The Trade Desk vs Google Stock? Advertising is changing, and companies can no longer rely on traditional methods to influence and seek out their target audience.
In fact, brands must adopt an omnichannel approach to stay ahead of the curve – which increasingly means using technologies such as social media and video streaming outlets.
Moreover, with digital advertising an integral part of the commercial ecosystem, it stands to reason that it should be expanding as quickly as it is. According to research, the global market is expected to grow at a compound annual rate of 13.9%, reaching a total of $786.2 billion by 2026.
One venture that’s perfectly positioned to exploit these emerging trends is The Trade Desk, an American multinational technology firm operating an increasingly popular and important media buying platform.
Indeed, the company’s sales spiked 32% in 2022, and – surprisingly, for a business still in its infancy – TTD’s been profitable for the last ten years.
However, Trade Desk is making such an impact that some are comparing it to the likes of Google and Facebook, the kingpins of the sector. While TTD is punching above its weight right now, is that enough to make it a buy?
Why Makes The Trade Desk Unique?
The Trade Desk is a rapidly growing digital advertising outfit that’s transforming the way enterprises approach ad campaign management. With its robust and intuitive online interface, TTD lets advertisers take control of their entire digital advertising program, from campaign creation and optimization to budgeting and reporting.
Moreover, its advanced targeting capabilities – powered as they are with Trade Desk’s leading artificial intelligence application, Koa – enable advertisers to reach their desired audiences with tailored messages, leveraging proprietary data and algorithms to maximize campaign ROI.
Critical to the company’s ability to attract new customers is Trade Desk’s superior connectivity and functionality, which grants access to a broad range of demand-side platforms (DSPs) and enables advertisers to utilize proprietary data to inform their advertising decisions. By facilitating the elimination of manual processes and burdensome paperwork associated with traditional ad buying, TTD delivers enhanced efficiencies and cost-effectiveness to its users.
What’s especially fascinating about The Trade Desk’s fee structure is that because it’s based on a percentage of total user ad spend, it aligns the company’s interests with those of its clients.
This further incentivizes the firm to render a high-quality user experience while also enabling access to valuable features and services that would otherwise be unaffordable to many businesses.
Is The Trade Desk A Rival To Google?
Although The Trade Desk and Google appear to be competitors in the space, they each aim for different market segments, meaning their individual approaches vary.
For instance, Alphabet primarily focuses on its search and display products, permitting users to reach audiences via the Google search engine, YouTube, and other related properties.
In contrast, TTD concentrates its efforts exclusively on programmatic advertising, giving its customers a way to manage and optimize their campaigns on various ad exchanges. This is designed to proffer more control and transparency for advertisers, allowing them to select specific audiences with greater precision and monitor the performance of their campaigns in real-time.
That said, Google does offer similar programmatic advertising solutions through its ad exchange, Google Ad Manager, empowering advertisers to reach consumers across multiple channels while providing a range of features to increase engagement and conversion.
Even though Google’s advertising interests are significantly larger than The Trade Desk’s, TTD has carved out a niche by focusing exclusively on automated ad buying. Indeed, as this kind of advertising continues to grow in popularity, it’s likely that The Trade Desk will continue to compete with – and possibly outcompete – Google and other major players.
What Makes The Trade Desk Successful?
While there are definite headwinds afflicting the industry, many verticals are actually enjoying a post-COVID resurgence. For instance, despite television advertising being expected to “suffer from continued erosion in linear viewing,” digital sales are anticipated to grow more than 8% to $557 billion in 2023.
These macro trends come as reassuring news for The Trade Desk, not least because its latest quarterly earnings report was a mixed bag. The firm beat its non-GAAP EPS target of $0.36 by $0.02 but missed consensus revenue estimates by $1.07 million with a top line of $490.74 million instead.
However, although TTD’s stock has risen 25% this year, the company’s trailing twelve-month price-to-sales ratio of 17x is very similar to the level it was at before the pandemic. Furthermore, it sports a huge 82% gross margin, putting to shame the Communication Services sector median of just 50%.
Crucially, the firm claims that 95% of its spend comes through master service agreements (MSAs). This is a massive boon for The Trade Desk for several reasons. For example, MSA’s promise predictable and stable income visibility, rewarding The Trade Desk with an advantage over competitors in a highly dynamic field.
Furthermore, MSAs present a unique opportunity to build deeper, more strategic relationships with clients, often resulting in higher margins and increased customer loyalty. This fosters a strong reputation for the company and enhances its differentiation from rivals.
The firm is still close to 50% off its November 2021 high, but, if sentiment returns to the business once more, it’s possible The Trade Desk could reach these vaunted heights again.
Interestingly, TTD’s board recently approved a repurchase scheme worth up to $700 million. This suggests optimism is already there with the directors – which is a good sign for potential shareholders too.
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