The Trade Desk Deep Dive

Among secular growth stories in stock markets, programmatic advertising is among the most compelling. Through the year 2025, the industry is poised to grow by at least 11% annually with some data sources predicting a much faster rate. Within that theme, The Trade Desk (Ticker: TTD) looks to be a strong player. For years, the company has delivered lofty top-line growth with a superb margin profile.

The Trade Desk was founded 12 years ago in California by Jeff Green and Dave Pickles who both remain executives for the organization today. Here I will cover in detail the company’s mission, path and investment case, including:

1. The Evolution of Ad-Buying

   1. a. The Old: Up-Fronts

   2. b. The New: The Trade Desk’s Programmatic Niche

2. A Transaction with The Trade Desk

3. Why Would One Advertiser Pay More?

4. A Purely Unbiased Partner

5. Programmatic’s Growing Edge

6. CTV: It’s a Movement

7. Pandemic Impact

   1. a. Short Term

   2. b. Long Term

8. Why Buy-Side?

9. Main Risk: The Cookie Monster (Google) and Apple

10. Unified ID 2.0 (UID2)

11. Solimar Product Launch

12. What’s Next?

13. Leadership

14. Financials and Valuation

15. Balance Sheet

16. My Approach

17. Research and Image Citations

1. The Evolution of Ad-Buying

a. The Old: Up-Fronts

To understand The Trade Desk’s programmatic ad-buying niche, I should first discuss the legacy up-front model (AKA traditional direct) that it’s actively replacing. The up-front model involves advertisers buying large blocks of advertising supply from publishers months in advance. Traditionally, publishers have set fixed prices with advertisers placing orders via rate cards. This somewhat strict process is antiquated — why?

Up-fronts lack the flexibility for advertisers and agencies to make real-time decisions based on data and global trends. It also lacks the flexibility to target advertisements on a per consumer (or per impression) basis making precision a pipe-dream.

How can a specific ad-slot today be properly valued 6 weeks from now? Absent a crystal ball, taking an educated guess is the only option in the up-front system. Up-fronts require us to forecast future audience and interests rather than making decisions based on real-time consumer preferences.

The Trade Desk changes that.

b. The New: The Trade Desk’s Programmatic Niche

The Trade Desk brings a far more granular and precise approach to ad-buying. It does help agencies and advertisers make more data-driven decisions within the up-front model, but does so mainly to transition clients to its bread and butter: programmatic advertising.

Through a process known as Programmatic Activations, The Trade Desk’s platform equips ad-buyers (The Trade Desk usually directly works with agencies who work on behalf of advertisers) with tools to ensure maximum campaign return on investment (ROI) with the ability to track results and optimize to key performance indicators (KPIs) in real time. With its software, parameters like device type, region, a plethora of audience data, consumer preferences, and Nielsen’s gross rating point system are just a few of the targetable signals available to benefit ad-buyers. Users can even manage multiple sets of parameters when running more complex campaigns to ensure the most granular of targeting and, in turn, effective marketing campaigns.

Thanks to the firm’s software, ad-buyers can utilize and make actionable decisions on both 1st party data as well as the plethora of 3rd party data that The Trade Desk has access to. When an individual ad-slot becomes available, campaigns running on The Trade Desk are helped to quantify what the slot is worth specifically to that respective advertiser. This ensures the avoidance of overpaying or missing out on a lucrative opportunity.

All of this happens in real-time enabling price discovery per consumer impression, rather than accepting a fixed price on millions of impressions at a time. It’s easy to see how more precisely quantifying the value of each and every ad-dollar spent greatly enhances campaign success.

To deepen its value proposition further, The Trade Desk also offers a media planner to advertisers. This tool provides a goals-based system to craft campaigns with a clear view of audience characteristics — this guarantees they don’t miss anything important.

Agencies and advertisers directly access The Trade Desk’s self-serve, cloud-based platform to ensure complete transparency of performance and knowledge of any incremental costs. Unlike many ‘black box’ players in ad-tech, there is never a doubt where fees came from when partnering with this organization. 

