PubMatic, Inc.
Q4 2020 Earnings Call Transcript

Published: 23 Feb 2021

[Operator:]

Hello everyone and welcome to PubMatic's Fourth Quarter 2020 Earnings Call. My name is Kara and I will be your operator today. Before I hand the call over to PubMatic team, I'd like to go over a few housekeeping notes. As a reminder, the webinar is being recorded. We'll host a short Q&A after the prepared remarks. We don't get to your question during today's call, please feel free to send your questions into PubMatic's Investor Relations team at investorspubmatic.com. You have any technical issues, please reach out to [e-mail]. We'll do our best to assist you.

[Dylan Solomon:]

Thank you, operator and good afternoon, everyone. Thank you for joining us on PubMatic's fourth quarter and full year 2020 earnings call. Today's prepared remarks have been prerecorded. A live Q&A session will follow. Please note that today's call is being webcast on the Investor Relations section of the company's website. A replay of the webcast will also be available following today's call. Joining me on the call today are Rajeev Goel, Co-Founder and CEO and Steve Pantelick, CFO. Before we start, I would like to remind participants that during this call, management will make forward-looking statements, including without limitation statements regarding our future performance, growth strategy and our guidance for the first quarter and full year of 2021. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and future conditions. These forward looking statements are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict. You can find more information about these risks, uncertainties and other factors in our perspectives filed with the Securities and Exchange Commission on December 9th, 2020. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. All information discussed today is as of February 23rd, 2021, and we did not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future developments or otherwise, as accept may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures. These non-GAAP measures are presented for supplemental informational purposes only, and should not be considered a substitute for financial information present in, in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our press release filed earlier today at our Investor Presentation, both of which are posted at investors.pubmatic.com. I'll now turn the call over to Rajeev. Rajeev?

[Rajeev Goel:]

Thank you for joining us today. I'm honored to welcome you to our first earnings call as a public company. Before we begin, I want to thank all of those who have supported us over the last 14 years. We have been fortunate to grow with a wonderful team of colleagues, customers, partners, and investors who have helped contribute to our success. We're excited to welcome a new group of shareholders as we embark on PubMatic's next phase of growth.

[Steve Pantelick:]

