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Item 1. Business

2021-02-25 compared with 2020-02-27 · 272 added, 247 removed, 88 unchanged (86% of the section changed)

Overview and History

The Rubicon Project, Inc., or Rubicon Project (the "Company"), was formed on April 20, 2007 in Delaware and began operations in April 2007.

The Company is headquartered in Los Angeles, California.

We provide a technology solution to automate the purchase and sale of digital advertising inventory for buyers and sellers.

Our platform features applications and services for digital advertising inventory sellers, including websites, mobile applications and other digital media properties, and their representatives, to sell their digital advertising inventory;

Magnite, Inc., formerly known as The Rubicon Project, Inc.

("we," or "us"), provides technology solutions to automate the purchase and sale of digital advertising inventory.

On April 1, 2020, we completed a stock-for-stock merger with Telaria, Inc , a leading provider of connected television ("CTV") technology, creating what we believe is the world's largest independent sell-side advertising platform, offering a single partner for transacting globally across all channels, formats, and auction types.

On February 4, 2021, we entered into a Stock Purchase Agreement (the "SpotX Purchase Agreement") with RTL US Holding, Inc.

("RTL") to acquire 100% of the issued and outstanding shares of capital stock of SpotX, Inc., a Delaware corporation, for a purchase price equal to $560 million in cash plus 14 million shares of the Company’s common stock.

SpotX is one of the leading platforms shaping CTV and video advertising globally.

We believe the acquisition will create the largest independent CTV advertising platform in the programmatic marketplace, making it easier for buyers to reach CTV audiences at scale from industry-leading streaming content providers, broadcasters, platforms and device manufacturers.

The SpotX Acquisition is subject to receipt of regulatory approvals and satisfaction of customary closing conditions and is expected to close in the second quarter of 2021.

Our platform features applications and services for sellers of digital advertising inventory, or publishers, that own and operate CTV channels, applications, websites and other digital media properties, to manage and monetize their inventory;

applications and services for buyers, including advertisers, agencies, agency trading desks, and demand side platforms, ("DSPs"), to buy digital advertising inventory;

and a marketplace over which such transactions are executed.

We power a comprehensive, transparent, independent advertising marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution for the digital advertising inventory managed on our platform.

Our clients include many of the world’s leading publishers of websites and mobile applications and buyers of digital advertising inventory.

We believe our platform reaches approximately one billion users globally.

Advertising inventory takes different forms, referred to as advertising units, including display, audio and video;

is purchased and sold through real-time bidding which includes (i) direct sale of premium inventory, which we refer to as private marketplace ("PMP"), and (ii) open auction bidding, which we refer to as open marketplace, ("OMP");

and is accessed by users through different channels, including mobile web, mobile application, desktop, and connected television (“CTV”) as well as across various out-of-home channels, such as digital billboards.

Sellers of digital advertising inventory monetize their inventory by using our platform to access a global market of buyers representing top advertiser brands.

We also help sellers decrease costs and protect their brands and user experience.

At the same time, buyers leverage our platform to manage their advertising spending and reach their target audiences, simplify order management and campaign tracking, obtain actionable insights into audiences for their advertising, and access impression-level purchasing from thousands of sellers.

and a transparent, independent marketplace that brings buyers and sellers together and facilitates intelligent decision making and automated transaction execution at scale.

Our clients include many of the world’s leading buyers and sellers of digital advertising inventory.

Our platform processes over 6 trillion ad requests per month allowing buyers access to a global, scaled, independent alternative to "walled gardens," who both own and sell inventory and maintain control on the demand side.

We provide a full suite of tools for sellers to control their advertising business and protect the consumer viewing experience.

These controls are particularly important to CTV sellers who need to ensure a TV-like viewing and advertising experience for consumers.

Buyers leverage our platform to manage their advertising spending and reach their target audiences on brand-safe premium inventory, simplify order management and campaign tracking, obtain actionable insights into audiences for their advertising, and access impression-level purchasing from thousands of sellers.

We believe that our scale, platform features, and omni-channel offering makes us an essential partner for buyers.

The Company is headquartered in Los Angeles, California with a presence in New York, New York.

We operate our business on a worldwide basis, with an established operating presence in North America, Australia and Europe, and a developing presence in Asia and South America.

subsidiaries and operations perform primarily sales, marketing, and service functions.

COVID-19 Pandemic Impact on the Business

The COVID-19 pandemic and resulting global disruptions negatively affected our revenue, results of operations, cash flows, and financial condition.

Our business depends on the overall demand for advertising and on the economic health of our current and prospective sellers and buyers.

In response to the pandemic and associated economic challenges, a significant number of advertisers, in particular with respect to certain categories of advertising that were particularly impacted by the pandemic and resulting stay-at-home orders, reduced their advertising budgets, resulting in an overall decrease in advertising spend through our platform compared to our pre-COVID expectations.

This decrease was particularly pronounced through the first half of the year, where we experienced a significant decline in our revenues compared to our expectations.

Our revenue trends improved significantly during the third and fourth quarters of 2020 as our revenue returned to positive growth.

In addition to the United States, we have personnel and operations in the United Kingdom, Canada, France, Australia, New Zealand, Germany, Italy, Japan, Singapore, and Brazil, and each of these countries has been affected by the pandemic and taken measures to try to contain it.

Our global workforce maintained a work from home policy for the entirety of the second quarter through year-end 2020 and this policy is expected to continue in the foreseeable future for the majority of our employees.

We believe that our employees have been able to work productively during the time period in which our global offices have been shut down.

However, to the extent we have extended work from home requirements, or that work patterns are permanently altered, it is unclear how productivity may be impacted in the long-term.

We intend to approach returning to our

offices with caution and to prioritize the safety and health of our employees, while following the guidance set by local authorities and our landlords.

The economic health of our current and prospective buyers also impacts the collectability of our accounts receivable.

Although our liquidity has not been significantly affected by the effects of COVID-19 to date, any downturn in economic conditions in the future may severely impact our liquidity as we may need additional time to collect from buyers, which may impact our ability to pay sellers.

Due to the substantial uncertainties associated with the COVID-19 pandemic, the extent to which the pandemic (and actions taken in response to it by governments, businesses, and individuals) will ultimately impact our business is currently unknown, and depends on various factors, many of which are outside of our control.

Refer to Item 1A.

"Risk Factors" for additional information related to this risk.

Industry Trends

Continued Shift Toward Digital Advertising

Consumers are rapidly shifting their viewing habits towards digital mediums and expect to be able to consume content seamlessly across multiple devices, including computers, tablets, smartphones, and CTVs whenever and wherever they want.

Several factors, including the availability of high-speed broadband and mobile network infrastructure, penetration of internet-connected devices, a proliferation of online content sellers and a behavioral shift towards online and on demand viewing are driving robust growth in digital content consumption.

The shift to digital has created opportunities for buyers and sellers of advertising inventory to improve return on advertising investment by using data to more accurately target and measure campaigns.

As digital content consumption continues to proliferate, we believe the percentage of advertising dollars spent through digital channels will continue to grow.

Automation of Buying and Selling

Due to the size and complexity of the advertising ecosystem and purchasing process, manual processes cannot effectively manage digital advertising inventory at scale.

In addition, both buyers and sellers are demanding more transparency, better controls and more relevant insights from their advertising inventory purchases and sales.

This has created a need for software solutions, known as programmatic advertising, that automate the process for planning, buying, selling and measuring digital advertising across screens.

Programmatic buying enables the use of real-time bidding technology that allows for the dynamic purchase and sale of advertising inventory on an impression-by-impression basis, which includes direct sale of premium inventory to a buyer, which we refer to as private marketplace ("PMP"), and open auction bidding, where buyers bid against each other in real-time auction for the right to purchase a publisher's inventory, which we refer to as open marketplace ("OMP").

Programmatic transactions complement a publisher’s direct sales force by enabling them to automate their sales process and improve workflow capabilities to increase productivity.

These transactions also create additional revenue opportunities by enabling buyers and sellers to directly communicate and share data to deliver more valuable targeted advertising.

Programmatic has become the dominant method of transacting for desktop and mobile inventory and we expect it to continue to grow as a percentage of CTV advertising.

Convergence of TV and Digital

We expect CTV to be a significant driver of our revenue growth.

CTV refers to the viewing of digital content on internet connected televisions, including through stand-alone streaming devices, gaming consoles and smart TV operating systems.

CTV viewership is growing rapidly and the pace of adoption is accelerating the transition of linear television to CTV programming.

