TTD raw numbers

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Sometimes raw numbers can be helpful. The difference between 41% growth and 50% growth might not be as much as you think. If you’re selling on 41% growth you’re telling me that the difference between selling and buying is the difference between this:


Mar18 Q:  86m
Jun18 Q: 112m
Sep18 Q: 119m
Dec18 Q: 161m
Mar19 Q: 121m

and this:


Mar18 Q:  86m
Jun18 Q: 112m
Sep18 Q: 119m
Dec18 Q: 161m
Mar19 Q: 129m

Both look pretty good to me. With next quarter guidance at 154m, I’m not even a little worried.

Bear

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Sometimes raw numbers can be helpful. The difference between 41% growth and 50% growth might not be as much as you think. If you’re selling on 41% growth you’re telling me that the difference between selling and buying is the difference between this:

Bear:

True that the numbers can be lesser absolute amounts but remember they are guiding to 37% YoY growth and not 41%.

This NPI thread perhaps adds some color to this conversation:

https://discussion.fool.com/ttd-sorry-if-you-followed-me-3420409…

Last quarter, they guided to 35% growth and came in at 41%. Next quarter’s guide is 37% and will end at 43% growth with the same percentage beat. Green has a history of “beat and raise.”

The “beat” was a pretty small beat by TTD’s historical standards and the raise was very meager IMO…what 5% or so at year end? They are a very nascent field with but a minuscule fraction of the industry, then why the cool off on revenue growth all of a sudden? That is my issue…this was a very rapid drop off from previous quarters…despite being spit on the wind to the total advertising dollars.

Programmatic is growing 20% annually and now at $33 Billion so even in that narrow advertising focus, TTD should not be slowing down with just $500 million revenue run rate.

Here are the previous quarters growth rates from most recent backward:

41.23%  56.33% 49.63%	54.30%	60.57%	41.76%	49.96%	54.30%	75.63%

So assuming they do in fact beat again as AJ suggests…next quarter would be 43%…sequential from 41%. That would be 2 quarters in a row below their prior high growth rates well exceeding 50%…this despite the fact that they ONLY have 1.5% of the programmable advertising market.

CTV and China are their holy grail…but based on the massive deceleration of CTV revenue growth from 12,000% to 300% in just 3 quarters and the clearly VERY slow uptake in China…for me…this feels more like a longer slog than the racehorse it used to be.

Slogs still can be great investments so no need to panic…but of course the past few years in this market have been all about momentum.

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

This is an unreasonable assumption.

I look back to the December 2017 quarter where they grew “only” 42% (and yet had what at the time was a record high quarterly revenue of $102.6m). They had guided for $101m. So that was a less than 2% beat. They guided for $73m (37% growth) the next quarter (March 2018) and actually achieved $85.7m (60% growth).

Bear

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This is an unreasonable assumption.

Bear:

That may be true of course and perhaps they will blow away their guidance of $154 million and hit the $168.5 million that would qualify as a 50% YoY revenue growth. As you say, that would require them to beat by $14.5 million…how often have they beat by that much in previous quarters?

Anything is possible…but for me…probabilities rule and there still seems to be a few racehorses out there.

There are many many stocks out there in that 40%+ YoY revenue growth bookends…but rarified air in those above 50%.

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Here are the previous quarters growth rates from most recent backward:

41.23% 56.33% 49.63% 54.30% 60.57% 41.76% 49.96% 54.30% 75.63%

From the above we can see TTD’s quarterly growth is not smooth. Maybe it’s because that TTD is not a subscription based company and the sales can be lumpy.

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Here’s what I did initially:

I bought more on the day that earnings were announced at about $185. I sold some OKTA to buy those TTD shares. Then that afternoon, I reconsidered and sold the extra shares for about $198. I put those funds into more MDB.

After the market close, I decided that I would sell more TTD the next day (Friday) to add to my small SMAR position. On Friday, I was fortunate that SMAR was also down (below $40) and I executed on the plan.

