Crossroads Capital’s commentary on Google’s ad-tech ruling and the evolving open internet landscape.
No ‘Get Out of Jail Free’ Card: Google’s Ad-Tech Loss is Already Shifting the Board - Remedies Ahead, Open Internet Winners Pass “Go”
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Dear Partners and Colleagues,
On April 17th, U.S. District Judge Leonie Brinkema (EDVA) ruled that Google violated Section 2 of the Sherman Act by willfully acquiring and maintaining monopoly power in two core “supply-side” markets for open-web display advertising: publisher ad servers and ad exchanges. By contrast, Judge Brinkema ruled in Google’s favor on the “demand-side” monopolization allegations, concluding that the company had not violated Section 2 with respect to the ad network market. Readers of our previous reports might be surprised that the judge took an agonizing four months beyond her self-imposed deadline to issue her ruling, but they won’t be surprised by the verdict or the focus on Google’s supply-side market behavior.
In our initial writeup over a year and a half ago, the three most important elements of our thesis were the ruling, the scope of the remedies, and the relative magnitude of potential EBITDA gains to supply-side platforms (SSPs) from a breakup of Google’s ad server/exchange. We forecasted all of these accurately, as we discuss below. We continue to believe that the biggest winner from the open internet’s regime shift should be Magnite (MGNI), followed by PubMatic (PUBM).
Although remedies are still being finalized and likely won’t be implemented until next year, we’re already seeing behavioral shifts at Google and across the ad tech industry that suggest SSPs may realize benefits sooner than expected. Viewed through a real options valuation framework, the market is only just beginning to price in these developments. If we assign a reasonable probability of success (greater than 50% but less than 100%) and a realistic timeline of 1-2 years for these changes to take full effect, even while maintaining conservative EBITDA estimates, then the potential upside from remedies significantly exceeds Magnite’s current market capitalization.
Before we get into the details of the ruling, the remedies, and the changes in our beneficiary valuation framework, we’d like to explain how we developed this thesis now that we’re in the endgame. Back in 2018, our Director of Research, Daniel Prather asked himself, “How is the internet monetized?” The search for answers took him down a rabbit hole that eventually led him to the ad tech industry and Magnite (then known as Rubicon Project). Keeping up with industry participants for years paid off in 2021, when he saw Magnite acquire SpotX and its ad server SpringServe. This combination was unique in the industry. It laid the groundwork for Magnite to be the first company in nearly a decade to offer an alternative to the biggest incumbents in the open internet (against Google), and the emerging CTV space (against Comcast’s FreeWheel). At the time, few seemed to recognize that fact – and even fewer believed Google’s ad tech stack would be broken up.
As mentioned in our original 2023 report, we noted someone asked Magnite CEO Michael Barrett at the company’s 2021 Analyst Day, “What would the market environment look like if there was no longer a large monopoly at the center of ad tech?”
For the record, this is the entire quote, which is even more applicable today than it was back in 2021 (although you should change the transcription error from Frater to Prather):
Nick Kormeluk: Excellent. Next question comes from Daniel Frater. What would the market environment look like if there was no longer a large monopoly at the center of ad tech? The monopoly isn't stated but safe assume […].
Michael G. Barrett: Well, it would create a nice opening for Magnite to become the new monopoly. No, I can't say that. The – it just would free up – listen, publishers are looking for trusted scaled folks that don't compete with them, right? And it's not that [an] alternative has never existed as much as we liked at legacy Rubicon and say we were that guy or Telaria or SpotX. There wasn't just enough scale or full stack capabilities. So now we have that full stack capability, it truly – it literally is the first time a publisher has a true alternative in [the] market. And that doesn't mean you flip the light switch and it happens overnight. But I don't think we need the monopoly to go away through some third-party intervention.
I think we're in a great position right now to take a lot of money away. I think that oftentimes people think of our competition as like OpenX, or Xandr, or PubMatic. And all these guys are fiercely competitive. Don't get me wrong. But it's always been Google and FreeWheel always. That's where the vast majority of the dollars are held and that's why we built this company to be able to go after those dollars in a way that doesn't sacrifice in terms of monetization and/or a feature capabilities.
Looks like we’re getting that “third-party intervention” on top of a highly competitive business. While we’re not out of the woods yet, the probabilities and outcomes in our antitrust thesis are much clearer now than when we first spotted them in 2021 and acted on them in late 2023. Tangible impacts are likely to arrive in late 2025 and beyond. What began as a purely academic “what if?” has steadily moved closer to reality, with the potential beneficiaries still wildly mispriced.