According to a November 2020 poll conducted by the Interactive Advertising Bureau, approximately 60% of US advertisers planned to shift ad dollars from linear TV to either CTV or OTT in 2021.

eMarketer forecasted that advertisers will spent an additional $1.16 billion on programmatic CTV video ads in 2020 compared with 2019, and incremental spending in 2021 will increase to $2.37 billion.

The adoption of CTV has disrupted the traditional linear TV distribution model, as eMarketer estimates that approximately 31.2 million U.S.

households have "cut-the-cord" (i.e., canceled a pay TV service and continued without it) as of the end of 2020, and this number is expected to increase to close to 50% of all U.S.

households by the end of 2024.

This disruption has created new options for consumers and new economic opportunities for content sellers to compete with traditional linear TV.

Despite the growth in CTV viewership, the CTV advertising market, in particular programmatic advertising, is still in its early stages.

Historically, the largest streaming applications have been subscription-based, and CTV sellers with ad-supported models have been slower to adopt programmatic solutions compared to desktop and mobile sellers due to a variety of technical and business reasons.

As the number of CTV channels continues to proliferate, we believe that ad-supported models or hybrid models that rely on a combination of subscription fees and advertising revenue will continue to gain traction.

Furthermore, as the CTV

market continues to mature, we believe that a greater percentage of CTV advertising inventory will be sold programmatically, similar to trends that occurred in desktop and mobile.

Although the COVID-19 pandemic caused temporary headwinds related to demand challenges, we believe that the pandemic and resulting shelter-in-place orders have accelerated these positive long-term CTV trends.

With people spending more time at home, we have seen a large increase in viewership on CTV.

This increase in viewership has the potential to create long-term changes in viewing habits.

Many CTV providers have committed to significant increases in investment in quality content, which we believe will further drive increases in viewership.

At the same time, macroeconomic challenges are driving consumers away from pay subscriptions towards ad supported models.

Prolonged macroeconomic challenges may lead CTV advertisers and sellers to more readily embrace programmatic advertising as they look to create economic efficiencies and reduce costs.

We believe that as streaming continues to become mainstream and ad supported models become more prevalent, brand advertisers that look to engage with streaming viewers will continue to shift their budgets from linear to CTV.

As such, we expect CTV to be a significant driver of our revenue growth for the foreseeable future.

We expect the pending acquisition of SpotX to further fuel this growth.

Identity Solutions

A number of participants in the advertising technology ecosystem have taken or are expected to take action to eliminate or restrict the use of third-party cookies and other primary identifiers that have historically been used to deliver targeted advertisements.

For instance, Google has announced plans to fully eliminate the use of third-party cookies by January 2022, while Apple has further restricted the use of mobile identifiers on its devices.

We believe that the elimination of third-party cookies has the potential to shift the programmatic ecosystem from an identity model powered by buyers that are able to aggregate and target audiences through cookies to one enabled by sellers that have direct relationships with consumers and are therefore better positioned to obtain user data and consent for implementing first party identifiers.

We believe that our platform and scale position us well to provide the infrastructure and tools needed for a publisher-centric identity model to succeed, and we are already enabling sellers to create audience segments with their first-party data.

In addition to actively working with sellers to develop solutions that could leverage their first party data, we are leading efforts through Prebid.org, with industry support, to create standardized open identity solutions that ensure a smooth transition to a cookieless environment, and offer an alternative to proprietary solutions.

Prebid.org is an independent organization that we co-founded, which is dedicated to promoting fair, transparent open source solutions for the programmatic ecosystem.

We are also participating in the Wc3 Web standards initiatives, which are being led by Google Chrome, to create anonymized advertising segments.

We have contributed several product and design ideas to this process and expects to start production prototypes in the first half of 2021.

Finally, we are also actively supporting single sign-on initiatives such as Universal ID 2.0 (UID) and other industry efforts.

We support industry privacy initiatives and believe that the next generation of identity solutions need to be open and ubiquitous, with consumer privacy, transparency and control at the core.

We further believe that these solutions will ultimately lead to greater trust and consumer confidence in digital advertising, which will be positive for the advertising ecosystem in the long term.

In the short term, however, these changes could create some variability in our revenue across certain buyers or sellers, depending on the timing of changes and developed solutions.

Supply Path Optimization

Supply Path Optimization ("SPO") refers to efforts by buyers to consolidate the number of vendors with which they work to find the most effective and cost-efficient paths to procure media.

SPO is important to buyers because it can increase the proportion of their advertising ultimately spent on working media, with the goal of increasing return on their advertising spending, and can help them gain efficiencies by reducing the number of vendors with which they work in a complex ecosystem.

We believe we are well positioned to benefit from SPO in the long run as a result of our transparency, our broad and unique inventory supply across all channels and formats, including CTV, buyer tools, such as traffic shaping that reduce the cost of working with us, and our brand safety measures.

Header Bidding and Data Processing

Header bidding is a programmatic technique by which sellers offer inventory to multiple ad exchanges and supply side platforms, such as our platform, simultaneously.

Header bidding has been rapidly adopted in recent years in the desktop and mobile channels, and while the rise and rapid adoption of header bidding increased revenue for sellers, it has also created new challenges and technical complexities.

Header bidding has led to a significant increase in the number of ad impressions to be processed and analyzed through our platform as well as by DSPs, which can lead to increased costs if not properly addressed.

We have invested in technology solutions to help manage the increased infrastructure costs of header-bidding while increasing our access to valuable seller inventory.

How We Generate Revenue

We generate revenue from the use of our platform for the purchase and sale of digital advertising inventory.

We also generate revenue from the fee we charge clients for use of our Demand Manager product, which generally is a percentage of the client's advertising spending on any advertising marketplace.

Digital advertising inventory is created when consumers access sellers' content.

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We also refer to revenue divided by advertising spend as our take rate.

Historically, our business primarily focused on supporting desktop display advertising.

In 2013 and 2014, due in part to the rapid adoption and growth in smartphone use, we increased our focus on supporting advertising across mobile platforms, including mobile web and mobile applications.

In 2016, we began to focus further on development of our video solution, helping grow our product footprint to allow our sellers to sell video advertising inventory across desktop or mobile platforms, and include instream, outstream and mobile-specific formats such as interstitials.

In 2016 we also introduced our header bidding solution.

Header bidding is a programmatic technique where publishers offer inventory to multiple ad exchanges, such as Rubicon Project, at the same time.

While the rise of header bidding increased revenue for sellers, it also created new challenges.

Managing multiple exchanges on the page is technically complex, and in the early days of header bidding, this complexity was exacerbated by the lack of independent technology standards.

In 2017, we began to address these issues through our support of Prebid, a free and open source suite of software products designed by advertising community developers to enable publishers to implement header bidding on their websites and from within their apps.

Despite Prebid’s adoption by a number of the world’s largest sellers, deploying and customizing it still requires dedicated technical resources.

In the second quarter of 2019, we announced the beta program for Demand Manager.

Demand Manager helps sellers effectively monetize their advertising inventory through configuration tools and analytics to make it easier to deploy, configure, and optimize Prebid-based header bidding solutions.

In October 2019, we acquired RTK.io, a provider of header bidding solutions that

has much in common with our Demand Manager product, including a foundation in Prebid.

RTK’s technology and team enables Rubicon Project to extend the strategy we introduced with the launch of Demand Manager.

We plan to integrate the two solutions to extend our Demand Manager product portfolio and client base, and to add talented header bidding experts and Prebid developers to our team.

We believe that adoption of these tools will further strengthen our relationship with sellers and contribute to our future revenue growth.

We charge sellers a fee for Demand Manager that is based on all of the sellers’ advertising spending managed through Demand Manager, whether the actual inventory monetization runs through our exchange or otherwise.

Header bidding has dramatically increased the volume of bid requests sent to buyers, increasing buyers’ processing costs and making it more difficult for them to find the impressions they want.

To help address this challenge, in 2017, we acquired nToggle, Inc.

("nToggle"), a provider of technology to make it easier and more cost effective for programmatic buyers to find the inventory they are looking for among the billions of bid requests they receive each day.

nToggle technology utilizes analytical and data science techniques to help shape real-time bidding requests, optimize traffic, and reduce the number of duplicates and irrelevant bid requests DSPs must process.

The technology also helps us manage our infrastructure costs and increase our aggregate ingestion capacity by filtering out impressions that are not in demand before they are processed through the bid stream.

In 2019, we incorporated this technology into our software, which provides additional efficiencies in managing auction volumes.

The technology also allows us to optimize traffic toward DSPs and buyers based on their unique, historical buying behaviors, leading to an overall expansion of relevant bid requests to DSPs unable or unwilling to process the full stream of real-time bidding requests available from our platform.

