Bear's DecQ Review of TTD

PaulWBryant · February 23, 2018, 1:21pm

The Trade Desk (TTD) is a stock I owned for most of 2018. They came on the scene at a very low valuation (just over 1B), even as they were growing like wildfire. They reported yesterday that revenue crested 308M for FY2017, and the market cap is now at 2.4B (good for a double if you bought a year ago).

I sold in early January, because I don’t know where this company fits in long term. I still don’t know where this company fits in long term. This isn’t sour grapes. In fact, I took a gamble that they would bounce a little on earnings, and bought call options. I got lucky…luckier than I expected, and so I sold those options this morning and was thrilled. Let me explain why I sold (again).

Today’s 20% bump is a little silly. Or you could say the 30% drop in the last few months was what was silly. I wouldn’t argue with that either. But I think both go to show that there’s not a lot of certainty to be found here. I simply cannot figure out how much value TTD is adding. I know that Jeff Green believes they are adding value. He is a masterful advocate for his company. I just don’t know if he’s right.

I have two more words for TTD bulls who see the 600%, 1000%, etc growth numbers for Connected TV, Audio, or what have you. SMALL BASE. Small base, small base, small base, small base, small base. If I sold $1 worth of bubble gum last year and $11 worth this year, I’m up 1000%. Do you want to invest in my bubble gum selling company? The only growth number that ultimately matters is the top line. Here’s what it’s done the last 4 quarters:

Mar 2017: revenue grew 76%!
Jun 2017: revenue grew 54% – still awesome
Sep 2017: revenue grew 50% – no complaints here
Dec 2017: revenue grew 42%

No one would ever say that 42% is bad, but it’s just over half what it was a few quarters ago. It is fair to say that the growth rate is slowing FAST. That fact tells a very different story than their gaudy triple digit segment growth numbers.

They have 657 active customers. They had 566 at the end of 2016. That’s 16% more customers in 12 months.

You have to look at all the numbers. Here are a few more from the December quarter.

Revenue: 102.6M (up 42% YoY), a slight beat (1M or so)
Adj. EPS: 0.54 (up 64% YoY), an 0.11 beat
So far so good…but…
Gross Profit: 81.5M, up 38% YoY
Ok, not quite as fast as revenue, but close…
Operating Expenses: 52.2M, up 49% YoY
Uh oh…revenue was up 42% and OpEx was up 49%…that’s not great.
Operating Income: 29.3M, up 22% YoY
There it is. WOAH. 22%???

Let me stop for a minute an explain why I’m not excited about that 64% growth in EPS. Sounds AMAZING…but do you see what really happened? Operating Profit was up 22%. They turned 42% revenue growth into 22% operating profit growth, but then through some accounting (paying more SBC and less income tax) showed 64% EPS growth.

When you look at ALL the numbers, you see the real story – they’re growing less and it’s costing them more. So before you jump on me and scream, “It’s a GROWTH company,” hear me out. I’m fine with spending to grow! If they can turn the OpEx into faster growth, great – but growth is slowing down!

Conclusion

The Trade Desk isn’t down and out by any means. They’re still growing…just not as fast as they used to be. They had a fine year, yes. But is this the bargain of a lifetime? A foregone conclusion? A destined long run success? I’m just not so sure.

Bear

volfan84 · February 23, 2018, 1:46pm

Very good points, Bear.
Those factors are probably why TTD didn’t blow through $60 today.

TTD is a bit in between, as they are already profitable, but remain in land and expand mode. That context seems to me to be key to looking at their overall numbers.

volfan84
Posting from out on the lake

SaulR80683 · February 23, 2018, 1:48pm

When you look at ALL the numbers, you see the real story – they’re growing less and it’s costing them more.

Bear, I agree with your analysis. I owned TTD once and sold out too.
Saul

LifeOfDreamer · February 23, 2018, 2:01pm

Wow…we have different views of the industries out there for sure.
I took small positions in PSTG and ANET, largely due to initially hearing about it on this board, but they are 1 year plays for me likely at most. I like their P/S ratios and when I think about the market share out there still, I can see growth. But like JNPR, NTAP, and every other IT company out there, I think it plateaus in a hurry due to too much competition and simply not enough of a moat. Every major storage vendor does flash, for example, and has for years, as an example. SDN is not a new concept and every major networking company has done it for years, as another example. Again - I just opened small positions, especially after ANET came down from their highs. Hopefully these two pay off this year, but they largely each do 1 thing.

