This is a nice bullet list for TTD and I think all your points are valid, including the valuation conundrum. However, there are ideas that can’t be gleaned from reading a brief feature list when it comes to this company.
Learning what MAKES The Trade Desk such a fast grower and so valuable, IMO, requires going beyond the simple list. The fact is that many others have tried (and failed) in the advertising sales game. Most are gone or down 50% or more from their IPO’s. What makes TTD different goes right back to their business model. They aren’t out to get cheap advertising. They aren’t trying to overcharge buyers for products, nor are they out to underpay content providers for ad space/time. There goal is to find the most effective advertising for their clients no matter who the content supplier is. The way they do this is by using AI, or Artificial Intelligence.
This model is kind of like buying stocks. It’s not as hard to find good companies as it is effective advertising, but find them we must. Then we need to make sure that the price allows for a decent (or better) return if and when we invest. The same is true of buying advertising, but advertising comes in many different forms, and there is no SEC, nor hundreds of companies publishing data on its effectiveness. It has been, to date, a true Black Box. Add to that all the new forms of content (internet, of course, broadcast TV, radio, Cable TV, podcasts, streaming entertainment, etc., and if suddenly a buyer of advertising is faced with an array of suppliers that boggles the mind.
Now comes TTD’s genius (and unique) business model. You tell them what you want to accomplish, they sic their AI software infrastructure on all the myriad forms of advertising and the relevant results, and they come back with the most effective form of advertising for you dollars you want to spend.
Nobody loses except the suppliers that wanted to hide everything (Black Boxes are, of course, fantastic at hiding things, and no one can verify results without spending up front.) Voila’! Everybody wins.
Now we come to price. I agree, it’s expensive. So was MSFT, AMZN, GOOGL, and AAPL. Good companies are seldom cheap. Thankfully I’ve been long TTD for awhile so I don’t have to pay today’s prices, but you know what, my friend? They were expensive way back when too. Very expensive. “TOO” expensive. What’s an investor to do, pass and miss out? Well, maybe.
Or, an astute investor who recognizes quality when he/she sees it, could buy a small “starter” position and build on it at opportune times when the price dips (or earnings skyrocket). After a few months or a few years, he/she 1) didn’t miss out, 2) made a great return and 3) has a piece of a great company with a great future.
The alternative? Pass completely, put TTD out of your wish-list altogether, and 2 years or 5 years from now, kick yourself endlessly for being so obstinate and dare I say it … so darned cheap.
Sometimes today’s expensive company is tomorrow’s “I shoulda” and sometimes today’s “Cheap” company is tomorrow’s “Cheaper” company. Or worse. Just sayin’ …
Good luck all!
Dan
long TTD and smart, expensive businesses
short anything cheap
