This Stock Has Been a Big Winner and Could Still Have Tremendous Potential

With a return of 2,400% since its 2016 IPO, advertising technology company The Trade Desk (TTD -4.34%) has been an incredible performer for early investors, but it has captured a surprisingly small slice of its addressable market. In this Fool Live video clip, recorded on Oct. 18, Fool.com contributor Trevor Jennewine explains why he's still a big shareholder and doesn't plan to change that anytime soon.

Trevor Jennewine: So, The Trade Desk is an ad tech company, and they provide a programmatic platform that helps marketers create ad campaigns across a lot of digital channels like connected TV, desktop, mobile devices. The reason this is such a large position in my portfolio, it was actually the second stock that I bought after Shopify (SHOP 0.23%). But, I haven't sold it, I think they have a few things that set them apart. They're the only buy-side platform in the industry that uses a bid factor-based architecture. That just means that marketers can create these very expressive targeting parameters, billions of different parameters with just a few clicks.

They allow marketers to easily create these very defined targeting parameters compared to what the other solutions out there and then, of course, this industry is dominated by Google (GOOG -1.10%) (GOOGL -1.23%) and Facebook (META -4.13%). But, both of those companies, they have great business models, but there's a conflict of interest built into their business models. They work with buyers and sellers of ad inventory so they are working on both sides of the equation, and they're also selling their own ad inventory off the content properties they own. If you go to Google, Google's goal is not to help you find the best ad inventory, it's to help you find the best ad inventory that they have access to.

The Trade Desk is an independent. They don't own any ad inventory themselves. They don't own any content platforms like Google Search or Facebook. They don't arbitrage inventories that are out, buying it up and reselling it at a higher price. They're independent of the largest independent demand-side platform, and they are also strictly focused on the buy-side. I like that business model. I think it aligns their values with those of their clients. The other thing at this industry in general, there's a lot of growth potential here. This year, $748 billion, at least spent on advertising worldwide, 61% of that will be spent on digital ads, but just 21% will be spent on programmatic ads, just to define that term.

Traditionally, media buying has occurred through manual negotiations where an ad buyer and publisher would come up with a price together, and it would be done in advance of the ad being displayed, you're basically paying up front. Programmatic advertising automates that process with real-time bidding. Just 21% of ad spent will be on programmatic ads this year, so there is a long way to go. The company is really focused on areas like connected TV, international expansion, and shopper marketing, and each of those is a big opportunity for this company. That's why it's such a large position in my portfolio.