TTD raw numbers

Investment Analysis Clubs Saul’s Investing Discussions
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My last post too Duma. Getting ready to fly out to LA.

I’d have to take a look more at those other reports. The first one shows $3 billion in programmatic advertising in 2017 and $30B in 2025? What the heck are they talking about? No idea what they are measuring.

Same for the other one. They come up with $68B in 2018. So I’d have to know what they’re measuring.

The MAGNA report, in general, seems to be the more widely used by the industry. And is the one discussed by TTD over multiple years now.

For the third article it’s more of what we know and is only important if you want to try to make the argument that Amazon, FB, or GOOG are competitors to TTD. Which they aren’t in this context. Amazon has a DSP that largely fills up Amazon inventory. Google has a subdivision Doubleclick that is in fact a DSP competitor.

But in the articles context Amazon.com and other Amazon owned media, Facebook.com, Google.com and other Google owned media are destinations. And more they are destinations only served by the respective destination owned airline. Conversely TTD is more like a travel agent. They can sell you a seat to any destination on any airline for a fee, with the exception of those few destinations(granted they are huge destinations that everyone wants to go to).

As we have said before AMZN, FB, and GOOG, except for those small parts of the business, do not compete against TTD. They compete against all the other destinations, media companies that exist in the digital space. FB competes against GOOG competes against nytimes.com for instance. Nobody goes to theTrade Desk.com to consume media where you will be shown advertisements.

But whatever. Pretty sure this is one of those arguments that will never go away.

Darth

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22

Facebook does have Facebook Audience Network that offers advertising on other websites other than Facebook. It’s value is still limited to whether the visitor has a FB account. With GOOG having a similar offering, it seems to me TTD does compete with TTD because they are all trying to compete for as space on independent websites.

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Sorry, I know my last post did not make sense. But it does seem to me TTD does compete directly with FB not only for advertising spend dollars but ad placement because a website can go with Facebook, google or TTD for their ad space on their site.

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Maybe I can explain this better with an example. How would an ad campaign from a TTD customer spend a dollar on a Hulu CTV show?

Thanks Darth for an incredibly clear explanation.
Saul

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25

Sure they compete. In your analogy TTD sells trips to the minority of out of the way places,whereas Facebook, Google, and Amazon are selling to Paris, Hong Kong, etc.

It is concerning when available information is not disclosed and yet it is hyped. It is also concerning when you grow slower than your larger competition.

TTD sells ads using data that is available in common. They have scale and are neutral in regard to demand side like no one else is. But how far does that take them against the mainstream ofte web, and the mainstream of CTV? We really need to understand this market better to put the slowing revenue growth into context. 40% long term growth is fabulous, but Criteo once led the industry as well, as did Arista in its own sphere, and Juniper before them.

Is TTD more like a Cisco or Amazon that continues to find new hyper growth markets or Morenike the former companies? I honestly do not know the answer. What I do know is Roku, who owns their platform is taking off w CTV, whereas TTD hides their CTV numbers.

It simply is worth a deeper dive instead of relying on charisma of management. It may very well be TTD is rocking and its best days are still Ahmed of it. But we are presently guessing on that.

Tinker

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Wow…this has a been a great thread.
Thanks for everyone who contributed.

Darth - Thanks for breaking down the market data to date. That was a very helpful reminder.

There was something in the initial posts that I wanted to clarify a bit.

(Duma) So assuming they do in fact beat again as AJ suggests…next quarter would be 43%

(Bear) This is an unreasonable assumption.

The 43% growth I mentioned was only applying last quarter’s percentage growth to next quarter. It wasn’t magic, but I do consider it a low bar. I believe I mentioned Green’s history of beating and raising and expect this to continue. I also expect TTD to be able to grow at or above 40% for some time. I’d begin to rethink things if I started to see growth slowing more than that.

I don’t see any material issues in the business, believe in the CEO, believe in their value proposition and ability to continue to take 20% because of it and more positives to long to list.

Things can change, but I believe TTD is a great long term hold. I’m hoping to hold it for many years.

A.J.

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Great post and example/explanation Darth…that post goes in the reference vault!

Dreamer

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It is also concerning when you grow slower than your larger competition.

