TTD - HULU Tears Down it’s Walls

Investment Analysis Clubs Saul’s Investing Discussions
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In addition to HULU cutting its price for its ad-supported subscription service (it’s most popular service) by 25%

https://finance.yahoo.com/news/hulu-cuts-price-most-popular-…

They are also eliminating their walled gardens on programmatic advertising in their video ad inventory by opening up a private marketplace. And that ad inventory has seen rapid growth along with rapid subscriptions growth. HULU now has over 25 million subscribers in US or slightly less than half what Netflix pulls in. I do not have knowledge or a reference to what degree and how much Hulu was “walled off” before.

This will include opening up their inventory to supply side and demand side platforms as well sharing their programmatic data with these third party vendors.

Why the change, because that’s the way the advertisers (the people with the bucks) want to do business.

On Jan. 1, Hulu will officially open a new private marketplace for advertisers and agencies to programmatically purchase video ads running across the streaming service’s on-demand and live TV inventory. The PMP will enable advertisers to bid on Hulu’s inventory through their agency trading desks or demand-side platforms without having to go through Hulu’s direct sales team to access its inventory and set their prices.

The timing of the PMP’s introduction coincides with advertisers looking to push more money towards these closed programmatic marketplaces. A recent Digiday survey found that 62 percent of media buyers plan to spend more money buying ads through PMPs in 2019. Advertisers are generally interested in PMP deals because they take the flexibility of programmatic buying — which, compared to going through a direct sales team, can be like buying a product on Amazon instead of schlepping to a store — and combine it with the certainty of knowing whose inventory they are buying by working with a direct sales team.

Ad buyers have noticed the subscriber increase coincides with more inventory being available this year than in the past. “There were certain times of year where they wouldn’t give us inventory. This year wasn’t as bad. In 2017, we were fighting like crazy to get inventory,” said one ad buyer.

Must read for TTD investors. CTV is a Paradigm in the early innings of what will be a huge market. This is for both the ad supported subscription service and the live-TV service.

https://digiday.com/marketing/hulu-private-marketplace-ad-bu…

And more on what a private market place is

https://www.digilant.com/digilant_university/programmatic-10…

Darth

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Darth, this might sum it up BINGO!

Green is in the early stage of vindication.

Tinker

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https://discussion.fool.com/the-question-to-answer-is-will-roku-…

The linked thread is what I had to say about Roku and whether they could sustain a walled garden. I don’t think so. Now we see Hulu turning to DSP’s who can provide a better ROI for advertisers.
I imagine Roku will join. But I’m just listening to Green.

A.J.

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Darth, thank you for bringing up the HULU news. Jeff Green talked specifically about this a little bit on the most recent conference call in answer to a question at around 42 minutes. To see it actually playing out is quite encouraging.

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Darth,
Good find. Few days ago at NPI we were discussing if Roku and Hulu were walled and had concluded that Roku definitely was. Looks like Hulu was as well and is opening up its inventory to DSPs.

Hulu’s PMP, which is being run through video supply-side platform Telaria, will offer all the same ad-buying bells and whistles available when buying directly from Hulu’s sales team. These include Hulu’s proprietary audience segments, viewability measurement, frequency-capping and advertiser category separation

Now Why are they doing that? 1. They have more ad inventory now 2. Advertisers are interested in PMPs as opposed to buying from a sales team. 3. They can make more money than through their direct sales team

Advertisers may still be asked to pay a premium to access Hulu’s inventory through its new PMP. Advertisers can use their own or third-party data to target ads bought through the PMP. However, that capability comes with a cost. According to a second ad buyer, running a campaign through Hulu’s PMP costs more money than a comparable campaign purchased directly from Hulu outside the PMP. That cost consideration could impact advertisers’ interest in the PMP because they will need to assess whether the additional targeting and ease of access would be worthwhile, said the buyer.

It still augers well for TTD. But curious to see what their cut will be. Probably <20%. Also curious if Roku will follow suit. I have to think they will. Go Green…

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What TTD’s cut will be is the big question. TV ads simply do not offer the same tight focus of this ad is perfect for this person. TV ads are larger, more general facing, made to hit certain demographics vs. specific buying and surfing habits.

I watch a lot of connected TV and the ads themselves (except for a few cheap ones made for some charity, and one ad campaign by Kohl’s that appeared to be custom made for CCTV) are no different that those you see on linear TV. The products are so broad in nature that there is simply no value in tightly matching the ad to the viewer. Buy this truck, buy this laundry detergent, Apple iPad is cool and has lots of colors, T-Mobile baby…

Advertisers are going to have to change the way they produce their TV ads if you want to obtain the same value of ad matching to viewer as you have on uTube or the regular web. The value add potential is clearly not there at the moment for using all that data to target ads.

