The State Of The
Open Internet
A data-driven perspective on the forces that will shape
the ad-supported open internet in 2022

About thisresearch

Jounce Media is a programmatic advertising consultancy thatpartners with buyers and sellers to develop data-driven trading
strategies.
Through our work, we have the opportunity to build a deep
understanding of the ways in which buyers and sellers transact on
the open internet – the websites, mobile apps, and CTV apps that
accept demand from DSPs and ad networks. We maintain a dailyupdating catalog of all authorized programmatic supply chainsbased on industry-standard ads.txt, app-ads.txt, and sellers.json
disclosures. We additionally source media metrics from marketersthat invested $600M in programmatically-traded open internet
inventory in 2021. The combination of these data sets provides arich, time-trended view of the total addressable market for eachsub-sector of digital advertising, shifting marketer spend patterns,
and technology platform consolidation.
This report provides a data-driven perspective on how marketers
will deploy paid media investments in 2022 as well as thecommercial and technical drivers of paid media share shift.
2Summary Findings
2022 digital advertising outlook
The defining theme of the ad-supported open internet in 2022 is a blurring of lines
between partners and competitors. This takes hold in three ways:•

Walled Garden Coopetition
Walled gardens are both the biggest competitors to open internet media
companies and the biggest sources of demand for open internet media
companies. This coopetition has become increasingly problematic as walled
gardens outpace open internet growth.

•

Supply Concentration
Scaled media companies are emerging as monetization engines for the rest of theopen internet. Small and mid-sized publishers cannot match the yieldsophistication, sales presence, and data richness of scaled rivals and arechoosing to outsource yield management to these companies. But thosepartnerships make sub-scale publishers dependent on their scaled peers.

•

Supply Chain Compression
As fewer companies monetize more supply, DSPs and SSPs are evolving frompartners to competitors. DSPs are challenging the value of SSPs by building
publisher-direct integrations. And SSPs are marginalizing the role of DSPs bybuilding buyer-direct partnerships.

Across all three vectors, the open internet is seeking a sweet spot of competition.
Fragmented publishers and fragmented ad tech platforms have made quality control
an evergreen problem on the open internet. But concentrated demand acrossGoogle, Amazon, and Meta has limited marketplace competition. There is acompetitive sweet spot, and we see the industry moving toward this sweet spot in
2022.
3

Open Internet
DemandWalled gardens continue to consolidate marketer budgets. These
companies are both the biggest competitors to open internet media
companies and the biggest sources of demand for open internet
media companies.

Global Ad Spend
Major media channels

We track five categories of paid media:
Digital
All internet-delivered advertising across websites, mobile
apps, and connected TV apps
TV
Broadcast TV advertising

Print
Newspaper and magazine placements

Out Of Home
Outdoor signage, inclusive of both static posters and digital
billboards

Radio
Terrestrial and satellite radio

This list notably excludes trade spend, influencer marketing, and experiential
marketing. We have anecdotal information that suggests these are large pools ofinvestment, and we additionally believe these budgets are both contributing to andpulling from the marketing categories that we do track.
As one example, a significant driver of Amazon’s advertising growth is likely
reallocation of trade spend from in-store promotions (e.g., retail aisle endcaps) todigital promotions (e.g., Amazon app sponsored listings).
5

Global Ad Spend
Digital advertising sectors

Within digital advertising, there are four sub-sectors:

SearchPaid placement in search engine results pages

WalledGardens

Auction-based ad environments that require marketers
to use bidding systems operated by the media company

Open
Programmatic

Auction-based ad environments that allow marketers to
use third party bidding systems (DSPs and ad networks)

Reservations

Pre-sold campaigns that carry volume commitments andnegotiated (i.e., non-auction) pricing

What is display advertising?

We call all non-search digital advertising (walled gardens + open programmatic +reservations) “display” advertising. Display is broader than banner ads. It includes
banner, video, audio, and native formats delivered on desktop computers, mobile
devices, and connected TVs.
What is the open internet?
The open internet includes all display advertising, excluding walled gardens. The
open internet represents the addressable market for DSPs, SSPs, and ad
networks.
6

Global Ad Spend
2022 projections

Each year, we cross-reference industry ad spend forecasts with a bottom-up build of
the known size of the largest media companies. We then project growth rates for theyear ahead:

Share of Global Ad Spend

2022 Global Digital Ad Spend ($B)

Radio
$257.4OOH
Print

The Open Internet$163.2

TV

64.4%

$87.9

$3.6
SearchWalledGardens

Open
Programmatic

Reservations

In 2022, we project that the open internet will be a $91.6B category that spans web,mobile app, and connected TV inventory. After years of stagnation, the open internet
grew 13% in 2021. This growth lags the growth of walled gardens but reflects a postCOVID rebalancing of advertising investments toward digital channels. We expect the
open internet will continue to grow in 2022, though at a slower pace than walled
gardens.
A complete breakdown of 2017-2022 global ad spend figures for each media subsector is available in the appendix of this report.