Tinker, could you expand on what you’re referencing here. Facebook and Google both grew at a lower percentage wise rate than TTD. Same with Amazon. Supposedly as this article states Amazon ad revenue grew at 36% this last quarter.

https://www.cnbc.com/2019/04/25/amazons-advertising-sales-gr…

Any other larger competitors?

What about Roku? They also don’t tell us what ad revenues were. Platform revenue grew at 79%, but Platform Revenue consists of advertisements (both native ads on Roku home screen and in- video advertisements), subscription and transaction revenue, sales of branded channel buttons on remotes, and licensing agreements with TV brands and service operators. We can’t tell from the information what ad revenues were but they’re probably pulling the number up.

The most specific Roku gets is that “Advertising, monetized ad impressions more than doubled again in the quarter.” Did they break out a more specific ad dollar anywhere else?

And if we compare that to TTD where CTV ad spend tripled, we see that TTD is growing faster as well.

The best I can tell, the Trade Desk is growing faster than anybody else in the market. And when I look at opportunity and offering to current size, I think that TTD is the most attractive of the bunch.

But, nobody likes a slow down in revenue growth rate even after acceleration and even if it may be only one quarter(we don’t know yet). I did reduce my position a prior to the big drop and added some back in after the fall. Took some of the remainder and started a small position in ROKU to try on. Wait and see which one to add to as time passes.

As an aside if you look back to Q1 2018 full year forecast for 2018, TTD went on to beat that by 10%. If TTD beats this Q1 forecast by same amount that equates to growth of about 48%.

Darth

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29

Sorry I’ve only skimmed a lot of the posts here, but I feel like some of the argument is kind of wrong. TTD doesn’t compete directly with Facebook or Google, programmatic advertising does.

More or less Facebook and Google have maximised their ad inventory availability (for platforms that exist today). It will grow organically but they can’t create millions of new ads out of thin air, without either new users or increased usage by existing users (both of which we know are slowing).

The pool of ad inventory from the rest of the web getting transitioned to programmatic is growing massively and will only continue to grow rapidly as digital TV platforms, digital radio/podcasts and mobile/app ads continue to shift from rudimentary digital ad buying models.

Why will they do this? Because advertisers demand better targeting of individuals (such as that provided by TTD) as it is far more powerful than dumb ad buys. Why won’t they this happen quicker? Because programmatic inherently devalues ads, compared to the dumb model which effectively overvalues ad inventory.

So the question is not how TTD growth compares to FB/GOOG/AMZN, but how TTD growth compares to other DSP’s competing for programmatic ad spend. A better comparison for market growth is how does the growth of programmatic revenue compare to the ad revenue growth of FB/GOOG/AMZN. I’d suggest programmatic wins that battle.

The analogy of FB and GOOG being ‘Paris and Rome’, I find to be false too. The ‘quality’ you believe a site to be is kind of irrelevant, because your ideal target user could be on the best ‘quality’ site or trawling the worst ‘quality’ site. Either way, the advertiser just wants the target user to see the ad.

So the better metric is the score for viewability of the ad i.e. a headline banner just below the masthead of a newspaper site, might be better quality inventory because the user sees it and notices it, than a Facebook ad in the newsfeed.

What probably hasn’t been discussed sufficiently enough, is how digital ad spend is affected by economic cycles. Likely a global recession would see digital ad spend affected, which would in turn affect TTD’s revenue growth.

However at least TTD has global inventory and customers and is less reliant on one country’s economy than a traditional advertising agency.

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Not sure why this is so complicated. The overall digital ad market is growing at 18% yoy. The digital ad market consists of the walled gardens and the non-walled space. The walled gardens (Google, fb, Amzn ad, Roku etc) grew faster than the overall digital market. This means that the non-walled space as a percent of the digital ad market shrunk this Q. TTD operates in the non-walled space. But TTD grew faster than any company. What that means is that it occupied a bigger portion of the non-walled space which is good. As I have stated many times in this board I see it only as an yellow flag at this time. I am watching these growth rates with interest though. If the walled gardens continue to grow faster than the overall digital ad market it means that the walled gardens are taking a larger share of the overall digital ad spend which ultimately does not bode well for TTD. The good thing is that the walled garden growth rates have come down a lot this Q as well. So, the yellow and not red flag.

https://www.emarketer.com/content/global-digital-ad-spending…

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