Since first flagging Magnite as the likely pole-position antitrust beneficiary in our 2023 report, the core of our thesis – secular CTV growth, expanding margin profile, and Magnite’s unique competitive positioning – has played out remarkably close to our expectations. The market is beginning to recognize Magnite’s differentiated CTV offerings and competitive position, which have driven an 85% increase in the shares from our average cost basis of $8.39 in September 2023.
Crucially, our conviction in Magnite was never predicated on the outcome of the DOJ’s case against Google. Rather, we viewed the antitrust angle as a deeply asymmetric call option, a variant perception that the market was pricing at zero. In the last several weeks, we’ve seen the market start to wake up to what we saw years ago. We believe the call option we identified is finally being seen as real – but it’s still far from priced in, and the runway remains long. We think the industry realignment is just beginning, and the market continues to underestimate both the magnitude and durability of the upside for the true open web winners.
Now let’s get to the update.
I. Ruling as Expected, DOJ Possibly Targeting 50% Share Loss for Google, Two-Stage Remedy Impacts
Despite initially indicating she would rule by late 2024, Judge Brinkema ultimately issued her decision on April 17th. While this turnaround is swift by legal standards, it felt interminable for public market participants – and was notably slower than the court’s usual “Rocket Docket” pace. Theories abounded about the reasons for the delay, ranging from speculation about a secret Google settlement to doubts about the judge’s grasp of market dynamics. Our view, however, was that the real sticking point lay with the demand-side monopolization allegations, which were weaker on the merits than the others, but were inextricably linked to the supply-side issues at the heart of the case. It’s also likely that some “wait and see” was involved regarding the proposed remedies for Google’s Chrome browser in the Search trial: Chrome represents a potential overlap between the two cases, as it’s a gatekeeper to the open internet and could be used to circumvent remedies. But the bottom line is that the ruling found Google unlawfully tied its publisher ad server and its ad exchange (supply-side) – and for the purposes of our thesis, that’s all that matters.
Remedy hearings are scheduled for September 22nd, 2025, with initial guidance calling for a late 2025 ruling. (Notably, these are merely hearings, not another trial for remedies as in the Search case.) The DOJ is proposing two structural remedies, a handful of behavioral, data, and transparency remedies, and also some administrative oversight. Google is proposing only behavioral remedies that amount to peanuts. (One such laughable “concession” was allowing other ad servers access to AdX, to which we’d ask, “what other ad servers?” Another “concession” was eliminating “First Look” and “Last Look,” which Google already got rid of in 2019.)
A quick note on how we view structural remedies: we expect that any mandated divestitures will result in Google spinning off the relevant divisions, rather than selling them outright. The reason is simple: The looming threat of class actions by independent ad tech firms may make these assets unattractive to potential buyers. This dynamic creates significant leverage outside of the DOJ’s case, via the afflicted parties. If Google Networks’ supply-side net revenue from 2009 to 2024 produced net profit margins above 60%, its monopoly profits could exceed $15 billion. That translates into potential damages of $45 billion or more, because antitrust damage awards are triple the actual damages suffered. In similar situations, companies in other industries have often spun off problematic divisions to shield the parent from direct financial exposure to sources of legal liabilities (asbestos, PFAS, environmental remediation). The threat of such class actions could force Google to negotiate or restructure more urgently than it otherwise would.
We’ll now break down the DOJ’s proposed remedies and our view of their potential market impact. We see that impact arriving in two stages: market share gains, followed by increased customer stickiness and potential multiple expansion.
Structural Remedy #1: Divestiture of AdX
This one is the most straightforward. The DOJ proposes that Google be required to divest its AdX ad exchange as soon as possible and that this process should be overseen by a court-appointed trustee, with the DOJ having approval rights over the buyer. After divestiture, Google would be barred from operating an ad exchange or similar product for ten years.
Since most supply-side revenue flows through AdX, its separation from Google – and the removal of its preferential advantages – puts the largest portion of Google’s market share up for grabs for independent SSPs. This is what we’d describe as “Stage One” of the remedy impacts, which we think will mean rapid revenue growth for Magnite’s DV+ and PubMatic’s open web segment.