7Walled Gardens
2022 projections

There are nine walled gardens that each capture at least $1B of annual ad spend withno dependence on third party demand from DSPs or ad networks.
Media Company

Walled Garden Inventory

Forecasted
2022 Ad Spend

Facebook, Instagram, and other Meta ownedand-operated properties$144.2B

YouTube, Google Maps, Gmail, and other
Google owned-and-operated properties(excluding Google Search)$37.9B

Amazon website, app, andselect Amazon Fire TV inventory$39.4B

TikTok mobile app$7.6B

Snapchat mobile app$6.8B

Twitter website and app$5.0B

LinkedIn website and app$5.0B

Pinterest website and app$3.9B

Walmart website and app

$3.8B
8

Walled Gardens
2022 projections

Marketers that want to advertise on YouTube or Instagram or any of the other O&O
properties listed on the prior page need to transact directly with the media company
and use ad buying tools that are controlled by the media company. Transacting inseller-controlled environment is strategically unattractive to media buyers, but themost scaled media companies have leverage to dictate these requirements tomarketers.
Additionally, highly specialized media properties – even at modest scale – also haveleverage to operate as walled gardens. In particular, many commerce platforms arelaunching new walled garden advertising businesses:

We estimate that each of these companies operates a sub-$1B media business. But
collectively, we estimate these companies will capture nearly $4B of global ad spend
in 2022.
Combining these companies with Amazon and Walmart creates a $47B commerce
media category that is almost entirely transacted via walled garden auctions. (Target,
Ebay, and handful of other commerce platforms are uniquely choosing to monetize
their inventory via open programmatic auctions.)
9

Walled Gardens
2022 projections

All-in we project marketers will invest $257B with walled gardens in 2022, and thatspending power makes walled gardens uniquely positioned to bring demand to open
internet media companies. While priority #1 for the walled gardens is monetizing their
O&O inventory, the open internet is a highly attractive incremental monetization
opportunity.
Said differently, these walled gardens are not sellers on the open internet, but they
are the largest buyers. The highly interconnected nature of walled gardens and theopen internet results in a market map that looks like this:The Meta
Internet
The Google
Internet

The OpenInternet

The Challenger
Gardens

The Amazon
Internet$1B

The size of the bubble
represents gross ad spend

In 2022, marketers will invest $92B buying web, mobile app, and CTV inventory on
the open internet. And more than half of that spend will be powered by walled garden
buying systems.

10Open Internet Demand2022 projections

Google, Amazon, and Meta all have multi-billion dollar off-property advertisingbusinesses that point their proprietary demand at third party websites and apps.

Buying Platform

Open Internet Inventory~1,300,000 websites and apps that
integrate with Google AdSense and AdMob(sometimes called Google Display Network)+ any property that transacts via any RTB
exchange

Forecasted
2022 Ad Spend$36.7B($26.0B Google Ads +$10.7B DV360)~250,000 websites and apps that integratewith Amazon Publisher Services + any
property that transacts via any RTB
exchange$9.7B~75,000 apps that integrate with Meta
Audience Network$2.8B

LinkedIn, Twitter, Walmart, and many of the smaller commerce media platforms also
power off-site advertising businesses that we estimate contribute another $2-3B ofannual open internet demand.
11

Open Internet Demand2022 projections

The average open internet media company now generates half of its revenue from its
three largest rivals – Google, Amazon, and Meta. And that dependence is particularly
problematic because these three companies (along with a growing roster ofchallenger gardens) are capturing nearly all of the industry’s growth.
Non-search digital advertising has seen net inflows of more than $211B since 2017,
and the walled gardens have captured 96% of this growth.

2022 Global Non-Search Digital Ad Spend ($B)
$400
$350
$300
Challenger Gardens$250

Amazon O&O$200

YouTubeMeta O&O$150

Open Internet

$100
$50
$0
2017

2018

2019

2020

2021

2022

During this period, the open internet has stagnated at $70-80B per year. Growing an
open internet media company requires either extracting more spend from walled
gardens (deepening a strategically problematic dependence) or sourcing demand
from new buyers.

12Open Internet Demand2022 projections

To date, those new demand sources have failed to materialize in a meaningful way. In
2017, Google, Amazon, and Meta represented less than a quarter of all open internet
demand. In 2022, those three companies will represent more than half of all open
internet demand.

Share Of Open Internet Demand
100%
90%
80%

Reservations

70%

All Other Buy-Side Platforms

60%

Criteo50%

Meta Audience Network

40%

The Trade Desk
Amazon DSP

30%

Google DV360

20%

Google Ads

10%
0%
2017

2018

2019

2020

2021

2022

The Trade Desk is emerging as a celebrated source of non-walled garden demand forthe open internet, and TTD’s buying power will grow from $1.6B in 2017 to $8.5B in
2022. But TTD’s growth will need to continue compounding for another 3-4 years tomatch the scale of walled garden demand.
Most critically, the growth of today’s leaders (walled gardens and TTD) has largely
been at the expense of sub-scale buying platforms (yellow region above) and handsold reservations (gray region above), which have seen steep declines since 2017.
13

