The Trade Desk (TTD 2.57%) surprised investors last month when it bucked the trend of suppressed revenue levels seen by many of its digital advertising peers. The company, which provides a platform for ad agencies and other marketers to optimize ad spend across the open internet, posted 31% year-over-year growth in the third quarter. Even more, The Trade Desk guided for strong double-digit growth in the fourth quarter, too.
But could the tech company's near-term momentum prove to be short-lived? If management's bullish commentary in The Trade Desk's third-quarter earnings call is any indicator of what's to come, probably not. During the call, management repeatedly remarked how bullish it was about 2023 and beyond. Let's explore some of those bullish comments in this article to help investors get more insight into the company's expectations for next year.
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Key Data Points
An unprecedented tailwind
When asked about his expectations for 2023, The Trade Desk founder and CEO Jeff Green said he believes the company is benefiting from a secular tailwind unlike any it's seen before, and potentially unlike any it will see in the future. This tailwind, which he says will continue into 2023, is being driven by the sheer amount of inventory coming onto its platform. This is especially true in connected TV (CTV), where marketers increasingly want to "spend their very first dollar," Green said.
With not only CTV gaining momentum but programmatic advertising -- The Trade Desk's bread and butter -- gaining traction within CTV, the company is well positioned to benefit from this channel's growth. Further, any momentum in this channel will have a substantial impact on The Trade Desk since CTV is the company's largest contributing channel to revenue.
A wave of valuable first-party data is coming
Green is also very bullish on the rapidly increasing adoption of UID2, an independent and open-source identity solution aimed at replacing and improving privacy while also aiding targeting and measurement in digital advertising. The Trade Desk expects UID2, which it helped pioneer in partnership with other digital advertising players, to be "fully embraced" by marketers next year.
UID2 adoption, combined with The Trade Desk's investments in data solutions, will unlock the value of first-party data, making campaigns on its platform more effective than ever. "This gives me tremendous confidence for 2023 and beyond," Green said.
OpenPath will gain more traction
Perhaps one of the most underrated catalysts for The Trade Desk's business is its recent launch of OpenPath. The proprietary product gives publishers the opportunity to connect directly to The Trade Desk's platform. This, in turn, lets advertisers have direct access to premium digital advertising inventory. While The Trade Desk doesn't make any money directly from this arrangement it offers publishers, OpenPath helps streamline the supply chain and removes a middleman for those who utilize it: supply side platforms. A more efficient supply chain, The Trade Desk believes, is critical to long-term growth in programmatic advertising.
Just a few months after its launch in February 2022, The Trade Desk said over 100 publishers had already expressed interest in the product.
Management has big expectations for OpenPath next year. It "will accelerate our growth in land grabbing around the world irrespective of the macro environment in 2023," Green said.
All of these drivers don't necessarily guarantee strong growth from The Trade Desk in 2023 and beyond. The company's revenue, to some degree, is dependent on the macroeconomic environment. So investors shouldn't rule out the possibility of a significant revenue growth slowdown if advertisers' budgets contract substantially. But the company's strong momentum year to date means the odds of The Trade Desk continuing to gain significant market share next year are high.
