The Trade Desk Earnings

The Trade Desk recently announced their earnings. They serve as the most direct public market proxy for the programmatic ecosystem given their relative position of strength and the robust nature of their business across a variety of media types. It is thus always helpful to explore their earnings in greater depth. 

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The high level is that $1.55B of media was spent on their platform in 2017, with revenue to them of $308M, meaning they averaged a 20% take rate. This was a 52% year-over-year increase, while the programmatic ecosystem as a whole grew at 27% over the same period (meaning TTD is gaining share). When asked about the sustainability of their take rate, their CEO Jeff Green answered this is a growth period - the industry is transitioning to pure digital transactions - so top line growth should be favored about all else for the time being, but that they also believe between 15-20% is the sustainable number. TTD is forecasting 33% growth in 2018 to $2.1B of media spend and $403M in revenue.  The company was profitable by nearly $100M, meaning total costs were around $200. Their Q4 reflected 1/3 of the company's total revenue (perhaps negatively impacted by the CA fires).  Nearly half of the top 200 advertisers in the world spend at least $1M on TTD and they have a retention rate of 95%. Their annualized revenue per employee is around $435,000 - which is very high.  

The company has a number of initiatives, the first is being the champion across all channels, with the goal ultimately of trying to capture as much TV budget as possible when it moves to being connected TV, or otherwise purchasable programmatically. To make that happen, they need to be where agencies buy all media - potentially to make a stronger case to content providers. Towards this goal, mobile surpassed display on their platform for the first time ever in Q4. Native was highlighted as among the most promising channels, along with CTV, and as a growth area, at 600% as well as and audio at 1000% (elsewhere in the call they said 200% and 600%, respectively - either way, it's a lot). Video, from a larger base, grew 70%. The company is very much eyeing a post-display world. The company's available CTV inventory grew 1000% YoY, while spend grew over 500% 

TTD is bullish on China, believing that, in particular, CTV represents a strong opportunity there (perhaps stronger than in the US). The Chinese CTV market is long-form and ad-funded, and in a market growing faster than the US. Thus they are establishing a large physical presence in the country and partnering with the major relevant companies. Their German market is also growing quickly, at 200%.

The third TTD initiative is identity. One of the main headwinds the company faces, which they don't discuss explicitly, is Google and Facebook and their ownership of walled garden identities. In response, they are trying to create an even bigger footprint of identities with their Unified Open ID effort. This challenge is best highlighted when considering that TTD's great year showed $1.55B of media spend on their platform, whereas in the same year FB achieved $17.37B and and Google $35B - so it will be a steep hill to climb (though perhaps aided by the fact that FB and Google will likely never work together). The fourth TTD initiative is around data. This was fairly vague on the earnings call, but generally the company is prioritizing getting and using more data. And finally the company is prioritizing an overhaul of their user experience to focus on data visualization and media planning. TTD also made an express note of its partnership with White Ops to note that it is now scanning the inventory platform-wide (over 9M impressions per second).