Open Internet Demand2022 projections

We track 36 independent DSPs and ad networks that will collectively bring $27.7B ofdemand to the open internet in 2022:

2022 Open Programmatic Ad Spend by Platform ($B)
$40

$36.7

$35
$27.7

$30
DV360

$25
$20
$15
$10
$5
$0

Google
Ads

$9.7

$8.5
$2.8

$2.5

All Other DSPs
and Ad Networks

While it is true that this category has declined in the last 5 years, much of that decline
was driven by now-defunct ad networks whose business models failed to meet buyer
and seller price efficiency expectations. The remaining independents have built
platforms that are trusted by programmatic buyers and sellers and that have
weathered competition from Google, Amazon, and others. Further, the foundationalrules of the open internet are changing in a way that destabilizes today’s incumbents.
14

Open Internet Demand2022 projections

Apple (who has near-zero financial interest in ad-supported media) continues toadvance initiatives that restrict cross-site and cross-app user tracking. Under
competitive pressure, Google is reluctantly following, and it’s likely that connected TV
operating systems like Roku and Amazon will at some point follow as well. Further,
regulators in many geographies bolster technical initiatives by imposing commercial
limitations on cross-company data sharing.
These changes require a ground-up rethinking of programmatic advertising. And
while Google, Amazon, and Meta all have unmatched ability to invest in nextgeneration advertising technology, it’s not clear those investments will be a strategic
priority.

Google is too conflicted to innovate quickly. Google operates the largest publisher
yield management system, the largest advertising buying system, the most widelyadopted web browser, and the most widely adopted mobile operating system. This
multi-tentacled business positions Google to protect the status quo but limits
Google’s ability to deploy disruptive, next-generation advertising technology. Facedwith conflicting demands from publishers, marketers, consumers, and regulators,
Google continues to slow roll its Privacy Sandbox initiatives, and we see no reason tobelieve Google can accelerate progress in 2022.

Amazon has too much opportunity cost to be singularly focused on open internet
innovation. Amazon’s walled garden is the best positioned advertising business for a
privacy-restricted internet. By owning the consumer experience from productdiscovery through checkout, Amazon has unrivaled audience data to inform targeting
15

Open Internet Demand2022 projections

and attribution. And Amazon’s control of the Fire TV operating system protects
against the risk of signal loss for some of the most valuable open internet inventory.
Amazon certainly has the resources to also invest in next generation targeting andattribution for web and mobile app inventory, but the opportunity cost is diverting
focus from the company’s most promising growth drivers.

Meta has already deprioritized the open internet. As Meta’s advertising businessfaces both consumer headwinds (stalled user growth) and technical headwinds(Apple ATT), the company is right to prioritize investments in its O&O apps. Meta has
guided investors to expect a $10B revenue penalty in 2022 caused by Apple ATT.
This pain is likely lopsided toward the off-property Audience Network, which we
expect will decline in 2022. More generally, we expect the Audience Network willcontinue to suffer from under-investment relative to Meta’s focus on overcoming
signal loss for O&O apps.
To be clear, there is no question that walled gardens will remain the largest buyers ofopen internet inventory in 2022. But there is reason to question whether the open
internet is a long term priority for Google, Amazon, and Meta, leaving two potential
long term demand scenarios for open internet media companies:•

Scenario 1: Walled gardens continue to consolidate market share, creating arevenue concentration problem for open internet media companies.

•

Scenario 2: Walled gardens refocus their advertising businesses on O&O
inventory, leaving a demand gap for open internet media companies.

In either outcome, open internet media companies need to diversify their revenue andsecure dedicated budgets from brands and agencies. And that’s a much moreachievable strategy for the most scaled publishers.
16

Open Internet
SupplySub-scale open internet media companies cannot match the technicalsophistication, sales presence, and data richness of scaled peers.
This monetization advantage creates opportunities for sales houses
and scaled publishers to provide monetization services to sub-scale
properties, making a small number of companies gatekeepers foropen internet supply.

Monetization Engines
Open internet supply concentration

Buyers have been taught to think of the open internet as a vast expanse offragmented supply. It is true that there are hundreds of thousands of websites, mobile
apps, and CTV apps available to programmatic buyers – our buy-side clientspurchase inventory on 1.5 million different properties. But that property-oriented lensmisses the more important point that a relatively small number of media companies
control the properties that matter. Companies like Disney, NBC Universal, andWarner Media operate diverse multi-channel portfolios that concentrate open internet
supply. Consider the following chart, which plots the distribution of programmaticweb, mobile app, and CTV spend by publisher:

Cumulative Share Of Spend By Publisher
100%

CTV

80%

Mobile App
Web

60%
40%
20%
0%
0

10

20
30
Number of Publishers

40

50

The 10 largest web publishers capture 49% of programmatic web spend. The 10
largest mobile app developers capture 70% of programmatic mobile app spend. And
then 10 largest CTV app developers capture 82% of programmatic CTV spend.
18

Monetization Engines
Open internet supply concentration

These 100 companies collectively capture more than 80% of all programmatic
demand across web, mobile app, and CTV environments:

19

Monetization Engines
Open internet supply concentration

Many of these publishers produce low quality content and poor user experiences(more on that in the coming pages), but they do all operate at scale. And scaled
media companies benefit from four structural advantages vs. sub-scale peers:
Technical
Sophistication

The most scaled media companies can invest in proprietary technicalcapabilities to maximize programmatic yield.

