U of Digital Newsletter - 9/5/24 (premium)

August 28th-September 4th // Estimated Reading Time: 11 minutes

Below is a roundup of last week’s notable industry news, with summaries and our opinions. Google is going to antitrust court next week and the buzz (and evidence) is building. But for our top story, let’s discuss a little big rumor about The Trade Desk’s CTV ambitions…

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Top Story 👁️ 

Scoop: The Trade Desk is building its own smart TV OS
Source: Lowpass Newsletter (we’ve never heard of it either)
August 29th, 2024

Summary: Independent demand-side platform (DSP) The Trade Desk is reportedly developing a smart TV operating system that would compete with the likes of Roku, Google, Amazon, LG, and Samsung. The Trade Desk is said to be pitching the TV OS to device makers that don't want to use their competitors’ TV operating systems—and is offering more generous revenue-sharing splits and flexibility in designing the interface. So far, one hardware maker has apparently signed on, which may lead to The Trade Desk's TV OS appearing on a device for the first time as early as 2025.

The OS is based on the Android AOSP, which could make it easier to build the system and install apps. However, TV makers may run into issues with Google. Amazon's Fire TV OS is also based on the Android AOSP, and Google didn't let Amazon work with some device makers for years, though the two have since patched things up.

The Trade Desk reportedly started secretly working on the OS during the pandemic. Connected TV is a major growth driver for the company, and it is said that the DSP was concerned that it would get locked out of the smart TV ad market by platforms that handle sales of CTV ads appearing on their platforms. Owning the OS also creates access to more CTV inventory and data that can be reserved for The Trade Desk’s advertising customers. 

Opinion: No legitimate news outlet has confirmed this story yet. So it’s just speculation at this point. But it’s fun speculation, so let’s get into it!

On one hand, this makes no sense at all. First off, the CTV hardware and software business is an uber competitive, consumer-facing business and The Trade Desk is getting a late start: 

They have no consumer-facing appeal, so adoption would have to come entirely through distribution deals with TV manufacturers (note: major manufacturers like Samsung and LG already have their own OSs, and smaller manufacturers like Hisense and TCL already have deals in place with other OSs, so the pool of prospects is limited). Secondly, what happened to “we’re the agnostic DSP” and “we’re the antithesis to the walled gardens like Google who own inventory and data and preference it through their ad tech?” We’ve been saying for years that this Trade Desk narrative is hypocritical, given their evolution into becoming a data reseller, an ID purveyor, etc. But owning their own CTV OS would truly be the nail in the coffin for TTD’s “agnostic DSP” claim. And would put them on the same path that is leading Google into antitrust court next week. 

On the other hand, this makes tons of sense! CTV is the primary driver of growth in digital advertising, and for The Trade Desk, having their software installed in smart TVs would give them proprietary access to CTV inventory (from the apps that they feature on their platform) and data (demographic data, viewership data, ACR data, etc). 

But the question still remains: how will The Trade Desk “get there”? CTV devices and OSs have traditionally come at this market from the “let’s get a critical mass of consumers and then monetize through ads” angle. So they built a consumer-facing product first and then tried to stand up an ad business. But the consumer-facing TV OS today has become a commodity. They all look and feel the same. It’s the “easy part”. Which means the only meaningful differentiation for these businesses is now a) how much scale they currently have and b) their ability to monetize their scale through ads. While TTD doesn’t have a), they can do b) better than anyone right out of the gate. TTD is coming at this market from the “let’s get a critical mass of advertising demand and then launch a TV OS” angle.

So once their OS is live, TTD will be able to offer more advertising $$$ upside to manufacturers and publishers, undercut other OSs, and shortcut their way to scale.

Of course, they could just take the ultimate shortcut to scale:

Other Notable Headlines ✍️ 

Google reveals ad tech revenue in antitrust case court documents 🔒 - Google has never publicly released revenue for its ad tech portfolio until now, under order from the US Department of Justice ahead of its antitrust trial. Brian Weiser of Madison and Wall did an analysis 🔒 of what was disclosed and incorporated data that helps make apples to apples comparisons to Google’s competitors. Here’s what he surfaced: 

• Google Ad Manager (publisher ad server and ad exchange, essentially the SSP): $9.6B in 2020 revenue, $602M in operating profit.

• DV360 (DSP): $6.7B in 2020 revenue, $461M in net revenue.

• Google Ads (formerly AdWords): $12.8B in 2020 revenue

• CM360 (buy-side ad server): $400M in 2020 revenue, $164M in operating profit

Comparing Google’s 2020 DSP gross revenue ($6.7B) to The Trade Desk, Google's closest DSP competitor, which had $4.2B in gross revenue and $836M in net revenue, we see that DV360 had more topline spend but less net revenue.  Google’s 2020 SSP revenue ($7.4B) was significantly higher than independent SSP competitor PubMatic ($149M). Google’s buy-side ad server CM360 (formerly DoubleClick Campaign Manager) had nearly $400M in 2020 revenue, with $164M in operating profit, while competitive video buy-side ad server Innovid clocked $69M in 2020 revenue and $1.1M in operating profit.

In conclusion: Google has a giant lead over the competition on the pub side and in ad serving. Google has a smaller lead in the DSP market. Google moves margin around from product to product in order to maintain a competitive edge in each sector, while still ensuring its raking in cash overall. The antitrust case is scheduled to start next week, when more juicy details are likely to come out. 

