The Trade Desk earned $280 million in Q2 2021, doubling its total from the same time last year, the company reported in quarterly earnings on Monday. Its profitability jumped from $25 million a year ago to almost $48 million.
The Trade Desk’s crazy year-over-year growth comes with a familiar asterisk during this earnings period: Q2 2020 was a historic dip, when brands pulled back on advertising to rethink campaigns and a potential recession.
But there’s been a strong recovery in ad budgets, according to The Trade Desk CEO Jeff Green, as companies that halted spending for a stretch are fighting to regain market share, and as advertisers target reopened markets.
One sign of a sustainable recovery is that The Trade Desk’s improved profitability came despite a $63 million increase in operating expenses in Q2 2021, much of that going to sales, marketing and head count growth.
The Trade Desk emphasized to investors two key categories that determine its future growth potential: the rise of connected TV (CTV) and the company’s data policies compared to walled gardens.
The video future
The Trade Desk doesn’t disclose CTV revenue – neither does it break out channels like mobile or display – but Green said it’s the fastest-growing channel and growing as a percentage of overall revenue. In Europe, The Trade Desk’s CTV revenue increased tenfold during the pandemic.
Programmatic was invented by B2B companies as a way to monetize the web, and then was foisted on users, Green told investors. CTV, on the other hand, is driven entirely by consumers, he said, who vote with their attention and their wallets (in the form of content subscriptions), while advertisers follow in their wake.
CTV supply hit a critical tipping point during the pandemic, he said. “One thing we constantly say to advertisers is that whatever you thought you knew about scale and reach in CTV six months ago has changed dramatically.”
And that’s pressuring traditional TV ad buying, like the upfronts sales process. CPMs continued to rise during the upfronts during Q2 this year, despite linear TV audience numbers declining.
“That sets it up for some amount of under-delivery,” he said. And brands are also more skeptical of the linear TV reach estimates.
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The end result, according to Green, is that advertisers are pulling money out of channel-based or event-based TV campaigns, and setting aside an annual budget they can use more flexibly across TV or video ads.
Don‘t hold your breath, but Green said his ambition is for The Trade Desk to have a more important role within a new upfronts process, which would be less of a citywide party to woo buyers and more of a futures trading opportunity for CTV inventory, with media commitments placed based on attributable conversions or audience reach.
It’s your data
The Trade Desk historically struck a conciliatory tone with competitor-suppliers like Google and Amazon.
The company lauded Amazon Fire TV in 2019 for opening up its programmatic supply to outside DSPs. And Green noted in an AdExchanger column earlier this year that it has a strong partnership with Google Ad Manager, the Google SSP, despite other tensions in the Googleverse.
But the company has lately become more assertive and combative even with the walled garden players. When The Trade Desk launched the new ad-buying interface Solimar last month, its pitch boiled down to: the Open Internet vs. the Walled Gardens.
“Walled gardens provide easy access to scale … but don’t provide precision and decisioning that’s essential to modern marketers,” Green told investors.
In other words, when first-party data goes into a walled garden, it can be used for that campaign only, and no data can be extracted. An open programmatic approach allows an advertiser holds onto its audience IDs and export that data back to their own database to learn more.
The same pitch around objectivity is helping The Trade Desk secure important partnerships with TV companies, bringing inventory to the platform.
“Channels that claim to be independent, then push their own content will lose favor,” Green said.
That’s why broadcast companies are among the earliest and most important adopters of the Unified ID 2.0 (UID2) standard, an ad identifier for targeting and measuring campaigns without third-party cookies. Blockgraph and OpenAP, two data onboarding consortiums co-owned by major broadcasters, integrated UID2 in Q2. So did the CTV apps Fubo and Pluto TV.
“As the TV ecosystem gets more crowded and competitive, our focus on objectivity is more important than ever,” Green said.