Sales Presence

These scaled media companies can also invest in distributed sales teams
that secure dedicated budget from brands and agencies.

Negotiating
Leverage

Scale allows media companies to negotiate attractive take rates andelevated service levels from ad tech vendors.

Data Richness

Scale also positions media companies to build rich audience profiles
based on either authentication events or anonymous 1st party identifiers.

Most obviously, the benefits of scale strengthen the business case for corporate
mergers, and we saw many examples of media mergers in 2021:

20

Monetization Engines
Open internet supply concentration

In all of these cases, previously mid-size publishers combine to form scaled media
businesses that benefit from cross-selling opportunities, superior yield management
capabilities, and hard-to-replicate audience data. We expect this business case will
support more media mergers in 2022.
But media companies are also unlocking scale benefits in less obvious ways.
Consider five examples that illustrate the range of possibilities:

The Arena Group has pursued a roll-up strategy that now brings 135 previously
fragmented web domains under a single publisher. Arena’s portfolio includes anchor
tenants like Sports Illustrated and long tail properties like yachtsinternational.com.
And critically, those long tail properties publish highly endemic content that provides
rich signals about user intent.
As cross-site tracking faces mounting headwinds, audience targeting decisions will
move from the buy side to the sell side. A growing share of ad impressions will notcarry user identifiers that are recognizable to advertisers. But these users will berecognizable to publishers (particularly if Chrome and other browsers choose tosupport first party cookie sets.) Arena’s high signal long tail sites create data richness
that Arena can activate across its entire footprint – allowing, for example, a boat
manufacturer to reach a yachtsinternational.com visitor on a future visit to si.com.
Arena is now publicly traded on the New York Stock Exchange, and we expect
Arena’s access to capital markets will support ongoing inorganic growth. Other top100 publishers pursuing a similar rollup strategy include Recurrent Ventures and Red
Ventures.
21

Monetization Engines
Open internet supply concentration

Zynga acquired Chartboost, a scaled mobile app ad network, in 2021. Faced withcross-app tracking headwinds (specifically Apple’s ATT initiative), Zynga’s ownershipof an ad tech platform enables sophisticated cross-promotion of apps within the
Zynga portfolio.
In addition to bringing technical sophistication to monetizing Zynga’s owned-andoperated (O&O) apps, Chartboost positions Zynga as a one stop shop for all mobile
app advertising. Zynga’s sales team can now package its O&O apps with apps
developed by Tripledot, MobilityWare, Etermax, and others. In this way, Zynga
becomes a monetization engine for its sub-scale peers.

Other top-100 publishers that are taking a media + tech strategy include:•

Athena Studio and PeopleFun (partially or fully acquired by AppLovin)•

Digital Turbine (acquired AdColony, Fyber, and Appreciate)•

Yahoo (owns yahoo.com and aol.com along with Yahoo DSP and Yahoo
Exchange)

CafeMedia does not own any media properties. Instead, the company has secured
exclusive sales rights for over 5,000 small and mid-size websites. These websites are
typically operated by independent content creators in the lifestyle category – sites likesavvysavingcouple.net, diaryofafitmommy.com, and offbeatbride.com. CafeMedia
brings sophisticated yield management and a scaled sales team to these content
creators and shares in the revenue upside.
22

Monetization Engines
Open internet supply concentration

But mid-size publishers are also now choosing to outsource yield management tosales houses like CafeMedia. In late 2021, for example, Britannica (the publisher of
merriam-webster.com and britannica.com) outsourced its yield management toCafeMedia. We take this as a sign that the scale threshold for a go-it-alone
monetization strategy continues to rise, and we expect to see more mid-size media
companies engage with sales houses in 2022.
Other pure play sale houses in our top-100 publisher list include Ezoic, Freestar,Mediavine, Media Tradecraft, and Snigel.

Publishers that invest in proprietary yield management capabilities carry a fixeddevelopment cost. Those costs then pay back in proportion to the volume of inventory
the technology helps monetize. Framed this way, it’s obvious that publishers like The
Washington Post are eying opportunities to license yield management technology tosmall and mid-size publishers.
Dozens of news properties owned by McClatchy, MediaNews Group, Tribune
Publishing and others license WaPo’s Zeus monetization platform to access yieldsophistication that would be uneconomical to develop internally.
In late 2021, The Washington Post extended the Zeus offering from technology tosales with the launch of the Zeus Prime ad network – allowing Zeus licensees to also
benefit from WaPo’s scaled sales presence.
Other top-100 publishers that offer third party monetization services include Hearst,
Minute Media, Penske Media Corporation, Playwire, and Proper.
23

