Why the Trade Desk celebrated when Microsoft won Netflix’s ad business

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The Trade Desk reported a profit of $377 million in the second quarter of this year, up just over a third from the same period in 2021.

The company went from a profit of $48 million in the second quarter of 2021 to a loss of $19 million this quarter, although that was because founder and CEO Jeff Green received a stock incentive bonus of $66 million. dollars this quarter. The payment increased The Trade Desk’s general and administrative expenses from $12.5 million in the second quarter of 2021 to $80.9 million this year.

Trade Desk stock jumped around 15% after the close of trading.

Green said there were macro headwinds. “But it’s possible to have macro headwinds in our face and secular tailwinds that overshadow that,” he said.

The Trade Desk has hammered the same tailwinds messages into quarterly earnings calls over the past two years: promoting the CTV business first and foremost, as well as the retail media segment and a dash of Google bashing for good measure.

The company’s investor call on Tuesday bought into the trend.


Just connected

Despite CTV’s rise to prominence, The Trade Desk does not disclose its CTV earnings — nor does it break down revenue by channel or device in general. The company came closest to revealing its contribution by revealing that video ads (which include desktop, mobile and TV) fall within the 40% range of overall revenue , and that the segment is “growing rapidly as a percentage of our overall mix”. according to CFO Blake Grayson.

Green leaned heavily on Disney as an example of the standout film and TV entertainment company seizing the programmatic opportunity. Disney has become the largest media player to join the Unified ID 2.0 identity program, and The Trade Desk is a pilot partner for Disney’s data cleanroom product development.

But CTV’s biggest Trade Desk win didn’t directly involve the Trade Desk.

“I for one was very excited when I heard that Netflix had selected Microsoft,” Green said.

Ad tech circles are small, and Green said he felt personally satisfied because he introduced the president of Microsoft Advertising to Brian O’Kelley, then CEO of AppNexus at the time. The introduction turned into a major strategic partnership and eventually led to Microsoft acquiring the company.

But for the Trade Desk, which is trying to grow its CTV business, the move signals that Netflix intends to source from a wider set of companies and serve ads on the open web. Enter the Trading Post.

Xandr is focused on his SSP, and although he has a DSP, Green estimated that he represents less than 10% of The Trade Desk’s CTV demand.

If Microsoft had gone with Google, the early Vegas favorite to win the Netflix account, or some other comprehensive provider, that would indicate the company was pursuing a walled garden model. The decision to go with Microsoft “is another sign that savvy businesses understand the desirability of the open internet versus the limits of walled gardens,” Green said.

CTV is also a big opportunity for The Trade Desk because “in relative terms, the market is fair,” he said. Despite the fact that programmatic always gets scraps while networks sell the juiciest inventory during initials, there isn’t a single dominant tech vendor underneath.

No individual CTV company “is in the position to be draconian,” Green said. In contrast, Google’s control over search, web browser, and ad server market share means it’s like a football player who can whistle the dead and invent rules on the fly.

Opt for Google

One of the “macro-global trends” that benefits The Trade Desk the most is the regulatory pressure on Google.

When governments and regulators sue Google, Green said The Trade Desk sees tangible gains in these markets. Agencies are shifting more of their business to options like its DSP.

Google’s policies and actions have made it very difficult for companies (“which are smaller than The Trade Desk”) to sustainably monetize the open web, Green said. He also cited the UK Antitrust Commissioner’s investigation into Google for allegedly favoring its own service over rivals, potentially resulting in higher prices for goods and services being passed on to consumers due to the higher cost of advertisements for businesses.

Here to shop

Retail media is a more recent addition to The Trade Desk’s earnings report.

In the second quarter, The Trade Desk announced advertising and identity buying partnerships with Walgreens, Target and Albertson’s, among other retail chains. Not to mention The Trade Desk’s DSP setup with Walmart, which has documented its current full first quarter.

These retailers are investing heavily in their advertising platforms for shoppers, as the platforms consider larger business decisions around profitability, such as managing working hours or increasing online orders for pickups. in-store, which have a much higher profit margin than door-to-door delivery, rather than just collecting handy fruits from site display ads.

Retail media doesn’t bring the same influx of mass inventory like mobile, CTV, or display. But retail media partnerships significantly increase the company’s total addressable market, Green said.

Less and less of the Web is addressable. A much smaller share of mobile ads may be targeted by device or advertising ID. Retail media doesn’t bring much inventory, but it does bring user-level data, and otherwise unaddressable media turns into potentially user-targeted spots.

“Initially, retailers looked to retail media and saw a way to make more money,” Green said. “Now they see it as a way to spin their flywheels faster.”

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