In 2018, we made first-price our default auction dynamic for header bidding due to increased competition inherent in header bidding, which led other exchanges to submit bids on a first-price basis, rendering our second-price auction methodology less competitive.

This allowed us to improve the rate at which we win header-bidding auctions.

To support buyers that needed some time to adapt their systems and bidding strategies to first-price auction dynamics, or may not want to make those adaptations themselves, we developed our Estimated Market Rate (“EMR”) feature.

This feature uses algorithms that monitor existing market conditions against our dataset of auction outcomes to look for opportunities to reduce the amount of the bid that we pass through to the downstream auction on behalf of our winning bidder, while maintaining high fill rates.

This is intended to help buyers avoid overpaying for impressions while providing sellers with more stable, predictable demand.

While most exchanges had already transitioned to first price auction dynamics, the largest exchange—Google Ad Manager—only transitioned to first price auction dynamics in September 2019.

On December 19, 2019, we announced a stock-for-stock merger (“Merger”) with Telaria, Inc., (“Telaria”), which will create a combined company offering a single partner for transacting CTV, desktop display, video, audio, and mobile inventory across all geographies and auction types.

We believe the combination of Rubicon Project’s programmatic scale and expertise with Telaria’s leadership in CTV technology and premium partnerships, will create the world’s largest independent sell-side advertising platform with scale, capabilities, and solutions exceeding those offered by competitors.

Together, the combined company will enable thousands of publishers to connect with hundreds of buyers and brands, creating a global, independent alternative to closed players.

The combination will provide additional engineering and sales resources as well as deeper financial assets to seize the opportunity of CTV, the fastest-growing digital medium.

We believe the combined company will be an essential omni-channel partner for buyers to reach target audiences, optimizing the supply path with industry-leading transparency, robust support for identity solutions and brand-safe premium inventory.

In addition, Rubicon Project and Telaria have complimentary domestic and international footprints that will create a combined broader global reach.

Upon completion of the Merger, which is expected to close in early April 2020, each share of Telaria common stock issued and outstanding as of the effective time of the Merger will be converted into the right to receive 1.082 shares of Rubicon Project common stock.

Based on the number of shares of Telaria and Rubicon Project common stock outstanding and reserved for issuance as of February 11, 2020, we estimate that former holders of Telaria common stock will own approximately 47.6% and pre-merger holders of Rubicon Project common stock will own approximately 52.4% of the common stock of the combined company on a fully diluted basis.

We operate our business on a worldwide basis, with an established operating presence in North America and Europe and a developing presence in Asia, Australia, and South America.

Substantially all of our assets are U.S.

subsidiaries and operations perform primarily sales, marketing, and service functions.

Our Industry and Industry Trends

Continued Shift Toward Digital Advertising

The programmatic digital advertising market continues to experience growth.

In October 2019, MAGNA estimated that the global programmatic market (excluding search and social) will grow from $44 billion in 2019 to $75 billion by 2023, which represents a 14% compound annual growth rate over that period.

The expansion of the growth is continuously driven by the market

need for automated buying and selling of advertising inventory, through various channels and across all formats.

The increased delivery of content to users digitally over the Internet or through applications, as opposed to analog and print media, such as newspapers, magazines, broadcast radio, and television, has created an opportunity for buyers of advertising inventory to improve return on advertising investment by targeting audiences more accurately using data-driven strategies and delivering more relevant advertising in real time on multiple screens.

Buyers are able to utilize various technologies to analyze data relating to return on investment, demographics, user behavior, location, and other attributes that enable them to create and deliver targeted advertisements to users, which helps achieve specific advertising goals.

Technological advances have also enabled sellers to sell their inventory on an impression-by-impression basis, as well as in bulk, making it easier for sellers to enhance the monetization of their inventory.

Therefore, advertising is continuing to shift with content to digital media.

Continued Shift to Mobile

An ongoing trend in the digital advertising industry is automating inventory transactions through new and developing channels, including mobile, which has market growth rates exceeding those of the desktop channel.

According to MAGNA estimates, mobile advertising is a $26 billion global market in 2019 that is expected to increase to $56 billion by 2023, producing a compound annual growth rate of 22%.

Consistent with industry trends, our mobile business is growing faster than desktop.

Our mobile revenue increased $22.5 million , or 34% , for the year ended December 31, 2019, compared to the year ended December 31, 2018, while our desktop revenue increased 16% during the same period.

Our mobile business consists of two components, mobile web and mobile applications.

Initially our mobile business was built upon mobile web, which is more similar to our desktop business, but our mobile application business has become the growth driver behind our mobile business and has shown growth rates in excess of industry projections.

Revenue from mobile applications is approximately half of our mobile business.

In recent years, we have seen an industry-wide slowdown in the growth rate for traditional desktop advertising, and the growth rate for this portion of the market is expected to flatten in future years.

According to MAGNA, programmatic desktop advertising is expected to grow at a 1% compound annual growth rate over the 2019-2023 period.

This results from the market shift to mobile channels and other emerging formats noted above.

These market factors still present long-term growth opportunities as we pursue spend consolidation on our platform;

however, in the near term, these trends are dampening our overall growth rate, because desktop advertising continues to be a meaningful part of our core business.

Continued Shift to Video, Including CTV

Another important trend in the digital advertising industry is automating inventory transactions across all formats.

We enable an omni-channel approach to expand beyond traditional display advertising and have observed growth trends in emerging formats like video and audio.

According to MAGNA estimates, video advertising was $25 billion in 2019 and is projected to increase to $57 billion in 2023, with a compound annual growth rate of 22%.

We expect video to be a meaningful driver of our future growth with a longer-term opportunity in connected television, or CTV, advertising as more linear TV budgets shift to programmatic.

We expect the pending merger with Telaria will help us access these budgets.

Supply Path Optimization

Supply Path Optimization ("SPO") refers to efforts by buyers to consolidate the number of vendors they work with to find the most effective and cost-efficient paths to procure media.

This practice emerged in 2018 and continues to gain momentum.

Largely because of header bidding, buyers are able to choose the best partner (or a small number of partners) without limiting the available inventory to bid on.

There are a number of criteria that buyers use to evaluate supply partners, including transparency, cost, quality of inventory, privacy standards, brand safety standards, including compliance with ads.txt and similar industry standards, and fraudulent traffic prevention policies.

We believe we are well positioned to benefit from supply path optimization in the long run as a result of our broad inventory supply, buyer tools such as traffic shaping, our pricing tools, which reduce the overall cost of working with us, our transparency, and our brand safety measures.

Complicated and Manual Workflow for Direct Buying and Selling of Digital Advertising Inventory

Due to the size and complexity of the advertising ecosystem and purchasing process, manual processes cannot effectively manage digital advertising inventory at scale.

In addition, both buyers and sellers are demanding more transparency, better controls and more relevant insights from their advertising inventory purchases and sales.

Buyers and sellers benefit from a platform that enables them to leverage the targeting capabilities of their proprietary data assets.

This has created a need to automate the digital advertising industry and to simplify the process of buying and selling advertising inventory.

A variety of factors makes the digital advertising ecosystem highly complex and challenging to automate, including the perishable nature of the inventory, impression-level user matching, brand safety and inventory concerns, concerns about maintaining a positive user experience, large volumes of

data, lack of standardization in the industry, and increasing privacy demands.

We believe we are well-positioned to help our buyers and sellers address these challenges.

Rubicon Project:

Competitive Strengths of Our Platform in the Digital Advertising Marketplace

Rubicon Project was founded to address the inherent challenges associated with the digital advertising ecosystem.

Buyers can direct their spending towards the impressions that are of most value to them based on demographics, pricing, timing, and other targeting objectives.

Sellers can improve revenue per impression, while adhering to their own specific rules around advertising that is permissible on their websites and mobile applications.

Serving a Broad Universe of Buyers and Sellers Across a Full Spectrum of Inventory Types, Advertising Units, and Channels Creates Network Effects

By accommodating a full spectrum of digital advertising inventory through various transaction types across multiple channels, our solution brings value to both buyers and sellers.

Our sellers gain instant access to the world’s largest automated digital advertising buyers, including hundreds of DSPs with the flexibility to sell their advertising inventory in an automated fashion on an impression-by-impression basis, such as with OMP transactions, in bulk, or in PMP transactions pursuant to arrangements directly between the seller and the buyer.

Our buyers gain the ability to fulfill their audience needs in a cost-effective manner.

Large numbers of diverse sellers on our platform attract more buyers and vice versa, resulting in a self-reinforcing network effect that adds value for all our clients and creates a strong platform for growth.