Monetization Engines
Open internet supply concentration

Vizio is a leading manufacturer of Smart TVs and pre-loads those TVs with the Vizio
WatchFree app – a program guide that includes content from traditional content
owners like A&E and emerging content creators like Newsy. The WatchFree app
unlocks a new high margin advertising opportunity for Vizio that offsets its low margin
hardware business. In August 2021, Vizio announced it had secured over $100M in
2022 ad spend commitments.
But Vizio’s advertising business is bigger than the WatchFree app. Through an ad
network called Vizio Amplify, Vizio brings its demand to third party CTV apps.
Because Vizio controls the operating system, it is well positioned to enable superior
targeting and attribution for third party app developers. Additionally, Vizio’s brandrecognition and scaled sales presence allows Vizio to acess demand that sub-scale
CTV app developers cannot.
We estimate that Amplify (i.e., Vizio selling inventory on third party apps) contributes
30-40% of Vizio’s overall advertising revenue. Amazon, LG, Roku, and Samsung are
taking similar strategies in the CTV category. Gannett’s USA Today Sports Media
network follows a comparable playbook for web inventory.

24

Monetization Engines
Open internet supply concentration

These examples paint an optimistic picture of the future of the open internet in whicha small number of scaled, trusted sellers become supply gatekeepers. But theseexamples miss a critical consideration about the current state of the open internet.
The 100 logos on page 19 of this report include many scaled publishers that are likely
unfamiliar to the average media buyer. We estimate that 15-20% of programmatic
spend in 2022 will be deployed to low quality “made for advertising” (MFA) publishers
that thrive on the opacity of the programmatic supply chain.
Made For Advertising
The MFA business model is built on an arbitrage opportunity – buy cheap traffic andthen aggressively monetize the resulting page views. Readers of this report will likely
be familiar with clickbait advertising like this:

These types of clickbait ads run on content recommendations networks like Taboola
and Outbrain, social platforms like Facebook and Twitter, and search engines like
Google. The MFA publisher pays these companies on a per-click basis to drive paid
traffic and then monetizes the resulting page views through programmatic auctions.
Overcoming this traffic acquisition cost requires the MFA publisher to sell lots of ads,
and that requirement results in user-hostile ad experiences that look like this:25

Monetization Engines
Open internet supply concentration

While this ad experience fails most reasonable marketers’ judgment for quality, it
meets or exceeds all automated quality checks:•

The content is brand safe•

The ads are viewable•

The videos play to completion•

And as a bonus, the auction clearing prices are low

In our conversations with premium publishers, we consistently hear a readiness tocompete with walled gardens and other premium publishers. But it’s not clear how
premium publishers can compete with MFA publishers that offer lower prices andachieve superior media KPIs.
26

Monetization Engines
Open internet supply concentration

And so we observe premium publishers selling sub-premium inventory that also
harvests irrational programmatic demand. Web publishers in particular commonly
delegate control of select placements (typically their lowest quality placements) to athird party. Consider the comments section of a premium web property:

Ad slot delegated by
the publisher to anintermediary

As of March 2022, the overall viewability of this website is 25%, well below industry
benchmarks. But this overall viewability is a weighted average of inventory monetizedby the publisher (65% viewability) and inventory monetized by the comments section
provider (1% viewability).
Marketers who transact directly with this publisher get the quality they expect. But
automated buying systems that chase low cost inventory buy non-viewable
impressions that are sold by a supply chain intermediary. In our view, this dysfunction
is a major driver of the open internet’s slow growth. Programmatic advertising
campaigns that drift into low quality supply fail to demonstrate real world outcomesfor marketers.
27

Ad Tech Supply
Chain
DSPs and SSPs are moving from partners to competitors. DSPs arebuilding publisher-direct integrations that bypass exchanges. And
SSPs are building value-add targeting and ad delivery capabilities thatmarginalize the role of DSPs.

Supply Chain Evolution
Publisher-direct DSP integrations

For the last decade, programmatic buying systems (DSPs and ad networks) have bid
into a patchwork of auctions operated by SSPs (which we prefer to call exchanges).
And programmatic buyers have designed their campaigns to target specificaudiences across the full breadth of programmatic supply. This demand behavior
rewards publishers that produce high volumes of auctions for high value audiences.
One approach for publisher growth is of course to develop content that attracts highvalue audiences. But a less obvious and far easier approach is to create auction
duplication. A publisher that issues just a single bid request for each available
impression captures less programmatic demand than a publisher that issues multiple
duplicative bid requests for each available impression. And that creates a supply
chain that looks like this:29Supply Chain Evolution
Publisher-direct DSP integrations

Further, each of a publisher’s exchange partners can multiply bid request volume
through reselling relationships with other exchanges. In the illustration below,
Exchange A issues two bid requests to DSPs for each available impression:•

One auction in which the chain of payment is DSP > Exchange A > Publisher(blue path below)•

And another auction in which the chain of payment is DSP > Exchange A >Exchange C > Publisher (green path below)

The average open internet property now monetizes its inventory through 16
exchanges and authorizes 7 of those exchanges to initiate resold auctions – asignificantly more complicated configuration than these illustrations suggest.