Thank you, Rajeev and welcome everyone. I am Steve Pantelick, PubMatic CFO. As our first earnings call as a public company, I'm very pleased to discuss our outstanding results for the fourth quarter. We achieved record revenues with growth of 64% year-over-year, net income of $18.8 million and adjusted EBITDA of $26.9 million. With these results, we entered 2021 with solid momentum across our global business and are actively participated in a large and growing market. As an omnichannel global company, we are well-positioned to grow across platforms and formats with existing and new customers and in every major ad market in the world, apart from China. We also anticipate continued expansion of our supply path optimization deals that will drive our growth. Before I jump into the quarterly financials, I would like to briefly recap the five key financial drivers that we believe will lead to the long-term success of our business. First, we have one of the few scale global businesses in our highly fragmented industry. Our specialized cloud infrastructure and local go-to-market presence is geographically distributed in all the major ad markets. This allows us to continue expanding across the world with existing and new customers, both effectively and efficiently. Second, the combination of our usage based model and our ability to retain and grow revenue from existing customers provides a high degree of revenue stickiness and corresponding visibility. Third, we have high gross margins. Our long-term efforts of driving CapEx efficiency, coupled with our workflow automation to manage our growing customer base has led to an average gross margin in excess of 70% over the last nine years. Fourth, our business model is highly efficient. Our model is built on long-term durable structural advantages, emanating from our owned and operated infrastructure and offshore R&D that enables us to consistently invest in technological innovation. And lastly, we generate consistent cash flow through our efficient use of capital expenditures and rigorous working capital management. As a result, 2020 was our seventh consecutive year of positive net cash from operating activities. Now into the quarter. In the fourth quarter, we generated revenue of $56.2 million or growth of 64% year-over-year. Our top line growth was driven by several factors, strength across a number of advertising verticals, notably e-commerce technology and personal finance; a longer 2020 holiday season as compared to 2019; and to a lesser extent incremental ad spend related to the U.S. presidential election. We also achieved an important milestone in Q4 as the sum of mobile, video and OTT/CTV revenues represented roughly 65% of our total revenue. A key factor was the growth of our omnichannel video revenues, the combination of short form video and OTT/CTV that grew over 100% year-over-year. Now turning to the full year. Revenue grew 31%, despite the strong headwinds experienced across the ad industry in the first half of 2020. There are a couple of key call outs regarding our 2020 revenue growth, mobile and video grew strongly throughout the year with market acceleration in the second half; desktop display started to recover in the second half following pandemic related challenges earlier in the year. With the combined effect of mobile and video plus desktop display recovery, year-over-year total revenue grew 50% in the second half of 2020. An important contributed to these results was our existing customer growth. For the full year 2020, we achieved strong net dollar based retention of 122%. We also added a significant number of new publishers despite the ongoing pandemic. Overall, we added 368 new publishers and app developers for a total of 1,208 customers at the end of 2020. Revenue growth from existing and new publishers also contributed to reduce revenue concentration of our largest single customer Verizon Media Group, which accounted for about 20% of revenue 2020 versus 28% of 2019. It should be noted that while Verizon Media Group revenues were impacted by the COVID-19 pandemic articularly it's desktop display business, we saw a solid recovery in Q4. Another important growth driver for us in 2020 has been our supply path optimization deals with advertisers and agencies. We have seen these relationships serve as a catalyst for buyers to consolidate ad dollars onto our platform. And the final point on 2020 revenue growth. In order to take advantage of our significant opportunities throughout the year, we increased platform capacity. In total, we increased the number of impressions we processed by 69% from 27.8 trillion in 2019 to 46.9 trillion in 2020. Turning to our gross margins. In Q4, we were able to significantly expand our margins 80% compared to 73% in the prior year. Our full year gross margin also expanded to 72% compared to 68% for 2019. As I mentioned earlier, our strong gross margins are a direct result of owning and constantly optimizing our infrastructure. Because we focus on platform optimization, cost management, and targeted capacity expansion, we're able to achieve significant operating leverage. Illustrating this point, we successfully reduced our GAAP cost of revenue per million impressions process by 32% year-over-year. Once we have implemented our planned capacity expansion at a point in time, we achieve leverage because our platform costs are largely fixed in the near term, typically a quarter. When we exceed our revenue targets, as we get to