How Long Can The Trade Desk Ride Its Current Wave of Success?  

Can the good times last?

Much celebrated as the success story of ad tech on the public markets, could The Trade Desk's future lie elsewhere?
Getty Images, Trade Desk

The ad-tech sector has taken it on the chin over the last couple years, with the ever-growing dominance of Facebook and Google, early stage investors impatient for an exit and increased public scrutiny over the use of personal data for ad targeting.

However, The Trade Desk, which primarily offers a programmatic media buying tool known as a demand-side platform (DSP), continues to post impressive financials since listing publicly in 2016.

Last week the company reported revenues of $112 million for the three months to June 30, representing a rise of 54 percent year-over-year, with the California-based outfit further increasing its full-year forecast to $456 million, up from its earlier $433 million estimate.

Speaking on the company’s subsequent earnings call, The Trade Desk CEO Jeff Green commented that his company was able to benefit from some of the headwinds faced by the rest of the industry such as the EU’s General Data Protection Regulations (GDPR) and marketers’ increased focus on transparency in programmatic trading practices.

These numbers clearly impressed investors with its stock pricing rising by more than 36.4 percent, valuing it at circa $5 billion within the 24-hour period after the filing. However, despite the prolonged success of The Trade Desk on the public markets, some have questioned whether or not its much-vaunted success and market valuation is overinflated, especially in the long term.

In particular, Green discussed how Google halting its DoubleClick ID-sharing, in order to achieve GDPR compliance, during the reporting period demonstrated the point-of-difference and value The Trade Desk represents in the market.

“The ID makes it possible for marketers to compare YouTube, Google and DBM performance to the other parts of their media plan,” he said. “Taking this away weakens the value proposition of YouTube, Google and DBM [DoubleClick Bid Manager].”

Green claimed The Trade Desk does not transact in directly identifiable consumer data, due to the fact it does not own a search engine or social network, therefore it can provide an open ID to help advertisers objectively compare every placement on their media plan.

Investors are taking a punt

“The Trade Desk turns over its shareholder base rapidly because there’s so many people who are truly punting on the stock,” said Brian Wieser, senior analyst at Pivotal Research.

He further pointed out how the impressive revenue numbers are currently buoyed by the onboarding of large clients such as Procter & Gamble, adding that he was unsure that a lot of investors fully appreciated how much this boosts existing revenue numbers.

“I don’t know that P&G is necessarily going to spend consistently every quarter … P&G does could distort what The Trade Desk does. There’s more trading volume in The Trade Desk than in Omnicom or certainly WPP, it’s symptomatic of uncertainty on the one hand and people who are willing to take wagers, one way or the other … But, at some point it starts to build on a life of its own.”

Questions over the existing market valuation of the company have been raised, especially since many others in the sector are experiencing difficulty. For instance, Criteo, another significantly scaled ad-tech company trading on the open markets lowered its full-year revenue guidance for 2018 in its recent financial filing, as it looks to transform from “a single-product to a multiproduct platform.”

However, buy-side sources and investors report that in the short-term (at least) The Trade Desk’s continued emphasis on product, client services and reputed unwillingness to usurp the advertiser/media agency relationship, a tactic often referred to as ‘going client-direct’, will likely keep the dollars flowing in its direction.

One senior media agency source told Adweek that The Trade Desk staff are often quick to raise any direct conversations they’ve had with advertisers. This is in complete contrast to rival ad-tech outfits who have “all chased clients and burnt bridges,” they said. “Agencies love to be told about a client-direct conversation and that’s what TTD [sic] did!”

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