The Trade Desk (TTD 3.35%) is unphased by worries of a global economic slowdown and turbulence in the digital advertising space. The company put up 35% year-over-year revenue growth in the second quarter of 2022, a sizzling pace that far surpassed its peers in advertising technology.
How is the company able to put up fast and steady growth numbers quarter after quarter? In a word: television.
The migration to connected TV continues
What's so impressive about The Trade Desk's 35% growth rate ($377 million in revenue) in the quarter is the company was lapping a 101% growth rate in the same period last year. Not only did CEO Jeff Green and company hold on to their boom in new business from early on in the pandemic, but they continue to gobble up market share as growth at many other adtech companies dips into the low-teens percentage range or lower -- Alphabet's mighty Google included.
As was the theme last year, Green said a rapid move to internet-connected TV (CTV) is what's fueling The Trade Desk's growth. Media companies have gotten myriad streaming services up and running the last few years, and now, they're figuring out how to maximize the value of their subscriber bases. Programmatic advertising (in which digital ad processes are automated) is where they're turning.
And given the first-party relationship these streaming services have with their customers, media companies and their marketing agencies are turning to The Trade Desk. The Trade Desk doesn't own media assets -- it's simply a tech platform for driving advertising efficiency. And it's quickly becoming a preferred partner over walled gardens like Google that own competing media properties like YouTube. Given the global economic slowdown, CTV is becoming a top way brands get the most from their marketing campaigns. Green had this to say on the earnings call:
And it's because in times of uncertainty and volatility, when marketers have to make the most of every advertising dollar that we have an opportunity to demonstrate our value. Our customers recognize that efficient and decisioned advertising can play a critical role in differentiating their brands to specific audiences and specific times. And there's no better platform on which to do that than The Trade Desk. Throughout the first half of 2022 and particularly in the second quarter, I believe we have gained more market share or grabbed more land than at any period in our history.
The Trade Desk said CTV made up a low 40% share of total revenue in the second quarter, and CTV remains its fastest-growing segment.
Google strikes back, but The Trade Desk has momentum
Of course, Google isn't resting on its laurels. It recently announced it's working on a YouTube hub where viewers can also subscribe to streaming services right from their existing YouTube experience. Despite the conflict of interest, YouTube's massive scale could be tempting for TV media outfits.
However, The Trade Desk is still in pole position in CTV. Green highlighted some of its recent deals as proof. Walt Disney signed an expanded partnership as it ramps up advertising spend on Disney+, Hulu, and ESPN+. Amazon Web Services is making use of the The Trade Desk to open up its shopper data to merchants. And Green said his company is also in talks with Netflix and Microsoft after their announced partnership to bring an ad-supported tier to Netflix's streaming service.
Basically, don't write off Google from this fight, but as video quickly becomes a pillar of internet-based advertising, The Trade Desk will be a top beneficiary. Of course, this is no closely held secret. The stock trades for a premium 65 times enterprise value to free cash flow. Clearly, the market expects The Trade Desk to continue expanding revenue and profitability at a rapid pace for years to come. But if you believe CTV will be a top adtech trend for the foreseeable future, it would be a mistake to ignore The Trade Desk.