Q4 2020, we achieve high flow through to profit. With respect to our Q4 operating expenses. The combination of increased headcount for growth and incremental stock-based compensation resulted in operating expenses of $22.6 million or 18% year-over-year. For 2021, we plan to continue to invest in team members and related investments to drive growth. We will also incur incremental public company costs. Overall, we expect our operating expenses on an absolute dollar basis to increase over the course of 2021. GAAP net income in the fourth quarter was $18.8 million, up 356% year-over-year. It was 33% of revenue substantially higher than the prior year net margin of 12%. Full year net income was $26.6 million, which grew by 301% over 2019. Q4 diluted EPS was $0.34 compared to prior year $0.06 and 2024 year EPS was $0.46 compared to $0.04 for 2019. Adjusted EBITDA in Q4 was $26.9 million or 48% of revenue compared to 27% of revenue in the prior year. This impressive profit result was primarily due to the high flow through from strong revenue ahead of plan and the cost leverage we achieved on our platform. For the full year, adjusted EBITDA was $50.3 million or 34% of revenue, a substantial increase over 2019's margin of 20%. To summarize, our breakout profitability was a result of several key drivers. Acceleration of mobile and omnichannel video driven by the increase in open internet activity globally, strong spending in key verticals like e-commerce and incremental ad spending related to the U.S. presidential election in Q4, increased buyer activity due to the supply path optimization agreement signed in 2019 and 2020, and our target investments in people and platform capacity. I also want to call out that our profit growth is a reflection of our long-term focus on growing both our top line and bottom line. This focus has helped us deliver our eighth consecutive year of adjusted EBITDA profitability as of 2020. Turning to cash flow. We generated net cash from operating activities of $24.3 million for the full year 2020. We believe that this cash generating ability positions us well to take advantage of the long-term trends in digital advertising and capture incremental growth and market share through targeted investments in people, platform capabilities and capacity. For example, we accelerated capacity investments in 2020 to support our growth in 2021 and beyond. We ended 2020 with cash, cash equivalents and marketable securities of $101 million. Now onto our 2021 guidance. The unprecedented conditions surrounding the pandemic makes assessing market conditions unusually difficult, particularly for the second half of 2021. Accordingly, we are providing estimates for Q1 and the full year based on several underlying assumptions that I will summarize. In terms of our revenues, broadly speaking, we see multiple growth drivers be 2021. Coming into the year, we clearly had solid momentum from strengthen in mobile and omnichannel video, expanding SPO relationships and favorable trends driving e-commerce. Further to this point, according to a recent eMarketer study, global retail e-commerce sales are projected to grow by almost 50% from 2020 to 2024. In this regard, our business is well-suited to take advantage of the e-commerce opportunity. We have top publishers with high quality ad inventory and audiences that e-commerce advertisers to reach. In Q1, we are seeing solid momentum, but there is uncertainty around the timing and size of impact from Apple's elimination of IDFA. For Q2, we anticipate in above average fable year-over-year comparison, as we will be lapping the early stages of the pandemic when advertising spending was significantly impacted last year. Moving into the second half of the year. Due to the combination of uncertainty around macroeconomic conditions, the pandemic, and lapping a very strong growth in the second half of 2020, we think it is appropriate to be conservative in terms of second half year year-over-year guidance. Despite potential countervailing factors that may reduce our growth rates in 2021, such as the elimination of Apple's IDFA and uncertain pandemic status, overall, we remain confident that we could achieve full year revenue growth of 20%-plus. Now, in terms of specifics. For Q1 2021, we expect revenue between $38 million and $40 million, a range of 34% to 41% year-over-year growth. Adjusted EBITDA between $8 million and $9 million or 21% to 23% EBITDA margin. For the full year 2021, we expect revenue between $180 million and $185 million or range of 21% to 24% year-over-year. Adjusted EBITDA between $45 million and $49 million or 25% to 27% margin. It should be noted in 2021 we are incurring public company costs of approximately $7 million. Full year capital expenditures are expected to be $18 million to $22 million. And depending on growth opportunities, we may accelerate the phasing of our planned CapEx to earlier this year. Overall, we expect to increase the total number of impressions process in 2021 by over 40%. In closing, we are very pleased with our progress in 2020, but we are even more excited about the opportunities ahead of us in 2021. Our track record of driving profitable revenue growth and cash flows allows us to continue innovating and delivery for our customers and shareholders. We believe we have the right platform and the right approach to be at the forefront of our industry. With that, I'll turn the call over to our operator to open it up for questions. Operator?