TTD is in the advertising business. Not comparing them to Google, but when you realize that is how Google makes their revenue, you realize the TAM is huge for advertising…always has been and probably will continue to be. The markets are moving to digital and programmatic. AT&T buying TimeWarner so they can have enough content to stream. Disney buying Fox for same reason. Netflix set the trend and everyone is racing to catch up. Amazon already there with their Prime Video investments. CBS just put their big new Star Trek show on streaming channel. Sling TV is growing, ROKU (more a shovel in this space) is growing, etc etc… On conf call yesterday TTD announced new CTV partnerships with NFL network, FX, TNT, and Travel channel as more examples.

CEO Jeff Green has consistently called out the biggest areas for growth as: CTV, Asia/China, and Mobile. Mobile just grew to be the largest segment of their biz, just surpassing Display for the first time. In Asia, the Google/Facebooks of the world (Baidu/BABA, etc) have partnerships with TTD and are NOT following the “walled garden” model of GOOGL/FB, and they have the largest mobile users and growing middle class in the world. Before you assume China will have new companies that are “The TTD of China” and ruin Green’s plans, you realize that what TTD brings to China, as stated by Green, is the US Brand relationships…so a win-win for China and TTD to partner up.

So if the company has been growing rapidly (which they have) WHILE the market transitions from the legacy non-programmatic model, AND their stated growth market targets have just started to grow from a small base, then you realize that the slowing revenues from more traditional (Display) will be offset by the faster-growing and eventually-larger markets of CTV, China, and Mobile.

You don’t even need Google/Facebook to drop their Walled Garden approach for TTD to be successful, but in the likely event they eventually do, as Green points out Google can better monetize YouTube that way, then you have even more upside.

While not exactly apples-to-apples as switching standards tend to offset each other naturally as companies upgrade over time, an easy way to think about it would be if ANET had never done 100gb and instead had been hot and heavy in 10gb only, with an emphasis on the 400gb market down the road. You would (rightly) point out that 10gb market is not growing as fast as it used to and would point to the 400gb growth as a mirage because it was such a small base.

The move for TTD is not going to be linear (which Green mentioned yesterday on conf call) as it would be for ANET transitioning from 10gb to 100gb to 400gb. TTD is making more of a 10gb to 400gb move. That base will be small for now, but will grow exponentially.

You also mentioned their # of clients…they already have half of the 200 largest advertising brands. Green has stated before, I think even in the interview with TMF, that client retention and a bigger SOW with existing clients is the play right now vs a focus on new clients. Again - many/most brands are just now making the shift to programmatic and/or they are just now allocating more and more of their advertising budget to programmatic. TTD wants to sell those clients on CTV, on leveraging China, on operating more in Mobile, than those Brands are doing today.

I noticed that small-cap companies with this kind of growth tend to have P/S over 7, and many times closer to 10. At the projected $400m revenue for 2018, that would put them at a $2.8-4b market cap. They are sitting at $2.3b after todays spike up. I do not sweat their earnings because Green has repeatedly stated it is “land grab” time and reinvesting in the business is key. The company, unlike a lot of TMF-recommended small growth companies, is and has been profitable…but growth and revenue is more important to Green right now.

-Dreamer

PaulWBryant · February 23, 2018, 2:16pm

The move for TTD is not going to be linear (which Green mentioned yesterday on conf call) as it would be for ANET transitioning from 10gb to 100gb to 400gb. TTD is making more of a 10gb to 400gb move. That base will be small for now, but will grow exponentially.

Dreamer,

Why do you say that? What move? And why won’t it be linear for TTD?

Bear

LifeOfDreamer · February 23, 2018, 2:26pm

CTV growth, programmatic growth, the move from traditional to digital for Brands, the growth with China.
All this is happening now in real-time.