To empower the demand side, The Trade Desk leverages trillions of unique data points and a decade of training data to constantly feed and improve its machine learning algorithms — these algorithms then aid its clients in running the highest performing (and most profitable) campaigns possible. Koa is The Trade Desk’s core artificial intelligence (AI) engine enabling all of this to be a reality. It explicitly functions to free users to make better decisions thanks to timely, accurate recommendations.

Koa is specifically what helps agencies and advertisers to quantify an impression’s value; as it collects more data, it becomes better and better at doing so. With it, users can be proactive with data rather than reactive, but importantly, ad-buyers maintain ultimate control of this entire process by picking which optimizations they prefer and forgoing others.

It is no longer necessary to guess what an ad-slot will be worth in a few months or if that ad-slot is truly relevant to a campaign. Now, advertisers can just bid on it at the exact time that it becomes available. This reduces booking costs by 50% while improving campaign ROI for advertisers and campaign managers when using The Trade Desk’s platform.

Today, the ad-tech company enjoys industry-leading scale with its advertisers accessing 12 million ad-slots per second through The Trade Desk’s platform. As a very oversimplified but still accurate rule of thumb: The more data a company is using and more granularly each ad-dollar is deployed the higher the ROI that company can deliver. In this light, advantage: The Trade Desk. 

2. A Transaction with The Trade Desk

Each transaction that The Trade Desk participates in begins with a publisher having an ad-slot to sell to the open market. A publisher could be any platform like Pluto TV, Barstool Sports or something entirely different. As long as they’re selling ads and not one of the few walled-garden behemoths like Facebook, The Trade Desk is probably working with them in some capacity.

This publisher will generally work with a supply side platform (SSP), like Magnite which functions as the piece of the value chain that actually controls ad-inventory. These SSPs enable publishers to more effectively monetize their supply and thus can enhance the value an ad-seller provides to its buyers.

The SSP then sends individual slots to a digital marketplace where the supply side and demand side interact. All in all, The Trade Desk works with 82 integrated ad-exchanges and SSPs to serve as the conduit bringing this ad-inventory to the demand side buyers.

With these ad-slots, a demand side platform (DSP) like The Trade Desk hosts live auctions for each potential impression it has access to with the highest bidder winning. Remember, The Trade Desk always tells its customers what these impressions are worth.

To generate revenue, the ad-tech organization signs Master Service Agreements (MSAs) with demand-side players and by collecting a fixed percentage of a client’s total spend. It also generates sales via data analytics services but these MSAs make up the majority of The Trade Desk’s business today.

3. Why Would One Advertiser Pay More?

Let’s use Interactive Brokers specifically to see why everyone wouldn’t just pay the same for an impression. Interactive Brokers advertises on CNBC’s cable, audio and streaming services. For a company serving investors like this one, a CNBC impression is likely worth more to it than it is for a company selling cosmetics for example. The more relevant the audience, the more an impression is worth.

We have to ask ourselves: who is consuming the content, what do they want, and will they exhibit an action? The Trade Desk has automated the answers to these pressing questions for the advertising industry and this is why it can tell us what to pay for an impression.

4. A Purely Unbiased Partner

Importantly, The Trade Desk has no affiliation to inventory and supply side players in this space. It has earned the title of largest independent and unbiased programmatic ad-buying platform on the planet. It believes that avoiding conflict-of-interest when serving both the demand and supply side is all but impossible, so it doesn’t. By staying truly unbiased, The Trade Desk can guarantee it’s providing the most value possible for both its own clients and integrated SSPs.

Once-independent competitors like BeesWax are actively being bought up by behemoths like Comcast making The Trade Desk’s lack of platform or publisher bias all the more unique and valuable. The absence of affiliation ensures agencies can trust The Trade Desk with their 1st party data and campaign performance without any intervening agendas. It’s a true team effort here.

Furthermore, The Trade Desk has committed to NEVER actually owning advertising supply. It merely acts as a connector between publishers and agencies thus guaranteeing it is not arbitraging inventory for profit. Another potential conflict of interest, gone.

When combining this fairness with complete KPI and fee authority — as well as the superior ROI — it’s clear to see why The Trade Desk’s user retention rate has remained over 95% for 28 straight quarters.

Its application programming interfaces (APIs) are even open to its demand-side users so that they can build their own features on top of The Trade Desk’s to boost utility if they so choose.