[Operator:]

We'll be doing a live Q&A with Steve and Rajeev. Your first question comes from the line of Brent.

[Brent Thill:]

Good afternoon. Thank you for taking the question. I guess, Steve, just as it relates to the guide, low twenties off of a bit, the numbers that you just posted, I think many are trying to understand and reconcile what -- why you would see such a major slowdown. Other companies in the industry like Snap today said that they would grow 50% for the next several years. There's been some very bullish backdrop of ad spend. If you could just maybe discuss your expectations? And then I had a quick follow-up question for Rajeev.

[Steve Pantelick:]

Sure. Well, good to speak with you, Brent. So, the big picture is we really aren't seeing the material slowdown. We are, obviously, coming off a very strong 2020, and we're continuing to guide to 20%-plus growth in 2021 and that is our long-term growth target. And the reality is, we do have a strong second half of 2020, which was 50% growth year-over-year. So the comps are going to be tough, but there is no material slowdown from our perspective. We're feeling very good about the growth drivers, that we have. Both Rajeev and I commented, we have mobile growing, omnichannel, video growing very nicely and we are seeing recovery in our desktop display business. And having said all that, there is a fair degree of uncertainty in the broader macro environment. So, we're being appropriately conservative. And as we go through the year at each of these calls, we'll update the analyst community and the investing public.

[Brent Thill:]

Okay. Thanks, Steve. And Rajeev, just on connected TV. Can you just update us on the progress and how you see that progressing through 2021?

[Rajeev Goel:]

Yeah. Absolutely. Hey Brent. Good to reconnect. So, look, I'm really excited by our growth in OTT and CTV. It's one of several high growth drivers in our business. Our CTV strategy really is consistent with how we've approached and scaled other ad formats, such as mobile app or digital video, just to focus on aligning the needs of buyers for transparency and increased ROI from their ad spend with the needs of publishers for increased revenue. Today the vast majority of OTT/CTV transactions are via non-programmatic insertion orders, which is a very manual approach. And we're really focused on where do we think the market is heading, which is programmatic monetization with header bidding, using automation and data for better outcomes. So, we started building product for this in 2019. We shipped it in mid 2020 in beta. Now we made our product generally available in Q4 of last year, that scaling very nicely to over 60 publishers with rapidly growing volume and continuous innovation. And as I mentioned earlier, our omnichannel video revenue, which is a combination of both OTT/CTV, as well as short form video grew by over 100% year-over-year. So, bottom line is we're really pleased with the progress there and we think it's adding another growth driver to our business alongside mobile app, alongside video and alongside SPO.

[Brent Thill:]

Great. Thank you.

[Rajeev Goel:]

Thanks, Brent.

[Operator:]

And your next question comes from Andrew.

[Unidentified Analyst:]

Hi, guys. Thanks for taking the question. I'm assuming you can hear me, right?

[Rajeev Goel:]

We can, yes.

[Unidentified Analyst:]

Just checking. Yeah. Thank you. So, SPO, I think accounted for 20% plus of the platform. Can you talk a little bit about the drivers of SPO adoption and just more recent trends you're seeing there? And then secondly, just following up on kind of the CTV commentary, can you talk about what needs to happen for the product to move more broadly, just from an advertiser as well as a publisher perspective? Like, what needs to happen for CTV header bidding to become more widely available and more commonplace?

[Rajeev Goel:]

Sure. Yeah. Let me start, Andrew, with SPO and then we'll move to the CTV question. So, look, buyers are continuing to consolidate their ad spend onto PubMatic resulting in market share gains for us. And I think we're a leader in executing SPO deals because of the efficiency of our infrastructure, our omnichannel and global scale and our focus on transparency. We invested significantly in 2020 and continue to invest in 2021 in building out our sales and account management team. That's covering agencies and advertisers who are executing supply path optimization deals. So, we feel very good about our competitive offering and resulting win rate. And so some of the drivers, as to why buyers are moving in this direction, it really starts with buyers wanting to get their arms around their digital and media supply chain. So transparency, they want to know where their ads are showing up. They want to know what kinds of audiences they're buying, what kinds of data they're buying against. They want to know what fees look like in the supply chain. They want to be more efficient. Obviously coming out of the pandemic, everybody has had to relook at how to make their businesses more efficient. And so that means they want to work with fewer larger platforms that can meet their needs around the world and can meet their needs across a variety of different ad formats. And then the third thing that they're really looking for is a high quality inventory, right? So they want to make sure that they're buying humans and not bots. And we put all of that together for these buyers. And I think we do it in a way where we are really focused on innovation on behalf of the buyer so that the buyer gets more ROI from their ad budget. And when we do that and do that well, of course, it means more revenue for our publishers. And so that's really, what's driving our market share gains with SPO. Now, turning to your second question around CTV, we think in terms of what are the drivers there. In every ad format we've seen that header bidding does take some time to take over the majority or the vast majority of how impressions are transacted in a particular market. And that has to do with technology transition, but also people in process transition, how buyers are used to buying and how publishers are used to selling. So a good example of this where we're seeing great traction, which makes us very excited. We published a case study a week or two ago with a top 10 agency in the U.S. who had started buying CTV inventory via our header bidding solution. So, they were able to increase the impressions that they purchased by more than 14X while maintaining flat to slightly lower CPMs, which results in significantly higher ROI for these -- for their advertisers. And so, we're replicating that with a number of different buyers. We need to evangelize that and with that kind of data and that kind of capability will drive more buyers to buying via header bidding. And at the same time, we need to continue to deploy our technology on the publisher side. I'm super excited about the fact that we ramped already to 60 publishers -- over 60 publishers in just two quarters. So I think, we're very well-positioned to continue to drive the growth. And this approach can be a little bit slower than replicating what others are doing. But we think it's important as a long-term innovator that we focus on where the market is going to be as we drive growth for ourselves.

