LiveRamp's Clearer Picture of Customer Journey Benefits Publishers and Advertisers

Senior Equity Analyst

Ali Mogharabi

We believe LiveRamp plays an important role in addressing the disruption that data privacy regulations, Apple’s data policy changes, and the upcoming end to third-party cookies by Google have brought to the digital advertising market. The firm’s cloud-based software allows various participants in the digital advertising workflow—publishers, supply-side platforms, demand-side platforms, and advertisers and agencies—to connect data from different sources for a better view of a customer’s current or potential journey from awareness to closing a sale, which can help marketers better personalize ad campaigns to increase the returns on their efforts. 

As an independent data aggregation platform, LiveRamp is well positioned to attract data from publishers and advertisers along with third-party data, in our view. The firm’s customer identifier, RampID, which is generated after connections between various customer data points are found, is independent and interoperable with other platforms and identifiers. RampID is already being used by many supply-side platforms; 17% of publishers surveyed by Advertiser Perceptions said they use it, compared with 13% for Google and 12% for The Trade Desk. The largest ad holding firms in the world use LiveRamp’s platform, including the fourth largest, Interpublic Group, which purchased Acxiom Marketing Solutions from LiveRamp in 2018 and continues to use the platform. We believe LiveRamp’s independence while serving publishers and advertisers through the entire data collaboration process is a differentiator when compared with demand-side platform provider The Trade Desk and its UID 2.0 and Google’s replacement for third-party cookies. 

We estimate the digital advertising market will grow at a 7% annual rate through 2027, including 21% growth for advertising on connected television services. We believe CTV will be an important growth driver for LiveRamp, as it helps to improve the addressability of CTV ads by integrating data coming in from other channels.

Business Strategy & Outlook

While there are some indications that LiveRamp may be creating switching costs for customers and a network effect around the business, we think it is too early to assume that the firm can maintain those moat sources to generate excess returns on capital for at least the next 10 years. For this reason, we view LiveRamp as a no-moat company. 

LiveRamp’s technology helps connect data from disparate sources, which publishers and marketers then use to get a better understanding of their users and customers. Businesses want to combine their own (first-party) data with other data sources—such as their offline data, data from publishers like apps or websites, data from mobile devices, or data from connected TVs—to connect touch points of their customers and get a better view of their journey from awareness to purchase. If such data is effectively utilized, it may provide marketers a better understanding of how to target customers for initial, repeat, or additional purchases and measure the effectiveness of ad campaigns. 

In our view, person identifiers and how widely they will be used by different data providers are the differentiators in this market. LiveRamp appears to be slightly ahead of Google and The Trade Desk on that front, based on a survey conducted by Advertiser Perceptions in late 2021 which indicates that 17% of publishers surveyed have “firmly committed to adhering to [LiveRamp] as a standard,” while 13% have committed to Google and 12% to The Trade Desk.

After onboarding data onto the platform, the software looks for personal identifiable information and replaces it with LiveRamp’s anonymized identifiers, or RampIDs. When RampID is used by various sources, it becomes the link that enables the matching and connecting of disparate data in different formats and from different sources. Increased insertion and usage of RampID within publisher and marketer data, along with third-party data, could create a network effect moat source for LiveRamp. As more data sources and providers use RampID, the processes of data onboarding, matching, and the creation of an aggregated view of a customer's journey become more efficient. 

With many other ad technology providers, including The Trade Desk, TransUnion’s Neustar, Apple, and Google striving to offer a standardized identifier, we think it is too early to assume which firms will be the winners. In the meantime, as the digital advertising market approaches the end of third-party cookies, which Google recently delayed to 2024 from 2023, many firms will continue to work on identifier substitutes. 

We think there might also be early indications of a switching cost moat source for LiveRamp. However, we remain uncertain about whether it can strengthen and then be maintained. LiveRamp’s net retention rate has remained above 100% since 2018 (LiveRamp’s fiscal 2019). High net retention rates indicate that clients are consistently increasing their usage of the platform, which could be a sign of increasing dependence on the software. 

In addition, the number of clients that spend more than $1 million per year on LiveRamp has increased at an average rate of 24% during LiveRamp’s last three fiscal years. Plus, the firm’s annualized recurring subscription revenue, or ARR, has increased at 15% average rate the last two years. ARR did decline in fiscal 2020 (negative 4.5%), which we think was mainly due to the pandemic. We view these figures as indicators of further integration and use of LiveRamp by its clients which if continued could result in a switching cost for the clients, especially if RampID becomes standardized in the space.

None

Economic Moat

LiveRamp Holdings Inc

LiveRamp Holdings, Inc. operates as a global technology company. It is engaged in providing identity platform leveraged by brands and partners to deliver innovative products and exceptional experiences. The firm's identifyLink connects people, data and devices across the digital and physical world, powering the people-based marketing revolution and allowing consumers to safely connect with brands and products. The company was founded in 1969 and is headquartered in San Francisco, CA.

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LiveRamp Holdings, Inc. is a global technology company, which engages in the provision of a data collaboration platform in consumer privacy, data ethics, and foundational identity. The company was founded in 1969 and is headquartered in San Francisco, CA.

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