Here’s why I cut back TTD to a 4.8% position:

I was mostly in TTD (since November) because of the outstanding financial performance which included a super high revenue growth rate. I have always had reservations about the sustainability of TTD’s business model but so long as the growth is great I was going to stick with it. Was the growth rate decline of 41% last quarter due to a strong Q1 in the prior year or is it an indication that the business is not as strong as we though. I really don’t know. But I know that I’m not comfortable with a 9.3% allocation that I had in mid-March. The 7.6% allocation that I had in early May was also too high for me. The price drop cut it down a bit for me. My SMAR allocation was around 3% and I wanted a little more of that. If TTD shows much better growth next quarter then I probably won’t touch it but if is shows another quarter of similar growth I will probably sell more to buy more of a company that has a higher growth rate and that I have more confidence in (in the story I mean).

I have found the diverse views on TTD interesting. There does not seem to be a common view on the company here.

Chris

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Jeff Green says Q1 is the most difficult quarter to forecast because this is the quarter annual advertising budgets are set. So on one hand there is variability in this quarter. On the other hand, if growth slowed down this quarter, what does that say about annual advertising budget for this year?

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…but based on the massive deceleration of CTV revenue growth from 12,000% to 300%…

A couple people have mentioned this, but isn’t it just signifying a VERY SMALL starting number? If we actually put random numbers to get those growth rates it would be:

   10
1,210     12,000% growth
4,840        300%

So it basically just means the starting number BEFORE the 12,000% growth was incredibly small (and should probably not even be included in the numbers, but you have to start somewhere, right?). And if growth then continued to decelerate to 200%, 150%, 100%, we’d have:

    10
 1,210   12,000% growth
 4,840      300%
14,520      200%
36,300      150%
72,600      100%

So even with such a small starting number this progression starts yielding some large numbers from it.

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It’s being a stock salesman. Why even bring up 12000 then? When you have conpanies like MDB that break down what percent their 4x atlas sales are or ZScaler tell you it’s mesningless and will be for some time?

I didn’t buy TTD for CTV. But the more I listen to Jeff Green or follow it the less I trust him.

Break down the numbers. Give real information. Talk about what’s happening now. Not what you’d like to happen. Or how is this any different than buying Modernica then.

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Example TTD now has hundreds of advertisers spending $100k a month on CTV. That must not all be through TTD? Or is it? Because if it is that’s $120 million on CTV this year alone. That’s for hundred not plural. Hundreds plural means TTD should see $240 million this year on CTV right? If I’m reading the transcript right and it’s actual spend with TTD or just spend on CTV period and a small portion with TTD? Or is it they spend that much on CTV but not a dime through TTD? Example Colgate spends $100k a month on Roku but is also a TTD customer for desktop banner ads but doesn’t spend a dime with TTD on CTV but it’s one of their customers that buys a lot of CTV so they see that as opportunity?

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It was over the last quarter, not per month - they corrected themselves on the call.

Alex

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So it basically just means the starting number BEFORE the 12,000% growth was incredibly small (and should probably not even be included in the numbers, but you have to start somewhere, right?). And if growth then continued to decelerate to 200%, 150%, 100%, we’d have:

Hey Foodles:

That really is one of the points…it was obvious Green was talking about VERY small numbers because of the 12,000% revenue growth number…but this rate declined not year over year but quarter over quarter to 300%. It was obviously pure salesmanship hype.

And at the same time, the total revenue growth has decelerated.

I gave Green a pass on his creative salesmanship early on because the revenue growth rates were super other than a single quarter in 2017. But it appears we will be 2 sequential quarters with a new trend barring some extraordinary event and even at the earnings call, they really didn’t seem to have much to say compared to previous calls…in fact he finished early.

So let’s just consider that TTD now grows revenue in the 40% range for years to come. That is still pretty good and what appears to be twice the overall programmable ad growth of 20% annually. Since TTD has only 1.5% of that market, to maintain that growth rate, it must either grow by cannibalizing other programmable businesses or grow new business (China as an example)….otherwise, it will eventually converge to grow at the overall industry rate of 20%.

But others are growing ad revenue quite impressively:

FB grew mobile ad revenue 30% to $13.9 BILLION in a single quarter!
GOOG is tough to parse ad revenue since they are more conglomerate but they are the major source of data for TTD and a massive competitor.
AMZN is the same as GOOG in that regard.

These walled gardens aren’t going to give ad revenue away too easily and expect AAPL to do the same with their expansion into content and Apple TV and likely advertising to its huge ecosystem.