[Unidentified Analyst:]

Great. Thank you.

[Rajeev Goel:]

Thank you.

[Operator:]

And your next question comes from Justin Patterson.

[Justin Patterson:]

Thank you very much. I'm glad. I hope everyone's healthy and well right now. Two, if I can. First, you clearly had a lot of new impressions come on the platform in 2020 and added capacity around that. But given the momentum in the business and the growth of channels like CTV, are you thinking of additional investment in capacity and platform optimization? So, I'll start with that and then I'll have one quick follow-up.

[Steve Pantelick:]

Sure. So good to reconnect, Justin. So, from our perspective, one of the key ingredients of our ability to be profitable over the long run is to make targeted capacity investments when we see the opportunity. And certainly that was the case in 2020, when we increase our impressions by nearly 70%. And we've approached the opportunity by ensuring that whenever we do bring on new impressions, we have the competence, so we can monetize those very cost effectively. So, as we look at 2021, we continue to see significant opportunities across multiple growth factors. Of course, we've talked about mobile and omnichannel video, the ramping up of CTV and, of course, the desktop display recovery. And so when I look at 2021, fully expect to continue to invest for capacity expansion in the range of about $18 million to $22 million in total across all capital expenditure categories. And we believe that this will allow us to grow very nicely this year and beyond. And then, we always take the opportunity if there's a chance to accelerate investment as we did in 2020. We'll do that in 2021 as well.

[Justin Patterson:]

Got it. Thanks Steve. And then for Rajeev, I appreciate your comments around privacy during the prepared remarks. Would love to hear how you're just thinking through the puts and takes around industry spend on targeting and pricing as we have IDFA come into place. And then the growth of these third-party identifiers, the alternatives to the cookies emerge. There's some cases out there where it's considered a threat, and other cases it sounds like this could actually be inflationary to the open web. So, curious to hear how you think through the puts and takes.

[Rajeev Goel:]

Yeah. Absolutely. And obviously it is an area of high degree of change. So, look, we think the identity transition that's underway is a tremendous opportunity for the open internet to grow its share of the ad market relative to the walled gardens. Advertisers are seeking a combination of brand safe content with known consumer identity, and that has previously not existed at scale. And by moving away from anonymous tracking, like third-party cookies or IDFA to known identity, the open internet is building a better solution. And we're really excited about the opportunity for that and also our position within that. And so, we're investing heavily behind this opportunity and have created multiple solutions. So if I can, I'll just spend a minute on those solutions. So, first, as an infrastructure provider to the ecosystem, we've partnered with many of the leading identity solution providers, Trade Desk and Unified ID 2.0, LiveRamp, Criteo, many others. And what we've done is we've created a software layer for publishers that allows them to seamlessly integrate and manage all of these identity solutions, so that no matter which solution an advertiser is working with, the publisher can access the advertiser's budgets. And that's a unique solution. And we're seeing a high degree of uptake from our publishers, and this really lays the groundwork for a transition from anonymous identity to known identity. And then second, both publishers and advertisers may have valuable first party data on their users. And so, we built a solution that's being used by both segments of the market, publishers and advertisers to package up these users into private marketplace deals and make them targetable by advertisers. And so, this is an opportunity really to target audiences when they're not logged in. So, ultimately, we think the ROI benefits from the conversion from anonymous to known identity will lead to increase ad spend and increase utilization of our infrastructure, benefiting both our customers and us. And I think key to why we're excited about this -- the potential here in the transition is that again, we're omnichannel, so we're not overly exposed to any single ad format or device, and we have a wide variety of different ad formats on our platform, which means advertisers and agencies are leveraging our platform for both brand spend as well as performance advertising spent.