30

Supply Chain Evolution
Publisher-direct DSP integrations

This complexity means that the huge majority of bidstream activity is unproductive forbuyers, burdening DSPs with unnecessary systems infrastructure costs that squeeze
operating margins. And so DSPs are looking for opportunities to de-duplicate thebidstream. This might mean disabling participation in resold auctions. It might mean
cutting ties with tier 2 exchanges and aligning with a short list of scaled supply
partners. But the most obvious solution to bidstream de-duplication is for DSPs tointegrate directly with the most scaled publishers:

Tier 1 Publisher
Tier 1DSP

Exchange

Tier 2 Publisher
Tier 2
DSP

Exchange

And when only 100 publishers control the great majority of supply, a publisher-direct
supply strategy is achievable. With a few dozen publisher-direct integrations, DSPs
can:•Create a more direct and more transparent supply chain for marketers•

Increase the share of the marketer’s gross spend that is paid to publishers•

Reduce the QPS burden of processing the bidstream from multiple duplicative
exchanges

31Supply Chain Evolution
Publisher-direct DSP integrations

DSPs might still rely on third party exchanges to facilitate access to sub-scale
publishers and intermediaries. But the job of the exchange is diminished to providing
access to the least valuable and least strategically important supply.
Every DSP that manages at least $1B of annual ad spend now has publisher-direct
integrations:

Buy-Side Platform

Publisher-Direct Integrations

Criteo “Direct Bidder”

The Trade Desk’s OpenPath initiative, announced in February 2022, was a major
milestone in the programmatic supply chain that signaled a future where DSPs andexchanges evolve from partners to competitors. But it’s worth recognizing that The
Trade Desk was very late in this industry evolution. Google, Amazon, and Criteo haveoperated publisher-direct integrations for many years.
32Supply Chain Evolution
Publisher-direct DSP integrations

And even below the $1B annual spend mark, there are many examples of bidding
systems that have publisher-direct integrations:Company

Buy-Side Platform

Sell-Side Plaform

AdForm DSP

AdForm SSP

Beeswax

FreeWheel

Roku OneView

Roku O&O

Teads Ad Manager

Teads Exchange

Tremor DSP

Unruly Exchange

Liftoff

VungleXandr Invest

Xandr Monetize

Yahoo DSP

Yahoo Exchange

There are also of course ad networks whose business model requires direct
integrations with advertisers and with publishers: Taboola, Outbrain, Meta Audience
Network, AppLovin, ironSource, Chartboost, and many others.
Publisher-direct integrations are not a wholesale replacement of exchanges. Every
DSP listed above and most of the ad networks listed above continue to bid into
exchange auctions. But the long term strategy for these companies is to concentrate
investments on direct integrations with premium publishers.

33

Supply Chain Evolution
Exchange-controlled demand

That long term strategy is a healthy dynamic for the industry, but it challenges theviability of independent exchanges that rely on DSP demand. The addressable market
for pure play DSPs (i.e., DSPs that have no publisher-direct integrations) is small. We
have identified 21 DSPs that meet this profile, and we estimate their collective
spending power is at most $5B per year:

In this market context, pure play exchanges have three strategies for growth:•

Build a buy-side business•

Acquire a buy-side business•Marginalize buy-side businesses

Certainly there will be continued moves by exchanges to build or acquire buy-sidebusinesses. But it’s hard to see how this approach leads to long term buying powerthat can challenge current DSP leaders. And it’s easy to see how this approachstrains exchange partnerships with the most scaled DSPs, eroding short term
demand.
Instead, exchanges are taking steps to marginalize the role of DSPs.

34

Supply Chain Evolution
Exchange-controlled demand

There is a long running industry narrative that ad exchanges are just “dumb pipes”
that connect DSP demand with publisher supply. Exchanges are now attempting toflip this script, moving value-added capabilities into the exchange layer and casting
DSPs as dumb pipes that simply execute basic campaign workflow tasks. We see thistaking hold in three ways:
Audience
TargetingAs cross-site and cross-app tracking capabilities erode, exchanges arewell positioned to manage publisher-provided audience data.

Creative
Enrichment

Against a backdrop of banner blindness, exchanges are building nonstandard creative execution capabilities.

Inventory
Curation

Across all screens, but especially CTV, exchanges are curating publisher
content to match marketer targeting requirements.

To illustrate, consider three examples:

Magnite’s acquisitions of Nth Party Data and Carbon reflect a broader industry trend
to move audience data management into the exchange layer. As Apple and Google
implement restrictions on collecting user-level data and as regulators impose
restrictions on distributing user-level data, DSP buyers will see fewer ad opportunities
that contain a user identifier. Instead, DSP buyers will see ad opportunities that
contain aggregate audience information – an auction that previously declared a userspecific identifier will instead declare attributes of that user like demographics andpurchase intent.
This evolution requires sell-side technology platforms like Magnite to enablepublishers to enrich ad auctions with publisher-provided audience information.

35

Supply Chain Evolution
Exchange-controlled demand

That requirement also happens to be strategically attractive to these sell-side
technology companies. As exchanges like Magnite become the trusted custodian of
publisher data, value shifts from buy-side technology to sell-side technology. In thisfuture state, DSPs are demoted to simple campaign workflow tools.

