There was an abundance of things to like when The Trade Desk (NASDAQ:TTD) reported its second-quarter financial results on Aug. 9. The company reported record revenue of $112 million, up 54% year over year, and adjusted earnings per share of $0.60, which climbed 15%. That was driven by triple-digit year-over-year growth in a number of the company's channels, including audio, mobile video, and mobile in-app, which all grew more than 100%. Connected TV growth soared, more than doubling sequentially -- on top of the more than 2,000% year-over-year growth it produced just last quarter.
Investors got all the financial data they were looking for. But in the conference call to discuss the results with analysts, there was a wealth of additional information about the company's explosive growth and the expanding opportunity. The Trade Desk identified three significant developments that it sees as catalysts for future growth. Read on to see why management is excited about the changing television landscape, the launching of GDPR in the European Union, and consumer privacy changes at Google, a subsidiary of Alphabet.
Big media marriages
One of the biggest opportunities ahead for the company is the result of massive mergers that are happening in the television space. The Trade Desk founder and CEO Jeff Green specifically addressed Disney's acquisition of Twenty-First Century Fox, and AT&T's recent coupling with Time Warner, as indicators of the opportunities ahead.
"The worldwide advertising market is currently at $700 billion and moving toward $1 trillion over the next 10 years," Green said. "The biggest part of that market is television, which ... is nearly $230 billion this year." He pointed to the "generational shift with the global convergence of the Internet and television."
He also sees the combination of digitally delivered content from services like Hulu, skinny cable bundles like Sling TV, and direct relationships with providers like Discovery as opening up a wealth of additional opportunities for programmatic advertising.
The GDPR phenomenon
The recent and far-reaching new data-privacy regulations that went into effect in the European Union -- known as the General Data Protection Regulation (GDPR) -- address the privacy rights and data protections afforded to EU citizens. But the GDPR had an unforeseen consequence for advertisers. When the new rules went into effect in late May, many publishers found they were not in compliance.
This provided a big opportunity for The Trade Desk. "Our engineering and partnerships team put in a huge effort working with publishers and their SSPs [supply-side platforms] who, in some cases, were not ready to ensure the technology was in place to secure the required consents." This helped deliver "record spend in all four of our European offices: the U.K., Spain, Germany, and France." Green said this was a result of the trust the company has fostered with its client base.
Big changes at Google
In addition to the significant runway the company already had, recent changes at Google increased the prospects for The Trade Desk. Green detailed how "Google announced in April that they would stop sharing DoubleClick IDs with clients ... this makes comparative reporting go away, so this is a very big deal."
Green said that this was likely related to the Cambridge Analytica scandal, and that Google is now reducing the risk that personally identifiable consumer data will be maliciously used. Since The Trade Desk doesn't collect any of this data, there's no chance it could be breached, giving the company a strategic advantage against Google in the programmatic advertising space. The Trade Desk "enables advertisers to compare every destination on their media plan to every other destination objectively."
The big picture
The common thread running through each of these discussions is the large and growing opportunity in the programmatic advertising realm. Green said, "Let me remind you that programmatic is growing at 21%, while our growth was nearly two and a half times that."
He also said that programmatic was at "just over 2% of the entire advertising market ... Programmatic is the fastest-growing segment of advertising, and The Trade Desk is growing faster than anyone in programmatic."
That sounds like the investment thesis in a nutshell.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena owns shares of GOOGL, The Trade Desk, and DIS and has the following options: long January 2019 $85 calls on DIS. The Motley Fool owns shares of and recommends GOOGL, GOOG, DISCK, The Trade Desk, and DIS. The Motley Fool has a disclosure policy.