The company obsessively commits itself to complete data, fee and algorithm transparency which is easier thanks to an absence of supply side conflicts. This is quite the refreshing change from walled-garden mammoths attempting to keep as much traffic within their own ecosystems as possible, rather than providing the greatest possible advertiser utility. These walled gardens tend to be far more timid with data and fee structure sharing which makes a transparent approach all the more appealing.

For the Facebook’s of the world, the more data they can control and monetize, the better. The Trade Desk takes a polar opposite approach and essentially works with every company in the advertising world besides the titans.

This is what creates the powerful, and accurate, label of The Trade Desk being the open internet advocate. And as we will see later with Unified ID 2.0 (UID2), it’s not just calling itself that, it’s acting like it.

5. Programmatic’s Growing Edge

We’ve gone from people consuming content solely on ABC, CBS, Fox & NBC (heritage broadcasters) to hundreds upon hundreds of entertainment options. Furthermore, we don’t solely consume content on a television or a desktop anymore, but tablets, smartphones, watches and more. This combination lends itself to audiences becoming more and more fragmented.

The value gap between programmatic and up-front purchasing widens as this fragmentation expands. More separated audiences make effective targeting all the more important and all the more difficult, which is where the scalable, 1-to-1 impressions that The Trade Desk offers truly shines. The company can consolidate all of this increasingly fragmented traffic in one platform, which makes quantifying the value for advertisers and conducting real-time auctions possible. Whether it’s streaming video, podcasts, video games, smartphone apps or music services — this entity has the demand side covered.

I touched on how programmatic advertising boosts ROI and lowers costs for advertisers, but it also saves valuable time for the entire value chain as well. According to Boston Consulting Group, publishers reduce time to ad-placement by 57% via switching from up-front advertising to programmatic. Agencies reduce their time by 29%. More profits and time means more focus on things like product innovation and creativity rather than solely brand awareness. And that’s what actually builds a sustainably successful company. 

As a result of these advantages, programmatic spend as a percentage of total global video and display ad-spend has risen from 49% in 2017 to over 63% last year. The United States specifically saw its programmatic penetration rise from 79.3% to 86.3% over the same period. Markets like Latin American are less tapped at 36.3% but it’s seeing a similar trend and the rest of the world is no different. The programmatic shift is clearly happening.

6. CTV: It’s a Movement

Connected TV (CTV) is probably the most compelling programmatic advertising growth channel thanks to the linear TV cord cutting movement. Notably, there are now more streaming subscriptions in the world than cable subscribers — and there are really no signs of this slowing with more content precipitously moving to streaming services.

Live sports as a category is now making its way over to Paramount+, ESPN+ and others. 88% of the U.S.A’s most watched shows pre-pandemic were live sporting events making it crystal clear to see how this will impact these trends as well. Eyeballs will follow interest and the interesting content is leaving legacy cable at a rapid clip.

We don’t get specific color on how The Trade Desk’s CTV category is growing on quarterly earnings reports, but the company has told us “CTV revenues have more than doubled” for several consecutive quarters.

Finally, the global rollout of 5g will work wonders in lowering latency and boosting data transfer speeds. In a programmatic world where real-time is vital, this should be a positive development for the sector’s ubiquity.

7. Pandemic Impact

a. Short Term

As you’d expect, advertising budgets were decimated by Covid-19 as global chaos and uncertainty reigned. Growth for The Trade Desk meaningfully slowed and even turned temporarily negative. Fortunately, its pristine balance sheet, asset-light business and strong unit economics all enabled the company to endure the toughest of times.

As vaccinations have entered more arms, this daunting headwind has begun to fade. For some evidence, The Trade Desk guided to 87% revenue growth for the next quarter which represents a meaningful acceleration & depicts pent-up demand unwinding. According to Jeff Green, several verticals still have much more acceleration to come meaning this boost may not be over just yet.

b. Long Term

The long term impact of Covid-19 on the programmatic advertising industry looks to be much more positive. The crisis forced CFOs to be that much more effective with every precious ad-dollar they had left to spend. Targeting consumers 1-to-1 rather than millions at a time is the way to achieve this objective.

