Connected TV is on Fire

One of my favorite ad tech companies has to be The Trade Desk (TTD).

They are a middleman of sorts, using an in-house platform to match the inventory of digital ads with the advertisers themselves.

They have been extremely effective at harnessing data to deliver the right ads to the right people and many major streaming companies and Fortune 500 companies are reaching out to them to figure out how to deploy ads in the most systematic way possible.

Let’s just say there is a lot of slippage going on in the linear industry where wrong ad placement is common.

Performance of late has been strong in TTD — more of the world's top advertisers and their agencies signed up or expanded their use of TTD’s platform, which just continues to validate their business strategy.

Companies are now increasingly embracing the opportunities of the open Internet in contrast to the limitations of walled gardens.

The highlight of last quarter’s performance is led by Connected TV (CTV) and premium video.

What is CTV in advertising? CTV is short form, skippable online advertising targeted to relevant content channels and/or audience groups. Connected TV (CTV) refers to any TV that can be connected to the internet and access content beyond what is available via the normal offering from a cable provider.

The CTV growth coincides with a broad move from broadcast and cable to digital on-demand content that is happening all over the world.

CTV as a percentage of TTD’s business continues to grow very rapidly and is, by far, their fastest-growing channel.

Overall, total revenue was up 101% from a year ago to $280 million, significantly surpassing in-house expectations.

Growth occurred mainly because of TTD’s latest platform launch, Solimar, which is the result of more than two years of engineering work, and it addresses many of the opportunities in front of agencies and brands today.

Just to provide some context on growth in CTV, through just the first half of this year, the number of brands spending more than $1 million in CTV to TTD has already more than doubled year over year.

And it's not just larger advertisers that are taking advantage of CTV anymore. The number of advertisers spending over $100,000 has also doubled. In total, TTD has nearly 10,000 CTV advertisers, up over 50% compared to last year.

That exponential growth speaks to how rapidly the TV landscape is evolving. The accelerated consumer shift to digital video is real, including CTV. And that shows no signs of slowing down.

In fact, TTD reached more households via CTV in the U.S. today than are reachable through linear TV. Today, TTD reaches more than 87 million households. Those trends are now well established.

MoffettNathanson recently reported that the ad-supported video-on-demand market is growing from $4.4 billion in 2020 to about $18 billion as early as 2025.

And every major ad-supported platform, whether it's Disney's Hulu, Peacock, Discovery Plus, ViacomCBS' Paramount and Pluto, FOX's 2B or fuboTV and many others, all are reporting record viewership or ad spend figures.

Broadcasters recognize that the traditional upfront process is a mismatch. It doesn't work in a digital world where data and personalization are required to succeed.

The legacy upfront process is really hard to run in an environment with lots of change and lots of uncertainty. I believe that this year will mark a turning point in how the process is managed. In today's fragmented TV environment, linear audiences continue to erode, linear supply is shrinking and the prices are rising simply because of the scarcity. This year, broadcasters use that scarcity to their advantage and lock up commitments as the demand for growth intensifies.

When compared to parallel linear TV ad campaigns, CTV delivered a 51% incremental reach and a four times improvement when analyzing cost per household reach. These are not isolated cases.

Retail is a point of emphasis this year with Walmart integrating Walmart shopper data on TTD’s platform. This is a leading example of how TTD is working with advertising customers to help unlock the value of retail data estimated at $100 billion to $200 billion market.

This is a highly volatile stock and 2021 has been a year of consolidation.

If TTD comes down to $60 from the $70 today, that should represent an optimal entry point into one of the hottest sub-industries in tech.