So it will be a process to see if the way television advertising will change to be more like programmatic advertising on the rest of internet media. If so then there is no reason TTD won’t retain its 15-20% margins; if not, then they will struggle to produce sufficient value add to deserve those margins in CCTV.

Thus, to me, CCTV is great and exciting, but more exciting for TTD is continuing to grow in traditional internet advertising, particularly in video and mobile where TTD can really provide value add to its customers and materially increase the efficiency of advertising.

On the Fool I actually like the return of the banner ads. I have seen many such ads that actually interest me. Many have lead me to excellent company insights. A few to pondering a purchase, and a minority of those has actually lead me to buy something. It is almost like bonus material for me.

We can thank, amongst others, TTD for this. But can the same be done for CCTV? We all know that at present it cannot.

Tinker

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Digging up a post from January. This is a checkup on a major part of the thesis for TTD. If you like to refresh the back story just hit the whole thread button.

Thesis - Walled Gardens will, over time, come down as the digital inventory exceeds the ability for a media company to fill it. Among other reasons like privacy concerns and the demands of the advertisers themselves. This is particularly true for the holy grail of digital ad inventory CTV (another thesis itself). This will benefit demand side platforms and especially the #1 DSP, TTD.

As mentioned in my original post, HULU opened up their ad platform to DSPs on Jan 1, 2019. I pointed this out as evidence of this TTD thesis. So what actually happened in the first 3 months? From the call.

Vasily Karasyov

Good morning, I have a question on Hulu. The CEO of Hulu at the investor day that Disney held actually called out that they will be investing heavily in automating this ad sales process. And I believe that refers to the private marketplace that they launched in January first and where The Trade Desk is a partner. So, I was wondering if you can tell us more about the role of The Trade Desk in that private marketplace and how to expect this private marketplace to evolve now that Disney is in control and really focused on automating the head sales process.

Jeffrey Green

Yeah. It’s one of the most exciting things happening in the TV. And the reason why, just to give a little top line color, is if you were to go down your Amazon Fire box or your Roku box and just see which aps are most popular, Netflix would likely be first, Amazon would likely be second and on many people’s TV Hulu would be third, and therefore representing the first ad-funded app in that stack rank. So I think Hulu is a very important case study. It’s an important tea leaf. I’ve been saying for years. They are one of the tea leaf companies of all of media. And I’m not sure that there are any two companies beyond Hulu and Spotify that represent tea leaf companies more than those two.

But Hulu, as you pointed out, announced in January that they are opening up their automated biddable marketplace. This is really exciting because, in the past, there’s been some channel conflict between their direct sales team and programmatic, and so they’ve gotten rid of that, so that we actually – they put it into one market which is great for them because then you consolidate all the demand, so compete against each other. And it’s great for us because all we’ve been asking for years is give us a chance to compete. And it means that our buyers will be able to dynamically influence pricing and will give us access to more inventory, then we fully expect to become a bigger and better partner to Hulu than we’ve ever been. And I think we’ve been, one of, if not the, most important programmatic partner that they have. So, I expect long term to be the most important source of demand and price discoverable inventory and premium content is an amazing combination.

So, I think what they’re doing is really innovative and I couldn’t be more excited about our partnership and the opportunity.

Big take away. Yes, TTD is in HULU. That was still a question. And they are one of the most, if not the most important partners for HULU.

One down, the world to go…

So this morning I saw the report and immediately sold half my position at down about 3%. Then added a chunk of it back at down 15%. So that helped weather the down day. It could still trend down more of course. It stinks to see a drop off in growth, but I’m not worried. TTD has a history of ups and downs in growth rates. I’ve held for over two years. The 4 -5x didn’t come in a day.

Darth

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Darth,
That is what I was looking for. I remember the Jan thread. Good someone asked that question. Green does not give numbers. But does talk about Hulu’s “one market”. I think when we looked at in Jan. There was an article which said it will still be cheaper for advertisers in Hulu to go to their direct sales teams. But the one market perhaps evens up the playing field. He also says TTD is Hulu’s biggest programmatic partner.

No discussion on Roku. I heard a MF Podcast today where they talked about Roku’ digital ad growth. Seems like that is a walled garden for now.

I did not sell. Here is the issue. Even if they beat Q2 by $5M they get 40% growth which will be a slow down and now a trend. Wonder how the market will react. Also remember last year FB scandal happened around this time and Google also had their double click issue which acted as tail winds. We dont have that this year for TTD.