Google Is Fighting To Keep Ad Tech Execs Off the Stand In Its Upcoming Antitrust Trial - Speaking of juicy details coming out, Google wants to keep that to a minimum by trying to block a bunch of ad tech vets from testifying at its trial. Google is fighting the testimony of anyone who isn’t an economist or antitrust expert. The witness list is a who’s who of ad tech, including AppNexus founder Brian O’Kelley, OpenX CEO John Gentry, Index Exchange CEO Andrew Casale, and The Trade Desk’s CRO Jed Dederick, among many others. The DOJ says many of the witnesses represent companies that are both competitors AND Google customers. Their industry experience, the DOJ says, makes their testimony valuable. The judge will make the call. 

Agencies Continue to Receive Perks From Media Owners That Aren't Disclosed to Clients 🔒- But wait, there’s more! Last week, court filings also revealed that Google gave agencies incentives 🔒 in 2018 to buy its media. These types of incentive programs are nothing new and were characterized as "pervasive" across the industry in a 2016 report from the Association of National Advertisers. Despite the negative publicity, large media companies are still giving agencies kickbacks for buying some of their products, and many times, the agencies are keeping the proceeds and not telling their clients they were paid extra for pushing certain products.

If you want to go into more depth on all things Google antitrust, check out The Monopoly Report newsletter by Marketecture (in this week’s edition, they reveal the deck DoubleClick used to sell itself to Google in 2007).

‘Isn’t this more of a quid pro quo?’: Confessions of an agency CEO on kickbacks in retail media landscape 🔒- Of course, shadiness and greed can thrive where there is no transparency. In the booming commerce media space, standardization and transparency continue to vex advertisers, who are increasingly suspicious of quid pro quo arrangements in which retailers give brands shelf space in their stores or preferential treatment in exchange for buying ads through their media network. There are more than 200 commerce media networks operating—with more seemingly emerging every week—and many charge high CPMs, which can squeeze smaller brands that don't have the budget to buy into them. Unfortunately, these types of quid pro quo deals seem to be the standard as retailers try to wring as much revenue as possible from their first-party data, according to one well-placed agency CEO.

Amid a new CEO-hunt, is Criteo up for sale? 🔒- Criteo CEO Megan Clarken wants to retire in the next year, which some see as a potential precursor to an acquisition. Criteo was reportedly up for sale as recently as last year, though a buyer obviously never materialized. Now, Clarken's exit has some speculating that a pool of potential acquirers would include The Trade Desk, Microsoft, Walmart, Publicis, and GroupM. According to their thinking, The Trade Desk would make sense because it would give the DSP a stronger foothold in commerce media should CTV ever flounder. Microsoft's acquisitive nature and its recent deal with Criteo would make it a logical fit. Walmart is an obvious choice due to its advertising ambitions. Publicis nearly bought Criteo 10 years ago and could circle back, while GroupM could make a move under new CEO Brian Lesser, who has a track record of doing big deals. Lots of intriguing possibilities. 

Inside Netflix's hunt for its next ads leader and what it signals about the company's future 🔒- Netflix advertising president Amy Reinhard is looking for a replacement for Peter Naylor, who left the company in July. Sources say that she is focused on finding someone well-versed in ad product and tech, programmatic sales, and TV investments and who can develop products and processes. A background in sports advertising would also be a bonus considering the company's interest and investments in sports. Some potential candidates include Lisa Valentino, formerly of Disney; Warner Bros. Discovery's Ryan Gould; and Pooja Midha at Effectv, Comcast's ad sales unit.

Other Notable Headlines
(that you should know about too) 🤓 

Disney Nets Go Dark On DirecTV, 11M Affected - A contract renewal dispute caused a blackout for millions of DirecTV customers, who couldn't access some college football games and the US Open.

Longtime Unilever media exec Luis Di Como is leaving amid a broader shake-up of the business 🔒- Di Como worked for Unilever for 33 years and oversaw its media budget, which totaled about $9.4B in 2023. Unilever is cost-cutting and stripping some organization layers.

Scoop: IAB And MRC To Collaborate On Attention Measurement Accreditation - A draft of accreditation guidelines could be ready for public comment by the first quarter of 2025. If you want to learn more about attention measurement, check out the recording of U of Digital’s Attention Metrics Explained Live Learning Event!

Google ends video ad program as it prioritizes AI campaigns🔒- Google will fold its video action campaigns into Demand Gen, its AI-powered ad product launched last year.

WPP, OMG Big Winners In $5 Billion Amazon Media Review - Amazon spends $5B a year on global media, half of which was managed by IPG Mediabrands last year, with Amazon managing the rest in-house.

eBay Selects Dentsu's iProspect As Global Media Agency - EssenceMediacom was the incumbent for the account, which is split between the media agency and eBay's in-house team.

Court Narrows Section 230, Revives Suit Against TikTok Over Algorithms - TikTok can't use Section 230 of the Communications Decency Act to shield itself from liability for showing “blackout challenge” videos to a 10-year-old girl who died after attempting it.

California Legislature Advances Bill to Make it Easier to Exercise Privacy Rights - AB 3048 will force browsers to support opt–out preference signals so consumers can opt out of personal information being sold or shared in just one step.

Yelp sues Google, alleging a search engine monopoly that promotes its own reviews - In the wake of Google’s search antitrust defeat, Yelp claims Google manipulates search results to promote its own local search products at the expense of competitors. Yelp had rebuffed Google's acquisition offer in 2009. 

Brazil begins to block X as Elon Musk’s feud with judge deepens - Brazil's Supreme Court ordered X to be suspended because X refused to name a legal representative in the country—the latest twist in a monthslong feud over alleged misinformation and hate speech on the platform.

“…the world is not obliged to put up with Musk’s extreme right-wing anything goes just because he is rich,” said Brazil President Lula Da Silva.

That’s It For This Week 👋

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