The Trade Desk earned $160.7 million in Q1 2020, up by a third from a year ago, with connected TV ads powering its growth and its growth prospects this year, according to the company’s earnings report Thursday.
Linear television had been decelerating at a steady 3-4% clip for the last five years, said The Trade Desk founder and CEO Jeff Green. And while nationwide sheltering at home means TV screens are on more, that extra attention is accruing mostly to on-demand video services, while many consumers rethink expensive cable bundles, where live sports are the biggest draw.
Green said The Trade Desk now projects CTV will “rival and even surpass” the overall reach of linear TV.
Investors are convinced, with The Trade Desk’s stock bouncing up in April after a sharp drop starting in February. The Trade Desk shares reached an all-time high after its earnings report, and the company is close to a $15 billion market cap.
The CTV opportunity is clear, but The Trade Desk did suffer losses from the coronavirus fallout.
“Programmatic was hurt by one of its greatest features, its agility,” Green said. No other channel is as easy to stop and start, so when CFOs give indiscriminate orders to pull back on expenditures, programmatic is the first off-button available to marketers.
The Trade Desk is also disadvantaged compared to walled garden media players.
Search and social media can charge on a cost per click or a conversion like an app download. Which is why companies such as Alphabet, Facebook, Snapchat and Twitter had relatively consistent revenue in Q1, which they attributed to strength in direct response advertising.
The Trade Desk only operates on a CPM, Green said.
Plus, owning media right now means those companies benefit from the overall increase in media consumption.
CTV is also a bulwark against depressed ad demand. In the first 20 days of April, The Trade Desk’s CTV spend grew by 20% year over year, Green said. In the final 10 days of the month, it accelerated by 40%.
Advertisers are following consumers into streaming and OTT channels. And Green said TV budgets are moving to real-time deals since the upfronts are delayed and advertisers are warier this year of placing large commitments on programs they don’t know are being watched.
The traditional TV ad buying practice is poorly suited to the economy right now, he said. A large US restaurant chain that usually spends heavily on national branding campaigns now needs to focus its messaging more specifically to states or at the local level based on which stores are open for delivery.
As businesses open up, there will be a period of strong marketing demand. Uber and Lyft are in hibernation right now, but as states open up and people take rides again, Green said that those brands understand that market share gains will accrue to whichever advertises most effectively in that window.
“And that same scenario will play out across every industry: Marriott vs. Hilton; Domino’s vs. Pizza Hut; Toyota vs. Ford,” he said. “All of these companies, and every other company out there, is figuring out, right now, how they use advertising to connect with consumers and gain share once the gears of the economy start cranking again.”
