Commentary

What Do Layoffs At PubMatic And Other Ad-Tech Firms Mean?

News of 100 layoffs at PubMatic broke Tuesday and was confirmed by our friends at AdExchanger. It came just a week after Turn announced layoffs of 57 employees amid a company restructuring. Rocket  Fuel shed nearly 129 employees in April. It’s Q4 and this stuff happens all the time across industries, but what can we read in the tea leaves about these reductions?

One might attribute these cuts to industry consolidation, a doubling down and refocusing on core strengths or restructuring to emphasize higher growth, revenue-generating parts of the business, or all of these things.

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An industry source who declined to go on the record told RTBlog that “PubMatic is still a strong company. I think the activity there has more to do with pruning and right-sizing the business rather than any major issues with long-term viability,” while “Turn is a mess and its new CEO is trying to right the ship and conserve cash.”

Another industry source told RTBlog that the fast-growth mode in ad tech may be over and there's a flight to quality and profitability. “We’ll see a continued shakeout of these fast-growth companies that are trying to migrate to a quality business structure.” The source went on to say that while PubMatic has been profitable, Turn and Rocket Fuel have been fast-growing but not profitable. “Now investors want to see long-term profitability. These companies need to grow revenue and decrease costs to be profitable. They have bloated sales and marketing teams. Companies in the space will migrate to profitability by cultivating longer term, stickier client relationships and they’ll have more predictable revenues.”

PubMatic and Turn are global, so these rumblings have ripple effects throughout the programmatic universe. In fact, Mumbrella Asia said it was unclear how the Asian parts of these businesses will be affected.  But Pubmatic did tell Mumbrella that the move was designed to “support our core customers and propel continued growth and profitability in 2016.” A spokesperson added: "To support this effort, we are moving (smart-shoring) resources -- particularly in client operations -- into local markets such as Tokyo and Singapore.”

PubMatic has offices in Sydney, Tokyo, Singapore and Delhi. Mumbrella reported that the company's global chief Kirk McDonald had recently commented that the sell-side platform wanted to enter China and Indonesia in 2016. Turn didn’t respond to Mumbrella’s queries.

PubMatic today declined to comment any further beyond what it told AdExchanger which has a complete account of the situation.

PubMatic’s layoffs amount to 20% of the staff, and come after an 8% reduction in October. Ouch. The workforce went from 600 to 450. Turn’s layoffs amounted to 57 of 400 employees and were attributed to reducing a focus on SaaS services, according to company spokesman Jonathan Gardner. Turn wants to focus on its strength as an omnichannel DSP and video, dialing down on the SSP side of the business.

Speaking with AdExchanger on Tuesday, PubMatic CEO and Co-Founder Rajeev Goel said  a “minority of publisher customers represent 90% of our revenue… We’re doubling down on the minority of customers who are poised to grow with us.” Goel noted that PubMatic has been profitable for the last three years. The company has also been something of a market-mover with an early lead on RTB and header bidding, but has struggled with execution, according to the AdExchanger report.

“PubMatic has a very highly respected management team in Rajeev and Kirk [McDonald, president]. I think they care about the future of our ecosystem and the quality of the publisher business,” Art Muldoon, CEO and Co-Founder, Accordant Media, told RTBlog. Of the layoffs, Muldoon said: “I think this is a normal part of a business cycle. In the ad tech ecosystem, many companies have been in grow fast mode and now we’re in a new and important phase where the speed of growth is being scrutinized by the quality of the growth. ...Both private and public investors in the space are recognizing that the long-term viability of players in the ad tech space requires a focus on quality, sustainable business.”

Ironically, on Nov. 15 was named PubMatic was ranked 236 on Deloitte's Technology Fast 500™ list, a ranking of the 500 fastest growing technology, media, telecommunications, life sciences and energy tech companies in North America. The ranking states: “PubMatic has achieved 318% revenue growth since 2011, which can be attributed to a combination of the growing adoption of marketing automation platforms by publishers and advertisers as well as the continued increase in global mobile consumption over the past five years.”

Let the flight to quality begin.

2 comments about "What Do Layoffs At PubMatic And Other Ad-Tech Firms Mean?".
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  1. John Shomaker from Core2 Group, December 9, 2015 at 11:29 a.m.

    Totally agree, and I expound here: http://bit.ly/1PZxmeq. I'm a big fan of Pubmatic, but they didn't garner Admeld's exit and multiple because its growth was tinged with less premium inventory. Pubmatic is shedding its low-value networks and publishers. Equally important to the 'flight to quality' is Pubmatic's need to show the street it can generate predictable SaaS-like revenue streams, less reliant on the at-will streams of CPM fluctuations. Flight to quality also means flight to credit-worthiness.

  2. Henry Blaufox from Dragon360, December 9, 2015 at 11:39 a.m.

    Are the staff reductions at these companies  a sign that the plain vanilla online ad DSP SSP business has become a commodity, with no unique value differntiation?

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