Structural Remedy #2: Phased Divestiture of the Ad Server
The DOJ proposes Google divest its DFP (DoubleClick for Publishers) publisher ad server, but in three phases:
- Provide Interim Access: Google must provide APIs so AdX can bid into non-Google publisher ad servers and integrate with open-source header bidding solutions (like Prebid), and must help publishers export their data.
- Open-Source Auction Logic: Google must separate and open-source the auction logic from DFP, allowing neutral third parties to run the final auction.
- Final Divestiture: The remainder of DFP would be sold, possibly to multiple buyers, with the DOJ having approval rights. DFP cannot be sold to the same entity that buys AdX.
These phased actions would likely occur over several years, with the most impactful being open-sourcing the auction logic. (That’s where Google has played the most games.) With the ad server essentially being dismantled, we would expect publisher “stickiness” to also be dispersed among other players. Allowing independent ad tech companies to establish closer relationships with their publisher clients should provide them with more stable revenue streams. This constitutes our “Stage Two” of the remedy impact. It serves as the missing link in shifting investor sentiment toward the upcoming regime change, challenging the prevailing narrative that Google’s supply-side stack is superior, while improving perceptions of publicly traded SSPs that have been unfairly maligned for over a decade.
Now we’ll get into oversight and behavioral remedies. We’ll start with one that we think points to the DOJ’s intention, and one that would place the beneficiaries in a better position than the most extreme scenario of share loss detailed in our original thesis.
Main Oversight Remedy: Escrow 50% of Net Revenue from April 17 to Divestiture Date
This proposed remedy states that Google must place 50% of net revenues from AdX and DFP in escrow from the date of the court’s opinion until divestiture is complete, to help fund industry transition and technical assistance for publishers.
According to DOJ court documents, a court-appointed trustee would manage the escrow funds, which could be used for two purposes: (1) funding an independent industry group to run publisher ad-server auctions using open-source DFP code, and (2) helping publishers cover the costs of moving away from Google’s DFP ad server. Google is also required to provide technical assistance to the industry group as part of this remedy. In short, the funds are dedicated to supporting both the creation of, and the technical transition to, a neutral auction platform.
We think this proposed remedy is extremely telling: Even before market forces can take effect, the DOJ is essentially saying that Google’s supply side should be half its current size. Once 50% of net revenues are forced out of DFP/AdX, we believe they’re unlikely to return even after the escrow goes away, especially if the stickiness of the ad server is spread around to competing solutions for the first time in almost two decades – and DFP/AdX as smaller, standalone entities would likely struggle to meet the compensation expectations of Google employees accustomed to high salaries and generous stock-based rewards.
Other proposed oversight remedies are less consequential. These include appointing court-approved trustees to supervise divestitures and monitor Google’s compliance; prohibiting the company from retaliating against any party that cooperated with the investigation or litigation; and requiring Google to implement mandatory compliance training for all employees on evidence preservation, the use of attorney-client privilege, antitrust law, and the court’s decree, all under the supervision of a compliance monitor. The DOJ likely believes such training is essential because, as followers of Google’s trials know, it was a de facto company policy to auto-delete messages and to wrap sensitive communications regarding competition in false claims of supposed privilege.
Main Behavioral Remedy: Google DSP must work with all third-parties fairly
The DOJ is proposing that Google’s ad buying tools (AdWords and DV360) must work with all third-party ad tech tools, including ad exchanges and publisher ad servers, on non-discriminatory terms. It wants the court to prevent Google from preferentially routing demand (or receiving compensation for such routing), except if following an advertiser’s explicit instruction to do so.
The reasoning behind this proposed remedy is straightforward: with AdX divested, DV360 (DSP) must engage other SSPs without preferentially selecting one or another. Over the last year, we’ve observed DV360 moving to direct one-to-one integrations with SSPs. However, the only SSP integrated with DV360’s Instant Deals private marketplace is Magnite.1 The Instant Deals marketplace lets advertisers quickly build and launch custom deals directly on the DV360 platform – yet another sign that Magnite in a league of its own compared to other SSPs, and is the one best positioned to benefit from share loss at DFP/AdX.
One other proposed behavioral remedy proposed provides that while Google still owns AdX or DFP, its ad buying tools must interact with these products only through third-party exchanges or APIs, not directly.
