TTD: Anecdotal Observation

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I recently switched streaming services from AT&T’s DirecTV Now product to YouTube TV. The AT&T product had just increased its monthly price, again, and I decided to make the switch. I had used the AT&T streaming product for about 14 months which encompassed a name change from DirecTV Now to its current name. Over that time period I observed the introduction of programmatic advertising to the platform.

AT&T is NOT inside a walled garden & it appeared to fill most of its content with ads, some I assume sold to users of The Trade Desk’s platform.

YouTube TV is a subscription service that costs about $50/month and should not be confused with YouTube or YouTube Premium. They are different services. I am paying to see live television, local channels plus over 50 other channels including live sports on YouTube TV.

YouTube TV, like YouTube, is inside a “walled garden”. The Trade Desk, as far as I know cannot sell ads to its content. I have noticed watching numerous Bowl games this week that there are many 45 second ad slots that are NOT being filled. In other words YouTube TV is not serving up an ad and collecting revenue multiple times per hour. You can tell this is happening because you see the ESPN ads which run with the ESPN scroll of scores and sports news at the bottom of the screen. After the ESPN ads conclude you see the 45 second space provided by the content provider, ESPN, to YouTube TV. There is no ESPN scroll at the bottom of the screen for the 45 second ad slot given to YouTube TV. You simply see a 15 second nature scene and then a 30 second banner saying ESPN is in a commercial break and programming will be back shortly.

So this has got me wondering - at some point will YouTube TV join Amazon FireTV and take down its walls to allow The Trade Desk to offer ads in its unfilled spots as opposed to foregoing revenue by simply showing nothing for 45 seconds about ten times a game?

Frank - long, GOOG, long AMZN, long TTD, see profile for all holdings

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I imagine that Google will try to fill its own ad inventory. That’s how they make most of their money after all.

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Good post, Frank. I agree w your assessment.

Further credence/need for TTD demand side platform. TTD has the demand/advertisers on it. There’s a TON of supply w AVOD ---- and more supply being created by the minute. Roku’s CEO has said the same thing ---- they have plenty of supply/inventory on their own channel… Jeff Green has stated that over time, all of these walled gardens will need their capability ---- including SVOD. I agree w him. TTD has the demand in an increasingly demand constrained streaming world. As more advertisers move from linear to digital ---- digital only 3% penetrated…TTD wins. Amazon’s walled garden has already given way in part to TTD. The others will fall as well.

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then a 30 second banner saying ESPN is in a commercial break and programming will be back shortly.

I believe that, if you think the way current broadcast advertising works, this is the time given to cable company or the local affiliate to run ads. The current infrastructure of advertising is still having growing pains with allocating ad times. The rules and contracts haven’t caught up.

What I’m trying to say is that YouTube TV, Sling, or Hulu Live TV and etc may not be contractually able to play ads during those time slots because the network has contractually obligated that time to other entities as it is broadcast on other mediums. Being that it is live TV and not On Demand content. So I’m not sure it’s an ability to fill slots problem at this stage but more a legal and contractual issue.

AT&T may have not have this issue as it has the DirectTV service. And basically Now is a broadcast of that over streaming. Maybe your Now service has a local tie-in.

I imagine that as more and more live TV viewing transitions to streaming these obstacles will come down as contracts are renewed. Ultimately leading to more inventory which at some point will create a fulfillment problem. But I don’t think we’re there yet. Which is good. We want something to look forward to.

Here is a good article explaining how this works better than I did:

https://www.marketplace.org/2016/05/23/whats-no-commercials-…

Darth

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Great input Darth. That may explain it.

I continue to learn how this stuff works and I enjoy experiencing it as I watch updates and variations roll out.

Frank - long TTD, see profile for all holdings

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This is especially Interesting to me because when I cut the cable long ago, it wasn’t for anything to do with price; it was to get away from advertising. When fiber optic internet & TV came to my city, I went with that but still kept Netflix for the same reason—no advertising. Now our tv and internet run about $165 a month, which is more than I care to spend for what little tv we watch, and what I watch most, besides PBS and BBC occasionally, is still Netflix, for movies and documentaries. I’m hooked on fast internet, but could do without 99% of the 200 channels of tv on offer.

I have become so adverse/immune to advertising that any time I watch tv or listen to the radio with family or friends, and someone says something about a commercial they just viewed, (“Whoa. Did you see that?”) although I was sitting right there with them, I have to admit I don’t know what they’re talking about because I have the ads so effectively “tuned out” that it must be ingrained in my brain.

So, just as everyone including TTD, ATT, Disney, Hulu, networks, etc., etc., are fighting the competition to place ads all over the internet and cc tv, I can’t help but wonder if I am typical in my distaste and boredom of being constantly bombarded with advertising for stuff I don’t need or want, or if I’m atypical and everyone else is ok with the constant advertising as long as they can watch what they want in between ads.

Or maybe it’s an age thing? I don’t know; I just know that I am so tired of being awash in constant advertising, that I am willing to pay (considerably) more for tv, music and news from either, without advertising. So, if Netflix caves in to the ad monetization tsunami one of these days, I can only hope that they (or someone else) adopts premium services that feature no advertising at a still reasonable price.

Obviously, somebody must be buying the pills, the insurance, whatever all the stuff is being advertised, but I don’t even know what stuff that is, and I seem to be getting along just fine without knowing.

Dan, Spotify subscriber and in spite of my own viewing and listening choices, TTD shareholder

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Oh wait, I.m not on any of those either. Never mind.

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Raptor,

It sounds like you know this since you are invested in TTD. Ads aren’t going anywhere. They are the primary avenue for sellers of goods to get their services to the masses. Ads are necessary, even if a necessary evil as you view them.

Further, the vast majority of people will likely want to view content as cheaply as possible and will not be able to afford too many subscriptions. Like I said, it appears you already know all of this since you are long TTD. I agree with you.

TTD has lots of room to grow in several parts of their business. They are very well positioned in CTV which should grow significantly in 2020. Sometime revenues from China should start making a difference as well. Outside of China, the rest of the international markets are growing quite well.

Take care,
A.J.

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I have to agree with Raptor on this based on my personal dislike of adverts.
I own a TV but very rarely use it except for watching films which I have rented on Blu-Ray or when people are visiting us and we want a communal experience.
There’s plenty of research to support the fact that cord cutting and then subscribing to multiple streaming companies actually costs you more, so that would tend to imply that reintroducing adverts would save you money.
But three questions remain for me:

  1. Are targeted ads going to get better as TTD learns more about us and might at some future date realise that I’d never eat at McDonalds so offer me ads for local reconstruction services instead? I need my roof repaired and try as I might to convince McDonalds to do this then they seem strangely reticent.

  2. Will the smaller companies with a very limited advertising budget even realise that they can target local potential customers at a realistic budget, and how long will this take?

  3. I can imagine that Netflix might offer ads in low income countries for a reduced subscription price, but which companies are going to spend their ad budget on potential customers who are willing to save $5 (<guesswork) for that ad-supported service? This seems counterintuitive to me since those potential customers will probably be cash strapped as it is, so won’t be a massive source of revenue unless you’re just trying to get them to shop at your store or switch brands of toilet paper.

Food for thought.

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