The year 2019 was a big one for streaming TV. Not only did Netflix continue to add millions of new subscribers around the globe, but Apple and Disney also made their grand entrance onto the scene. The field will get even more crowded in 2020 when AT&T launches HBO Max in the spring, and Comcast launches Peacock in the summer.

This boom in TV via an internet connection is really a migration from traditional cable. So, for some of these companies, I still believe the financial benefits will be minimal over the next year or two. For digital advertising technologist The Trade Desk (TTD 0.77%), though, the mass migration to connected TV is a huge opportunity right now.

A man and woman sitting on a couch watching TV.

Image source: Getty Images.

Not just digital advertising, but data-driven advertising

As he has in past earnings calls, The Trade Desk CEO Jeff Green again pointed out in the fiscal 2019 Q4 call that the $750 billion in global ad spending remains on track to reach $1 trillion a year in about seven years' time. Just over half of that annual spend is digital, so there are two tailwinds blowing at the backs of ad technology platforms.  

But for The Trade Desk, there is a third: Programmatic advertising, or the automation of ad placement using data. Still a minority percentage of the digital share of the industry, internet-connected TV and audio is proving to be a big boost to data-driven ads.

Campaign managers are getting more for their money and driving positive results. Green explained on the earnings conference call:

I believe that in many ways, we're at a watershed moment in our industry and for our business. I say that not simply because of the revolutionary impact of emerging trends such as [connected TV], but also because we're at a point where we no longer have to make the case for data-driven advertising. Advertisers get it. They understand it and they want to apply it. It's no longer a question of "What the hell is this thing?" But it's more a question of "How can I do more with you?"

To illustrate the success The Trade Desk is having adding new advertisers and expanding relationships with existing ones, let the numbers do the talking. Spending using the company's cloud-based data-driven placement software exceeded $1 billion in the fourth quarter of 2019 (a new quarterly record), which led to revenue growth of 35%, to $216 million.

For the full-year period, revenue increased 39% to $661 million. And what I like most about this cloud computing stock is that it's profitable -- both on an unadjusted and adjusted (backing out non-cash expense and stock-based employee compensation) basis.


Full-Year 2019

Full-Year 2018



$661 million

$477 million


Operating expenses

$549 million

$370 million


Earnings per share




Adjusted earnings per share




Adjusted EBITDA

$214 million

$159 million


EBITDA = earnings before interest, tax, depreciation, and amortization. Data source: The Trade Desk.  

The Trade Desk goes into investing mode

Spending on Trade Desk's platform was big last year, with connected TV and audio specifically growing 137% and 185%, respectively, from 2018. TV spend is expected to double again in 2020, so Green said his company is gearing up to take advantage of the mass migration to internet-based video. Spending growth is expected to accelerate again as it did in 2019.  

The Trade Desk generates profitable margins from its investments, so an elevated spend rate isn't too worrisome for now. As a result of higher expense, Green said to expect revenue growth of at least 30.5% and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margins again exceeding 30% in 2020. With that kind of return on investment, I say spend away.  

Based on the expected growth, the stock is currently going for 14.3 times one-year forward revenue and 47.7 times adjusted EBITDA. Both are premium price tags, but not unreasonable considering the outlook for 2020 and the momentum the company is riding from connected TV and data-driven ad interest.

With the migration expected to last for the foreseeable future, I like The Trade Desk stock for the long-haul.