Many of Magnites peers are following a similar audience data strategy. Other notable
examples of exchange-managed audiences include OpenX Open Audience,
PubMatic Audience Encore, and Xandr Curate.

TripleLift transacts non-standard native formats that dynamically assemble creative
components into an ad unit that is designed to match a publisher’s organic content.
That sell-side ad assembly creates two points of defensibility for TripleLift’smarketplace:•

Native ad execution requires media buyers to hand over creative control to a third
party, and TripleLift is trusted by media buyers.

•

DSPs are unlikely to attempt to replicate TripleLift’s native rendering capabilities,
preferring instead to delegate creative execution responsibility to a specialist.

TripleLift does transact standard banner and video ad units, and this part of thebusiness remains vulnerable to publisher-direct DSP integrations. But TripleLift’sfoothold on native executions makes the company more insulated than its peers from
DSP publisher-direct integrations.

Other examples of exchange-managed creative enrichment include Connatix,
GumGum, Kargo, Nativo, Sharethrough, Teads, and Yieldmo.
36

Supply Chain Evolution
Exchange-controlled demand

FreeWheel is Comcast’s ad tech division, which includes a publisher ad server (theoriginal FreeWheel product), an ad exchange (FreeWheel Programmatic Module),
and a DSP (Beeswax). This end-to-end stack is a leader in the connected TV
category and enables buyers and sellers to transact through a single platform. But
FreeWheel remains highly dependent on third party demand from the largest CTV
bidding systems like The Trade Desk and Google DV360.
Because connected TV is a supply-constrained market, there is very little open
auction bidding. Instead, buyers and sellers establish commercial agreements thatare transacted through private marketplaces. And the enforcement of thosecommercial agreements happens at the exchange layer. This can include geographic
targeting, frequency management, and other targeting constraints. But the moststrategically-important exchange capability is content curation.
CTV buyers care very much about content adjacency, particularly in a charged
political environment. But CTV sellers have financial incentives, and sometimes
contractual requirements, to bundle content into a single campaign. The solution isfor the exchange to manage inventory curation – providing DSPs the option to bid
only on marketer-approve content without disclosing the specific content associatedwith each available impression. This curation role also positions the exchange – notthe DSP – as the best source of campaign delivery reports.
Exchange-managed inventory curation creates a strategic control point for
FreeWheel, and more generally for CTV-enabled ad exchanges. Buyers can execute
CTV campaigns through their DSP of choice, but the most valuable media buying
capabilities are controlled by the exchange.

37

The Open Internet
In 2022To recap our view of the open internet in 2022:•

Walled gardens continue to consolidate marketer budgets. These
companies are both the biggest competitors to open internet
media companies and the biggest sources of demand for open
internet media companies.

•

Sub-scale open internet media companies cannot match thetechnical sophistication, sales presence, and data richness ofscaled peers. This monetization advantage creates opportunities
for sales houses and scaled publishers to provide monetization
services to sub-scale properties, making a small number ofcompanies gatekeepers for open internet supply.

•

DSPs and exchanges are moving from partners to competitors.
DSPs are building publisher-direct integrations that bypass
exchanges. And exchanges are building value-add targeting andad delivery capabilities that marginalize the role of DSPs.

These trends are part of a broader industry evolution from fragmented
supply and demand to scaled buy-side and sell-side businesses.

Appendix:
Market Sizing Data

Market Sizing Data
Total Global Paid Media

Digital
TV
Print
OOH
Radio
Total

2017
$218.1$175.8
$79.8
$38.4
$33.5
$545.62018$244.4$177.1
$73.0
$40.0
$34.0
$568.4Gross Ad Spend ($B)
2019
2020
2021
$278.2$321.0$413.6$174.5$160.4$169.3
$66.7
$50.4
$46.6
$41.3
$30.0
$34.3
$34.1
$26.3
$27.9
$594.7$588.0$691.62022$512.2$172.3
$44.0
$37.9
$28.9
$795.2

Digital
TV
Print
OOH
Radio
Total

2017
40.0%
32.2%
14.6%
7.0%
6.1%
100.0%

2018
43.0%
31.2%
12.8%
7.0%
6.0%
100.0%

Share Of Total
2019
2020
46.8%
54.6%
29.3%
27.3%
11.2%
8.6%
6.9%
5.1%
5.7%
4.5%
100.0%
100.0%

2021
59.8%
24.5%
6.7%
5.0%
4.0%
100.0%

2022
64.4%
21.7%
5.5%
4.8%
3.6%
100.0%

CAGR
18.6%
-0.4%
-11.2%
-0.3%
-3.0%
7.8%

Digital Marketing Categories

SearchWalled Gardens
Open Programmatic
Reservations
Total

2017
$80.5
$54.1
$64.6
$19.0
$218.1

2018
$90.1
$76.0
$66.4
$11.9
$244.4Gross Ad Spend ($B)
2019
2020
2021
$100.6$118.1$144.8$100.4$128.8$185.2
$67.7
$69.4
$79.6
$9.5
$4.8
$4.0
$278.2$321.0$413.62022$163.2$257.4$87.9$3.6$512.2

