PubMatic platform is a promising name in the digital advertising market
The advertising platform PubMatic Inc. (PUBM) is currently down almost 60% from its 52-week highs. The company operates in a promising market, where it has not yet been able its potential. PubMatic is unlikely to be afraid of competition because the advertising market is growing so fast. PubMatic is an advertising platform focused not on brands, but on publishers.
The company offers publishers, content creators and application developers to sell their advertising inventory to brands. The platform cooperates with Verizon, Zynga, Electronic Arts, as well as with over 1,000 publishers, content creators and developers. In 2021, PubMatic’s revenue grew by over 50% because of the high demand for digital advertising amid the pandemic.
Thus, the company reported that revenue from connected television in the fourth quarter of 2021 increased sixfold compared to 2020. This year, management forecasts revenue growth of 25%, but this is a natural slowdown after an atypically rapid growth a year earlier. A more valuable indicator of PubMatic’s performance is not revenue growth, but the net profit retention ratio–the change in the amount that existing customers spend on the company’s services.
With PubMatic, this figure was 109% in 2019, 122% in 2020 and 149% in 2021. Customers are increasing their expenses on the platform. It is also important that PubMatic generate both free cash flow and net profit. They achieve this effect because the company outsources a lot of research and development to India, where wage costs are lower than in Europe or the USA.
Competition may become a risk for PubMatic, including from large technology companies, but the platform has already achieved significant success in attracting customers, is profitable and maintains double-digit revenue growth rates. To we should add this the favorable situation in the digital advertising market.
