021 however didn’t attain a majority of iOS gadgets till June 2021. Till This autumn 2022 outcomes have been launched — which occurred just a few weeks after the ATT Recession piece was printed — the social media platforms have been primarily blaming financial headwinds for his or her promoting income misfortunes. My argument with the ATT Recession is that juxtaposing the income outcomes of social media platforms, which have been the first casualties of ATT, with these of promoting platforms that have been wholly or within the majority not impacted by ATT reveals two issues:
- The notion of a broad-based, macroeconomic-driven promoting recession can’t be substantiated by information;
- To the extent that an promoting recession exists, it’s nearly fully confined to the social media class.
Taken collectively, these observations level to ATT because the wrongdoer for lackluster income progress for social media promoting equipment. I additionally make the case within the ATT Recession piece that macroeconomic circumstances have been a curious clarification to make use of in rationalizing weak promoting demand at the moment as a result of unemployment sat at secular lows, inflation was easing, and shopper debt delinquencies have been low. All of these issues are much more true at present than after I wrote the piece in early January. “Macroeconomic components” have been a bogeyman that, fortunately, the social media platforms have retired as an evidence for promoting income weak point.
Why is The Commerce Desk principally immune from the restrictions of ATT? As I clarify within the ATT Recession, it’s primarily a results of The Commerce Desk working a DSP that has little or no publicity to cellular system promoting identifiers. As Jeff Inexperienced, The Commerce Desk’s CEO, said within the firm’s Q3 2021 earnings name (emphasis mine):
So about 10% of our spend makes use of IDFA. And since we’ve had restricted focusing on on that 10% for fairly a very long time, persevering with to restrict it or restricted in a brand new means, doesn’t have a fabric affect to our enterprise. As a result of we’re roughly 12 million adverts each single second, whenever you take 1 million-ish of these and say, we’re going to permit much less information for use on these. We simply look extra fastidiously for gems within the different 11 million. So I don’t anticipate it to have a fabric affect on our enterprise the best way that it’ll others. So whenever you hear Fb, discuss having a big effect, simply keep in mind, they’re 70-ish % cellular, not 10% IDFA. So very completely different affect to us. That mentioned, I do consider that is Apple making an attempt to mess with Fb’s enterprise and Google’s enterprise, they’re way more dedicated, I believe, to funds than they’re to the promoting ecosystem.
Just a few different components contribute to this immunity, too:
- The Commerce Desk primarily helps model promoting spend relocated from linear tv promoting budgets (particularly to CTV) and never direct response promoting spend;
- The Commerce Desk’s advertiser base skews in direction of giant enterprises and companies and never SMBs;
- The Commerce Desk’s net stock continues to learn from the existence of cookies for focusing on, with the deprecation of cookies in Chrome having been delayed till 2024;
- The Commerce Desk has constructed its personal identification system, UID2, the adoption of which grew from 15% “of the third-party information ecosystem” in This autumn 2021 to an anticipated 75% in 2023.
All of those traits and initiatives distinguish The Commerce Desk from the big social media platforms, however particularly Meta, the vast majority of the income of which, by my estimation, is comprised of direct response spend from SMBs.
Just a few excerpts from the earnings name that I discovered notably insightful are discovered under (all emphasis mine).
In response to a query about macroeconomic well being, Jeff Inexperienced mentioned:
From a macro standpoint, in early January, we noticed somewhat little bit of a late begin as a result of calendar 12 months. We additionally noticed the best way that each manufacturers and companies have been planning was somewhat bit delayed. However then we’ve seen issues begin to unlock, and we noticed, as a substitute of there being delays — or as a substitute of there being canceled, there was simply delays. After which, these have change into unpaused and unlocked since then…In consequence, we’ve seen extra JBPs [edit: Joint Business Plans], and we’ve seen much more exercise to this point in 2023 than we’ve seen at any time so far in any 12 months beforehand. So, general, we’re very inspired by the pattern in 2023 to this point and intensely optimistic, particularly that we proceed to seize land relative to all of our rivals.
When requested concerning the Division of Justice’s lawsuit towards Google, Jeff Inexperienced responded:
Now we have been profitable in an unfair market. So, after all, if the market turns into extra honest, which we expect it can because of this, like I mentioned, a method or one other, then, after all, that signifies considerably higher setting for us to carry out it. The Division of Justice has clearly executed their homework on this, which I’m extraordinarily inspired by. I do know there’s some at Google who tried to counsel that we now have been by this three or 4 occasions earlier than…I do wish to acknowledge that as there’s some stress to only break up property, I don’t consider that, that alone is sufficient. And that if that’s all this executed, I believe expertise might be changed. And a few of the identical practices that acquired us right here might occur once more. So, to me, an important factor that occurs right here is that any settlement or any conclusion to the case ends with extra equity and restrictions to make sure that the market stays honest, particularly when leveraging property which might be extraordinarily nearing monopoly, if you’ll.
On the stress for Walled Gardens to change into extra open / interoperable:
So, whether or not we’re speaking about CTV, whether or not we’re speaking about retail, whether or not we’re speaking concerning the financial setting and stress that places on walled gardens to wish to welcome incremental demand, all of that factors towards an ecosystem, the place increasingly more of them are contemplating bringing down the partitions, even the most important of them, in order that they will welcome incremental demand. And definitely, an setting like that is the place you might be more than likely to see a few of these modifications. So, there’s numerous exercise contemplating that kind of stuff.