But Clorox or Unilever or P&G doesn’t just decide to move all of their spend to programmatic all at once. These are the biggest advertisers in the world, which is why SOW with existing clients is more important (and therefore their 16 straight Q’s of 95%+ client retention) than new clients.

CTV - you are seeing the process taking place…Disney announced intentions for 2 streaming services. They are trying to finalize Fox acquisition for part of that reason. Same with AT&T buying TW. CBS just put a major new show on streaming service. Netflix growing, Amazon Prime growing. Apple and Google won’t just sit around and let them take all the streaming ad revenues or subscription fees. Hulu continues to grow, etc… But this is all still early days, yet expected to be the biggest market in the end. (again - think what 400gb means to ANET, except CTV is probably 1 year ahead)

China - TenCent, BABA, JD, Baidu, Weibo…all growing rapidly, as China is a massive market. More mobile users in China than US. No walled gardens like Google/Facebook. CTV expected to adopt faster there as they are more internet/mobile-inclined already. Again - fastest growing and largest middle class in the world. International was 13% of TTD revenues for 2017…expected to grow faster than US, but - again - early days so a smaller base.

-Dreamer

LifeOfDreamer · February 23, 2018, 2:34pm

read the CC transcript to answer most of your questions on my comments:

https://seekingalpha.com/article/4149772-trade-desks-ttd-ceo…

On Asia/international - small base growing rapidly
"While we move forward with expanding our partnerships on inventory and data, we are also pushing forward with our third priority which is expanding our geographic footprint. In Q4, international spend outpaced that of the U.S. by more than 3x. Exiting the year, our international business amounted to just about 13% of total spend globally. Nearly every one of our offices outside of the U.S. grew over 100% year-over-year for the full-year 2017.

Today, Asia is nearly one-third of the total global ad spend and is expected to see some of the fastest programmatic growth in the coming years. eMarketer estimates that China grew programmatic spend by 49% in 2017 compared with about 28% in the U.S. In Southeast Asia which eMarketer defines as Singapore, Indonesia, Thailand, Malaysia, Vietnam and the Philippines, digital mobile ad growth of about 60% is expected in 2018. We are extremely bullish on growth in Asia."

Analyst basically asked question about small CTV base and when it becomes material- Green’s response:
"Awesome. So as it relates to programmatic TV, I mean when we talk about the expediential growth happening year-after-year like, once you experience the numbers like we’re putting up and we’re talking about, we use numbers like 1000% growth and we talked about how it looked like that last year. We’ve been in TV for a couple of years now. When you’re putting up percentages like that for multiple years, it’s impossible for it not to become material really fast.

So I really expect those green shoots that we’re seeing now in early 2018 to be much taller by the end of 2018. So I think 2018 is the year that it becomes material. But we’re growing the rest of our business which is already scaled so much that it is going to take years for it to be the kingpin that eventually will before it becomes the largest piece in the pie and what we just talked about mobile being 40% of our business before it surpasses mobile as the largest chunk of the business."

The “not linear” comment from Green is in this response to CTV analyst question. Analyst had read that by 2020 10% of tv would be programmatic and he was asking Green if he agreed with that number:
"Yes, so thank you. I love the question, I love the topic. So the thing that it’s hard to predict inside of TV, and I kind of alluded to this in the last question or last response. I just want to be a little bit more explicit in this response. So the thing that’s hard is, if you’re running a big TV company, still 90% plus of your revenue come through linear television and I think many of them are acknowledging that that business model is going to change, like linear television is not going to last for 20 more years. But nobody knows how long they can ride the wave that they’ve been on for a while.

And they make a bunch of money from it and they like the way that it works and they’re afraid of all the change that comes that they may not make as much money in the programmatic world and the digital world as they did in a linear television.

But what that does is it creates a ticking time bomb in a linear television, which is fewer people are watching, so they add more commercials to make up for the fact that fewer people are watching and they create a work experience. I think all of us as consumers can acknowledge that the experience in terms of just that add to content ratio that has become worse over the last few years.