Private Marketplace Solutions Provide Unique Access to Quality Supply and Facilitate Transactions

A significant portion of premium inventory is purchased and sold through PMPs.

Competitive Strengths of Our Platform.

Key competitive strengths of our platform include:

Leadership in CTV

Our platform has been strategically built to meet the unique requirements of CTV sellers.

Many of these sellers have their roots in linear television and it is important that established business practices in television advertising can be translated to programmatic CTV advertising.

For instance, our "ad-pod" feature provides long-form content sellers with a tool analogous to commercial breaks in traditional linear television, so that they can request and manage several ads at once from different demand sources, in a single ad-pod.

In addition, we provide dynamic ad insertion to serve live streaming events, audio normalization tools to control for the volume of an ad relative to content, frequency capping to avoid exposing viewers to repetitive ad placements, and creative review so that a publisher can review and approve the ad units being served to its properties.

We have invested significant time and resources cultivating relationships with CTV sellers and have built a specialized team of CTV experts across our engineering and sales functions to support our clients and evangelize the benefits of CTV advertising.

In addition, for certain larger CTV sellers, we may build custom features or functionality to help drive deeper adoption.

Scaled Omni-Channel Platform

We offer a scaled omni-channel platform that brings value to both buyers and sellers of ad inventory.

For buyers, we offer a single omni-channel partner to reach target audiences globally across all channels, including CTV, mobile, desktop, and digital out-of-home, and formats, including video, display, and audio.

For sellers, we partner as a one stop shop where they can sell digital advertising across all of their properties, regardless of device or format, and gain instant access to the world’s largest automated digital advertising buyers with the flexibility to sell their advertising inventory in an automated fashion on an impression-by-impression basis.

We believe large numbers of diverse sellers on our platform attract more buyers and vice versa, resulting in a self-reinforcing network effect that adds value for all our clients and creates a stickier platform solution.

Private Marketplace Solutions

A significant portion of premium inventory is purchased and sold through PMPs, in particular with respect to CTV.

Some sellers will continue to rely on their own sales forces for sales of premium inventory, but will benefit from automation to better price, match, and place campaigns, and to automate manual operations such as ad trafficking, quality assurance, and billing and collections.

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Big Data Analytics and Machine-Learning Algorithms;

A core aspect of our value proposition is our big data and machine-learning/artificial intelligence platform that is able to discover unique insights from our massive data repositories containing proprietary information on ad requests, bid requests, bid responses, and served advertisements.

Our systems collect and analyze variable pieces of information such as pricing of advertisements, historical clearing prices, bid responses, what types of ads are allowed on a particular website, which sellers’ websites a buyer prefers, what ad formats are available to be served, advertisement size and location, user location, which users a buyer wants to target, how many ads the user has seen, browser or device information, and sellers’ proprietary data about users.

Our access to data puts us in a unique position to develop differentiated insights to help both buyers and sellers, and we have developed proprietary machine-learning algorithms that analyze trillions of these data points to enable our solution to make data-driven decisions in real time and to process high volumes of bid requests and responses.

Bid Filtering

A core aspect of our value proposition is our big data and machine-learning platform that is able to discover unique insights from our massive data repositories.

Our systems collect and analyze a myriad of information such as historical clearing prices, bid responses, buyer preferences, ad formats , user location, buyer audience preferences, how many ads the user has

seen, browser or device information, and sellers’ first party data about users.

Our access to data puts us in a unique position to develop differentiated insights to help both buyers and sellers.

Our solution is constantly self-improving as we process more volume and accumulate more data, which in turn helps make our machine-learning algorithms more intelligent and contributes to higher-quality matching between buyers and sellers.

This traffic optimization toward our DSP partners and buyers coupled with more aggressive filtering of non-monetizable traffic improves return on investment for buyers and increases revenue for sellers, which in turn attracts more buyers and sellers to our platform.

We believe this self-reinforcing dynamic contributes to the dual network effects described above, creating a strong platform for growth.

Header Bidding Solutions

While there are still some proprietary solutions with declining usage, there are three primary header bidding solutions with broad-based adoption—one provided by Prebid.org, which we co-founded, one provided by Amazon (called Amazon A9) and one provided by Google (called Google EB), and we are integrated with all three.

We believe the various header bidding alternatives we offer, our buyer reach and scale, our buying efficiency, and our machine learning capabilities put us in a strong position to compete for seller impressions, and we expect each of these header bidding solutions to deliver a meaningful volume of impressions.

We have also launched Demand Manager, a software solution that helps publishers manage all of their advertising inventory, regardless of exchange, for a fee based on a percentage of that advertising spending.

Demand Manager provides an intuitive user interface with a set of tools that manages Prebid open source software.

It helps publishers to better monetize their advertising inventory through configuration tools and analytics to make improvements in their yield, more efficiently than they do using their own engineering resources or tools or other third-party solutions.

This data also fuels our bid filtering technology, allowing us to more aggressively block traffic that is not likely to monetize.

We believe that our traffic optimization coupled with bid filtering improves return on investment for buyers and increases revenue for sellers, which in turn attracts more buyers and sellers to our platform creating a dual network effect that makes our platform stickier.

These capabilities also help us manage the costs associated with the high volumes of ad requests we receive.

Identity Solutions

We offer identity solutions that help buyers and sellers create better matches and increase advertising ROI and the value of the underlying impression.

Our tools enable sellers to create audience segments based on first-party data, which makes their advertising inventory more valuable to buyers looking to achieve specific campaign goals.

In addition, our technology is integrated with a number of third party data, attribution and identity vendors, allowing buyers and sellers to leverage these solutions directly through our platform without the need for multiple vendor contracts.

Header Bidding and Demand Manager Solutions

We are integrated with all of the major header-bidding standards, including Prebid.org, which we co-founded, as well as the solutions offered by Google and Amazon.

We believe the various header bidding alternatives we offer, our buyer reach and scale, our buying efficiency, and our machine-learning capabilities put us in a strong position to compete for seller impressions monetized through header-bidding solutions, and we expect these header bidding solutions to deliver a meaningful volume of impressions.

We have also launched Demand Manager, a software solution that helps desktop and mobile sellers manage all of their header-bidding advertising inventory, regardless of who wins the impression, for a fee based on a percentage of that advertising spending.

We believe that adoption and proliferation of these tools will further strengthen our relationship with sellers and contribute to our future revenue growth.

Transparency and Controls

We generate revenue each time an impression is monetized on our platform based on a simple and transparent fee structure established with our publisher partners, and do not collect any fees directly from buyers.

Our clients direct the sale and management of ad inventory through our platform, including the ability to define supply hierarchies and demand tiers, set minimum price floors, and establish advertiser and category level blocked and allowed lists.

We provide sellers with detailed analytics, which allows them to effectively monitor buying patterns and make real-time changes to take advantage of market dynamics and maximize their yield.

Self-Service Model

We offer a self-service model that lets sellers access our platform without extensive involvement by our personnel.

This model allows us to scale efficiently and grow our business at a faster pace than the growth of our sales and support organization.

As a result, we are able to achieve a high degree of operating leverage, which positions our business for growing profitability.

We have a suite of buyer tools designed to improve ROI for buyers and help them meet their campaign strategies.

Our Direct Connect offering allows agency holding companies and major brands to create their own private label marketplaces and establish direct connections with sellers through our platform, while our custom auction packages provide buyers with a versatile and cost effective way of curating and targeting open market inventory based on categories such as audience, context, and viewability.

In addition, our innovative bid shading technology, Estimated Market Rate, helps buyers bid more effectively in a first price auction environment.

We are fully aligned with the interests of our publisher clients.

Unlike some large industry participants, we do not have our own media properties that compete for advertising spending with our sellers.

Our independence means we have none of the inherent conflicts of interests characterizing competing exchanges that sell their own inventory, giving our clients an important alternative to monetize and acquire inventory without subsidizing their competitors.

Therefore, we are agnostic and have no preference towards delivering demand to any specific publisher.

In addition, because we do not offer a demand side platform, we are able to avoid inherent conflicts of interest that exist when serving both the buy- and sell-side.

Growth Strategies.

Two powerful market trends are affecting our business.

First, our exchange volume historically consisted largely of OMP transactions conducted through an ad server waterfall for desktop display advertising, but this business is being displaced by other ad units, channels, and transaction types.

Second, the ad tech market is demanding more efficiency and lower cost from intermediaries like us, and we believe market share will consolidate.

Our strategy for growth in this context is to operate a high-volume, low cost per transaction exchange, and focus on high-growth ad units, channels and transaction types.

