Demand-side video ad platform TubeMogul reported a very strong Q2 yesterday, with $105 million of total advertising spend on its platform, up 72% vs. Q2 ’14 and revenue of $45.4 million, up 58% vs. Q2 ’14. TubeMogul once again upped its full-year guidance, for total ad spending (to $395-$401 million) and revenue (to $164-$170 million).
While desktop pre-roll video ads still account for the dominant share of TubeMogul’s business, the company reported an upside surprise of between 5-10% of spending coming from programmatic TV (“PTV”), a useful indicator of how TV advertisers are beginning embrace programmatic. Mobile accounted for between 10-15% of spending in Q2 and the company’s new display offering accounted for under 5%.
It’s a very fast start in PTV for TubeMogul, because, as CEO Brett Wilson pointed out on the earnings call, the company only introduced its PTV product 6 months ago. It had previously forecast $6 million of PTV spending for all of 2015, but Brett said spending was above this level just for Q2, coming it at between 5%-10% of spending (so assume around $7-8 million of the $105 million total). PTV spending is now expected to cross the 10% threshold for TubeMogul in the next few quarters.
Programmatic TV, which like programmatic video, involves the planning, buying, optimization and measurement of ad campaigns, except in linear TV, is a huge growth opportunity for TubeMogul and other programmatic technology providers. The TV ad business is approximately $80 billion per year and is still characterized by limited data inputs, inefficient processes and imprecise targeting.
Compounding things, the increasing fragmentation of viewers across multiple services, platforms and devices has created unprecedented complexity for advertisers to reach intended audiences cost-effectively and at scale.
Programmatic TV offers a compelling solution, but there are numerous challenges for it to ramp up comparably to what we’ve seen in online video. Chief among them is access to premium linear TV inventory. As Brett noted, all of the inventory TubeMogul is accessing is from local broadcast and cable TV, including a deal the company recently announced with Cox. Brett noted that gaining access to more PTV inventory is a top priority and alluded to more news coming in Q3.
TubeMogul hasn’t done any deals with national TV networks yet (which are reluctant to migrate from traditional direct-sold campaigns), but Brett expects it’s just a matter of time until this happens. He sees TubeMogul’s software initially playing more of a planning and decisioning role and to consolidate reporting.
Importantly, Brett outlined why TubeMogul’s emphasis on transparent cross-screen campaign planning and execution is a key company differentiator. He sees TV buying as the “fulcrum” to cross-screen, with TV buyers first planning their TV buys as the “anchor,” and then wanting to layer in online video, mobile and display for holistic campaign planning, allocating dollars to the most valuable platforms.
Brett described a number of examples where TubeMogul helped clients adjust their campaign plans to target audiences more effectively. Critical to this holistic model is incorporating TV data sets with non-TV data sets. This is a key part of TubeMogul’s recent deal with Cadreon, the digital services platform of IPG Mediabrands to bring scalable PTV buying to their clients.
Programmatic TV is clearly already having a big impact for TubeMogul and Brett’s comments provide a useful roadmap for thinking about how programmatic is going to knit together TV ad buying and online/mobile video ad buying over time. This would represent major change to the TV ad ecosystem, which is necessary for it to keep pace with the tectonic shifts occurring (e.g. falling linear ratings, increase in OTT viewing, cord-cutting, etc.). This will be a long and complicated process, though one that seems increasingly inevitable.