Beyond that, Covid-19 made forecasting demand several weeks in advance virtually impossible — remember the legacy up-front model requires that from us. This made real-time auctions more enticing as flexibility became imperative. Both of these factors contributed to a meaningful acceleration in the shift to programmatic advertising.

And now that this shift has occurred, there is no reason to go back to up-fronts. Why accept the limitations of up-fronts when you don’t need to? Well, as it turns out advertisers aren’t. According to Jeff Green, this up-front season has shown by far the strongest signs of a programmatic shift.

8. Why Buy-Side?

Within the programmatic advertising world, the demand side niche that The Trade Desk occupies is ideal. Specifically, this piece of the value chain commands 40% of total advertising budgets while other pieces like the supply side and exchanges enjoy smaller pieces. The buy-side is where the money is made.

It’s also a buyer’s market with digital ad-inventory greatly exceeding demand which perhaps contributes to this company’s superb margins as you’ll see below.

9. Main Risk: The Cookie Monster (Google) and Apple

What are cookies and where did they come from? (If you know, please feel free to skip ahead)

There are 2 kinds of cookies: 1st and 3rd party. 1st party cookies are tiny sections of code installed on our devices when we visit any given site like eBay. These help a content creator identify and understand how to craft the best experience each time we visit.

3rd party cookies are exactly the same except they’re not created by the visited site but a 3rd party (hence the name). 3rd party cookies have served as the primary vehicle for relevant ad-targeting since the dawn of the internet.

There are two main issues with 3rd party cookies. The first is relatively straightforward: they are somewhat antiquated. Cookies were created by Netscape in 1994 to give websites the ability to decipher between visitors. This still works when we visit a traditional website, but as discussed above, in 2021 we consume content on many, many different platforms. Streaming platforms and mobile apps are cookie-less environments making this means of identification and targeting far less valuable as these channels proliferate.

The second issue is more complex and more pressing as well. Google — one of the most powerful walled gardens in the World — is attempting to phase out the use of 3rd party cookies and replacing them with a new product called “FloC”. Apple is also making similar moves by making advertisers more reliant on its ecosystem via changes to “The Identifier For Advertisers” (IDFA). The companies are justifying these moves in the name of privacy, but that claim is dubious, especially for Google.

The problem with making these changes in the name of privacy, is that both companies will continue to actively target. The main difference is now Gmail logins and Apple IDs will become more core parts of the respective companies’ targeting equations. This mean advertisers will become that much more reliant on running campaigns within Google’s or Apple’s scaled ecosystems.

The two organizations — again, especially Google —are simply limiting the effectiveness of other options. To me, this seems like a ploy to consolidate information and power which is entirely each company’s prerogative. Obviously as a Trade Desk shareholder I’m biased and you’re welcome to take a different view.

Importantly, The Trade Desk’s leadership does not expect these macro-dynamics to have a material impact on the company’s operations or value proposition. It has fortunately already reached a critical mass of training data and partners so that it does not need cooperation from these two mammoths to effectively compete. This is why massive scale is so important: The Trade Desk is in charge of its own destiny rather than mega-caps controlling it.

Furthermore, Google is also struggling to deliver on its 3rd party cookie-removing ambition. Last month, the company announced a 2-year delay to this action which my contact at Magnite called “an eternity in ad-tech world.” This type of operational blunder is quite uncommon for the iconic company. Perhaps the transition is not as easy as Google thinks, but even if it is, The Trade Desk will likely prosper.

10. Unified ID 2.0 (UID2)

Despite the muted risk, The Trade Desk is not waiting to see what happens but is instead taking groundbreaking action. Unified ID 2.0 (UID2) is The Trade Desk’s brainchild and a new means of tracking/targeting that ensures higher efficacy vs. 3rd party cookies as well as real privacy.

UID2 leans on the usage of hashed (AKA anonymized) email addresses collected when we log into something. The software creates a constantly regenerated identifier — not a Gmail login — to ensure continuous privacy. With it, identities are double and triple encrypted. UID2 even adds a new layer of data security and consumer authority not enjoyed by cookies. Now users can actively opt-into or out of any data sharing preferences and are ALWAYS told when their data is actually being shared.