I may have misread the ROKU earnings call but I believe they said the streaming ads increased by 100%.

Point being that all these programmable companies are going to fight hard for the advertising dollar so cannibalizing isn’t going to be easy.

Expansion into new markets has ALWAYS been a major investment thesis with TTD going back to the very first posts…the “omnichannel and omnigeography” strategy. China was part of that plan…but it will be a very long slog measured in terms of 5-7 years as we previously established.

We have come to expect TTD/Green to blow away expectations…now is perhaps a little different.

Again, no reason to panic…just step back and contemplate their competitive moat, sustainable competitive advantage, buyers power (so few ad agencies), etc.

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So let’s just consider that TTD now grows revenue in the 40% range for years to come. That is still pretty good and what appears to be twice the overall programmable ad growth of 20% annually. Since TTD has only 1.5% of that market, to maintain that growth rate, it must either grow by cannibalizing other programmable businesses or grow new business (China as an example)….otherwise, it will eventually converge to grow at the overall industry rate of 20%.

But others are growing ad revenue quite impressively:

FB grew mobile ad revenue 30% to $13.9 BILLION in a single quarter!
GOOG is tough to parse ad revenue since they are more conglomerate but they are the major source of data for TTD and a massive competitor.
AMZN is the same as GOOG in that regard.

These walled gardens aren’t going to give ad revenue away too easily and expect AAPL to do the same with their expansion into content and Apple TV and likely advertising to its huge ecosystem.

Duma,

We can analyze this a little better I think. You’re combining different market reports into one. The stats Green references in the Q4 2018 call and in Q1 2019 are from the MAGNA Report on ad spend here.

https://magnaglobal.com/magna-advertising-forecasts-winter-2…

The portion that Green talks about is programmatic only and was $33B in 2018. This excludes FB, Google, and Amazon platforms. That $33B portion of the market excluding the walled Titans is growing overall at about 20% which is how Green gets his growing at greater than double the market. The total digital ad market including those Titans was $250B and growing 15%.

Of the $33B total, $2.35B went through the Trade Desk Platform. This gives TTD around 7% of that market. Taking your assumptions of 40% TTD spend growth and 20% market growth. The market would be $39.6B and TTD would have spend of $3.3B or 8.5%.

It must again be stressed that this data that Green uses is independent of spend on FB and Google etc. TTD doesn’t take dollars from them. An advertiser that spends on Facebook only reaches Facebooks audience, which is large, but nowhere near as large as the rest of the digital space. That rest of the digital space (minus the other walled off corners) is where TTD operates. Advertisers want to reach those audiences too and they can’t reach them with Facebook spend.

Total ad dollars are growing by tens of billions. Total digital ad spend is growing faster and by tens of billions of dollars. Programmatic outside of walled platforms is growing even faster and by billions of dollars. The Trade Desk platform is growing the fastest and by around a billion dollars. They don’t have to take a dollar from the walled Titans. Only from the top line “ad dollars”, which are growing by much more than the Trade Desk size and not even half of that is digital yet.

Thus with the number one software platform for access to this paradigm, The Trade Desk has a huge opportunity to market cap.

Darth

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Of the $33B total, $2.35B went through the Trade Desk Platform. This gives TTD around 7% of that market. Taking your assumptions of 40% TTD spend growth and 20% market growth. The market would be $39.6B and TTD would have spend of $3.3B or 8.5%.

I don’t see where you got your $33 Billion and $2.35 Billion through TTD platform.

But you are saying that since TTD has an approx $500 million revenue run rate that it gets 21% of the advertising dollars on it’s platform?

There are quite a few competitors as listed on its 10K:

The Trade Desk faces competition from large enterprises such as Google (NASDAQ:GOOG) (NASDAQ:GOOGL) (DoubleClick Ad Exchange) and Amazon (NASDAQ:AMZN), as well as smaller companies that offer ad buying technology. These include Microsoft (NASDAQ:MSFT) Media Network, Marketplace by Adtech, OpenX, AppNexus, AdMob, NativeX, AirPush, and others.