[Justin Patterson:]

Great. Thank you both.

[Rajeev Goel:]

Thank you.

[Operator:]

Your next question is from Brian Schwartz.

[Steve Pantelick:]

Hey, Brian, we can hear you now.

[Aaron Kessler:]

It’s Aaron Kessler.

[Brian Schwartz:]

You hear me okay now?

[Steve Pantelick:]

Yeah. Okay. We got you Brian. And then we'll come to you Aaron right after.

[Aaron Kessler:]

Okay.

[Brian Schwartz:]

So wrap that up. Thanks, Aaron for waiting there. Steve, just wanted to ask you two real quick one follow-up on the guidance, some of the puts in between that. With the top line, what are you assuming in terms of a recovery from those distress industry customers? Are you baking in any type of recovery from those publishers and travel or those distressed areas of the economy in your 2021 guidance?

[Steve Pantelick:]

Sure. I'll take that first one. And then, obviously, any follow-ups you have on the guidance. We do see some recovery later in the year. We've already seen recovery on desktop display, which was hit pretty hard in Q2 of 2020. We saw a robust recovery in the Q4 timeframe. We see that continuing in the first quarter. And I think that's largely a perspective of -- some of these hard hit industries are starting to recover and plan for the future. So, we do think that there's going to be recovery, not as robust as, let's say, the e-commerce and personal finance, technology areas. But by the end of the year, those will start to emerge as important advertisers. And broadly speaking, given that we're an omnichannel company, we really can address all the particular advertising needs across the globe. And so, we have a portfolio of business and that's why it gives us the competence of being able to exceed our long-term growth targets of 20%-plus this year.

[Brian Schwartz:]

Thanks, Steve. And the one follow-up was just on the margin guidance. It looks like you're investing more here, which is great. We're always happy to see that. But you talked a little bit about I think the COGS line and the CapEx expenses. Can you talk a little bit on where you're investing in terms of your growth investments in 2021? You're guiding to down margins here versus 2020. So, clearly, you're investing back into the business. Can you maybe just shed a little light on where those spending is going? Thanks.

[Steve Pantelick:]

Sure. Well, I'll start out with the gross margin. I am fairly confident that we'll be continued on the track that we've had for many years of being around 70% gross margin business. And there's always going to be some puts and takes in particular quarter, because of timing of investment. So very competent on being able to achieve that and maintain that going into the future. Now where we're investing aggressively is around growth, particularly in engineering. And we're going to be hiring new engineers predominantly the -- out of our company in India, that does all of our offshore development. The second area is sales and marketing growth around the globe to drive our new initiatives around identity, as well as around our audience offerings and, of course, continued growth of mobile and omnichannel video. So, overall, our investments are towards growth and in people, and then to a lesser extent capacity. And the bottom line is, I'm feeling very confident that our long-term target EBITDA margin of 13% -- 30% is going to be achievable this year and beyond.

