The Trade Desk (TTD 2.69%) has been on fire in 2019, gaining more than 134% going into its second-quarter financial report. The results were better than many had hoped for, as the company's impressive growth continued.
Revenue increased to $160 million, up 42% year over year, and edging out expectations. This resulted in adjusted earnings per share of $0.95, soaring past analysts' consensus estimates of $0.69.
Management provided a wealth of important information to investors on the conference call to discuss the results. Here are a few of the key takeaways.
1. The shift to connected TVs will drive massive growth
If investors have any doubt regarding the importance of connected TVs and streaming video to The Trade Desk's future, consider this: the subject came up 47 times during the conference call. Here's The Trade Desk CEO Jeff Green's take:
We will likely never see a channel larger and more full of opportunity than we have right now in [connected TV]. Much of what we've done over the last decade has simply been a dress rehearsal for the digital shift happening in TV right now.
Green pointed out at that by 2027, the worldwide advertising market will likely top $1 trillion, and about half of that market will be in some form of video. With the advent of streaming, "more and more consumers watch TV content through connected devices."
Advertisers have caught on to the inevitable migration and are looking to cash in on this megatrend. "Nearly every discussion I have had over the last few months with advertisers or content providers, starts with the potential of Connected TV," Green said.
The Trade Desk's connected TV advertising business has been soaring and was up three times from the year-ago quarter. Even more importantly, the company recently reached an agreement with Amazon.com that Green called "a game changer." The deal allows The Trade Desk to place advertising on Amazon's Fire TV devices, thereby selling more connected TV advertising.
2. The advertising market is evolving
Green went to great lengths to outline the changes that are happening in the advertising industry. The industry, as a whole, is expected to achieve 4% growth in 2019. Programmatic advertising, which uses algorithms to automate the process, "is growing five times faster than total advertising at around 20% year-over-year according to Magna Global," he said. At the same time, The Trade Desk grew revenue by 42% year over year, 10 times the rate of industry growth and more than twice the rate of programmatic.
The inescapable conclusion is that not only is The Trade Desk taking market share from rivals, it's also perfectly positioned to benefit from the migration from traditional broadcast and print advertising to digital and programmatic. The transition is ongoing, and the ability to place effective ads in apps and streaming music, as well as streaming video and connected TVs will define the advertising leaders for decades to come.
3. Consumer data is protected
There was a time when advertising decisions were made in smoke-filled back rooms over cocktails, driven as much by instinct and experience as anything else. Those days are gone, and getting ads in front of the consumers most likely to act on them is the product of data and artificial intelligence (AI) algorithms. Unfortunately, as we've seen in recent years, sometimes that data comes at the expense of consumer privacy. This is one area where The Trade Desk has an advantage.
Green points to the company's acquisition of Adbrain and why it matters.
All this data is anonymized ... Adbrain's AI helps us integrate insights across environments in a way that protects consumer data by using only anonymized information. This is a differentiator for our advertisers who are hyper-focused on protecting the integrity of their consumer relationships, which sometimes go back decades.
In an era where government regulators are increasingly targeting companies that fail to protect consumer privacy, The Trade Desk's platform shields advertisers by using data that's not personally identifiable.