Even though the content have gotten better and invariably the cost of the content has gotten much more expensive, which is why I call it a ticking time bomb. So the thing that’s hard for an analyst to do is figure out when that an inflection point starts, when does the bomb go off? When the consumers really say that they’ve had enough and when does it stop looking like this early adopters of cord cut instead of everybody cord cutting and that is the hardest part to predict.

So I don’t know 10% is really aggressive, whether 10% will happen by 2020 is an open question. I do believe that’s aggressive. But it’s also not - it’s not impossible and largely depend on how well three or four or five companies make their content available and make the transition and when they see this as a landgrab opportunity, it changes everything.

And it will be really interesting to watch companies like AT&T and Comcast and NBC more specifically, ESPN, Disney, like these companies the way that they make that their content available will determine whether or not that that 10% as possible, while at the same time consumers are changing. The one thing we can be sure of is the move will not be linear, meaning that the shape of the adoption curve will not be linear and that that’s why the super hard to model."

When you read Q3 transcript, Q2 transcript, Q1 transcript, or any interviews with the CEO (TMF or otherwise) you will see the consistency of his predictions and focus. The company is just flat out executing.

-Dreamer

volfan84 · February 23, 2018, 2:53pm

David and Tom should be so proud of how Motley these opinions are.

LifeOfDreamer · February 23, 2018, 3:39pm

Final comment for now. Gotta get back to life, but I had 3 months of waiting and 2nd-guessing myself after TTD’s drop in November…been soaking it all up, plus a ton of moves to my portfolios today as I was too heavy TTD and too heavy in cash, and I finally deployed some of those funds. Cash is still bigger than any 1 holding in 2 of my ports though…finding it really hard to see value out there since so much has run up the past year.

Ok…another way to understand that this growth won’t be linear is 3 things I think are important:

Green shouldn’t screw up on an ER forecast again. CEO Jeff Green, who is a founder, technically proficient, and who created the ad marketplace with a company bought out by MSFT over a decade over is a passionate and sharp guy. But he screwed up by being a bit too conservative during the Q3 call when he didn’t need to be, and the stock took a hit. He has even stated his intention (since company is still fairly new with IPO in 2016) was to build trust with wall street by always beating/raising. He did technically beat in Q3, but his guidance was picked at because he raised the Full Year guidance by less than he over-achieved in Q3, which gave the market pause about Q4. I think he learned a HUGE lesson here, and you could tell from his tone on the call that he was making sure his points were clear. When he was questioned about EBIDTA pressure or how material the CTV or China numbers were, about whether he was concerned with the Walled Gardens, whether he had concerns about strength of his clients budgets - he was ready with answers, and they were good answers.
Related to the above, Trump’s tax cut wasn’t a sure thing during Q3 announcement. (was signed in late Dec) Brands like Unilever, P&G, Clorox…these are massive companies that are benefiting from the tax cut and to an extent the repatriation of funds. If budgets were tight heading into 2018, prior to the tax cut, which I think Green was concerned about during his Q3 call, it was possibly advertising revenues may take a hit. But with extra funds now for dividends or stock repurchases or to put towards new business goals/objectives, companies can actually move forward faster with the investments needed to grow their use of digital and programmatic.
Sort of related to above also. Mentioned often in adtech blogs or articles is that fraud or inefficient or hard to measure ad metrics are a big concern for major Brands. (think bots clicking on ads and then brands being “charged” for those impressions/views) The Trade Desk is truly best in class in leading the charge to be transparent in fees, to weed out fraud, and have announced partnerships with White Ops for example: http://www.adweek.com/digital/the-trade-desk-and-white-ops-a…
Basically, Green saw this as an issue, because ONLY 2% of the $700b advertising spend is programmatic. Talk about early days. So Green wanted to make sure that TTD wasn’t getting lumped in with bad actors that provide fraudulent advertising ROI…didn’t want to be the baby thrown out with the bath water basically. But - the key is that Unilever and P&G have both publicly been stating that Google/Facebook need to clean their act up and railing against fraud in the digital space. They know programmatic/digital is the future, but CMO’s are reluctant to shift massive parts of the budget that direction if they are going to find out later they paid for a bunch of bots to click on ads…they don’t want to be fired. So in Q3 there was a lot of noise around this, which I think Green was hedging against. Keep in mind, any slowness would be temporary or as Green referred to it “transitional”. These brands will grow their programmatic buckets…but it won’t be LINEAR…it will probably grow in big chunks and many brands will go all-in at once. These are all independent companies getting out of their comfort zone and moving from traditional to digital with their ad dollars. It is a LOT LIKE COMPANIES DECIDING TO PUT SOME OF THEIR APPLICATIONS OR WORKLOADS INTO THE CLOUD FOR THE FIRST TIME. AWS exploded…Azure exploded. But in 2010-2012, I still had clients telling me they thought the cloud hype was a bunch of crap…they were set in their ways. You can’t always see the tsunami coming until your beach chair starts floating away. Point is, TTD, via their Agencies and direct to clients, has been getting the open/transparent best-in-class tech in front of clients and easing their concerns about the move to programmatic. Again - this reiterates why SOW with existing clients is more important than new clients to Green. 2% of $700b growing to 25% of $700B is a massive and exponential move in TAM. That is why the 95%+ client retention and focus is so key to TTD. The base is small…the tsunami is real and it is coming, and the stock price will rise with the tide.

