Investment Thesis
Telaria (TLRA) will be a winning investment because of its industry tailwinds, increased focus, and solid financials.
The Business and Background
Prior to August 2017, Telaria was known as Tremor Video. Tremor Video was both a DSP (demand side platform) and an SSP (supply side platform) in the programmatic advertising space.
To give some background on programmatic advertising, it is a system that utilizes RTB (real time bidding) through the internet. Picture you’re on the couch watching Hulu (this is intentional), and you’re too cheap to pay for the premium ad-free subscription. Let’s say you see a Lexus ad. You may think nothing of it, but there was actually a complex process that went on behind the scenes.
Let’s start with the supplier of the ad: Lexus. It wants to increase sales, so it hires an advertising agency to help. This agency will use a software program, or a DSP, to optimize its client’s advertising dollars. These DSPs buy up advertising inventory for their clients, the agencies, from publishers like Hulu. But there is one more link in the chain. Hulu will use an SSP to maximize its advertising revenue as well. So, Hulu inputs its demographic data, and the SSP utilizes it to help sell ad inventory to the DSP. In short, this whole chain results in you seeing that Lexus commercial.
Back to the beginning, before August 2017, Tremor Video was both a DSP and an SSP. This creates conflicts of interests, though, when one company is involved in both the buying and selling of ad inventory. Upon finally realizing this, the company sold off its DSP business for $50 million. So, Tremor Video rebranded as solely an SSP under the name, Telaria.
As an SSP, the company makes money off of each transaction from ‘helping’ to sell a