Increase volumes and efficiencies and reduce transaction costs on our exchange.

We aim to increase our transaction volumes and to enhance the operational efficiency and value to clients of our exchange, enabling buyers and sellers to achieve their campaign and monetization objectives efficiently and to streamline the number of exchanges with which they work.

While we were able to increase take rates slightly during the first half of 2018, our take rate growth in 2019 remained relatively flat since the fourth quarter of 2018, and we do not expect significant further increases in take rates, so any increase in revenue will have to come from volume increases rather than take rate increases.

While we work to increase the volume of transactions on our exchange and compete more effectively, we must operate efficiently to relieve the pressure on our margins and cash resources that has resulted from our fee reductions and increased infrastructure required to support the increased volume of bid requests generated through header bidding and the increased volume of transactions that our growth plans require.

We believe that increasing our revenue through transaction volume while still offering competitive fees to our buyers and sellers, paired with cost reduction measures we undertook in 2018 and ongoing cost discipline, will establish us as a lower cost exchange.

Increasing Inventory Supply.

Increased transaction volume begins with ad requests from sellers, which represent the inventory available for buyers to purchase on our platform.

Our plan for increasing our inventory volumes includes active pursuit of more direct relationships with sellers, particularly of mobile, video, and PMP impressions, which are areas of industry growth, and expanding seller tools, including through Demand Manager.

In particular, benefits from successful outcomes in the SPO process could drive meaningful increases of ad spend across our platform.

Because our business has many fixed costs, increases in ad spend volume create opportunity to disproportionately improve net income.

Bid Filtering.

We continue to improve our fill rate by using the technology we acquired from nToggle to filter out low-quality impressions so that a higher proportion of the ad requests on our platform are of interest to our buyers, and to analyze market dynamics to optimize impressions toward our buyers, enabling them to identify and purchase the impressions they want more efficiently.

In addition, we expect the nToggle filtering technology, which we have incorporated into our platform, to help us and our buyers control the processing costs associated with higher volumes of ad requests and bid requests.

Platform Enhancements.

We are working on a number of platform innovations and enhancements designed to improve the value to clients and the operational efficiency of our platform.

For example, new technology and techniques will improve upon our market-leading position in inventory and ad quality, responding to market demands for increased brand security and protection against fraud.

Cookieless targeting, including device-based user identifiers, will improve audience identification and match rates.

Audience-based selling and enhanced measurement and viewability technologies will improve inventory values for sellers and campaign effectiveness for buyers.

Impression filtering and virtual machine support will improve the efficiency and effective capacity of our data processing infrastructure.

Our business historically consisted largely of OMP transactions conducted through an ad server waterfall for desktop display advertising, which has declined significantly.

In order for us to grow and compete effectively, we must continue to focus on areas of the digital advertising business that are experiencing growth and to adapt to evolution in the business, including mobile, video (both traditional web-based video and connected television), identity solutions, and header bidding.

The key elements to our long-term growth strategy include:

We expect CTV to be the biggest driver of our growth.

As streaming video continues to become mainstream and ad-supported models become more prevalent, we believe brand advertisers will continue to shift their budgets from linear

television to CTV.

We plan to invest significant resources in technology, sales and support related to our CTV growth initiatives.

Consistent with this growth objective, on February 4, 2021, we entered into an agreement to acquire SpotX, a leading platform shaping CTV and video advertising globally.

We expect the pending SpotX Acquisition to accelerate our CTV growth.

Supply Path Optimization

As described above, SPO refers to efforts by buyers to consolidate the number of vendors with which they work to find the most effective and cost-efficient paths to procure media.

We believe we are well positioned to benefit from SPO due to the factors described above and that it presents an opportunity for us to capture market share and increase the volume of advertising spend on our platform.

To capitalize on SPO opportunities, we have invested in our buyer focused sales team to pursue more direct relationships with advertisers and agencies.

Identity Solutions

As described above, we believe that the elimination of third party cookies has the potential to shift the programmatic ecosystem from an identity model powered by buyers that are able to aggregate and target audiences through cookies to one enabled by sellers that have direct relationships with consumers and are therefore better positioned to obtain user data and consent for implementing first party identifiers.

As the largest independent supply side platform, we believe we are well positioned to take a leadership position in driving open identity solutions that will benefit buyers and sellers on our platform.

Increase Efficiencies on our Exchange

We aim to increase the operational efficiency of our platform, so as to enable buyers and sellers to achieve their campaign and monetization objectives in a cost-effective manner.

We are continuing to invest in traffic optimization and bid filtering technology to allow us to monetize a higher proportion of the ad requests on our platform, which reduces costs for us as well as the process costs for buyers.

We believe these cost savings make our platform more attractive to buyers, which in turn improves revenue opportunities for sellers.

Increasing Seller Inventory

In order to increase the transaction volume on our platform we are continuously looking to add new high quality sellers to our platform.

In addition, we are seeking to expand our existing relationships with sellers to increase our share of their inventory, in particular in the CTV and OTT space where inventory is controlled by fewer sellers.

Our plan for increasing our inventory volumes includes establishing and deepening our direct relationships with sellers, including through custom integrations, expanding our seller tools, capitalizing on our omni-channel capabilities and leveraging our header bidding integrations, including through Demand Manager.

Expand our International Footprint, Especially in Asia and South America

With established operating presence in North America, Australia and Europe, and a developing presence in Asia and South America, we serve buyers and sellers on a global basis.

We plan to continue to expand our international presence and make additional investments in sales, marketing and infrastructure to support our long-term growth and to position ourselves for expected increases in the penetration of programmatic advertising globally.

We expect programmatic advertising to grow at different rates in different geographic markets, and are constantly evaluating new markets with a strategy to use our existing infrastructure and adjacent sales offices or by expanding our infrastructure footprint and placing personnel directly in those markets.

Continue to Innovate and Enhance our Platform

We are working on a number of platform innovations and enhancements designed to improve the value to our clients.

We intend to invest in new features that facilitate the creation of first-party publisher segments, improve upon our traffic optimization and bid filtering, enhance our brand safety controls, and help sellers to optimize their yield.

For example, we recently launched the open beta of Unified Decisioning, which gives sellers the tools and controls to define when and how direct sold and programmatic demand should compete.

The solution works alongside all major ad servers so that the optimal ad set is chosen taking into consideration both direct and programmatic deal priority and yield while ensuring publisher’s business rules, including frequency capping and competitive separation, are enforced.

Technology and Development

To support our solution, we have developed a globally distributed infrastructure hosted at data centers in the U.S., Europe, and Asia that run our proprietary software;

we have also begun using cloud-based infrastructure, and we expect that to increase.

Our hardware and cloud-based services provide significant scale and are programmed for high-frequency, low-latency transactions.

Their massive scale support the volume, diversity, and complexity of buyers’ bids on sellers’ advertising inventory to increase market liquidity, and achieve improved auction pricing using our machine-learning algorithms.

This infrastructure is supported by a real-time data pipeline, a system that quickly moves volumes of data generated by our business into reporting and machine learning systems that allow usage both internally and by buyers and sellers.

We use matchmaking algorithms with both historical and real-time data to drive automated decision-making processes.

To support a majority of our non-CTV transactions, we have developed a globally distributed infrastructure hosted at data centers in the U.S., Europe, and Asia that run our proprietary software.

Our CTV transactions run primarily on a cloud-based infrastructure.

These two approaches optimize the type of traffic we handle - hosted data centers for high-frequency, low-

latency transactions and cloud-supported for lower frequency transactions subject to more volatile viewing patterns, for example CTV prime-time viewing spikes.

Our approach supports the volume, diversity, and complexity of buyers’ bidding patterns, which increases market liquidity.

Bid efficiency algorithms provide bid prediction (i.e., which buyers are most likely to bid on a given impression) and throttling (i.e., the volume of bid requests a given buyer can process), to improve infrastructure load and execute transactions efficiently by only sending bid requests to those buyers of advertising inventory who can handle the volume and are likely to respond.

Our core technology and development team is responsible for the design, development, operation, and maintenance of our platform.

Our technology and development process is based on agile development methodologies and emphasizes frequent, iterative, and incremental development cycles.

Within the technology and development team, we have several highly aligned, independent sub-teams that focus on particular features of our platform.

Each of these sub-teams includes engineers, quality assurance specialists, and product developers responsible for the initial and ongoing development of each sub-team’s feature.

In addition, the technology and development team includes our technical operations sub-team, which is responsible for the performance and capacity of our platform.