TTD has already built a profitable business, with great company culture and leadership, and their target markets are all just getting started now. CTV off small base. Programmatic as a whole only 2% of $700B market…a market that is expected to grow to $1T with majority of that spend being done programmatically. Currently at a $2.3B small cap with growth and profitable - and the best is yet to come.

Have a good weekend all,
Dreamer

Rundog999 · February 23, 2018, 6:08pm

For what it is worth, I have a friend who works in the advertising business and has dealings with TTD. My friend says that TTD’s founders are among the smartest people he knows in the business, but that TTD does not offer anything that Google or others can’t or don’t offer. My friend says that his company’s philosophy is to use TTD for the present to help ensure that competitive alternatives to Google continue to exist. However, he says that TTD’s services are high priced and he has doubts that, longer term, customers will see sufficient value to keep using TTD at those high prices.

LifeOfDreamer · February 23, 2018, 6:26pm

In the traditional display and digital ad space, sure.

Outside of youtube, google is limited for CTV.

Google has no impact on their China growth.

Google is awesome company and I invest there too. But this oppty is not a play where google is only competitor. I wouldnt invest in TTD if i thought Google was a long twrm issue.

Phoolio18 · February 23, 2018, 8:42pm

Bear & DreamerDad,

Great back on forth on The Trade Desk and thank you for providing all of your thoughts. I don’t know that I can add to much to the discussion as it seems like the Bull & Bear points have been well described.

Here’s what I can say in my opinion, this company is most certainly worth a medium sized position (for me that is around 5%). There is certainly customer concentration risk. I mean, they only grew customers by 16%. But, those customers control a gargantuan portion of the ad market and 95% of them decide to stay with The Trade Desk. There is also the walled garden risk. No company can compete with Facebook and Google, right? International growth has mitagated that concern to a degree, but it still remains. CTV is the big catch that seems to be on the hook to also help mitigate.

As far as leverage is concerned, GAAP earnings grew 54% this quarter as well on 42% revenue growth. I’m not sure I see the “slight of hand” the company may be playing with leverage. But I’m no financial wizard either.

Back to my simple point, I believe the risk/reward scenario for this company is quite favorable based on the current capabilities and the TAM. The model already displays profitability, cash generation and earnings and they are at the very early stages of their potential. The International and CTV optionality play an important part in the risk/reward determination. I simply believe TTD has the capability to expand tremendously and do so while being profitable.

Of course, a competitor could come along and blow the whole thesis to shreds, but TTD has a big lead.

A.J.

Darthtaco · February 23, 2018, 10:37pm

Pretty sure that most people here would understand when talking about business segments growing so much faster than the overall company that those segments would be building off a small base. Otherwise they wouldn’t be “emerging”. I would include that in goes without saying category.

