Trading Opportunities for February 12, 2021: PubMatic, Inc. (PUBM)

Let me tell you a little story about an ad tech company called The Trade Desk (NASDAQ:TTD).

Back in 2018, this was a tiny, $2 billion company that had built a valuable yet not-very-widely used programmatic advertising platform which leveraged data to help brands optimize their digital ad campaigns.

Although not many people on Wall Street were talking about the company, I saw The Trade Desk as the next big thing in ad tech.

Why?

Because data-driven advertising represented the future of the entire ad industry, since it eliminated the “guess work” from advertising and produced superior outcomes. The Trade Desk offered the market’s best demand-side ad tech platform for data-driven advertising – and consequently, I told investors to buy The Trade Desk stock back in 2018.

Since then, that tiny, $2 billion company with a not-very-widely used platform has turned into a $40 BILLION titan of industry with a data-driven advertising platform that is challenging Amazon, Facebook, and Google.

Needless to say, buying The Trade Desk stock back in 2018 was one of the best things my readers I ever did…

Now, I think I’ve found the next The Trade Desk.

Today, we will tell you all about this small, freshly public company. It is exactly where The Trade Desk was back in 2018 – with a $2 billion market cap and a very valuable not yet widely used data-driven ad tech platform. Over the next two years, it could do exactly what The Trade Desk did over the past two years – and that is soar by nearly 20X.

 

Exactly Like The Trade Desk… But on the Sell-Side of Advertising

The advertising market has two sides.

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There’s the demand-side (or buy-side), which represents the brands and marketing agencies that buy advertising inventory to market their products and services.

Then there’s the supply-side (or sell-side), which represents the content publishers and app developers that sell that ad inventory to monetize their content and platforms.

The Trade Desk provides data-driven ad tools on the buy-side of the advertising equation. That is, the company leverages its data-driven algorithms and tools to help brands and agencies run efficient marketing campaigns that maximize the value of every ad dollar they spend.

On the sell-side, The Trade Desk’s equivalent is a company that just came public via a hugely successful IPO in December of 2020: PubMatic (NASDAQ:PUBM).

PubMatic has created a sell-side ad tech platform that leverages data-driven algorithms and tools to help content publishers and app developers maximize the value of their ad inventory.

In essence, PubMatic combines ad bid data from demand-side platforms, with consumer demographic and interest data from content publishers, to help ad inventory owners put the right ads in front of the right consumers, so as to increase advertiser return-on-investment (ROI) and publisher revenue.

It is The Trade Desk for ad sellers.

And, as is true with The Trade Desk, the value of the PubMatic business model lies in the company’s data.

The Trade Desk was able to turn into a $40 billion titan of the ad industry because it had more ad data than anyone else on the buy-side of this industry… which led to the platform being able to deploy the best data-driven algorithms, which ran the best ad campaigns for ad buyers.

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PubMatic runs on the same data-driven growth flywheel.

The company was a first-mover in the sell-side programmatic ad tech game. As such, the company has been able to rack up partnerships with some of the biggest ad sellers in the world, including News Corp (NASDAQ:NWS), Verizon (NYSE:VZ), AMC (NYSE:AMC), and Electronic Arts (NASDAQ:EA).

This matters only because it means PubMatic has amassed the largest and most valuable data-set in the sell-side programmatic ad tech world.

The company processes 1 trillion ad bids per day, is responsible for 134 billion daily ad impressions, and produces 1.65 petabytes of data every single day.

Those numbers are unprecedented in the sell-side ad tech space.

And as such – because algorithms are informed by data – PubMatic’s programmatic ad algorithms are also unprecedented in terms of their ability to maximize the value of publisher ad inventory.

This data advantage is enormous. But it’s not PubMatic’s only edge…

The company’s approach to providing sell-side ad tech solutions is unique and potentially game-changing. Traditionally, sell-side platforms have focused exclusively on helping ad sellers in a “closed box” loop. But PubMatic, seeing the value of transparency and coordination in the advertising process, has opened up this “closed box” and has integrated its platform with leading buy-side players like The Trade Desk.

This integration should only bolster the effectiveness of PubMatic’s solutions, since it gets both the buy- and sell-side parts of the ad equation to work together to produce Pareto optimal outcomes.

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Concurrently, PubMatic has a reputation for “innovation.” Two of the five customers quoted in PubMatic’s S-1 cite the company’s “innovation” as a reason why they chose PubMatic as their sell-side ad tech solutions provider. This mostly stems from the company’s leadership in header bidding, which PubMatic basically pioneered.

But, more importantly, this innovation DNA bodes well for future product developments and business expansions.

Net net, PubMatic is far from a “sure thing.” That doesn’t exist in the stock market. But, it does have all same ingredients that The Trade Desk had two years ago – and that worked out to a 20X gain for The Trade Desk stock in just 24 months.

Could PubMatic pull off a similar meteoric rally?

Absolutely… which means that PubMatic stock deserves to be your buy radar today.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

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