A list here:

https://www.g2.com/categories/cross-channel-advertising

Also of interest from the web site you linked:

https://magnaglobal.com/ad-spending-hits-a-new-high-as-searc…

Amazon more than doubled its ad revenue to roughly $6 billion in 2018, Magna said. Amazon has been rapidly increasing its offerings to marketers, empowered by its data on consumers’ shopping habits and its direct role in actual sales.

https://magnaglobal.com/u-s-ad-revenue-growth-to-slow-in-201…

U.S. ad revenue growth will slow down more than previously expected in 2019, according to a new study out of Magna, a division of Interpublic Group.

https://magnaglobal.com/3012-2/

Three top ad forecasters—GroupM, Magna Global and Zenith—are tempering expectations for ad spending next year and one predicts that digital spend might finally be slowing down.

GroupM, WPP’s media investment group, is downgrading its initial 2018 growth expectations from 4.5 percent to 4.3 percent in a report to be released this week. It’s also reducing its 2019 growth projections from 3.9 percent to 3.6 percent. The media agency company says this is due, in part, to stress in the auto category and continuing softness in the consumer packaged-goods category.

The IPG Mediabrands company also forecasts digital advertising growth will lose some momentum in 2019, growing only 13 percent as compared to 17 percent in 2018. But that might be due to saturation: Digital media sales are forecast to represent nearly half of global ad dollars next year, Magna says. “As far as we’re concerned, this symbolic milestone will be achieved in 2019 or 2020 at the latest,” says Létang.

Tough call for sure…we have great technology in numerous programmatic and overall digital advertising but all of them are still beholden to general economic conditions.

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Example TTD now has hundreds of advertisers spending $100k a month on CTV.

This has been mentioned a couple times, but I interpreted the comments as $100K over the last quarter and not $100K per month. From the call transcript:

Jeffrey Green:

The second part of your question – or I’m sorry the first part of your question on connected TV, I’ll just remind everybody that we announced 3X year-over-year growth on spend and 3X year-over-year growth on inventory. We now have hundreds of advertisers spending over $100,000 a month. I think that’s right. A month, that’s right.

Paul Ross:

Over the last quarter.

Jeffrey Green:

Over the last quarter, okay. I cannot remember the time frame.

Does anyone else interpret that differently? I don’t think it’s a major difference in the overall dynamics of the quarter, but it does make a difference if anyone is trying to figure out the math.

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But you are saying that since TTD has an approx $500 million revenue run rate that it gets 21% of the advertising dollars on it’s platform?

Exactly. The spend on TTD is what is counted in the advertising spend. TTDs revenue is not included in the Programmatic Spend number by the Magna market research or any other ad market research. TTDs revenue is software revenue not ad revenue.

Here’s the quote from Q4 2018 to be precise.

I’m excited to announce that our revenue growth accelerated to 55% in 2018 from 52% in 2017, it was a huge year for The Trade Desk. Spend on our platforms or past $2.35 billion, revenue was a record $477 million. This growth is more than twice the 22% growth of the entire programmatic advertising industry in 2018 according Magna Global.

20.3% to be exact. We must remember that TTD is SaaS. They are a software platform as a service that gives their customers software to self service access millions of available digital ad impressions across millions of digital locations every second. Instead of charging a subscription or some other licensing model to access the software TTD charges a fee that is approximately 20% of the spend. TTDs business model is SaaS billed on consumption. Fractions of pennies per ad and millions of ads per second.

Without digging up the exact language in the S-1, TTD bills their customers (the advertisers) monthly. The bill is for the cost of all ads that TTD purchases on behalf of the client plus TTDs platform fee and any other services or fees that are performed.

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?

Hulu has a show. Someone starts watching that show. Hulu allocates
certain times throughout the show where ads will be shown. These ads generate a digital imprint that Hulu wants to be filled by an advertisement. They then either put that available “inventory” directly into the marketplace or more likely pay a Supply Side Platform to carry that to the market. In this case we’ll assume that the inventory winds up in a market that TTD is a partner in.

TTDs customer has an advertisement with a certain dollar amount budgeted for TTDs platform to find a place to place that advertisement. TTDs platform has the parameters and the targeted audience from the customer. In TTDs massive data centers the platform processes millions of transactions per second placing ads in available inventory through this process. This available inventory for Hulu comes into view of the great seeing eye of TTD. The TTD brain says I know an ad that’s perfect and then determines through more algorithms what price to bid on that ad. The bid is placed.

