The Trade Desk projected a plan to re-establish its footing in the ad tech market as it fell short of revenue expectations, a rare miss that shook the ad tech company as it competes with Amazon and Google to run the programmatic, digital ad ecosystem. 

The ad tech player’s path to programmatic dominance still faces uncertainties as one of its key strategies hinges on Google leaving the open web game amid its antitrust fight in the U.S. The Trade Desk also needs to navigate a tricky strategy of getting closer to brands with direct deals, while not ruining agency relationships that often control brands’ programmatic budgets, according to ad tech experts.

The Trade Desk has long been a digital ad darling with its scrappy CEO Jeff Green positioning the company as the independent alternative demand-side platform (DSP) to Google and Amazon, which has turned its DSP into a behemoth, bulked up by unique shopping data only available to the e-commerce giant. All three ad tech players reported fourth-quarter results this month, and The Trade Desk missed revenue expectations set by Wall Street analysts for the first time since becoming a public company in 2016.

Also: LGBTQ+ streamer Revry blasts The Trade Desk, alleging ‘unjust practices’

The Trade Desk’s fourth-quarter revenue climbed 22% to $741 million—but Wall Street analysts’ average estimate was $759.6 million and the company itself predicted revenue of at least $756 million in November. The fickle markets took the miss as a sign to pound the stock, which dropped more than 30% this week. On Thursday, Green compared The Trade Desk to the protagonist in a boxing movie: “We will be defined by what we do next, not be the fact that we fell down once, after 33 quarters,” Green wrote.

The Trade Desk’s hope for Google to ditch the open web could be double-edged, according to Brian Wieser, industry analyst and head consultancy Madison and Wall. The timing of any spinoff was unknowable, and if a new entity were created from a Google divestment, that could create a new competitor to The Trade Desk, Wieser said.

“My guess is that this business would become a more aggressive competitor than it is now,” Wieser told Ad Age, “as small divisions of large companies are often constrained in their efforts to grow.”

The open internet, comprised of desktop, mobile and connected TV publishers fueled by online ads sold in real-time auctions, is in a period of transition, and it has been tarnished by distrust among advertisers. There have been damning reports in recent years about low-quality ad inventory on the open web. Most recently, a report from Adalytics, an industry watchdog group, blasted Amazon and Google, in particular, for funneling ad dollars to sites that allegedly contained child pornography images. The Trade Desk was not mentioned in the Adalytics report, and its proposition has always been that it wants to provide a well-lighted ad marketplace, which could help its message break through. Still, there is a persistent angst among brands about the safety of the open web.

Fix is in

The Trade Desk’s proposition has been that it can curate a safer open web and evolve to meet shifting ad budgets to new channels, such as connected TV. “We have a digital advertising supply chain to fix,” Green said in his LinkedIn post. “We have the opportunity to truly unlock the value of open internet for our clients.”

Aside from the questionable inventory, there also are privacy policies being enacted by major platforms, such as Apple, which have made older methods of targeting ads outdated. Cookies, the persistent web trackers being phased out across most platforms, are still in Google’s sights as the company finalizes its plan to limit them on Chrome. Meanwhile, tracking internet users for ad targeting continues to pose challenges for companies such as The Trade Desk.

The Trade Desk said it considers this a moment for “re-calibration,” not a “wake-up call,” a spokesperson for the company told Ad Age in an email. “This earnings report would have us miss our expectations for the first time in 33 quarters as a public company,” the spokesperson said. “32 out of 33 is a pretty good track record.”

While The Trade Desk had its gut-punching moment in the markets, another ad tech firm, AppLovin, was flying high. The app monetization platform, which makes money by selling mobile ads, beat expectations, generating $1.37 billion in revenue, up 44% from a year earlier and topping Wall Street’s forecast of $1.26 billion.

AppLovin shares were up about 25% this week, with the company valued at $160 billion. The Trade Desk was valued at $40 billion after its stock plunged. What The Trade Desk is trying to do for the open web, AppLovin has been trying to do for the mobile app landscape, offering developers a path to monetization outside of walled gardens, such as Meta and TikTok.

The Trade Desk outlined a 15-point plan to restore its programmatic position. It noted its connected TV operating system Ventura, which is expected to launch in the second half of the year. Ventura was a project it announced last year to develop TV software that is built right into the electronics makers’ screens, which would give it a closer pipeline into ad inventory and viewer data, ad tech experts previously told Ad Age.

Open field on the open web

Still, The Trade Desk’s bounce-back plan relies on a thesis that it can beat Amazon and that Google will exit the open web. Google is widely expected to ditch its ad exchange, AdX, and spin out parts of the business that serve the open web, following its antitrust case that is still awaiting a verdict. The Department of Justice brought Google to trial claiming it ran an ad tech monopoly, and Google’s role in the market is now seen as more of a liability than benefit, according to ad tech experts. In fact, in parent company Alphabet’s fourth-quarter report, Google’s ad network division continued to shrink, while search and YouTube remain the driving force behind its ad growth. Ad tech experts have said the antitrust trials tied Google’s hands to innovate in its open web ad services.

“Their core ad exchange business keeps getting smaller because they’re stuck,” a prominent ad tech CEO, who works closely with Google, told Ad Age this week on condition of anonymity. “My bet: It’s going to get broken up.”

Ad Age’s takeaways from Google antitrust ad tech trial

That is The Trade Desk’s bet, too: “Regardless of what happens with the pending trial decision, Google will likely distance itself from the open internet,” Green said Tuesday during the company’s earnings call. “If and when Google exits the open internet, they will leave a big hole and a big opportunity for the rest of us.”

Green also called out Amazon, saying it’s conflicted in its advertising relationships because it often competes with the very retailers that advertise through its platform. “Amazon competes with most of the Fortune 500 companies in some way, whether we are talking about Microsoft in cloud, or [Procter & Gamble] in CPG products, or UPS, or Nike, or all the rest,” Green said. “In our very first business plan 15 years ago we argued that the objective, independent DSP should get the lion’s share of the marketplace.”

While Amazon’s conflicting interests with some brands is a selling point for The Trade Desk, Yahoo’s DSP was not mentioned, which has “evidently been faring well, especially with the large agency community The Trade Desk has historically focused on,” Wieser said.

Google and Amazon were not immediately available for comment.

Lastly, in a pronouncement sure to catch the attention of major ad agency holding companies, Green also said The Trade Desk would go directly to brands to create programmatic relationships. The Trade Desk is striking joint business plans with brands, saying those deals were growing “50% faster than the rest of the business.”

Agencies are worried about “disintermediation,” according to the ad tech CEO who spoke with Ad Age. “The DSPs started as being very friendly to the agencies, but over the last few years, have started to sign brands directly, which is creating potential risks of disintermediation,” the CEO said. “And so if your partner now is potentially disintermediating you … that’s potentially problematic.”