Specialist
Former Director at The Trade Desk Inc
Agenda
- Operating environment for The Trade Desk (NASDAQ: TTD) – programmatic adoption trends through budget expansion and new client adoption
- Identity headwinds – impact of IDFA (Identifier for Advertisers) and eventual third-party cookie deprecation
- Competitive differentiation vs Google's (NASDAQ: GOOG) DV (Display & Video) 360 and Amazon (NASDAQ: AMZN) DSP (Demand-side Platform) – market share evolution
- Strategic initiatives update – Solimar, Walmart (NYSE: WMT) integration and Unified ID 2.0
- Outlook for 2022 and beyond – margin expectations and downside risks
Questions
1.
The world seems to be increasingly becoming omnichannel, with different headwinds and tailwinds within those various channels. How might traffic by channel shift over the next 3-5 years for The Trade Desk? The company releases its data traffic share by channel and it’s predominantly video at this point, split between mobile and CTV [connected TV]. Display and audio are stagnant but represent a smaller scale. How might this shift?
2.
How might the shifts in consumer behaviour towards mobile and CTV adoption you outlined impact how insulated or not a company such as The Trade Desk will be from key privacy and identity issues? Mobile adoption growth will come with headwinds, particularly for the iPhone around IDFA [Identifier for Advertisers] deprecation. Android could do the same thing with its ID. Desktop is declining, but the eventual third-party Chrome cookie deprecation could also impact the display segment. CTV seems largely insulated so far.
3.
How would you size the amount of business tied to the third-party cookie dynamic? I appreciate that it might never actually get deprecated, given the many antitrust regulation aspects. If it does, however, what degree of business is exposed to or amount of traffic is driven by third-party cookies?
4.
It seems The Trade Desk is nuanced vs supplier adtech type of players – particularly retargeters that might be more directly tied to opt-in rates across the various channels. How tied are Trade Desk’s revenues to those opt-in rates? If opt-in rates drop 25% on display or 25% for iOS users, does the revenue in that associated channel drop at an order-of-magnitude difference proportionally?
5.
Nielsen used to be the gold-standard linear TV measurement, though there isn’t one that’s set for a digital omnichannel presence, where UID 2.0 is trying to be that in the open internet world. There are products such as LiveRamp’s IdentityLink and even the consortium from the publisher’s standpoint that could do something independent but collaboratively. Is the end goal of UID 2.0 being the gold standard? Alternatively, is it a headwind for Trade Desk if other currencies get mass adopted?
6.
Could the most valuable aspect of the data sources be second-party-oriented from the publisher relationships vs any first-party data? Where if the company was trying to scale up the first-party assets, then driving UID 2.0 adoption and ingressing data into that would be benefiting Trade Desk above all else? Does the focus on second-party data drive a trust factor across the industry that could influence UID 2.0 adoption positively?
7.
Trade Desk CEO Jeff Green loves to talk about the company’s USD 1tn-plus total revenue opportunity, a figure which seems very pie-in-the-sky and long-term-oriented. Could you outline a better way to frame the serviceable revenue opportunity around what the company is tapping into now, maybe predominantly realtime bidding in CTV?
8.
North America has contributed 87-88% or so of the overall revenue base. Do you think there could be a 50/50 split with international in the next 10 years given how behind the company is in programmatic adoption?
9.
How significant an obstacle are agencies and their relationships with publishers? I think there can be digital publishers out there, but they’re still agency-based vs programmatic and fully automated-based buys. I’m thinking of an anecdote that I did on outdoor out-of-home where maybe there’s a 50% digital penetration, but it’s still 80/20 split for agency vs programmatic buys, regardless of being a digital inventory. How does that play into the pace of programmatic growth?
10.
There’s short inventory supply, even in the CTV segment. Where might we stand on that demand vs supply balance? Where’s the tipping point where publishers are perhaps increasingly inclined to consider programmatic buys?
11.
CTV is around a USD 60bn-70bn linear TV market at its peak, which is what everyone aims to achieve. Is it truly a USD 60bn-70bn market when we think about how much SVOD [subscription video-on-demand] viewership has been ad-free? They’re all really trying to cut ad loads per hour relative to linear TV and I would assume that programmatic CPMs will drive things lower than historically linear upfront buys. Do y
12.
: Isn’t the market insanely crowded? There are gatekeepers such as Facebook, Google, Apple and Roku, there’s Comcast increasingly, the publishers themselves, the DSPs [demand-side platforms] such as Trade Desk, the vMVPDs [virtual multichannel video programming distributor] with a live component, the OEMs [original equipment manufacturers], the SSPs and the inventory aggregators. How should we think about the potential market share of that USD 70bn that Trade Desk can actually attain in such a fragmented sector?
13.
Do some direct-to-publisher initiatives put The Trade Desk more on a direct competitive playing field with the SSPs [supply-side platforms] such as Magnite?
14.
What’s the value proposition like-for-like comparison for a publisher to try to retain SSP relationships as the transactions are delivered vs that disintermediation potential? What might SSPs’ moats be with publishers to hinder them from trying to go direct with The Trade Desk?
15.
What else do SSPs have to worry about? I think of Disney real-time ad exchange, in the sense that companies can build up an ad exchange or an SSP on their own and so lose the need for an SSP. Could that ever occur, at least from bigger publishers in the CTV sector?
16.
he Trade Desk seems to benefit from scale and independence. What else do you think the company needs to work on to remain that winner-takes-most frontrunner for the DSP segment across omnichannel capabilities, post-campaign reporting? What should the company focus on to shore up market share erosion, given adtech is so competitive?
17.
An area of recent improvement was Trade Desk’s announcement in and around Walmart’s DSP and Tribe which is now allowing the company to tap into a USD 200bn shopper marketing TAM. How big of a shortcoming was that regarding not being able to attribute offline conversions? How likely is The Trade Desk to capture shopper marketing business?
18.
How likely is additional retailer adoption? Considering companies such as Advantage Solutions and Acosta on the outsourced sales and marketing, that Coke and Pepsi won’t work with the same companies. How does that work on the retail level? Do you expect retailers will target one preferred partner? Criteo has its own retail partnerships for POS [point of service] data. How likely is it that Trade Desk can build this offline marketplace and get many more retailers on board vs nobody wanting to come in where Walmart already is because that’s their competition?
19.
You talked about the tech tax around Trade Desk’s take rates. You mentioned the company is in private marketplace for the most part, as it relates to how CTV is delivered. Do you expect open auctions to occur increasingly? What does that do to the take rate on average, if there’s more OMP [open marketplace] vs PMP [private marketplace] delivery?
20.
Do you have goalposts that you think about around if the upfront buyers are holding onto the budgets, that they might be good with a tech tax of maybe mid-single digits? Could there be the requirement to shift the monetisation model to something that’s more fee-based, considering how lucrative CTV can ultimately be, based on some of the possible headwinds that they might face on a take rate basis?
21.
What’s your outlook for The Trade Desk and the broader industry over the next 24 months? People seem to be suggesting that retargeters face an existential threat. Who or which segments might be winners or losers?