[Rajeev Goel:]

And if I could just briefly add to that, Brian, a little bit more color there. I think we anticipate that obviously there's been a huge shift in the size of the internet opportunity and how consumers are leveraging the internet, right? They have more time. They're spending more of that time online, and they're doing new things on the internet that they didn't before. Whether it's online banking or purchasing cars, ordering food, work-from-home, school-from-home, all of these types of activities and a significant portion of that we think will stick in the future. And so, we really see a lot of runway, a lot of long-term opportunity ahead of us. And so, to Steve's point, we are investing not only for 2021, but really to take advantage of the shifts in consumer behavior and really drive market share expansion for us over the coming years.

[Steve Pantelick:]

And if I could just add one comment, Brian. As a public company, we are incurring incremental costs here of about $7 million. So that obviously flows through OpEx and, of course, stock-based comp is an incremental add on to our cost structure this year. But, of course, will be normalized 2022 and beyond.

[Brian Schwartz:]

Thank you very much.

[Steve Pantelick:]

Thanks, Brian.

[Aaron Kessler:]

Can you guys hear me?

[Rajeev Goel:]

Yes, we can.

[Steve Pantelick:]

Yes.

[Aaron Kessler:]

That was easy. A couple of questions. Good quarter guys. First on the Q4 upside, just any more additional color you can provide. Do you see any kind of budget flushes? I think you mentioned e-commerce was very strong. Any other verticals you would call and also maybe around DR versus brand? And then maybe for Rajeev, just circling back to CTV quickly. It seems a bit of a debate, just kind of header bidding versus private marketplace as longer term. Is there a difference of views for the kind of -- how advertisers are thinking about this versus the publisher community? Thanks.

[Steve Pantelick:]

Hello, Aaron. Good to connect again. So, with respect to fourth quarter, I mean, we really did have an outstanding fourth quarter and it was a function of a variety of factors. The mobile and omnichannel video business continued to perform very well. As I mentioned, my prepared comments, over the course of the second half of 2020, that business -- part of our business accelerated to over 100%. And that's a big part of our success in the fourth quarter. And underneath that, of course, e-commerce is a very important ad vertical, as well as technology, personal finance business, advertising. And so we felt it was very broad brush and it wasn't a function of just one particular area growing nicely. And the other component is that, we saw desktop display recovery. And that's a very important sign for me, because it shows that as a global economy, we're starting to figure out how to operate successfully in the COVID world. And so, I expect many of those trends to continue into this year and beyond. And the one incremental piece that obviously won't be repeated, I'm sure to everybody's pleasure is, the U.S. presidential election. So there was a nice incremental spend related to that, which we are on track to find replacement for that this year.

[Rajeev Goel:]

Great. And on the CTV question, so, I mean, we participate in both private marketplace transactions as well as -- of course, as we talked about driving the transformation with header bidding. What we see is that advertisers prefer the transparency and efficiency that header bidding brings that allows them to spend more because they get higher ROI and that ultimately leads to higher publisher revenue. Now, what can happen in the short term? And again, we've seen this play out in mobile app and short form digital video and display as well, is that publishers, they set their goals to have sales forces, and those goals are often on an annual basis. And so a publisher goes out into the market and they've got a goal to drive a certain amount of P&P transactions. And that's what they're looking to do. But at the same time, advertisers are shifting how it is that they're buying in order to get more transparency, more efficiency and higher ROI. So, those two things will meet in the middle. And so we have every confidence that the market is going to move into a more efficient and header bidding driven, more automated approach that obviously makes a lot of sense. And so, we'll work actively with both the publishers and buyers to see that transition play through.

[Aaron Kessler:]

Got it. Thank you.

[Operator:]

That concludes the Q&A portion of today's call. I'll now turn the call back over to Rajeev for any closing remarks.

[Rajeev Goel:]

Great. Well, thank you everybody for joining us here on our first earnings call today. We're extremely excited with our performance and momentum going into 2021. And I'm grateful for the hard work and dedication of the entire PubMatic team. As we highlighted, we have multiple growth drivers we're executing against, as we expand our market share, and our infrastructure driven approach drives better outcomes for our customers and increase revenue and profit for us. We look forward to seeing you at our upcoming investor events. Have a great day.