It also goes without saying that such small but rapidly growing segments are extremely important for such small but rapidly growing companies.

Take the aforementioned segments. I don’t think you can find a breakdown exactly from what revenue to what revenue but they did say that revenue for the three “emergerging channels” Native (200% growth), Audio (600% growth), and Connected TV (535% qoq and 1000%Dec to Dec) generated $100M in add spend on TTd platform for 2017. That’s about 1/15th of the $1.55B in spend for the year. They earned $308M in revenue on that spend for about 20%. So they earned maybe $20M in revenue from these emerging segments. Based on the growth rates it’s safe to say that this small base from 2016 would have been something around $5-7M for a gain of $13-15M YoY. For comparison AYX was just celebrated for a “perfect quarter” where revenue increased $13.7M QoQ. I just started a position with AYX on Tuesday ahead of earnings thanks in large part to this board. I know that’s a year versus quarter comparison but it’s also a 500% growth rate verses 55% growth rate comparison. Both companies also finished yesterday at approx the same $2B market cap.

Connected TV and the ad spend across numerous platforms and apps is just get started and TTD is sprinting into this emerging segment. While continued 500%plus growth is probably not likely, even a fraction of that would start to be a lot of gum balls.

I’m not by any means suggesting that TTD is the perfect investment or I’d be in for a lot larger position than I am. It’s maybe 3%, though I’m strongly considering adding in the near future. But I do think they shouldn’t be dismissed outright either. They look to have some strong growth drivers in a changing field.

RaptorD2 · February 23, 2018, 11:07pm

Sounds AMAZING…but do you see what really happened? Operating Profit was up 22%. They turned 42% revenue growth into 22% operating profit growth, but then through some accounting (paying more SBC and less income tax) showed 64% EPS growth.

Amen, Bear.

I’ve a company or 2 (or 3 or …) on the other side of that scenario, which had truly outstanding results but didn’t bother to shuffle numbers which were realigned due to reporting changes and new requirements to make it easy for analysts and other hat racks to compare YOY change. Needless to say, their stock prices are considerably less now than before they reported, in spite of sales and growth that most companies can only dream of.

Unless one is a trader, either way of dealing with accounting changes sucks. One way looks good now, so the price soars temporarily (time to sell?) and the other way looks bad now (without interpretation) so the price suffers for who knows how long. If I had to choose though, I’d choose the latter. Pay me a little now or pay me a lot more later? Let’s see, I’ll take … pay me more! After all, it’s not like I’m planning on kicking the bucket this week. Not to mention one way is dealing with short-term glory seeking manipulators and one with some sense of an owner’s honesty. Again I’ll take … well, you know what I’ll take if those are the choices.

Still, I admit watching those 5-digit losses almost every day isn’t near as much fun as were the occasional days of 5-digit gains. I need to remember that it always takes longer to climb a long hill than to step off the cliff.

I can look past short-term pain easily enough. It’s tricky management in my companies that would cause real pain. Well, that and my broken neck. < sigh > it’s always something, isn’t it?

One Last thought: I wonder if TTD is hurting Facebook and especially GOOG. Offhand I would guess for one or both, that is affirmative - which means they may not be strong and nimble enough to serve as my port “anchors” any longer. Of course they’re way down on the charts now too.

Told ya, it’s always something.

Dan
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dumaflotchie · February 24, 2018, 7:52am

Conclusion

The Trade Desk isn’t down and out by any means. They’re still growing…just not as fast as they used to be. They had a fine year, yes. But is this the bargain of a lifetime? A foregone conclusion? A destined long run success? I’m just not so sure.