Aside from empowering users, UID2 will also include a single sign-on (SSO) service for all opted-in platforms to boost convenience and value even further.

This movement is nice, but it will only work with meaningful adoption. The Trade Desk has that. According to founder and CEO Jeff Green, the UID2 momentum the organization is enjoying is “beyond anything we could have imagined” and the list of opted-in partners is larger than what the company has shared publicly. There are already 50 million authenticated users hinting at its ability to continue delivering a superior ad-targeting experience for its constituents thanks to massive scale.

To build legitimacy, the company sought out the Partnership for Responsible Addressable Media’s (PRAM’s) blessing on the quality of UID2 both in terms of efficacy and privacy. They got it, and even saw industry giants such as Nielsen deciding to make it a core piece of their upgraded ad-measurements. Recently, well-known entities such as Unilever, Procter & Gamble, ViacomCBS and Comcast have all adopted UID2 as well.

Importantly, UID2 does not need a certain number of adopters to be on par with cookies as it leans on 1st party data from iconic brands like Hershey’s to fortify its value proposition. To ensure the same unbiased approach The Trade Desk takes with everything else, the Interactive Advertising Bureau (IAB) will be the independent, 3rd party governing body.

UID2 does seem like a direct response to 3rd party cookies degradation, but it isn’t according to Jeff Green. UID2 is more of an upgrade of 3rd party cookies as it integrates with all of the devices we now consume content on, not just web browsers.  Regardless, if advertisers want to effectively target while ensuring privacy, this does just that.

​​11. Solimar Product Launch

The Trade Desk officially launched Solimar this month. The product launch is in part a response to the accelerating audience fragmentation that publishers endure every day. It enables the advertising industry to “do more with less” at a time when that’s more important than ever before.

Solimar has long been touted as the biggest upgrade in The Trade Desk’s history, but what will this debut mean?

Solimar helps in several ways. First, it reinvents how The Trade Desk users can set campaign goals. Since 2018 when the company launched its “Next Wave'' of products, it has observed shortcomings in the way it was allowing advertisers to set KPIs for a campaign. In reality, preferred KPIs can look quite different for various companies. Solimar tailors this all-important goal-setting process more specifically to a given advertiser to ensure these goals are being set in the most effective way possible. Clearly-defined and specific goals lead to better outcomes.

Next, The Trade Desk’s Solimar streamlines the 1st party data on-boarding process for users. Walled gardens have long enjoyed the advantage of more seamless on-boarding. If you think about it, it’s easier to upload data into Facebook and start advertising there vs. uploading data into the open internet and trying to sell ads everywhere. Now Solimar contains a centralized, intuitive data on-boarding feature mirroring the convenience of these closed ecosystems.

Based on the company working with the vast majority of the Fortune 500, it’s able to onboard party data into its own platform and then start placing ads within the massive network of publishers it works with. Furthermore, it can now even incorporate and leverage off-site data using Solimar. According to CEO Jeff Green, this is the “easiest and most secure” means of data on-boarding within the open internet.

Solimar also features an upgrade to the company’s User Interface (UI). With The Trade Desk’s previous UI — “Megagon” — navigating the platform was not as seamless as it could have been. Now it is. For the last 2 years, engineers at The Trade Desk have been counting clicks per task completion to observe exactly where UI efficiencies can be realized. Solimar removes previous pain points and creates a more open, intuitive dialogue between man and machine.

There’s more. Solimar boasts a brand new “advanced measurement marketplace” tool for advertisers. The tool equips ad-buyers with the power to track campaign performance in a more focused way than ever before. Currently, walled gardens force ad-buyers to discover the success of campaigns on their own in what Green refers to as “grading your own homework.” This process involves signing data-sharing agreements with individual publishers to know how successful marketing spend actually was with that specific company; it’s a tedious endeavor.

Now, The Trade Desk is grading homework for its users in real-time and with bountiful access to data.

This measurement product was the key to the largest retailer in the world — Walmart — recently partnering with The Trade Desk. The Trade Desk is empowering Walmart to leverage its all-but-limitless consumer data to actually measure which ad-impressions lead to a specific sale. This newfound tracking ability makes Walmart far more valuable to all of its vendors by allowing them to arrive at more data-driven insights. The Trade Desk has allowed Walmart to close the loop between marketing dollars and sales which means it can measure and demonstrate the efficacy of an advertisement.

