The Trade Desk (TTD -4.34%) is an adtech company. Its platform leans on artificial intelligence to help advertisers deliver, measure, and optimize data-driven campaigns. More importantly, its programmatic tools automate the ad-buying process, helping clients operate more efficiently.
Unlike Alphabet's Google and Facebook, the companies that currently dominate the digital ad space, The Trade Desk is an independent platform, meaning it doesn't own any web properties or ad inventory. In fact, The Trade Desk is the leading independent platform for ad buyers, and with that scale comes tremendous amounts of data to power its AI models. That advantage should help The Trade Desk capitalize on its massive market opportunity.
In this Backstage Pass video, which aired on Oct. 13, Motley Fool contributor Trevor Jennewine explains why The Trade Desk has so much room to grow, highlighting the difference between total ad spend and programmatic ad spend.
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Trevor Jennewine: There's this fundamental shift away from traditional media buying, like print ads, toward digital ads. Then digital advertising itself is becoming programmatic, which just means that it's being automated with software that supports real-time bidding.
So I wanted to put some numbers, to give some numbers to put that in context. In 2017, total ad spend worldwide was $585 billion. Just 39% of that, or $228 billion, was digital ad spend. And an even smaller percentage, just 12% or $68 billion, was spent on programmatic ads.
This year, those numbers are all expected to grow. Total ad spend will reach $748 billion. Digital ad spend will reached $455 billion, which will represent 61% of the total now. So that's up from 39%. And [programmatic ad spend] will reach $155 billion; that will represent 21% of the total, up from 12% four years ago.
Of all of those numbers, programmatic advertising is growing the fastest. The compound annual growth rate over the last four years has been 23% per year, compared to 19% for digital ad spend, and 6% for total ad spend. So, the industry is headed to where The Trade Desk is.
The company spends a few slides here just talking about this fundamental shift away from those traditional solutions toward digital and programmatic. Let's see here, and so this quote, I think it's particularly important: The future of all media is digital and programmatic; eventually, all media will be digital, and it will be transacted by machines. I think that's highlights the industry tailwind that's driving the Trade Desk business -- that shift away from traditional media buying, toward digital, toward programmatic.
