A Look at Double Verify (DV): Software for Advertising Quality and Performance

Mission

The mission for DV is to help brands improve the effectiveness of their online advertising, giving companies clarity and confidence in their digital investment. DV’s core focus is on Digital Media:  Social Networks, Search Engine Ads, and Video Ads.  

How Does DV Improve Effectiveness, Clarity and Confidence?

DV focuses on 4 areas in order to accomplish goal.  Those areas are Ad Fraud Detection, Brand Safety & Suitability, Viewability Measurement, Media Quality Optimization.  DV uses software to prevent a company from paying for bad ad placement and fraudulent impressions.

Ad Fraud Detection

An impression is showing an ad to a potential or existing customer.  It is the initial expense an advertiser pays for. With fraudulent bots going around and causing a fake impression (one where no human gets shown and ad), bots can run up advertising costs for a company with 0 benefit to the company.

DV ensures advertisers pay for real impressions seen by humans.

Brand Safety & Suitability

DV’s tools analyze content surrounding an ad's placement, mitigating the risk of appearing alongside inappropriate or harmful content that could damage brand reputation.  An example would be if an advertisement appeared next to racist text.

Viewability Measurement

Closely related to ad fraud detection, DV measures whether ads are seen by actual users and are in a position to be visible, preventing wasted spending on unseen ads.

Media Quality Optimization

They analyze the overall quality of ad placements, considering factors like domain reputation and audience demographics, to improve campaign effectiveness.  Domain reputation is ensuring that ads appear on the proper sites.  For example, a company that sells baby products would not want their products advertised to pornographic sites.  Audience demographics for this baby product company would be such that baby products should not be marketed to people over 65.

Competitive Advantage

The Network Effect  

DV boasts a vast global network of partnerships with publishers, platforms, and ad exchanges, offering comprehensive coverage and insights.

Independent & Transparent  

Unlike competitor solutions embedded within specific platforms, DoubleVerify operates independently, providing unbiased evaluations and avoiding potential conflicts of interest.

Advanced Technology & Data 

Their proprietary tech like DV Authenticate leverages machine learning and artificial intelligence for superior detection capabilities and deeper industry insights.

Comprehensive Solutions

They offer a full suite of verification solutions, addressing various concerns like fraud, brand safety, viewability, and media quality, in one integrated platform.

Market Leadership

Industry Recognition

DV consistently ranks among the top ad verification vendors, receiving accolades from leading industry publications and awards.

Customer Base

They serve some of the world's biggest brands and agencies, with a reputation for reliability and performance.

Innovation & Growth

DV actively invests in R&D, continuously pushing the boundaries of ad verification technology and expanding its offerings.

Thought Leadership

DV actively contributes to industry discussions, advocating for transparency and best practices in digital advertising.

Financials

I look at the following financial metrics in companies.:

Free Cash Flow Yield (FCY)

FCY shows the cash flow level the company may earn against the share market value.  It determines the company's cash flow in case of its liquidation or other obligations by comparing the free cash flow per share with the market price per share.

DV’s Free Cash Flow Yield at the end of 2023 was 1.27%.  In general, Free Cash Flow Yield > 5% means stock is priced well.   So, there is room for improvement here.

Gross Margin

Gross margin is a key financial metric that indicates a company's effectiveness in converting its revenue into profit after accounting for the direct costs of producing its goods or services.

DV’s gross margin at the end of 2023 was 81.38%.   This is a very good number.  DV is in the software application industry.  The average gross margin for the software application industry generally falls somewhere between 60% and 80%.

Return On Invested Capital (ROIC)

ROIC represents the efficiency at which a company utilizes its capital to work in order to generate profitable returns on behalf of its shareholders and debt lenders,

The average ROIC for the Software Application Industry is 15%.  DV’s ROIC has been improving for the last 3 years.  It was 4.67, 5.21, 6.18 for 2021, 2022, and 2023.

Cash and Short-Term Securities Vs. Long-Term Debt

DV’s cash and short-term securities is at 259.21 million.  Its long-term debt is 0, so that have no liabilities against their cash position.  This is great!

Summary

I really like this company.  It has decent financials and is in a good space of fraud prevention in advertising. Furthermore, is considered a mid-cap stock. Mid-cap stocks have underperformed large-cap stocks in recent years, creating potential for a catch-up period.

This article is for informational purposes only and should not be considered a solicitation to buy or sell any security.  The securities or strategies mentioned herein may not be suitable for all types of investors.  The information contained in this article does not constitute any advice, especially on the tax consequences of making any particular investment decision.  Before acting on any information found in this article, readers should consider whether such an investment is suitable for their particular circumstances, perform their own due diligence, and if necessary, seek professional advice.