DoubleVerify’s Q2 2024 earnings, which came out last Wednesday, showed solid results. Second quarter revenue came in almost precisely as expected, at $156M and a year-on-year growth rate of 17%.
Now, you might think, wait a minute, how is this a good result? Didn’t they have an average annual net revenue growth rate of 33% between 2019 – 2022, then in 2023, that went down to only 27% growth, and now they’re down to 17%?
All of that is true, and yet, nothing bad is going on with DoubleVerify. The company has always had a rock-solid business within the programmatic advertising segment (see first chart below). You can clearly see that DoubleVerify’s net revenue grew at a faster pace than that of its main competitor Integral Ad Science (IAS) and that of programmatic advertising. The declining growth rate is wholly explained by the natural maturation of the business, and even more so, the slow-down in programmatic advertising growth after the strong growth during Covid. Note that despite the programmatic slowdown, the company still grows at a very quick clip.
Its annual profit grew nicely with the overall business, too. Even better, its profit rate, at around 8 – 9% for the years 2020 – 2022, jumped to 13% last year.
These numbers explain why DoubleVerify’s stock price outperforms that of IAS (see second chart below).
How did they do it? It is true that DoubleVerify’s products historically have relied on third-party cookies for various functionalities such as tracking, targeting, and measurement. However, with the impending deprecation of cookies in the Chrome browser, the company has been shifting its focus towards alternative, privacy-friendly solutions. One of the key strategies it has adopted is contextual advertising. Additionally, it has been investing in first-party data activation and attention-based metrics as replacements for cookies.
DoubleVerify has also expanded into two of the main advertising hotspots: Connected TV measurement showed 55% growth in “transactions” (so revenue growth probably came in lower). Social media measurement revenue increased by 44%.
The supply-side business also grew strongly at 26%, outpacing both demand-side products (Activation and Measurement). This is especially great news since the supply-side business suffered from anemic, just-4% growth the four previous quarters compared to the four quarters before. This is no doubt related to the strong growth in the retail media-related business (55%) withing the supply-side business.
More is to come: DoubleVerify has gained significant traction with ex-Moat’s clients after Oracle announced they would shut down its AdTech business, and even measurement company Moat (an inexplicable decision on Oracle’s part given Moat’s prominence in the marketplace). They also scored notable wins with companies such as Pepsi, Ulta, and AB InBev, which should nicely buoy sales.
In spite of DoubleVerify’s robust health, its stock price went down by 6% the day after the earnings (Thursday) and by 11% on Fridsy. The company had missed profit targets.
In conclusion, DoubleVerify’s Q2 2024 results highlight its resilience and adaptability in the digital advertising landscape. Despite a natural slowdown in programmatic advertising growth post-Covid, DoubleVerify continues to outperform the market and its competitor, IAS. The company’s strategic shift towards privacy-friendly solutions positions it well for the future. Significant growth in Connected TV and social media measurement, along with a rebound in the supply-side business thanks to retail media, underscores DoubleVerify’s ability to seize emerging opportunities. With new clients from ex-Moat customers and major wins like Pepsi and AB InBev, DoubleVerify is set for continued success.
DoubleVerify has three main products. The “Measurement” product measures the effectiveness of the ads advertisers buy directly from publishers and social media platforms after the fact. The “Activation” product helps advertisers assess the likely effectiveness of inventory from programmatic and social media platforms before they actually buy them. Finally, the “Supply-Side” product provides publishers and SSPs with data on the likely effectiveness of their inventory to support their sales efforts.
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