Zach Cummins: Understood. Well, thanks for taking my questions and best of luck with the rest of the quarter.
Rajeev Goel: Thank you, Zach.
Steve Pantelick: Thank you.
Stacie Clements: Our next question comes from Jason Helfstein at Oppenheimer. Please go ahead, Jason.
Jason Helfstein: Hey, guys. You came in nicely above the revenues, like 8%, $5 million or so. In case I missed it, did you call out, was there a specific catalyst or a broad base? That’s the first question.
Steve Pantelick: Sure. Hey, Jason, good to connect. So I would say when you reflect on Q1, I think the thing that jumps out is that it really was across the board. Our team, our business was fired in all cylinders, all formats, all channels grew nicely. In terms of the omnichannel video business that grew 33% year-over-year display, including the Yahoo headwind grew 10%. So overall, very pleased with the underlying growth of the business. And of course, we hit a major milestone with SPO at 50% of overall activity. And into the second quarter that momentum continued double-digit growth for April. And underpinning all of this has been our long-term efforts in terms of innovation and building differentiated solution that continues to resonate with existing and new customers.
Jason Helfstein: And then, just to follow-up I guess, we’ve talked about last quarter and I guess inter quarter, just some of the investments you’re making in headcount, are we kind of at that rate, or are you thinking about kind of still material increases in headcount as you move through the year?
Steve Pantelick: So for the first quarter, our overall headcount was up a little over 10%. And our game plan for the full year is to be about 11%, 12%. So by and large, we’re on the track that we had set out to do. But I would say just from a timing perspective, you’ll see some of that investment accelerate Q3, Q4, because of the normal cycle of bringing people on recruiting, et cetera. But overall, right on track with our goals. But I would expect some acceleration into the second half.
Rajeev Goel: Yes. And maybe I can just add Jason, a little bit of context on the headcount investments. They’re really focused on where the market, the industry is growing the fastest. And based on all of the product innovation work that we’ve been doing over the last couple of years, we see tremendous upside opportunity. So, for instance, last year we had two big product launches with Activate for SPO and Convert for commerce media. And so there’s a lot of work to be done to now that we’ve validated those products. We’ve gotten great feedback from customers. Obviously, you saw, Klarna and Instacart as two examples on the convert front, SPO at 50% multitude of signed Activate deals now. So what’s happening is as we engage more with customers, they’re coming up with additional product requirements that they’d like to see.
And so we’re investing behind that opportunity, and then we are also investing in the sales team to go out and create more opportunities and convert those opportunities into closed deals. So we view it as all both growth – both revenue as well as profit accretive over the medium to long term.
Steve Pantelick: And one thing I’d just like to add to Rajeev’s comments, and because I think it’s important for the group to understand, we’ve had some major new customers announce in the last couple of months, Instacart, Klarna, et cetera. And the reason why we’re so positive about these is that it helps, it identifies a clear path to do what we’ve done in the past, and that’s land and expand, bring these customers in, and then sell them the portfolio of opportunities products that we have. And the reason why that’s important from a financial perspective is that all of these products are on top of our unified platform. And so these kinds of deals help us get more utilization of our platform and ultimately will help us expand our margin.
For example, in the case of Instacart, we earn a data fee as well as our core SSP fee with GroupM, we anticipate continued acceleration of SPO spend, which is further driving utilization. So overall, the journey that we’re on is to bring on customers that where we can really land and then upsell the portfolio of offerings that we have.
Stacie Clements: Great. Thanks, Steve. Our next question comes from Mauricio Munoz of Raymond James. Mauricio, are you there?
Mauricio Munoz: Yes. Can you hear me okay?
Operator: Yes, we can.
Steve Pantelick: Yes, we can.
Mauricio Munoz: All right. Thank you for taking my question. Yes, I just want to go back and to the SPO results and objectives. Rajiv, you spoke about this on your prepared remarks, but maybe if you could please expand on the drivers of the 1Q upside. I’m particularly interested in contributions and traction from activate this quarter. And then maybe while we are at it, you could speak about the competitive dynamics. We’re seeing some DSPs commenting on some traction, trying to cross these SSP, DSP demarcation line. So if you could provide some color on that, that would be helpful? And then I have a follow up.
Rajeev Goel: Okay, great. Thanks, Mauricio. So let me try to get to all of that. If I leave out any part of your question, please remind me, and I’m happy to add to it. So I think the first thing, just from a context perspective is that from what we see in engaging with publishers and buyers, the importance of deep technology on the sell side of the ecosystem is going up at a pretty dramatic rate, and there’s a couple of drivers of that. One is certainly what’s happening with privacy regulations, cookie deprecation timeline, obviously with chrome, that’s just the latest, but we’ve seen similar moves by other browsers or other operating systems. And so data on the sell side of the ecosystem is now being more and more limited in terms of the ability to transmit it to the buy side of the ecosystem, and so that’s one driver.