This infrastructure is supported by real-time data pipelines, a system that quickly moves volumes of data generated by our business into reporting and machine-learning systems that allow usage both internally and by buyers and sellers.

It also is supported by a 24-hour Network Operations Center, which provides failure protection by monitoring and rerouting traffic in the event of equipment failure or network performance issues between buyers and our marketplace, and our core technology and development team, which is responsible for the design, development, operation, and maintenance of our platform, and employs an agile development process that emphasizes frequent, iterative, and incremental development cycles.

We believe that continued investment in our platform, including its technologies and functionalities, is critical to our success and long-term growth.

Sales and Marketing

We market our solution to buyers and sellers through global direct sales teams that operate from various locations around the world.

We market our solution to buyers and sellers through a global sales teams that operate from various locations around the world.

These teams leverage market knowledge and expertise to demonstrate the benefits of advertising automation and our solution to buyers and sellers.

We deploy a professional services team with each seller integration to assist sellers in extracting value from our solution.

We deploy a professional services team with each seller integration to assist sellers in getting the most value from our solution.

Our client services teams work closely with clients to support campaigns.

Our buyer team focuses on the unique challenges and priorities of buyers and is separately managed in order to properly represent this important client group.

We are focused on managing our brand, increasing market awareness, and driving advertising spend to our platform.

To do so, we often present at industry conferences, create custom events, and invest in public relations.

Our marketing initiatives are focused on managing our brand, increasing market awareness, and driving advertising spend to our platform.

We often present at industry conferences, create custom events, and invest in public relations.

In addition, our marketing team advertises online, in print, and in other forms of media, creates case studies, sponsors research, writes whitepapers, publishes marketing collateral, generates blog posts, and undertakes client research studies.

Our industry is highly competitive.

Overall digital advertising spending is highly concentrated in a small number of very large companies that have their own inventory, including Google, Facebook, and Amazon, with which we compete for digital advertising inventory and demand.

Overall digital advertising spending is highly concentrated in a small number of very large companies that have their own inventory, including Google, Facebook, Comcast, Verizon, AT&T and Amazon, with which we compete for digital advertising inventory and demand.

These companies are formidable competitors due to their huge resources and direct user relationships, and will become even more dominant as third-party cookie use decreases.

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There has been rapid evolution and consolidation in the advertising technology industry, and we expect these trends to continue, thereby increasing the capabilities and competitive posture of larger companies, particularly those that are already dominant in various ways, and enabling new or stronger competitors to emerge.

There are many ways for buyers and sellers of digital advertising inventory to connect and transact, including directly and through many other exchanges, and advertising inventory buyers are increasingly demanding more transparency and lower transaction costs and establishing relationships directly with sellers of advertising inventory, which puts significant pressure on us.

Our offering must remain competitive in terms of scope, ease of use, scalability, speed, price, inventory quality, brand security, customer service, and other technological features that help sellers monetize their inventory and buyers increase the return on their advertising investment.

While our industry is evolving rapidly and becoming increasingly competitive, we believe that our solution enables us to compete favorably on the factors described above.

However, competitive differentiation is difficult to achieve, both in terms of capabilities and in terms of client perception.

We lack the scale of some of our competitors, which may have the ability to compete

effectively with us by offering broader capabilities or more aggressive pricing.

Other competitors with capabilities inferior to ours may nevertheless compete effectively with us if clients do not perceive, or value, what we believe to be our competitive advantages.

Overall, our revenue increased 25% from $124.7 million in 2018 to $156.4 million in 2019, which reflects both increased ad spend and higher overall take rates.

Our ad spend increased to $1,117 million in 2019, up from $992 million in 2018.

Our overall take rate in 2019 increased to 14.0%, compared to 12.6% in 2018.

Our 2019 take rate is higher due primarily to seller pricing improvements negotiated during the first half of 2018.

We believe this take rate puts us in a favorable competitive position in terms of pricing, but it is uncertain whether it represents a sustainable competitive advantage.

There are many ways for buyers and sellers of digital advertising inventory to connect and transact, including directly and through many other exchanges, and buyers are increasingly demanding more transparency and lower transaction costs and establishing relationships directly with sellers of advertising inventory, which puts significant pressure on us.

Our offering must remain competitive in scope, ease of use, scalability, speed, data access, price, inventory quality, brand security, customer service, identity protection and other technological features that help sellers monetize their inventory and buyers increase the return on their advertising investment.

While our industry is evolving rapidly and becoming increasingly competitive, we believe that our solution enables us to compete favorably on these factors.

In addition, we believe we enjoy a number of competitive strengths, as further detailed above.

Human Capital:

Our Team and Culture

Our team draws from a broad spectrum of experience, including data science, machine-learning algorithms, auctions, infrastructure, software development, and from experienced managers on the seller and buyer sides.

We focus heavily upon developing and maintaining a company culture that supports our goals.

We strive to make our company an exciting place to work, not just a “job.” We reward team and individual excellence and constantly strive to build a stronger, more innovative team and a consistent culture across all our locations.

Our team draws from a broad spectrum of experience, including data science, machine-learning algorithms, infrastructure, software development, and from experienced leadership on the seller and buyer sides, including CTV, mobile

In addition to the United States, we have personnel and operations in the United Kingdom, Canada, France, Australia, New Zealand, Germany, Italy, Japan, Singapore, and Brazil in order to service buyers and sellers on a global scale.

We strive to build a culture that is high-performing and results-oriented while emphasizing transparency, collaboration and innovation.

Our recruitment team seeks individuals that are committed to seeing the big picture and being catalysts of change.

We ask our employees to empower others, make a difference and ensure our company is an exciting place to work, not just a "job."

Diversity , Equity and Inclusion

Our Magnify Council is focused on enhancing diversity, equity and inclusion.

Our objectives, through the support of the Magnify Council, are to create "the best" employee experience, continually deploy programs to develop diverse talent, and support external partners that emphasize the global promotion of diversity, equity and inclusion.

Talent Retention

We reward team and individual excellence and are committed to creating an exceptional workplace environment in which we seek feedback from our employees in annual engagement surveys.

We believe in continual feedback on performance.

Our employees set goals at a regular cadence throughout the year and managers provide achievement ratings.

Additionally, we routinely analyze voluntary employee turnover to understand and address trends.

We give equity to our employees to promote alignment and ownership.

Employee Wellness and Safety

Due to the COVID-19 pandemic, our global workforce maintained a work from home policy for the entirety of the second, third, and fourth quarters of 2020 and is expected to continue in the foreseeable future for the majority of our employees.

We believe that our employees have been able to work productively during the time period in which our global offices have been shut down.

However, we recognize that stressful circumstances require us to provide additional care for our employees.

In 2020, we introduced quarterly mental health days, deployed a global employee assistance program, and a digital platform with access to live classes and discussions supporting wellness.

We are committed to promoting high standards of honest and ethical business conduct and compliance in alignment with our cultural values.

We do not tolerate harassment or discrimination.

Our employees are required to take annual harassment and discrimination training as well as acknowledge our Code of Business and Ethics Policy.

As of December 31, 2020, we had 569 full-time employees.

In addition to the United States, we have personnel and operations in England, Canada, France, Australia, Germany, Italy, Japan, Singapore, and Brazil.

Our Intellectual Property

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We generally enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with parties with whom we conduct business, in order to limit access to, and disclosure and use of, our proprietary information.

We also use measures designed to control access to our technology and proprietary information.

We also use measures

designed to control access to our technology and proprietary information.

We view our trade secrets and know-how as a significant component of our intellectual property assets, which we believe differentiate us from our competitors.

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Client Dynamics

While we serve many clients, certain buyers and sellers account for a large share of business transacted through our platform.

On the buy-side of our business, while demand for advertising inventory is diffuse, spending by advertisers on digital advertising inventory has historically been channeled through intermediaries, including principally advertising agencies and DSPs, both of which are important to us.

We have generated a majority of our revenue through OMP, and most OMP inventory purchases are executed by a relatively small number of DSPs that have the bidding technologies, data assets, and client bases necessary to enable them to execute OMP purchases at scale on behalf of their clients.

We have relationships with almost all of these major DSPs, but because there are relatively few of them, each of these relationships is important to us because it represents a source of demand that could be difficult for us to replace.

Similarly, the majority of supply to date on our PMP product has been by a relatively small number of sellers.

Creating new seller clients and expanding our business with existing seller clients is important to our growth, and the loss of any seller clients could adversely affect our PMP business.

In addition, because large agencies often spend through multiple DSPs, new or enhanced agency relationships can result in increased spending on our platform by multiple DSPs, while a decrease in business or a decline in our relationship with a single agency can result in reduced spending by multiple DSPs.