Main Data and Transparency Remedies: Data Sharing; No Use of First-Party Data
The final proposed remedies concern data and transparency. These cut off the least-understood, yet most critical, part of Google’s ad tech advantages: its data. It’s widely recognized that Google could (and presumably would) easily circumvent purely behavioral remedies. As a result, the DOJ has proposed that the court back them up with other proposed remedies focused on data, the core asset of the internet advertising industry.
The main such remedy would require Google to share certain data (such as auction logic improvements and data signals from DFP) with competitors and industry organizations on equal terms. Specifically, Google would have to let publishers access data generated in DFP or AdX in the same format that Google itself can. While the separation of DFP and AdX is impactful on its own, forcing Google to share its data in this manner would all but ensure genuine competition.
The DOJ has also proposed that Google should not be allowed to use first-party data from its properties (such as YouTube, Gmail, Search, Chrome, and Android) to advantage its ad buying tools in third-party ad tech markets. We believe that such barring of data advantages for the demand side of the market (still within the scope of permissible remedies because it affects the supply side) would be the last step needed to deny Google an unfairly advantaged position in the open web.
We see these above set of proposed remedies as comprehensive, within scope, and likely to be highly impactful both at first and also over time. Below, we present additional evidence supporting our view that independent ad techs have already started to benefit from the trial fallout. Finally, we update the valuation framework from our original thesis.
II. Industry Transformation Occurring Today, Not Years from Now
Almost two years ago, a common criticism of our antitrust thesis was “A breakup will never happen.” This then turned into “The courts will neuter any legal win.” Later, during the delay in the ad tech ruling, naysayers argued that “Google is settling with the court and this will all go away.”
Today, we see yet another dismissal of our thesis: “With appeals dragging on, the remedies impact is years away, if there ever even is an impact.” Our response: yes, if an appeals process is underwent in full, it could extend the timeline by 6–18 months, but a Google victory remains unlikely—as we’ll explain. Crucially, signs of the ruling’s impact are already emerging.
We believe skepticism toward antitrust enforcement is likely rooted in a broader cultural malaise, a prevailing lack of faith in our institutions. Given how widespread this mindset has become, it’s unsurprising that any potential exception – such as a meaningful antitrust action against Google – is largely dismissed until it fully materializes. Even then, prior beliefs are not always updated to reflect the new information. Hence, we are continually told that whatever X just happened won’t matter because of Y and Z. However, businesses that rely on open web ad revenues cannot afford to be so dismissive. For them, the outcome of these actions is too consequential to ignore. As a result, behaviors are changing already, both at Google and elsewhere in the industry.
First, placing 50% of net revenues from DFP/AdX in escrow from the verdict date of April 17th until divestiture would be an immediate, impactful remedy. It could be executed simply, and it would materially alter Google’s financial position well before any divestitures take place. Such escrow arrangements are not unprecedented. Moreover, because the escrow would last until divestiture, Google would be operating on half of its financial resources during the entire time it pursues any of those much-ballyhooed lengthy appeals. (Nevertheless, we consider the possibility of appeals in more detail below.)
Second, behavioral changes at Google were already occurring even before the judge’s ruling. You could spot them if you knew where to look and what to look for. For example, after final arguments in the ad tech case, Google’s December launch of the DV360 Instant Deals private marketplace (with Magnite as its anchor SSP partner) marked the company’s first direct SSP integration beyond simple API connections. This move signaled the likely opening of Google’s ad tech stack, because forming direct partnerships with leading curators of premium open web ad inventory would be a logical step in a more competitive, less vertically integrated market.
Then, just five days after the ad tech ruling, Google announced its plans to keep third-party cookies in its Chrome browser. This move effectively ended the multi-year saga of the company’s efforts to get rid of those personal data trackers and push the ad tech industry into its Privacy Sandbox platform. (This quest in and of itself had sparked a UK CMA antitrust investigation, as we detailed in our original thought piece.) Google’s decision makes sense if (1) it wants Chrome, as an entity apart from Google, to have a reliable data stream to monetize, and (2) Chrome can’t get any first-party data from Google in the future.
In addition to the above ad tech changes, Bloomberg recently reported that the ongoing legal scrutiny of Google’s Search business has already started to open the door for competitors, just as the Microsoft antitrust case of the late 1990s created new opportunities in software.2 Indeed, our previous thought pieces pointed to Microsoft’s post-antitrust behaviors as a likely parallel for Google’s future trajectory. But it’s remarkable that this dynamic is playing out even before a potential appeal by Google – and since Search remains Google’s most valuable and strategically critical business, it was the last place we expected the company to give up any ground. If regulatory pressure is already generating market changes in Search, it stands to reason that its impact on Google’s less critical ad tech businesses could be even greater.
