There is an interesting exclusive article I just read on the WSJ site. You will need a subscription to read it - so I will post the link & walk you through the main points of the article and and how it links to The Trade Desk and what I learned about the internet television ad business.
Disney is launching its new streaming service in November. It is currently at odds with Amazon which makes the, Amazon Fire TV streaming stick, over the percentage of ad placement revenue it will give Amazon in return for Amazon allowing users of its Fire TV to see Disney content. According to the article Amazon’s Fire TV had a 29% market share in the United States in Q2 of this year behind ROKU’s 41 percent market share for media device shipments.
Amazon, as well as ROKU, typically negotiate with a supplier of content, such as Disney, for a percentage of ad slots in return for carrying the content on its device. Typically Amazon begins negotiations asking for 40% of the ad slots, according to the article, and negotiations often bring down the final agreement to 20% or 30%. Keep in mind Amazon is the “sell-side” platform for these ads within the content providers app when viewed through the Amazon Fire TV device. The Trade Desk is on the other side, or the “buy side”, of the equation. The more inventory Amazon has to sell, now that Amazon Fire TV it is no longer a walled garden, the better for The Trade Desk as it gives it more opportunity to match its client’s ads with viewers and content.
My interest is around the negotiation which must be taking place across the streaming landscape for “sell-side” ad placement rights. It helps my understanding that the “buy-side”, represented by a company like The Trade Desk, has a much more powerful position in the entire financial advertising ecosystem no matter what device a user uses to see Disney content. Disney sees all “buy-side” platforms as neutral and as its customer, where it sees the “sell-side” platform as a negotiating adversary at worst and a wary partner at best.
My contention is that The Trade Desk is really in the sweet spot - it has the smartest management in the space, a platform that is ahead of competition, and an enviable position on the “buy-side”. No matter how the Disney/Amazon negotiations turn out The Trade Desk still wins.
Frank - long DIS, long AMZN, long TTD, see profile for all holdings