Are you tired of paying through the nose for video streaming services that you barely have time to watch? You're not alone.

In 2022 there was a big shift toward ad-supported streaming services. For example, Fox's free ad-supported TV (FAST) service, Tubi TV, reached 64 million monthly active users in the fourth quarter of 2022. Its user base streamed 5.1 billion hours of content last year, which was 44% more than a year earlier.

Fox's FAST offering isn't even the largest. Paramount's Pluto TV added 6.5 million monthly active users in the fourth quarter, bringing its total to nearly 79 million at the end of 2022.

In addition to FAST offerings, ad-supported video-on-demand services such as Peacock from Comcast draw in deep-pocketed advertisers hungry for the same level of brand safety they receive from traditional television ads.

Streaming fatigue to the rescue?

Streaming fatigue isn't great for subscription-based businesses, but it's been transformational for independent adtech pioneers PubMatic (PUBM -3.59%) and Magnite (MGNI -3.82%). These companies help publishers get the best prices for their available ad inventory and the inventory on connected televisions (CTV) is a huge growth driver at the moment. Pubmatic recently reported fourth-quarter CTV revenue that more than doubled year over year.

The CTV market is growing fast but PubMatic still relies on traditional display ads for roughly two-thirds of revenue. The last three months of 2022 were challenging for the digital ad industry as a whole and the company reported an 11% year-over-year drop in display ad sales. Sinking display ad sales offset CTV gains and pushed total fourth-quarter revenue down 1.7% year over year.

Magnite recently reported total fourth-quarter sales that rose 9% year over year. This is better than PubMatic's performance but it doesn't tell the whole story. In recent years, Magnite spent heavily to build out its CTV offerings with little to show for it so far.

Based on recent growth rates, it also looks like publishers with CTV content to sell prefer listing it on PubMatic's platform. In the fourth quarter, Magnite reported CTV revenue that rose just 20% year over year. Remember, PubMatic reported CTV revenue that more than doubled over the same time frame.

Unlike, Magnite, PubMatic's taken an infrastructure-first approach that eschews acquisitions. This isn't helping it outpace Magnite with respect to top-line sales, but at least PubMatic consistently generates a profit. While Magnite lost $130 million in 2022, it was Pubmatic's seventh straight year with positive earnings according to generally accepted accounting practices (GAAP).

A bargain now

Investors disappointed with stagnating total sales pushed PubMatic's stock price down by about 8% the morning after management announced results from the fourth quarter of 2022. 

Long-term-minded investors want to jump on what could be a bargain opportunity here. At recent prices, you can scoop up shares of PubMatic for just 14.2 times earnings from 2021. At this level, long-term investors can come out ahead if the business grows at a modest single-digit percentage. 

Pandemic-driven lockdowns made 2021 a particularly good year for digital ads, but it's a high-water mark that I don't expect to last very long. Pubmatic is a much larger business now than it was in 2021. At the end of 2022, it monetized CTV inventory from 214 publishers up from 154 a year earlier.

A potential recession is weighing down demand for digital ads at the moment but it's just a matter of time before the world's biggest ad buyers start flexing their muscles again. With the platform CTV publishers appear to prefer, this company has a good chance to blow past the expectations the stock market has placed on it. Buying some shares now and holding them for the long run could do wonders for your portfolio's overall performance.