We have recognized that Google’s behavior often sheds light on its outlook far more than their rhetoric in the courtroom or in public. For example, in our last update, we noted that we became highly confident Google would lose the Search trial when it abruptly fired its Head of Competition Law not long after the trial’s concluding remarks (two months prior to the verdict) – a move the company tried to gloss over in a whitewashed press release on privacy personnel changes. Similarly, we believe the company’s abovementioned actions suggest that it’s bracing for ad tech and Chrome divestitures.
Next, we’ve saved the most significant near-term development for last: Despite predictions that effective remedies are still years away, we’re already witnessing a shift in the ad tech landscape, with publishers moving to the forefront. Based on discussions with several industry participants, we believe that leading media organizations, both omnichannel and digital-first, are proactively engaging SSPs (or rather one SSP in particular: Magnite) to develop alternative ad serving solutions. This trend reflects mounting concerns over potential ad revenue disruption as Google unbundles its supply-side technology.
Numerous premium publishers approaching Magnite to start devising ad serving solutions this early in the antitrust endgame underscores the company’s strong position in the industry. Importantly, this also signals that MGNI may see the benefits detailed in this antitrust piece before their peers. Given that Magnite is a true omnichannel SSP with a leading ad server that could deliver display/video ads, and that it’s the only direct partner with DV360, it has plenty to offer the higher end of the open web market.
Finally, while we’ve been arguing that industry change is likely occurring even before any official court-ordered remedies are brought to bear, those remedies may well arise sooner rather than later. By the time Judge Brinkema rules on ad tech remedies in late 2025, Google will have completed a second ad tech trial in Texas, set to begin in August that should last roughly four weeks. Notably, this trial includes the additional allegation that Google entered into an anticompetitive agreement with Meta (then Facebook) in 2018, internally codenamed “Jedi Blue,” to suppress rival ad technologies. This was discussed in detail in our original thesis. The Texas trial is expected to have a jury, and the plaintiffs are seeking monetary damages, which some legal experts believe could exceed $100 billion.
Considering the evidence of spoliation and findings from the EDVA trial, we believe it’s highly likely Google will lose this Texas trial, too. Winning any appeal of the ruling in either of these two trials will become much harder if both courts reach essentially the same conclusion: To win, Google would have to successfully argue that both courts applied the law incorrectly. It’s quite possible Google may simply cut their losses and not bother with an appeals process. As previously noted, we believe Google is likely to offer to divest its ad tech assets as a concession at some point in its legal travails, allowing the company to focus on protecting its core Search business and owned platforms.
III. SSP Beneficiaries Poised to Gain 2x-3x Market Share and 3x-8x EBITDA
Now that we’ve looked at the ongoing and expected changes in the open internet advertising industry, let’s update our market outlook and valuation analyses appropriately. The core opportunity is still much the same as we detailed almost two years ago, with the likely breakup beneficiaries Magnite and PubMatic standing, in our view, to gain incremental EBITDA at multiples of their current levels. Still, there are plenty of changes.
We lowered our estimates on Google’s net revenue to more closely align with estimates from Magnite and PubMatic, facilitating our comparison below. The companies cited a rough 60%+ market share for Google’s supply side compared to Magnite and PubMatic shares at 5% and 4%, respectively. From our previous update, industry participants largely agreed that while the court documents in the ad tech trial accurately presented Google’s supply-side gross revenue (~$20 billion), the net revenue numbers were bizarrely low. Industry participants still don’t have a good sense of the real net revenue figure, but they’re clearly coalescing around gross revenue of $20-25 billion with take rates around 25%. In our original report, we noted that third party analysis of ad tech fees couldn’t account for 15% of the 48% gap from $1 of ad spend that then netted to $0.52 to a publisher – a clear sign of Google’s dominance (and obfuscation of that dominance) in the ad tech market.
At any rate, we’ve stuck with the independent SSPs’ estimates of net revenue share for simplicity’s sake, but we believe those numbers are still low. Next, Magnite and PubMatic are stating that for every 1% share taken from Google, their net revenue gains should be $50 million and $50-75 million, respectively. Our analysis shows that to be closer to $75-100 million per 1% share gain. We believe the two companies are being conservative, as the revenue gains they project imply much lower share capture than they’ve historically exhibited.