The boosted value that Walmart can now provide incentivizes behemoths like Unilever to dedicate more resources for optimizing sales at Walmart specifically. Brands sell more products because ads are more relevant and Walmart makes more money — a sticky win-win. Unsurprisingly, other massive firms like Home Depot and Gojek are following in Walmart’s footsteps by partnering with The Trade Desk in a similar capacity.

Finally, Solimar includes a brand new planning tool. Previously, users could plan and schedule campaigns at the beginning of the period. Now, the upgraded tool can modify those campaigns and recommend in real time to re-allocate to more profitable impressions if/when the opportunity comes. In our world, variables are dynamic not static and this planning tool captures that reality.

At the core of all things Solimar is the company’s AI tool Koa. With this new platform, Koa is unleashed to make a larger portion of the rudimentary decisions for advertisers on a day-to-day basis. Importantly, it’s always up to The Trade Desk’s clients which Koa insights are used and which aren’t. The decisions that are made are also spelled out for users to ensure transparency. Jeff Green calls Koa Solimar’s “co-pilot.”

It’s imperative to know that UID2 is a vital part of this entire equation. Solimar’s overarching objective is to ensure ads are more relevant and profitable. This cannot be an acceptable reality unless privacy and anonymity are preserved which is why UID2 is so deeply ingrained in the Solimar software. Herein lies a key differentiator for The Trade Desk: It doesn’t sacrifice privacy to gain more effective targeting.

As 3rd party cookies continue to be degraded over time, Solimar will be imperative for allowing advertisers to continue finding success. Without it, Green believes low-margin industries such as music and journalism could be at existential risk as lack of targeting erodes profits further.

12. What’s Next?

The Trade Desk is still early on in its global expansion. Markets such as India where it just launched represent abundant low-hanging fruit for the company to dominate. Based on its success in the States, it’s feasible to think this can be a lucrative endeavor as well. For an early glimpse of how things are progressing there, the company ranked 7th in Asia’s Best Workplaces for 2020. Today, international bookings make up just 14% of the company’s business vs. 13% year over year; there is a long way to go.

The Trade Desk also recently announced a new venture capital arm of its company called “TD7.” This will aim to invest in open internet start-ups and while it’s a brand new endeavor this is absolutely something for investors to track. TD7 recently made its first investment in a company called Chalice. Chalice focuses on developing customized campaign algorithms for individual brands rather than many of the more uniform approaches we see today.

Interestingly, The Trade Desk’s head count has grown by 28% over the last year. It also has 187 active job openings posted on LinkedIn which would represent 10% growth in its current employee base. These openings are centered around product development. Clearly, the company continues to see a long runway of future opportunities.

13. Leadership

A wonderful product suite can create a successful business, but when pairing that with a capable, candid team the potential becomes far more exciting.

The Trade Desk’s management team is full of stars. The ad-tech organization is still led by its co-founder Jeff Green who also serves as the company CEO. Green was a former COO and co-founder at “AdECN” which was purchased by Microsoft. He also founded the early search engine “KingOfSearch.com.” Green has served on the Networks and Exchanges Quality Assurance Guidelines Committee for IAB as well as serving on the board of a few European ad-tech companies.

A couple years ago, Green was awarded a spot among the American Marketing Association’s 40 under 40 emerging leaders and Forbes has named his organization a top 10 Most Promising Company in America. Ernst & Young has also named Green a recipient of the Young Entrepreneur of the Year Award.

To get a sense of how Green’s team feels about him, he sports a lofty 94% rating on Glassdoor with several hundred reviews.

Dave Pickles (awesome name) is the other company co-founder; he still serves as The Trade Desk’s Chief Technology Officer (CTO). Before starting the company with Green over a decade ago, Pickles worked for Microsoft as a senior software development engineer.

Blake Grayson has worked as the organization’s CFO since 2019. Before joining the team, Grayson worked as the VP of Finance and the CFO of International Consumer as well as Marketplace at Amazon. He has been an international Finance Manager at AT&T and a Financial VP at JPMorgan Chase as well. Quite the background.

