Q4 2023 Earnings Summary
- The Trade Desk is in a strong competitive position in the current advertising environment, benefiting from being focused on the buy side with superior technology and client service. CEO Jeff Green stated, "Our competitive position couldn't be better because, of course, we focus on the buy side... our technology and our client service, both are the best they've ever been and I think have pretty consistently been credited as being the best in the space."
- Strong growth drivers such as Connected TV (CTV) and Retail Media are propelling The Trade Desk's growth, with significant international expansion, especially in CTV markets outside the U.S. Jeff Green mentioned, "First is that, of course, CTV, the shift continues to accelerate... we're seeing the exact same trends play out... we're now starting to see them in more markets around the world, and that's very good for us."
- The Trade Desk is well-prepared for the upcoming deprecation of third-party cookies and stands to benefit from it, thanks to their investment in UID2 and strong position in identity solutions. Jeff Green explained, "I believe here at The Trade Desk, we're in a phenomenal position... We invested in UID2 many years ago."
- Potential risks from Google's accelerated deprecation of third-party cookies: Jeff Green noted that while The Trade Desk is prepared for cookie deprecation, "most advertisers are not as ready as they could be" and "90% of publishers that have a meaningful amount of their traffic from browsers are not prepared at all". This could lead to rapid revaluing and struggles in the ecosystem, potentially impacting The Trade Desk's business.
- Macroeconomic uncertainty affecting advertiser spending: In Q4, there was some "macro-economic angst," leading to varying advertiser behaviors. Jeff Green mentioned that "some are watching every penny carefully and trying to be really deliberate". Continued economic uncertainty could lead to reduced ad spend from certain advertisers, potentially impacting The Trade Desk's growth.
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Cookie Deprecation Impact
Q: How will cookie deprecation affect TTD?
A: CEO Jeff Green explained that cookie deprecation will have minimal impact on TTD because a significant portion of their ad opportunities are authenticated and not reliant on cookies. With identity solutions like UID2, publishers can increase CPMs from $1 to $1.30, while those without authentication see CPMs drop by 30% to 50%. TTD sees this as an opportunity to add more value to clients. He noted that while some advertisers and 90% of publishers are not fully prepared, TTD is in a phenomenal position due to their investments in identity graphs and UID2. Rapid cookie deprecation could negatively affect unprepared publishers and the ad market, especially if it coincides with major events like the holidays or the U.S. presidential election. -
Growth Outlook for 2024
Q: How should investors think about TTD's growth in 2024?
A: Jeff Green expressed optimism about TTD's prospects, highlighting that the current ad environment is a buyer's market, which benefits TTD's objective technology and best-in-class client service. He emphasized that TTD has grown over 20% every quarter for the last 8 quarters, outperforming other scaled ad-funded companies. Unique tailwinds include accelerating shifts to Connected TV (CTV), the adoption of ad-supported models by streamers, strong retail media spend growth, and positive macro trends outside the U.S.. With their most sophisticated product launch, he expects TTD to continue growing and gaining market share in 2024. -
Amazon's Ad-Supported Prime Video
Q: How will Amazon's ad-supported Prime Video impact TTD?
A: Jeff Green believes that while Amazon's move will expand CTV inventory supply, it won't create a huge imbalance but will slightly tip the scale toward a buyer's market. He sees this as positive for TTD, as it pressures CTV companies to improve ad experiences with fewer, more relevant ads, achievable through programmatic advertising. Adoption of UID2 by major streamers enhances CPMs, and Amazon's move aligns with market trends that benefit TTD. -
Privacy Sandbox Evaluation
Q: What is TTD's view on Google's Privacy Sandbox?
A: Jeff Green stated that Privacy Sandbox increases complexity while deprecating the ecosystem, which he doesn't consider a good product approach. Despite criticism, TTD is testing Privacy Sandbox to stay informed and hopes it improves. He emphasized that regardless of Privacy Sandbox's outcome, TTD will be fine and sees advantages in their UID2 solution. -
OpenPath and UID2 Initiatives
Q: Can you elaborate on OpenPath and its relation to UID2?
A: Jeff Green explained that OpenPath is a single sign-on (SSO) solution that simplifies user authentication across sites, similar to Shopify's checkout experience. In closed beta with early adopters, results have been fantastic. OpenPath enhances the adoption of UID2 by making it easier for users and publishers, leading to higher CPMs and benefiting the advertising ecosystem. -
Advertiser Conversations in Q4
Q: How did advertiser engagement evolve during Q4?
A: Jeff Green noted that early in Q4, there was macroeconomic hesitation, but as the quarter progressed, some advertisers leaned in while others remained cautious. Ultimately, TTD saw increased spend beyond their guidance, reflecting a mix of aggressive growth strategies and careful spending among clients. -
International Growth Trends
Q: What is driving growth outside the U.S.?
A: Jeff Green highlighted that positive macroeconomic changes and media consumption trends are boosting growth internationally. Markets like the U.K. and Germany are experiencing higher CTV growth as they adopt ad-funded models, following trends observed in the U.S. a couple of years ago. -
Kokai Adoption Excitement
Q: What excites customers about Kokai?
A: Customers are enthusiastic about Kokai's streamlined reporting, faster performance, and AI-enhanced forecasting that helps prevent mistakes before campaigns launch. The upgrade includes improved attribution methodologies without added complexity, empowering advertisers to make better decisions efficiently. This positive reception reinforces TTD's confidence in their offerings.