Not sure if anyone caught this from Zacks today. They picked TTD as their bull of the day, and fluff aside, there was some insightful content.
I have a relatively small 2% position currently, and I’m considering adding, especially given the recent pullback. But I’m trying to learn more about TTD’s growth strategy.
The part that intrigues me is the OTT tech. Is this really a groundbreaking new tech that will revolutionize advertising, or is this overblown? If it does get the traction Zacks thinks it will, then how long does TTD have before the competition moves in and fragments the market; 6, 12, 18 months? If it is so lucrative, wouldn’t Facebook, Google and Amazon want a piece of this too, aren’t they likely to leverage their size and add this as a channel offering relatively easily?
TTD partnering with Baidu, Alibaba and Tencent seems like a brilliant and bold move to tap the Chinese market, which apparently has > 1 billion users. But I keep hearing cable is dying, so isn’t that a challenge for OTT and by association for TTD?
The Trade Desk is a next generation advertising platform that allows marketers precision access to billions of consumers using hundreds of websites, apps, web-connected TV channels and other digital content providers like streaming music sites that slip ads into the experience.
The Trade Desk technology gives advertisers all of this information and access in a real-time “mission control” platform that allows two important functions:
(1) consumer behavior data and research across digital media “channels” and verticals to obtain precision targeting; and
(2) complete automation of ad-buying programs that can participate in virtually unlimited auctions – lasting just 1/10th of a second – for omnichannel advertising “real estate” that suits their requirements and audiences.
CEO Jeff Green even compares their platform to the modern stock exchange where automated algorithms are responsible for over 70% of the trading volume.
“Ads are the currency of the internet. Ads are the currency of nearly all media.” - Jeff Green, CEO of The Trade Desk
When advertisers circumvent traditional ad-buying and placement channels with networks and cable to get their commercials onto TV shows using the internet, it’s call[ed] “over the top,” or OTT.
Initially named in reference to devices that go “over” a cable box to give the user access to TV content, OTT advertising is also delivered via an internet connection rather than through a traditional cable/broadcast provider.
This is probably one of the biggest new markets for The Trade Desk.
With this year’s revenue projected to hit $650 million, representing 36% growth, this $10.25 billion company is trading for over 15 times sales. That’s not cheap, but it’s also not out of line with many young software high-fliers like Veeva Systems (VEEV) or Shopify (SHOP) that have high margins and are growing revenues between 30% and 50%.
And since The Trade Desk doesn’t create content or sell products, it’s never in competition with any platform, marketer, or retailer. It is merely the exchange for hundreds of ad brokers and thousands of companies to get the right ads at the best price.
Finally, The Trade Desk has some of the highest margins in all of software and the company is projected to grow the bottom line to $3.60 EPS next year for over a 20% advance.
Invest wisely my friends