We are working to develop relationships directly with advertisers, to supplement their DSP and agency relationships and also to encourage them to influence their DSPs and agencies to route their spending through our platform.

We have increasingly been

receiving requests from buyers for discounts, rebates, or similar incentives in order to move more advertising spending to our platform.

On the sell-side of our business, while we work with many clients, a relatively small number of them provide a large share of the unique user audiences accessible by buyers.

In addition, most of the application providers that make inventory available through our platform utilize system development kits ("SDKs") and other proprietary technology of third parties, such as aggregators, and it is those third parties, not the application providers themselves, that contract with us to help monetize the inventory.

Sellers own or operate media properties, websites and applications through which advertisements can be delivered to consumers as they navigate across screens.

Sellers use our platform to monetize and manage their advertising inventory.

While we work with many clients, a relatively small number of them provide a large share of the unique user audiences accessible by buyers.

This is particularly true in CTV, where sellers tend to be larger and more sophisticated compared to other online sellers.

Given the limited number of CTV sellers, we are focused on building deeper, long-term strategic partnerships with these clients through a full-service business development strategy.

We have invested significant resources in identifying and cultivating these relationships and our sales executives and account managers often serve a consultative role within a client’s sales organization to help establish best practices and evangelize the benefits of programmatic CTV advertising.

This team is further supported by our product and engineering team with deep technical expertise, and for larger clients, we may build out custom features or functionality to help drive deeper adoption of our platform.

In the mobile channel, most of the application providers that make inventory available through our platform utilize system development kits ("SDKs") and other proprietary technology of third parties, such as aggregators, and it is those third parties, not the application providers themselves, that contract with us to help monetize the inventory.

Termination or diminution of our relationships with these third parties could result in a material reduction of the amount of mobile inventory available through our platform.

We encourage application developers to use our own SDK when appropriate, but it is difficult to displace existing SDKs.

Our contracts with buyers and sellers generally do not provide for any minimum volumes and may be terminated on relatively short notice.

Buyer and seller needs and plans can change quickly, and buyers and sellers are free to terminate their arrangements with us or direct their spending and inventory to competing sources of inventory and demand, quickly and without penalty.

Loss of a major buyer could result in a decrease of demand on our platform, and loss of a major seller could result in decrease of inventory available on our platform.

Despite such losses, there could still be adequate demand and inventory supply on our platform to sustain and grow our revenue, so it is not necessarily the case that loss of a buyer or seller equates to loss of revenue.

However, loss of unique inventory and loss of any demand could result directly in revenue loss.

In addition, just as growth in the inventory strengthens buyer activity in a network effect, loss of substantial inventory or demand could degrade our marketplace.

Loss of major DSP sources of demand could adversely affect bid density or pricing in our RTB auctions, and reduction in fees if we are not able to redirect inventory to other demand sources.

Loss of important unique inventory could reduce fees from demand that cannot be shifted to other sellers.

The number of large media buyers and sellers in the market is finite, and it could be difficult for us to replace the losses from any buyers or sellers whose relationships with us diminish or terminate.

Because of these factors, we seek to expand and diversify our client relationships.

In particular, as part of our strategy to increase the volume of advertising inventory on our exchange, we are continuing relationships with aggregators of inventory and with large sources of supply that have their own monetization capabilities but also allow third parties to connect to their exchanges and bid on their inventory.

These relationships represent additional risks in terms of inventory quality, transaction discrepancies, and collections, and may be less profitable because we may be required to compensate these partners or share the fees available for intermediaries in these transactions, and may incur higher serving costs relative to revenue.

On the buy-side of our business, while demand for advertising inventory is very distributed, spending by advertisers and agencies on digital advertising inventory has historically been channeled through technological intermediaries, principally DSPs.

These DSPs are directly connected to our technology through server-to-server integrations and are responsible for bidding on and purchasing advertising inventory on our platform pursuant to master service agreements.

We have relationships with almost all of these major DSPs, and because there are relatively few of them, each of these relationships is important to us and represents a source of demand that could be difficult for us to replace.

We maintain close relationships with DSPs to maximize the amount of spend being transacted through our platform.

For instance, our sales team collaborates with DSPs to create custom private marketplaces that fit specific targeting criteria for a given campaign and our team of technical account managers continually monitors DSP bidding activities and provides recommendations that inform their trading practices.

While the DSP is directly responsible for purchasing advertising inventory, the overall direction of an advertising campaign is typically determined by the advertiser or advertising agency that has engaged the DSP.

For certain private marketplace transactions, the specific parameters of a campaign may be negotiated directly with the advertiser or agency without involvement of a DSP.

Accordingly, in order to increase the amount of spend transacted on our platform, and in furtherance of our SPO efforts, we also maintain close relationships directly with brand advertisers and agencies.

Geographic Scope of Our Operations

The growth of programmatic advertising is also expanding into geographic markets outside of the United States, and in some markets, the adoption rate of programmatic digital advertising is greater than in the United States.

We attribute advertising spend to the geographic location of the seller on whose inventory the advertising spend was directed.

Our markets outside of the United States are more heavily built upon desktop display advertising than they are on mobile.

In addition, as programmatic advertising has grown in markets outside of the United States, we have seen more competitors enter those markets aggressively and gain market share.

Our international operations and expansion plans expose us to various risks.

International operations require significant investment in developing the technology infrastructure necessary to deliver our solution and establishing sales, delivery, support, and administrative capabilities in the countries where we operate.

The growth of programmatic advertising is expanding into geographic markets outside of the United States, and in some markets, the adoption rate of programmatic digital advertising is greater than in the United States.

We face staffing challenges, including difficulty in recruiting, retaining, and managing a diverse and distributed workforce across time zones, cultures, and languages.

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currencies expose us to potentially unfavorable changes in exchange rates and added transaction costs.

Foreign operations expose us to potentially adverse tax consequences in the United States and abroad and costs and restrictions affecting the repatriation of funds to the United States.

Foreign operations expose us to potentially adverse tax consequences in the United States and abroad and costs and restrictions affecting the repatriation of funds to the

United States.

For detailed information regarding our revenue and property and equipment, net by geographical region, see Note 4 and Note 7 of the "Notes to Consolidated Financial Statements."

We believe our platform reaches approximately one billion users globally, however it is not practicable to determine the exact number of unique users we reach because we do not collect personally identifiable information.

In order to estimate our user reach, we start with data we track on devices we see through our platform in a given time period:

for web browsers, we identify each combination of browser user agent and originating IP address, and for mobile application users, we identify unique device identifiers.

The resulting aggregated total counts some devices more than once because the same device creates different user agent and IP address combinations by using different browsers to access the Internet and/or accessing the Internet from locations with different IP addresses.

We therefore make assumptions about the amount of duplication, as well as assumptions about the average

numbers of devices per person, which can vary by geography and over time, and apply these assumptions to estimate the number of users we reach.

Behavioral or personalized advertising, or the use of data to draw inferences about a user’s interests and deliver relevant advertising to that user, has come under increasing scrutiny by legislative, regulatory, and self-regulatory bodies in the United States and abroad that focus on consumer protection or data privacy.

Our business is highly susceptible to emerging privacy regulations and oversight concerning the collection, use and sharing of data.

Data protection authorities in a number of territories have expressed a desire to focus on the advertising technology ecosystem.

In particular, this scrutiny has focused on the use of technology (including "cookies") to collect or aggregate information about Internet users’ online browsing activity.

Because we, and our clients, rely upon large volumes of such data, it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy practices, including providing consumers with notice of the types of data we collect and how we use that data to provide our services.

We provide this notice through our privacy policies, which can be found on our website at http://www.rubiconproject.com/privacy.

As stated in our privacy policy, our technology platform does not collect information, such as name, address, or phone number, that can be used directly to identify a real person, and we take steps not to collect and store such information.

Because we, and our clients, rely upon large volumes of such data, it is essential that we monitor developments in this area domestically and globally, and engage in responsible privacy practices.

We do n ot collect information, such as name, address, or phone number, that can be used directly to identify a real person, and we take steps not to collect and store such information.

Instead, we rely on IP addresses, geo-location information, and persistent identifiers about Internet users and do not attempt to associate this data with other data that can be used to identify real people.

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For example, the Children’s Online Privacy Protection Act ("COPPA"), imposes restrictions on the collection and use of data about users of child-directed websites.

To comply with COPPA, we have taken various steps to implement a system that:

With respect to COPPA, we have taken various steps to implement a system that:

(i) flags seller-identified child-directed sites to buyers, (ii) limits advertisers’ ability to serve personalized advertisements on child-directed sites, (iii) helps limit the types of information that our advertisers have access to when placing advertisements on child-directed sites, and (iv) limits the data that we collect and use on such child-directed sites.

