Recent free Beth Kindig article detailing the required opt in for the ID for advertisers (IDFA). Apple making this a required opt in upcoming IOS 14 in September.
From the article…
The ad exchanges who deliver this are paid a handsome premium. Google and Facebook can clearly deliver this as they sit on mountains of data but there are others who use unique identifiers in a similar purpose to target and track across multiple devices, such as The Trade Desk with a unique identifier that will likely come under this restriction: “Sharing a list of emails, advertising IDs, or other IDs with a third-party advertising network that uses that information to retarget those users in other developers’ apps or to find similar users.”
The opt-in changes to Apple’s IDFA are impossible to quantify but independent mobile analysts, such as Eric Seufert, have called this an apocalypse with opt-in rates likely to hit 0-20% with an article stating that “deterministic, user-level app attribution will cease to exist once [Apple’s] SKADNetwork adoption reaches critical mass.”
Q1 2020 listed total mobile spend increased 38% yoy. I cannot see mobile’s percentage of total revenue.
https://www.forbes.com/sites/bethkindig/2020/07/27/advertisi…
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I don’t know how closely people are following this or how technical they want to get, but Jeff Green from TTD has spoken extensively on this topic. Here is one example:
https://www.adweek.com/programmatic/the-trade-desk-ceo-is-no…
I can summarize Jeff’s position:
- Digital advertising is evolving and new formats like Connected TV don’t rely on cookies or IDFA.
- There are alternatives liked hashed-email that will take the place of cookies and IDFA.
- Jeff isn’t convinced that the apocalypse is coming as it would create FTC issues for Google.
I am long TTD and don’t believe any of this will materially impact their business. In may, in fact, benefit them as smaller competitors are less well-positioned and will struggle to implement the changes required to thrive in the new environment.
Beth’s article is the same hyperbole most journalists have been saying (wrongly) for years about digital advertising. Why? Journalists correctly see that ad platforms and exchanges are thriving, but the traditional publishing model is what is breaking down. The same model that supports their salaries.
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while there is a reason to be skeptical of journalist (or anyone for that matter) showing apocalypse, there are also good reason to be skeptical of great sales people like Jeff Green, specially as an interested party in this specific case…
We have discussed on this board extensively how TTD puts out metrics but avoids substance when needed (i.e. show triple digits gain on CTV ad revenue but dont show how small that is for TTD)… and really, big concern for TTD is that while CTV revenue may continue to go up, if IOS14 becomes a problem for mobile ad revenue, CTV revenue gain may not be enough to overcome such a drop AND deliver top line growth that TTD valuation demands…
Curious if this is not a real concern to TTD holders and why not…
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“Curious if this is not a real concern to TTD holders and why not…”
I am a TTD investor; it represents a solid position in the upper quartile of my 38 position portfolio. I have been in since January 2018 (+748.7%)adding periodically during the holding period, as recently as March 18, 2020 (+179.3%).
This represents a real concern for me and it should for others as well.
It was in mid-June of this year when I discussed TTD with Beth, at the time, I was gloating because TTD had fully rebounded from the Covid Correction by mid-June and was achieving new highs. Beth had cautioned investors (privately and publicly) in April and May that she was moving away from programmatic advertising, there was a chance that ad-tech would be flat and as an industry, it was just not going to be able to guide as high as Cloud companies, so she was putting her efforts there.
Fast forward another 45 days, and Apple/IOS14 have put another brick into TTDs backpack; as if the Covid mountain wasn’t hard enough to climb without the extra weight.
To this point she cautions that she wasn’t going to recommend selling winners; she feels all should be aware that this just isn’t noise from Apple. Apple controls a significant majority of mobile ad revenue as the owner and controller of the tech stack.
If the TTD investment thesis touted IDFA as a distinct competitive advantage (which it was because it provided for omni-channel programmatic advertising); then these latest developments should be of real concern. How large, I guess, as owners of TTD, we should be closely monitoring the situation.
I will leave you with this thought…Beth states that she wouldn’t tuck tail and run from TTD; but as she has done on many occasions in the past, she likes to emphasize that there is no such thing as a moat in advertising unless you own the tech stack.
Harley
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Just posted Ad Week Article
https://www.adweek.com/programmatic/the-trade-desk-building-…
Luck to All Fools,
Silverlinin (Long TTD)
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Harley -
I have similar thoughts re/ IDFA. I bought TTD early this year (2020) and again during the March lows. Small position in a portfolio of ~15 companies.
Green is a good salesman - and that is not necessarily a compliment.
I think Beth Kindig is generally pretty on point, although my investing style is a bit different from hers as I don’t really look at technical charts for entries. (I know that’s not what she does specifically, but it is part of her service she runs with another fellow.)
Listening to Green, you get the sense that CTV will eventually eclipse mobile in the next several years. The opacity with specific numbers isn’t ideal so I won’t be adding to TTD for now. I’ll sell if I have a better opportunity with which I feel more at ease.
Aside: Green seems prone to making these kind of statements/claims. For example, besides his comments on Apple/IDFA, he’s also claimed that Netflix will eventually have tiers with ads. This is a pretty bold statement given that Hastings has repeatedly emphasized that Netflix will be ad-free. (I follow Netflix as it is a larger position in my portfolio and I think Netflix has significant pricing power long term.)
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Just an update - I went ahead and sold all of my TTD early this past week.
The more I dug into the potential risks for TTD, the more I realized that TTD, while the best of the independent DSPs, still competes in a very difficult environment.
CTV advertising will be a big thing and they’ll likely get a sizeable cut, but since they don’t own their own platform (and the valuable first party data that comes with it), I see it as a tough, tough battle for advertising dollars as DSPs really don’t have “lock-in” with their customers.
I hope they do well for the longs here - it’s just not something I want to spend more time trying to figure out, specially given the other risks as well (e.g. Apple as mentioned previously in this thread.)