A surface-level look at The Trade Desk's (NASDAQ:TTD) third-quarter results could lead some investors to believe the company's rapidly growing business is entering a period of deceleration. After all, the programmatic advertising company's 38% year-over-year revenue growth rate in Q3 was below growth rates between 41% and 55% in the prior three quarters.
But investors would do well to look beyond The Trade Desk's third-quarter revenue growth deceleration and consider some of the company's underlying catalysts. A closer look at the ad-buying platform specialist's business suggests there's a good chance growth can accelerate in the coming quarters.
Two areas, in particular, look poised to be major drivers for the tech company: connected TV (CTV) and international markets.
Here's a look at why these two catalysts could help drive revenue acceleration in the coming quarters.
Ad spend on The Trade Desk's CTV channel soared in Q3, rising 145% year over year. This, however, was a slight deceleration from a growth rate above 150% in Q2, extending a trend of multiple quarters in a row of sequential deceleration for this channel.
But the channel's year-over-year growth rate may soon notch higher. The Trade Desk CEO Jeff Green noted in the company's third-quarter earnings call that "more and more premium inventory became available on our platform, and more of our customers started to access it," as the quarter progressed. Impressions coming from Amazon.com's (NASDAQ:AMZN) Fire TV, in particular, saw exceptional growth; impressions on the platform were 21 times higher than they were in the year-ago quarter, fueled by The Trade Desk's new partnership with Amazon Publisher Services as a demand-side platform partner.
While 2019 was an important year for The Trade Desk's international expansion, many of its efforts during the year were laying the groundwork for more rapid growth in the future. The company's March 2019 launch of capabilities for advertisers to buy premium inventory in China, for instance, was slated to scale slowly at first; management wanted to make sure to only bring incremental opportunities to partners in China and prove the value of its offering before it pushed for more advertising inventory in the market.
With an investment year for its international markets behind it, The Trade Desk now believes that its revenue growth rates internationally will accelerate in 2020. Green noted in the company's third-quarter call that there is "a huge amount of opportunity [internationally] in connected TV, in particular." Furthermore, Green said its investments in China are "showing green shoots finally."
"Our biggest opportunities are ahead of us"
During the earnings call, Green emphasized that its growth has reaccelerated before. After 40% year-over-year revenue growth in the fourth quarter of 2017, for instance, The Trade Desk went on to deliver 55% year-over-year growth in 2018. This could happen again, he implied.
"When you look at the untapped opportunity, especially in connected TV," Green explained, "I think you just have to look at the general trend and not get too caught up in the short term, which is that overall our biggest opportunities are ahead of us."