In fact, as we finalize this piece in mid-May, Microsoft announced that it will shut down Xandr’s DSP in February 2026.4 Xandr’s DSP was more important than its SSP, so we (along with some industry participants) expect the SSP to follow suit. If Xandr exits the open web SSP race very soon, the competitive field should narrow greatly, meaning our share capture and incremental EBITDA assumptions for Magnite and PubMatic are likely understated, not overstated.
In a change from our original analysis, we’ve removed the unrealistic assumption that long-tail SSPs would at least double their revenues in every breakup scenario. We always suspected these smaller players would see little benefit from a Google breakup, but we wanted to provide a margin of safety in our estimates. Now that we have more data and greater confidence, we’ve updated our projections to present a more realistic view of their lackluster prospects. Even without a breakup, long-tail SSPs would be likely to disappear, in our view, yielding their market share to the top SSPs. Long tail share is roughly equal to the top 5 players’ share in total, and consolidation of this lower-end segment is a tailwind for our Magnite thesis (with regard to DV+, notably excluding the antitrust call option). The same goes for PubMatic.
Moreover, this lower long tail SSP share capture is reflected in a higher market share capture rate for Magnite. The company believes it can capture 20-30% of any market share yielded by Google, but we think that’s conservative based on its historical market share capture of 30-40% since turning around the DV+ business years ago.
Other minor changes include lower share for Xandr, which has lost relevance, and swapping similarly-sized IndexExchange for TripleLift. On Xandr, its size in the SSP market is on par with PubMatic, as such its departure would stand to open up considerable market share even if Google weren’t being brought to heel. Finally, we present Nexxen for completeness, even though its DSP/SSP combination makes it unlikely to be a major beneficiary of Google’s breakup.
We kept our three scenarios at 20% through 40% share loss and added a 50% share loss scenario to reflect the possibility not just that the 50% escrow remedy is implemented, but that its impact remains after divestures of DFP and AdX. Even after Google loses half its market share, DFP/AdX could still be twice as large as the next competitor, as shown below:
In other changes, we have significantly raised our incremental EBITDA margins for the top beneficiaries. Originally, we conservatively estimated 65% incremental margins at the high end for MGNI, despite the fact we believed they could be 85%. In its latest earnings call, Magnite guided for 90% incremental margins. Accordingly, we boosted incremental margin assumptions in our analysis for all the players to 90%, an increase of at least 40%.
Our estimates for the incremental EBITDA to Magnite and PubMatic now stand only 25-30% lower than our original estimates, resulting in an average 5x increase in EBITDA versus our original 7x. However, we now believe the probabilities of success are in excess of 50% with a range of outcomes more definitively bound than our original 2023 analysis. Paraphrasing a certain investor, it’s better to be approximately right than precisely wrong.
Given the recent Xandr news, it’s worth emphasizing that if Microsoft does exit the open web SSP market, its share would almost certainly be split between Magnite and PubMatic. In that scenario, the incremental EBITDA estimates for these two companies would be likely within 10% of our originally estimated antitrust outcomes from 2023.
In all, the margins of safety we embedded in our analysis ended up paying off. With greater clarity on the key variables, it was reasonable to trim those buffers, resulting in more accurate projections. Nevertheless, we believe our forecasts remain conservative. Below are our original estimates for incremental EBITDA and the percentage of Google’s share the top players would receive from its breakup.
And here’s that same analysis updated (and with an added Scenario 4, a 50% share loss for Google):
Next are possible gains to equity value, assuming a slight premium to current EV/EBITDA valuations. PubMatic’s incremental EBITDA is capitalized at a 40% lower valuation than in our original thesis, and for good reason: Last year, Google found that PubMatic was exploiting a crack in Google’s auction system.5 Since then, PubMatic’s win rates have fallen materially, as has its growth prospects and current valuation (even excluding recent volatility):
As you can see, the size of the equity value generation opportunity has compressed from our initial projections of 5-10x. That’s due not just to lower estimates, but also to Magnite’s share price having nearly doubled since our September 2023 writeup (and since we value PubMatic at a 40% lower valuation multiple– it’s affected, too). Regardless, the opportunity on antitrust alone equates to 2-6x Magnite and PubMatic’s market caps.