Michelle Hulst, the COO, and Jay Grant, the CLO, are also impressive executive team highlights. Hulst has been a VP at both Oracle and Datalogix while Grant previously served as the General Counsel for Univision.

Green and Pickles both hold board of directors (BOD) seats, but outside of them there are a few interesting highlights to note including a DoorDash executive, and the former CFO of Netflix.

Green owns just under 10% of the company directly and has 50% of The Trade Desk’s total voting power thanks to his ownership of class b shares. These class b shares contain 10x the voting power of class A shares. 72% of shares are held by institutions with typical bellwethers like Vanguard and Ballie Gifford leading the way. The two firms together own 15.7% of The Trade Desk’s total shares and 7.6% of its total voting power. This institutional ownership is solely in class A shares.

14. Financials and Valuation

The Trade Desk’s most recent quarter (ending March 31st 2021) depicted glimpses of what a recovering advertising market would mean for the company. In the period, revenues rose 37% year over year to reach $219.8 million and slightly beat mean analyst expectations. As previously noted, CTV spend more than doubled year over year although The Trade Desk does not tell us how large that segment actually is. On a sequential basis, revenue growth did slow somewhat but CFO Blake Grayson ensured investors this was solely the result of not having an election season to bolster results.

The organization does not update customer count on a quarterly basis but did grow total customers from 820 to 875 in 2020 amid the heat of the pandemic’s pain. This figure only includes users with contracts in place worth more than $20,000. For the last three years, 2 clients have accounted for more than 10% of the company’s gross billings representing modest yet notable concentration risk.

The guidance management offered gave us explicit evidence that the pandemic ending is a large net positive for the business. As previously mentioned, it expects revenue growth to accelerate to 87% this upcoming quarter as campaign budgets continue to recover and normalize. With the shock permanently shifting budgets to programmatic, now The Trade Desk can really sink its feet in and thrive as campaign activity normalizes.

For the last decade, the company has maintained revenue growth over 30% aside from one quarter last year amid peak pandemic pain.

Margins for the organization are already excellent and continue to improve. In the last quarter, its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin soared from 24.3% to 32.1% and non-GAAP net income margin rose from 27% to 31.8%. Finally, cash flow from operations margin rose slightly from 32.8% to 34.1%. It has maintained a return on invested capital of 18% or higher for the last 3 years pointing at the true efficiency of this business model.

Based on analyst estimates — at a $33 billion enterprise value and $71 per share — The Trade Desk sells for the following valuation multiples:

Not ridiculous in my view based on its growth and unit economics, but certainly not cheap either.

15. Balance Sheet

The Trade Desk’s balance sheet is the definition of pristine. As of last quarter, it had $471 million in cash on hand with $208 million more in short-term investments like AAA-rated corporate bonds. The company has 0 outstanding debt. To ensure proper liquidity through the Covid-19 pandemic it did draw down a $143 million credit revolver but it has already paid that back offering a sign of its financial strength.

It raised just $7 million in total funding before turning profitable — something that stands in sharp contrast to many of the technology companies going public today.

Considering The Trade Desk is quite profitable and has the large cash cushion, capital is not at all an issue at this point. It can be aggressive with operating expenses or acquisitions if it so chooses; that’s what a flawless balance sheet provides.

16. My Approach

The Trade Desk is the 2nd largest position in my portfolio with my original purchase being on March 6, 2020 at $25.04/share (split adjusted). The current price is roughly $71/share and I have no plans to trim at this time. If anything, I will be accumulating more shares going forward as long as Green and Pickles continue to execute as admirably as they have thus far.

Thank you for reading!

17. Research & Image Citations

1. The Trade Desk 10-K

2. The Trade Desk S-1

3. The Trade Desk proxy statement

4. The Trade Desk earnings release

5. The Trade Desk blog post

6. The Trade Desk press release

7. The Trade Desk hiring data

8. Solimar launch presentation

9. BCG programmatic data

10. Live sports data

11. UID2 Info

12. International Advertising Bureau (IAB) Latin American data

13. The Trade Desk Investor Presentation

14. Programmatic Ad-cagr minimum

15. Programmatic Ad-cagr (more bullish)

16. Programmatic supply chain image

17. Solimar image