Bear

Hey Bear:

Before I add a little more color to what DD has suggested, at the NPI, we have pretty thoroughly pursued the “bear” case for this stock that essentially boils down to:

The “walled gardens” of GOOG, FB, AAPL, etc. would make access to customer buying/search preferences more challenging
privacy initiatives would make accessing customers searching and buying preferences more challenging
Their customer base is very concentrated largely to advertising agencies (whereas the GOOG’s of the world do not rely on agencies at all). Therefore, TTD may be subject to buyers power.
They are an early company and their growth rate may slow quicker as they mature just as CRTO did
Programmable advertiser casualties are littered from past failures and the market has doubts about whether TTD is going to be just another failure in a long list (casualties that have been flash in pans…Tubemogul got as high as $22 but fell to $8 when taken out by adobe, FUEL as high as $60 now down to $3. Numumerous other programmatic advertisers debuted over past 5 years including Tremor Video (TRMR), Rocket Fuel (FUEL), MaxPoint Interactive (MXPT), Marin Software (MRIN), and YuMe (YUME). The market ruthlessly damaged their stocks. Millennial Media was bought by AOL at a fraction of its initial valuation and TubeMogul was likewise acquired by Adobe Systems (ADBE) for a fraction of its imitation value.
A downturn in the economy would be felt quickly in advertising.

OK, now we have all those elephants out in the open, let’s go back and add some color to the excellent job that DD already did.

What then is the bull case:

TTD is growing at a rate over double the general programmable advertising industry as a whole (CRTO is growing at just that industry growth BTW)
TTD has a low market cap vs. more established advertisers (compare that to TSLA vs FORD)
SaaS is a clear paradigm shift and it has NOT yet hit mainstream news
The customer retention rate is higher than CRTO and they have surprised revenue in prior quarters to the upside 7-15% and have better margins than CRTO.
They believe they have a massive data base and intelligence that gives them advantages (moat) over new entrants or incumbents:

And so it actually gets smarter over time and getting smarter over time makes it more and more defensible which is part of the reason why we talk about when we ramp up a big customer it takes time, we have to go prove ourselves that after we have all of those learning and we’ve applied the budgets and the data that we have for years and years we think we have such an advantage over a newcomer that we’re going to keep doing that as long as we keep paying attention to it and building the right products and listening to our clients and maintaining our position as a product driven company. But there is nothing that can make this company fail faster than ceasing to be a product driven company that shifts product every single week and that is the core of who we are.

The OMNICHANNEL concept is crucial to their success with their ability to track a customers through all access points from mobile, to connected TV, to any country to any search, audio, video, etc.
They are expanding their customer base to major brands and not just ad agencies…thus broadening their reach.
Their expansion into audio, connected TV, Asia are all designed to go where GOOG, FB, AAPL may be less able to wall off gardens. Therefore, seeing these omnichannel sectors grow at a very fast clip (regardless of the smaller base) are important to the longer term investment thesis and should not be so readily dispelled.
They believe the above listed previous programmable company failures (and their stocks) are a major deterrent to new competitors…the ship has sailed according to them…the resources and historical databases required to compete are simply too great.
They have clearly stated that at this juncture, they are focused on growing market share and revenue growth and place increased profitability as a longer term initiate. At the present growth rate, they should be a $1 Billion annual revenue company in 2 1/2 years…this for a $2 Billion market capo company…does that seem reasonable???
They have a substantial land and grab success history…companies and brands tend to spend more the longer they are with them.
Take a look at these investor slides for a nice organized detail of what they do, TAM, growth rates, etc.:

http://phx.corporate-ir.net/External.File?t=1&item=VHlwZ…

So in summary…as in most stocks, there are threats and opportunities…each of us can weigh these in balance and place your bets where you think this likely goes.

Hope this adds a bit more color to an already colorful discussion.

Best:
Duma

http://www.stockta.com/cgi-bin/analysis.pl?symb=TTD&cobr…

captainccs · February 24, 2018, 9:08am

So in summary…as in most stocks, there are threats and opportunities…each of us can weigh these in balance and place your bets where you think this likely goes.

Hope this adds a bit more color to an already colorful discussion.

Best:
Duma

I was an early bull on The Trade Desk even in the face of Duma’s negatives. When I found out about the client concentration in ad agency holding companies I changed my tune and sold. Asked about new client acquisition Jeff Green said they were concentrating on retaining their ad agency holding companies (which are few in number). This clearly is a weak point for the The Trade Desk as it reduces pricing power and increases risk. I’m not saying The Trade Desk is doomed by any means, buy as Duma says, “place your bets where you think this likely goes [best].”

