Inside The Digital Advertising Stock That’s Breaking Away From The Pack: The Trade Desk

Inside The Digital Advertising Stock That’s Breaking Away From The Pack: The Trade Desk

The Trade Desk

The Trade Desk rings The Nasdaq Stock Market closing bell in celebration of its September 2016 IPO. Source: Nasdaq

The Trade Desk, a Silicon Valley-based media buying platform specializing in real-time automated advertising technology, has defied industry trends and seen its stock grow by 980 percent over the past five years while other ad-related stocks have lost ground.

Industry and macroeconomic pressures led to reduced ad spending at large digital advertising companies such as Alphabet’s Google and Meta’s Facebook in 2022. Some of it stemmed from Apple requiring apps to ask users if they want to be tracked. That change made it hard for companies such as Facebook to craft targeted ads.

Co-founder and CEO Jeff Green and his company have built an industry-leading platform that has continued to grow through bad times for tech and can operate worldwide including in China, a country that Alphabet, Meta and others don’t have access to.

Most of the trade Desk’s buyers are ad agencies, brands, or other tech companies, according to its fourth-quarter 2022 investor presentation. The company has been profitable since 2013 and says it is tapping into a fundamental shift happening in advertising that goes beyond just a move to digital.

Another reason for reduced ad spend had to do with more advertisers flocking to streaming. But a lot of it had to do with how social media is changing and how different platforms influence how we shop, Market Watch reported.

The Trade Desk is the world’s largest independent demand-side platform (DSP) for digital ads. Demand-side platforms help advertisers buy programmatic (automated) ad space across desktop, mobile, and connected TV (CTV) platforms. By contrast, sell-side platforms (SSPs) enable publishers to sell their own ad inventories.

Google and Meta bundle together DSPs, SSPs, and other ad tech services but they lock their advertisers into walled gardens, Leo Sun wrote for The Motley Fool. “Therefore, companies that want to purchase ads across the ‘open internet’ that aren’t tethered to those large tech ecosystems have been flocking to independent platforms like The Trade Desk,” Sun wrote, underscoring the resilience of The Trade Desk.

OpenPath and UID 2.0 are two products that demonstrate how far The Trade Desk has come since it went public in 2016 as a pure agency-based demand-side platform, Ad Exchanger reported.

Helping The Trade Desk expand beyond its DSP market, OpenPath is a new feature that directly connects publishers to advertisers, completely bypassing SSPs. That could make stand-alone SSPs obsolete and challenge integrated SSPs such as Google’s AdX.

UID2 is the identity anchor for The Trade Desk’s direct integration with Disney. CEO Jeff Green said it represents the largest pool of CTV supply on the internet. The Trade Desk also has a UID2 integration with Paramount.

CTV Unified ID 2.0 integrations are important because almost all the streaming viewership logs in via email, allowing for more personalization and control over campaigns. That is very different from walled garden platforms, which have more user-generated content and diminishing personalization controls, Green told Ad Exchanger.

The Trade Desk is a profitable growth stock and has been for a while in a bear market, with strong growth forecasts for the next several years, Investor Place reported. Analysts expect its bottom line to grow.

If The Trade Desk is still trading at 14 times sales by 2024, analysts say it could be worth nearly $34 billion — almost a 50-percent gain from current levels, Motley Fool reported in January 2023.

The Trade Desk could hit that target if, for example, market research company eMarketer is right in its expectation that CTV ad spending in the U.S. will more than double from $21.2 billion in 2022 to $43.6 billion in 2026 as linear TV platforms die out.

However, “a deep global recession could temporarily derail its growth,” Sun wrote. “Furthermore, its double-digit price-to-sales ratio still makes it pricey compared to other ad tech stocks.”