Back in the market place other bids from the total market come in to the supply side. Of course the best bid wins. Assume it’s the $1 bid by the Trade Desk software platform on behalf of this client that wins. The Trade Desk pays Hulu $1 and the ad is digitally transferred for display on Hulu. This all happens in a fraction of a second.

Finally The Trade Desk bills the advertiser $1.20. $1 for the ad and $.20 for the platform access fee.

TTD did not take a cut of the advertisement dollars. Hulu received 100% of the ad spend. They may then have to pay their representatives like the Supply Side Platforms and such, but TTD isn’t collecting ad dollars.

TTDs value ad is doing all of that on behalf of the advertiser. That advertiser would not have been able to place that ad like that. No human can do bidding and placing like that. You need sophisticated software, huge data centers(TTD spends >$100M a year on data center hardware), access to huge amounts of digital inventory, and access to useful data.

Which inadvertently describes TTDs moat.

Darth

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TTD did not take a cut of the advertisement dollars. Hulu received 100% of the ad spend. They may then have to pay their representatives like the Supply Side Platforms and such, but TTD isn’t collecting ad dollars.

Hey Darth:

I get what you are saying but of course they are advertising dollars…just not tagged as such.

So do you have an explanation for why they seem to be slowing revenue growth?

Last I checked Appnexus was leading TTD in volume of dollars…who has the other 93% of dollars now and what are these individual growth rates?..not just the industry as a whole.

There are huge number of contenders…and we also cannot ignore that companies like AMZN have more than DOUBLED their ad revenue even as TTD’s have slowed to 40%.

Programmatic or not…there are companies that are growing ad dollars without TTD’s help…and that would seem to imply that TTD is likely not the advertisers sole (if not major) advertising focus.

But enough on this topic from me…it all boils down to what appears to be revenue growth slowdown…the reasons and duration are certainly open for debate.

Best:
Duma

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OK…I lied, one more post:

https://www.persistencemarketresearch.com/market-research/pr…

The global programmatic advertising market is estimated to be valued at nearly US$ 3,000 Mn by 2017 end and is projected to reach close to US$ 29,800 Mn by 2025 end. Sales revenue is expected to increase at a CAGR of 33.3% during the forecast period (2017–2025).

This source says 33% CAGR rather than 20%.

https://www.zenithmedia.com/%EF%BB%BF%EF%BB%BF%EF%BB%BFprogr…

Programmatic advertising will grow 31% in 2017, faster than all other digital channels, according to Zenith’s Programmatic Marketing Forecasts, published toda

31% growth as above.

And of course for perspective, the lion’s here:

https://mediaradar.com/blog/will-amazon-own-the-programmatic…

Amazon may be in third place, but 4.1% is far behind Facebook’s 20.6% or Google’s 37.1% of market share. In 2020, Amazon’s 7.0% share will compare with Facebook’s 20.8% and Google’s 35.1% of US digital ad spending. So while the gap may be narrowing, the duopoly pillar still stands.”

Garett Sloane at AdAge writes that while there won’t be a major difference to the status of Google and Facebook as a duopoly, there will be a differential in what Amazon has on offer. “No other major platform is so plugged into what consumers buy,” Sloane writes. “Amazon doesn’t need to close the loop from ad to sale by reading uncertain data about when a person saw an online ad and when that led to an actual purchase. Amazon is the loop.”

That difference means Amazon should slowly but surely strengthen its impact on the programmatic advertising market over the next few years. And it will certainly change what, why and how advertisers buy on a programmatic platform.

Much more data out there of course…but suffice to say (without paying the high cost of the reports), programatic may be growing closer to 30% and AMZN is developing serious focus here.

Just a bit more color.

And most important…Happy Mothers Day for all you moms out there!

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As I read it, it was for the last three months, per month over the last quarter.

Gordon

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Maybe actually listening to the con call instead of reading transcripts would help, but I would agree with the others who say he was corrected to $100k per quarter instead of month.

And there’s a good chance that’s total ad spend meaning TTD gets $20k of that. Or, right now $4 million plus per quarter revenue from CTV.