I checked my wish list for candidates and decided to add to ALGN and TREE:

http://softwaretimes.com/pics/ttd-02-23-2018.gif

There was an additional consideration, market sentiment. There is a lot of distrust in the market regarding programmatic advertising reflected in all the negatives that Duma has brought up. If they are misplaced, in time the stock price will reflect it and believers will make out like bandits. But only time will tell and time is what I’m short of.

But, as you can see from the chart, the earning reports drove TTD up and TREE down even when the LendingTree’s earnings were excellent. One reason could be that the market thinks the stock is overbought.

Denny Schlesinger

LifeOfDreamer · February 24, 2018, 10:17am

Duma,
Great job stating both sides. Agree that the market does worry about the bear case concerns and that the market also sees the bull flipside. I obviously tend to lean to the bull side right now. Have been in this stock since April 2017, but wish I had found it sooner.

I actually got into the TTD stock because in my job at a large IT VAR, I actually have as a client one of the 4 largest ad agency holding companies (the 4 are: WPP, Omnicom, Publicis, and Interpublic). I started getting news feeds on this client and trying to understand their industry better and it was quickly apparent that they were old school (Mad Men) and looking to shift to digital/programmatic, and that this shift was just now happening in real-time (like AWS/Cloud in 2012-2013). Anyway, it is all really interesting to me because it is sort of this cool blend of technology (digital, data mining, BI, AI) in the commercial space but where the end product is all these brands we all know and see everyday. If you don’t really think about it, you don’t notice how much advertising makes the world go round. TV ads, radio ads, newspaper/magazine ads, billboards, mailers, telemarketing…these are the traditional methods. Now it is about my digital footprint indicating my interests and allowing (in theory - we aren’t quite there yet) my every action on mobile, streaming (CTV), digital audio (Pandora, Spotify) to have a more personalized ad experience. On Netflix I rate the shows I watch to help them provide a better recommended list. On google’s news feed I block tons of spam sources, highlight preferred sources, and indicate my interests and have a daily news feed that is much more streamlined and relevant than just blindly surfing major websites. Some people can sweat the privacy concerns, and I get that, but I am not telling them personal family info or giving my credit card number…I just want the big giant messy online world to be more relevant and interesting to me. Nothing drives me crazier than having the commercials/ads I come across be repetitive and uninteresting, whether it is tv, streaming, or radio.

So I welcome our digital and personalized future, even if robot overlords probably come with it.

Thanks for the great write up, and the links to the investor day presos…I posted those on Seeking Alpha but don’t think I did yet here at the Fool. There is a ton of info in those investor slides and I thought they did a great job during that Investor Day last year. It can get a bit technical, but I like that the leadership can get in the weeds…they understand the nuances and have skin in the game, which I like in an exec team. I wish there was an audio recording to go along with the slides from the Investor Day, but I haven’t seen one. Slides are great, but the majority of the info is verbalized in presentations like that. Hopefully the Investor Day is an annual thing, and maybe they have another one sometime after Summer.

-Dreamer

TimWEdits · February 24, 2018, 11:09am

streaming (CTV)
Been following this discussing, thanks all. Am getting stuck on the ‘C’ in CTV though. I understand that it indicates streaming TV, but what does the ‘c’ actually stand for?

Phoolio18 · February 24, 2018, 11:25am

C stands for Connected TV.

A.J.

volfan84 · February 24, 2018, 11:28am

C is connected in CTV.

Hopefully the Investor Day is an annual thing, and maybe they have another one sometime after Summer.

Dreamer Dad, you won’t have to wait that long. Pasted from the link below:
Non-deal roadshow meetings for marketing purposes: Ansys (NASDAQ:ANSS) and Belden (NYSE:BDC) on Feb. 26, Twitter (NYSE:TWTR) on Feb. 27; Trade Desk (NASDAQ:TTD) on Feb. 28; Zynga (ZNGA) and ON Semiconductor (NASDAQ:ON) on March 2.

Stocks To Watch: Investors Recharge After Soothing Fedspeak https://seekingalpha.com/article/4150390?source=ansh