The Trade Desk reported third-quarter revenue of $164 million, up 38 percent year-over-year, with connected TV powering growth.
The Trade Desk is a demand-side platform, or DSP, that is used by agencies and brands to buy digital ads in areas such as digital audio, display and connected TV through automation. The company is also perhaps the most successful DSP on the market after Google's: The Trade Desk has seen its share price balloon from about $29 when it first went public in 2016 to more than $190 today.
Jeff Green, co-founder and CEO at The Trade Desk, told investors in a call that “there is nothing I’m more excited about, nothing more game-changing than what is happening in connected TV."
The company is betting big on the segment with good reason: Quarterly connected TV ad spend on The Trade Desk grew 145 percent year-over-year, and the company has signed recent deals with streaming platforms from Amazon, Disney, Comcast and Roku. These companies work with The Trade Desk primarily because the largest brands and agencies use its platform to purchase ads programmatically.
Green says a new streaming player is entering the space "each month," adding that an increase in competition will force all of them to rethink their business model, including Netflix.
“All [streaming] providers will have to explore ad-funded models,” Green said. “Linear TV is fighting for fewer viewers while costs are going up. It’s a ticking time bomb, while competition on streaming is becoming more intense. Netflix is fighting tooth-and-nail for subscriber growth while also getting caught up in a spending war for new content.”
He says he “firmly” believes Netflix will add an ad-supported option to its platform in the near future, where people “pay less and see a few highly relevant ads.”
Advertising on connected TV like Hulu and Roku is expected to surge nearly 40 percent in 2019 to just under $7 billion, according to eMarketer. By 2021, eMarketer expects connected TV advertising to surpass $10 billion. Still, it’s just a fraction of the $70 billion TV ad marketplace.
Hurdles in the connected TV space remain. Companies such as AT&T and Roku have recently purchased their own DSPs. Although they currently work with platforms such as The Trade Desk, some industry executives believe it’s only a matter of time before they shore up their walls so that advertisers can purchase their inventory only through their respective DSPs. It’s a practice already at play with Google and its content for YouTube, for example. Meanwhile, looming U.S. privacy regulation may hurt connected TV's ability to scale so that it can truly rival linear television.
Green highlighted live sports and the upcoming 2020 U.S. elections as areas of significant growth for connected TV.
Green said the upcoming elections are a “humongous opportunity,” while adding that “a number of tech companies have opted to sit out and that is a huge mistake. We have a civic duty to make that process better.” Green didn't name names, but Twitter recently said it would ban political and issue ads globally.
With live sports, Green said connected TV will usher in significant revenue for both its streaming partners and itself. He points to unpredictability during Major League Baseball, the National Football League or soccer games that go into overtime.
“That is when most people are watching and viewership is most engaged,” Green said. “And it’s also when inventory is most valuable.”
He said these moments are “wasted on linear TV," while connected TV lets the industry react in real time to increased demand from advertisers. "In a data-driven environment, it can be optimized, and the broadcaster can realize the full value of those results.”
