AI hype meets reality.
Another quarter, another round of earnings calls. And if you listened closely, you heard a lot of the same old song and dance: Big Tech is raking it in, thanks to AI, while the rest of the ad tech ecosystem is… well, trying to keep up. We’re seeing senior folks jump ship at The Trade Desk, AppLovin’s still chugging along at nearly $2 billion in Q1. But strip away the jargon, and what are we left with? A whole lot of companies claiming growth, but dig a little deeper, and three of them are actually seeing revenue decline year-over-year. And the big question, the one that always hovers like a bad smell: who’s actually making money here, and is this AI stuff just a shiny distraction?
Is AI Hollowing Out Platforms?
Teads, for instance, is still navigating a rough patch, a year after trying to merge its premium potential with Outbrain’s performance engine. They coughed up a 7% revenue dip, which got analysts’ tongues wagging about whether AI is blurring the lines between top-of-funnel branding and bottom-of-funnel performance advertising – a historical separation that’s been the bread and butter for many. Criteo, too, is forecasting a comeback later this year after a sluggish retail media spend dragged revenues down by 6%. The fear? That self-serve AI tools will make agencies less reliant on them, which, let’s be honest, is a significant part of Criteo’s business model. You heard the same questions lobbed at Magnite and Criteo execs: is this AI trend going to squeeze your take-rates? It’s the age-old ad tech anxiety, amplified.
Executives, however, have a knack for spinning AI-driven job displacement into sunshine and rainbows. Criteo’s folks are practically singing the praises of its ChatGPT integration, while others are rolling out their own AI-powered wares: PubMatic bragging about over a thousand AI-driven deals, Viant pushing its “autonomous outcomes,” Taboola hawking its “AI Answer engine,” and DoubleVerify talking up its “AI-slop stopper.” It all sounds very impressive, until you ask for the actual revenue generated from these initiatives. So far, it’s a lot of promises, not a lot of proven cash flow.
CTV: The Real Growth Story
Despite all the AI-fueled bluster, concrete examples of AI actually generating new revenue streams are, shall we say, scarce. Criteo might offer revenue guidance on its OpenAI partnership next year, but the real story, the one screaming from the data across all 12 earnings reports, is that Connected TV (CTV) is the undisputed king of quality growth in the open internet. Viant’s CTV ad revenue now makes up over half of its platform spend – no wonder they’re buying TVision. The Trade Desk’s online video, including CTV, accounts for more than half of its platform spend too. Magnite is calling CTV its biggest business driver, and even MNTN is seeing small and medium-sized businesses flock to it for ad buys. The only wrinkle? Large platforms like Meta and Pinterest are starting to eye CTV, which could slow down that growth rate for some.
Margin Erosion? Who’s to Blame?
On the surface, things look rosy. Half the companies in this bunch have upped their revenue forecasts. But a weird chill went through the market when The Trade Desk’s Q2 forecast felt a bit… soft. Their stock dipped. The whisper on the street? Margin control. It seems everyone’s duking it out over who gets the biggest slice of the pie, whether it’s with holding company agencies or supply-side partners like Magnite and PubMatic. Some are even wondering if this squabbling is a sign of the market tightening, a precursor to consolidation.
PubMatic’s leadership even admitted that a spat with an unnamed demand-side platform turned what should have been a solid 13% Q1 revenue jump into a measly 2% dip. It’s a stark reminder that even with all the fancy tech, good old-fashioned business relationships (or lack thereof) still dictate the bottom line. The ad tech world is a complicated beast, and while AI is the shiny new toy, it’s the more mature, albeit contested, channels like CTV that are actually moving the needle. For now, at least.
Why Does CTV Keep Winning?
It’s simple, really. Advertisers are chasing eyeballs, and those eyeballs have migrated to the living room TV, streamed directly. Unlike the fragmented and often ad-cluttered digital landscape, CTV offers a more premium, lean-back viewing experience that mirrors traditional television, but with the added benefits of digital targeting and measurement. This convergence is what makes it so attractive. Plus, the move away from third-party cookies means that privacy-focused, first-party data strategies are becoming paramount, and CTV is well-positioned to use these. So, while everyone else is trying to build AI-powered magic wands, CTV is just… working.
Is The Trade Desk’s ‘Soft’ Forecast a Warning?
It’s certainly a head-scratcher. The Trade Desk is usually seen as the bellwether for the programmatic industry. When their projections seem a little less optimistic than usual, it signals that even the giants are feeling some headwinds. The conflict over margins with agencies and publishers could be a symptom of a broader issue: the addressable market for ad spend might not be growing as fast as everyone assumed. Or, more cynically, it could mean they’re just expecting the ongoing battles over commission rates to eat into their profitability. Either way, it’s a data point that deserves attention.
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Frequently Asked Questions
What is the biggest growth area in ad tech right now? Connected TV (CTV) is consistently cited as the highest-quality growth segment on the open internet, driving significant revenue for platforms like Viant, The Trade Desk, and Magnite.
Is AI really driving revenue for ad tech companies yet? While many ad tech companies are touting AI integrations and initiatives, concrete examples of AI directly generating significant new revenue streams are currently scarce, with CTV being the more established revenue driver.
What are the main challenges facing ad tech companies? Key challenges include margin erosion due to conflicts over take-rates with agencies and supply-side partners, and questions about whether AI tools will reduce reliance on existing platforms and reduce agencies’ operational dependence.