SearchWalled Gardens
Open Programmatic
Reservations
Total

2017
36.9%
24.8%
29.6%
8.7%
100.0%

2018
36.9%
31.1%
27.2%
4.9%
100.0%

Share Of Total
2019
2020
36.1%
36.8%
36.1%
40.1%
24.4%
21.6%
3.4%
1.5%
100.0%
100.0%

2022
31.9%
50.3%
17.2%
0.7%
100.0%

2021
35.0%
44.8%
19.2%
1.0%
100.0%

CAGR
15.2%
36.6%
6.4%
-28.1%
18.6%

40

Market Sizing Data
Walled Garden Spending

Meta
GoogleAmazonTikTokSnap
Twitter
LinkedIn
Pinterest
WalmartOther Commerce Media
Total

2017
$37.9
$7.9
$4.1
$0.0
$0.8
$2.1
$0.5
$0.5
$0.0
$0.1
$54.1

2018
$52.5
$11.2
$6.5
$0.1
$1.2
$2.6
$0.9
$0.7
$0.1
$0.4
$76.1

Gross Ad Spend ($B)
2019
2020
2021
$66.5
$80.7
$111.8
$15.1
$19.8
$28.8
$10.1
$15.9
$25.0
$0.2
$1.3
$3.1
$1.7
$2.5
$4.1
$3.0
$3.2
$4.4
$1.5
$2.4
$3.6
$1.1
$1.7
$2.6
$0.4
$0.9
$2.1
$0.8
$1.7
$2.7
$100.6$130.1$188.32022$144.2
$37.9
$39.4
$7.6
$6.8
$5.0
$5.0
$3.9
$3.8
$3.8
$257.4Meta
GoogleAmazonTikTokSnap
Twitter
LinkedIn
Pinterest
WalmartOther Commerce Media
Total

2017
70.1%
14.6%
7.6%
0.1%
1.5%
3.9%
0.9%
0.9%
0.1%
0.3%
100.0%

2018
69.0%
14.7%
8.5%
0.1%
1.6%
3.4%
1.2%
0.9%
0.2%
0.5%
100.0%

Share Of Total
2019
2020
66.1%
62.1%
15.1%
15.2%
10.1%
12.2%
0.2%
1.0%
1.7%
1.9%
3.0%
2.5%
1.5%
1.8%
1.1%
1.3%
0.4%
0.7%
0.8%
1.3%
100.0%
100.0%

2022
56.0%
14.7%
15.3%
3.0%
2.6%
2.0%
2.0%
1.5%
1.5%
1.5%
100.0%

2021
59.4%
15.3%
13.3%
1.7%
2.2%
2.3%
1.9%
1.4%
1.1%
1.4%
100.0%

CAGR
30.6%
36.8%
57.0%
181.5%
52.3%
19.0%
59.4%
52.7%
147.6%
94.7%
36.6%

41

Market Sizing Data
Open Programmatic Spending By Platform

Google Ads
Google DV360
FB Audience Network
Amazon DSP
The Trade Desk
CriteoOther Buy-Side Platforms
Reservations
Total

2017
$12.5
$5.1
$2.0
$1.0
$1.6
$2.3
$40.1
$19.0
$83.6

2018
$14.2
$5.8
$2.5
$1.6
$2.4
$2.3
$37.6
$11.9
$78.3

Gross Ad Spend ($B)
2019
2020
2021
$15.3
$16.4
$22.5
$6.3
$6.7
$9.2
$3.1
$3.4
$3.1
$2.5
$3.9
$6.2
$3.1
$4.2
$6.2
$2.3
$2.1
$2.3
$35.2
$32.7
$30.2
$9.5
$4.8
$4.0
$77.3
$74.2
$83.7

2022
$26.0
$10.7
$2.8
$9.7
$8.5
$2.5
$27.7
$3.6
$91.6

Google Ads
Google DV360
FB Audience Network
Amazon DSP
The Trade Desk
CriteoOther Buy-Side Platforms
Reservations
Total

2017
14.9%
6.1%
2.4%
1.2%
1.9%
2.7%
48.0%
22.7%
100.0%

2018
18.1%
7.4%
3.2%
2.0%
3.0%
2.9%
48.1%
15.2%
100.0%

Share Of Total
2019
2020
19.8%
22.1%
8.1%
9.0%
4.0%
4.6%
3.2%
5.3%
4.0%
5.7%
2.9%
2.8%
45.5%
44.1%
12.3%
6.4%
100.0%
100.0%

2022
28.4%
11.6%
3.0%
10.6%
9.3%
2.7%
30.3%
4.0%
100.0%

2021
26.9%
11.0%
3.7%
7.4%
7.4%
2.7%
36.1%
4.8%
100.0%

CAGR
15.8%
15.8%
6.8%
57.0%
40.5%
1.3%
-7.1%
-28.1%
1.8%

42

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