The use of and transfer of personal data in EU member states is currently governed by the General Data Protection Regulation (the "GDPR").

The GDPR sets out higher potential liabilities for certain data protection violations, as well as a greater compliance burden for us in the course of delivering our solution in Europe.

Among other requirements, the GDPR obligates companies that process large amounts of personal data about EU residents to implement a number of formal processes and policies for reviewing and documenting the privacy implications of the development, acquisition, or use of all new products, technologies, or types of data.

Further, the European Union is expected to replace the EU ePrivacy Directive governing the use of technologies to collect consumer information with the ePrivacy Regulation.

Current drafts of the ePrivacy Regulation impose fines for violations that are materially higher than those imposed under the ePrivacy Directive.

The GDPR also prohibits the transfer of personal data of EU subjects outside of the European Economic Area ("EEA"), unless the party exporting the data from the EU implements a compliance mechanism designed to ensure that the receiving party will adequately protect such data.

We have relied on certain compliance measures that are currently subject to legal challenge, and which directly subject us to regulatory enforcement by data protection authorities located in the European Union and the United States.

By relying on these compliance measures, we risk becoming the subject of regulatory investigations in any of the individual jurisdictions in which we operate.

Each such investigation could cost us significant time and resources, and could potentially result in fines, criminal prosecution, or other penalties.

Further, to the extent any of the legal challenges to these compliance measures are successful, this could invalidate our approach to data export from the EEA.

It may take us significant time, resources, and effort to restructure our business and/or rely on another legally sufficient compliance measure.

In addition to the GDPR, a number of new privacy regulations will or have already come into effect in 2020.

The use and transfer of personal data in the European Economic Area ("EEA") member states and the United Kingdom (“UK”) is currently governed by the General Data Protection Regulation (the "GDPR").

The GDPR sets out higher potential liabilities for certain data protection violations and establishes significant new regulatory requirements resulting in a greater compliance burden for us in the course of delivering our solution in the EEA and UK.

While data protection authorities have started to clarify certain requirements under GDPR, significant uncertainty remains as to how the regulation will be applied and enforced.

In addition to the GDPR, a number of new privacy regulations will or have already come into effect.

The California legislature passed the California Consumer Privacy Act ("CCPA") in 2018, which became effective January 1, 2020.

This regulation imposes new obligations on businesses that handle the personal information of California residents.

The obligations imposed will require the Company to devote significant resources towards compliance.

This law imposes new obligations on businesses that handle the personal information of California residents.

The obligations imposed require us to maintain ongoing significant resources for compliance purposes.

Certain requirements remain unclear due to ambiguities in the drafting of or incomplete guidance.

Adding to the uncertainty facing the ad tech industry, a new law, titled the California Privacy Rights Act ("CPRA") recently passed as a ballot initiative in California and will impose additional notice and opt out obligations on the digital advertising space.

This law, which will take effect in January 2023, will cause us to incur additional compliance costs and impose additional restrictions on us and on our industry partners.

These ambiguities and resulting impact on our business will need to be resolved over time.

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Certain international territories are also imposing new or expanded privacy obligations.

For example, Brazil's data protection regulation, the LGPD, will also come into effect in August 2020.

In the coming years, we expect further consumer privacy regulation worldwide.

Further, the European Union is expected to replace the EU ePrivacy Directive governing the use of technologies to collect consumer information with the ePrivacy Regulation.

Current drafts of the ePrivacy Regulation impose fines for violations that are materially higher than those imposed under the ePrivacy Directive.

The GDPR also prohibits the transfer of personal data of EU and UK subjects outside of the EEA and the UK, unless the party exporting the data from the EU or UK implements a compliance mechanism designed to ensure that the receiving party will adequately protect such data.

We have historically relied on certain compliance mechanisms that have since been invalidated, and had to shift our business practices to rely on other legally sufficient compliance measures.

However, guidance on exactly what measures must be taken to allow the lawful transfer of personal data to the United States remains unclear.

While we will interpret the guidance and continue to explore the additional measures that can be implemented to protect personal data that is transferred to us in the United States, we remain subject to regulatory enforcement by data protection authorities located in the EU, UK and the United States.

By relying on these compliance measures, we risk becoming the subject of regulatory investigations in any of the individual jurisdictions in which we operate.

Each such investigation could cost us significant time and resources, and could potentially result in fines, criminal prosecution, or other penalties.

Further, to the extent any new guidance emerges to these compliance measures, it could further invalidate our approach to data export from

the EEA and UK.

It may take us significant time, resources, and effort to restructure our business and/or rely on another legally sufficient compliance measure.

Additionally, our compliance with our privacy policies and our general consumer privacy practices are also subject to review by the Federal Trade Commission, which may bring enforcement actions to challenge allegedly unfair and deceptive trade practices, including the violation of privacy policies and representations therein.

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Outside of the United States, our privacy and data practices are subject to regulation by data protection authorities and other regulators in the countries in which we do business.

Beyond laws and regulations, we are also members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, including the Internet Advertising Bureau ("IAB"), the Digital Advertising Alliance, the Network Advertising Initiative, and the Europe Interactive Digital Advertising Alliance.

Beyond laws and regulations, we are members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data, including the Internet Advertising Bureau ("IAB"), the Digital Advertising Alliance, the Network Advertising Initiative, and the Europe Interactive Digital Advertising Alliance.

Under the requirements of these self-regulatory bodies, in addition to other compliance obligations, we provide consumers with notice via our privacy policy about our use of cookies and other technologies to collect consumer data, and of our collection and use of consumer data to deliver personalized advertisements.

We also allow consumers to opt-out from the use of data we collect for purposes of behavioral advertising through a mechanism on our website, linked through our privacy policy as well as through portals maintained by some of these self-regulatory bodies.

We allow consumers to opt-out from the use of data we collect for purposes of behavioral advertising through a mechanism on our website, linked through our privacy policy as well as through portals maintained by some of these self-regulatory bodies.

Some of these self-regulatory bodies have the ability to discipline members or participants, which could result in fines, penalties, and/or public censure (which could in turn cause reputational harm).

Additionally, some of these self-regulatory bodies might refer violations of their requirements to the Federal Trade Commission or other regulatory bodies.

Until prevailing compliance practices standardize, the impact of worldwide privacy regulations on our business and, consequently, our revenue could be negatively impacted.

For additional information regarding regulatory risks to our business, see "Item 1A.

Risk Factors."

Business Seasonality

Our advertising spend, revenue, cash flow from operations, Adjusted EBITDA, operating results, and other key operating and financial measures may vary from quarter to quarter due to the seasonal nature of buyer spending.

For example, many buyers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing.

We expect our revenue, cash flow, operating results and other key operating and financial measures to fluctuate based on seasonal factors from period to period and expect these measures to be higher in the fourth quarters than in prior quarters.

Working Capital Requirements

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Any such write-offs for bad debt could have a materially negative effect on our results of operations for the periods in which the write-offs occur.

In addition, growth and increased competitive pressure in the digital advertising industry are causing brand spenders to become more demanding, resulting in overall increased focus by all industry participants on pricing, transparency, and cash and collection cycles.

In addition, growth and increased competitive pressure in the digital advertising industry are causing overall increased focus by all industry participants on pricing, transparency, and cash and collection cycles.

Some buyers have experienced financial pressures that have motivated them to challenge some details of our invoices or to slow the timing of their payments to us.

In addition, although our liquidity has not been significantly affected by the effects of COVID-19 to date, any downturn in economic conditions in the future may severely impact our liquidity as we may need additional time to collect from buyers, which may impact our ability to pay sellers.

If buyers slow their payments to us or our cash collections are significantly diminished as a result of these dynamics, our revenue and/or cash flow could be adversely affected and we may need to use working capital to fund our accounts payable pending collection from buyers.

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Available Information

The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and accordingly files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and related amendments and other information with the Securities and Exchange Commission, or the SEC, pursuant to Sections 13(a) and 15(d) of the Exchange Act.

Information filed by the Company with the SEC is available free of charge on the Company’s website at investor.rubiconproject.com as soon as reasonably practicable after such materials are filed with or furnished to the SEC.

Securities and Exchange Commission, or the SEC, pursuant to Sections 13(a) and 15(d) of the Exchange Act.

Information filed by the Company with the SEC is

available free of charge on the Company’s website at investor.magnite.com as soon as reasonably practicable after such materials are filed with or furnished to the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business