And keep in mind, the multiples we apply here are well below TradeDesk’s at +30x EBITDA, a company that has competed well against Google’s DSP. So, what multiple would be ascribed to Magnite and PubMatic, should it be able to compete against Google’s SSP?
While we haven’t discussed this before, now is the right time to show these scenarios on a per-share basis and to include our base case valuation for Magnite (incorporating the CTV business) and PubMatic, reflecting both companies’ likely absorption of long-tail SSP revenue over time. Presenting it this way makes it easy to see how we arrive at our estimates for different scenarios:
Above, we see the value added per share in our various antitrust scenarios. Our base case standalone value for MGNI of $46.25/share leads to total possible share returns of 5-9x over a five-year time horizon, and the potential returns for PUBM are comparable. While we see similar outcomes for these two SSPs, we believe MGNI’s competitive positioning is superior, making it a better investment in our view.
Let’s turn to our final analysis: potential returns on LEAPs. We focused on Magnite's 2027 options, as they were the only long-dated contracts available. Our modeling isolates the antitrust opportunity's potential returns, then runs the same analysis for MGNI, including the CTV business contribution detailed earlier. (The case for investing in the company today rests on CTV expansion plus the now well-documented antitrust option):
With changes already happening now, and with the biggest impact to the independent ad techs likely occurring in 2026, we see the 2027 LEAPS possibly returning 8-40x just on the antitrust scenarios for Magnite. If you include the rest of the business (which is onboarding Netflix for CTV this year, not to mention X/Twitter and Pinterest in DV+/CTV), we believe you could see returns of 23-55x, should things progress in line with our view. If half of Xandr’s share capture goes to MGNI, the return profile presented above would increase by ~12x, for returns of 35-67x.
We believe that no matter how you slice it, Magnite remains deeply mispriced. With much higher probabilities of success and an NPV on antitrust outcomes several times greater than Magnite’s current market cap, we believe developments in the case should increasingly impact the share price as we approach the event horizon. This remains true even with a “smaller” opportunity than we outlined nearly two years ago.
IV. Summary – In the Endgame, Regime Change is Upon Us
After years of skepticism that Google would ever face any serious legal consequences for its anticompetitive behavior, the U.S. District Court’s April 2025 ruling upended the status quo in digital advertising. For the first time in nearly two decades, it’s no longer a foregone conclusion that the open internet’s supply side is a bad place to do business. Independent players (most notably Magnite, public since 2007) have, in our view, been persistently misjudged by investors. Their performance and their technology/strategy pivots have too often been dismissed as business flaws. In reality, these adaptations were necessary responses to Google’s overwhelming market power and ever-shifting ruleset. Their supposed underperformance was due less to business fundamentals and more to the need to survive under the thumb of a dominant gatekeeper.
With Google’s ad tech stack likely to be forcibly unbundled (and possibly weighed down by $45-100 billion in damages), the competitive landscape is already shifting beneath our feet – subtly at first, as we noted, with more pronounced effects likely coming sooner than most believe.
The DOJ’s proposed remedies are not window dressing, and we believe they’ll be finalized before year end. Forced divestitures of AdX and DFP, open-sourcing of auction logic, data-sharing mandates, and a 50% net revenue escrow are designed not only to restore competition, but also to actively redistribute market share and customer stickiness. Publishers are already moving, looking most notably at Magnite, which stands alone as the only omnichannel SSP with both the technical stack and the direct DV360 integration needed to capitalize on the industry’s regime change.
We think the equity valuations of the ad tech trial beneficiaries have barely begun to price in this previously free call option, which we see becoming increasingly likely to pay off. Moreover, MGNI is taking the lead across every segment of its business, finalizing its balance sheet deleveraging, increasing free cash flow, and committing to reducing its share count via buybacks. While we previously advocated an investment in MGNI to Google shareholders as a hedge against adverse outcomes, the prevailing consensus seems to largely ignore the ad tech business. We think that’s an error and they should reconsider. Regardless, Magnite presents a great investment with significant upside on its own: a 5-9x return in equity, 23-55x in LEAPs, all at a valuation of ~11x 2025 EBITDA.
As always, feel free to reach out to discuss this piece, as well as other opportunities we’re seeing at Crossroads.
Sincerely,
Ryan O’Connor
Founder and Portfolio Manager
Daniel Prather, CFA
Director of Research