You have a lot of new media coming on board, high value media, in CTV, in commerce media, where buyers want to have a more efficient way to transact when these CPMs can be $10, $20, $30, $40, $50 as opposed to $1 and $2 display ad impressions. And then the third is that buyers are increasingly asserting themselves in terms of controlling how ad budgets are spent. And that can be for reasons of differentiation, for performance. They don’t want a monopoly player in the industry to control both the sell side and the buy side of the ecosystem. So all of these things are driving up the importance of technology on the sell side and that’s exactly one of the primary opportunities we’re going after with supply path optimization and Activate. And then to your Activate question, Mauricio, so what we are seeing there is that buyers and sellers alike, they want a more efficient way to transact.
And the historical paradigm of DSP and SSP has a lot of great benefits to it, but there is a lot of operational overhead to that. And data being transmitted from the sell side to buy side is also a challenge. And so with Activate, what we are doing is introducing. We’ve introduced a single layer of tech that connects the seller and buyer primarily around the fixed price deals that are transacted in insertion orders for CTV and online video. And so that is resonating quite a bit with buyers as I mentioned earlier. They see the efficiency gains. They trust us. They see the operational overhead gains in simplifying the tech stack. And so we are gaining share as a result. Now, Activate is a different kind of sale for us in that. It does require a lot of onboarding and training of buyer – media buying teams.
So these are the hands on the keyboard. And so that is a process and education effort. And so we’re learning things about the speed with which we can do that, different tactics to accelerate that. And so we’re applying more energy there to speed up that process. And then, Mauricio, the third part of your question, I think, was around DSP competitive dynamics, is that right?
Mauricio Munoz: Yes, yes. We’ve seen some DSP also talking about gaining some traction on crossing over to.
Rajeev Goel: Yes.
Mauricio Munoz: Yes. And we’ve seen that mainly. Well, okay, I’ll give you the floor. Yes.
Rajeev Goel: Yes, yes, absolutely. So I absolutely understand that. And I think the significant advantage that we have is that we’ve been building publisher relationships now for 17 years. So if we get one buyer to leverage our platform, they can access all of the media, all of the inventory, all of the audiences that we’ve been building over 17 years. I think when you approach this problem from the buy side of the ecosystem, you have many buyers maybe using a particular buy side platform, but the breadth of publisher inventory is quite limited, right. And so that DSP or buyer interface, they have maybe been working on plugging in inventory for the last six months, 12 months, 18 months. And so the scope of inventory, the scope of audiences, particularly when you think about a variety of ad formats, a variety of geographies that can be very limited.
And so what we’re seeing that resonates very strongly with buyers is we can go in and say, hey, all of the types of media that you might want to buy all over the world, we have that available inside of PubMatic and inside of Activate, and that’s available today. And so I think that’s a very compelling value proposition.
Mauricio Munoz: That’s very helpful. And if I can squeeze in one more, it looks like you’re on full steam to expand from your historical focus on the top five, six agency holdcos. And this is related to SPO as well, perhaps into other smaller independent agencies as well as directly with brands. I think you articulated the sort of investment required to do that, mainly in the form of headcount additions. But how should we think about the margin profile from revenue contributions from those somewhat smaller agencies and brands as you bring that cohort into the SPO fold?
Rajeev Goel: Yes. Steve, do you want to take that?
Steve Pantelick: Yes. Happy to. So from our perspective, we already get a significant amount of leverage just given sort of the centralized nature of our GTM organization. We have a few people, covering relatively large swaths of customers. And so we’re going to apply the same model. We’re not going after every SPO opportunity. We have our ideal client profile and we’re focused on that. So, we’re feeling pretty confident in terms of getting the leverage and the appropriate economics from the go to market side. Now, from an overall cost of serving and, dropping it to the bottom line, all of these opportunities ultimately help us fill more of the impressions that we process. And because we’ve already incurred the cost to process, last count, 650 billion impressions, on a daily basis, the upside is fairly significant if we can increase that fill rate.
And so we see this as a very positive direction for us because ultimately they were not having to incremental processing costs. We’re just monetizing more of what we already process and we’re doing that, in every major region. So we’re feeling very good about the strategy. We’re early days in the execution. And as Rajeev has commented on previously, we anticipate upside to about 75% of activity through SPO relationships. And you can see, coming through the financials, how that does benefit us not just from a profitability perspective, but also from a stickiness perspective. I shared this data about 125% net spend retention. That’s incredibly powerful just in terms of revenue visibility and, stickiness and scale over time.
