Why stock trading is always a smart buy

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The commercial counter (NASDAQ: TTD) specializes in digital advertising. Its demand-side platform helps ad buyers create data-driven campaigns across devices like desktops, mobiles, and smart TV. And despite the domination of rivals like Alphabetis Google and Facebook, The Trade Desk still benefits from a great market opportunity and a strong competitive position.

In this Backstage Pass video, which was recorded on October 13Motley Fool contributor Trevor Jennevine explains why The Trade Desk is always a smart long-term investment.

Trevor Jennevine: I have read many articles on the internet explaining how much of advertising is already digital. I mentioned earlier that roughly 61% of ad spend will be spent on digital ads this year. But only 21% go to programmatic advertising. There is still a huge avenue for growth in this industry, and this is where things are heading. This quote that I showed earlier, management believes that all media will be processed by machines in the future. Everything will be processed programmatically. I think there’s a lot of growth in this industry, and I think it should be a “high tide lifts all ships” type of situation.

It’s good for The Trade Desk, but it’s also good for a lot of other players in the industry. Later in the presentation, we’ll cover some of the things that set The Trade Desk apart from its rivals.

This slide simply summarizes what The Trade Desk does. Its platform is self-service, therefore advertising agencies. It allows advertising agencies to access a wide variety of advertising inventories. As I mentioned, this applies to mobile devices, desktops, smart TV, social platforms, search engines – pretty much the entire Internet. The Trade Desk is a gateway to purchasing digital advertising space. I believe that $ 500 billion figure is actually higher now. I think the Trade Desk platform gets some 600 billion ad impressions per day. The company gives its customers access to a large number of inventories and collects a lot of data in the process, which only feeds its predictive models to make targeting more effective.

Nicolas Rossolillo: That’s a crazy number isn’t. I think Magnite has a similar figure in his presentation on the trillions of ad requests and impressions. But it is done across the world on the Internet every day. We’re talking huge numbers, massive amounts of data, huge audiences as well. It’s a huge market.

Jennevine: The Trade Desk is the main independent platform on the demand side, which just means that it has reached a larger scale than all of its other independent rivals. We’ll see what that means, but essentially independent just refers to The Trade Desk having no content. This separates it from a company like Google or Facebook, both of which have web content.

This scale benefits its clients as they can choose from a wide range of digital advertising spaces; and that benefits the Trade Desk because they are able to capture this data. This allows them to correlate things like viewer demographics with clicks and conversions, so over time they’re able to tell their customers, “Hey, that ad impression is particularly valuable. There is a very high chance of conversion here. Or forget about this one; it is no good to you. This user is unlikely to take the desired action. “

This slide here, focuses on the fact that The Trade Desk is a catalyst, not a disruptor in the industry; and this has helped him gain traction with many advertising agencies. The company had around 875 customers at the end of 2020.

Then this slide touches on one of the differentiators for the business. This is because The Trade Desk focuses exclusively on the buy side. I mentioned that it doesn’t have any content. Let me explain why this matters.

Google and Facebook: Google owns Google Search, YouTube, Gmail, and several other web properties. And then Facebook has its social network, and Instagram. These two companies absolutely dominate the digital advertising industry right now. Together, they hold more than 50% of the market share. Their economic model obviously works. But there is a conflict of interest there.

They have these walled gardens and they sell their own advertising inventory. They don’t necessarily have an incentive to help an ad buyer find the best inventory. They are encouraged to sell them the best inventory they have to offer within their closed ecosystem.

Then to complicate matters, Google and Facebook are actually working with third-party publishers, and that just means ad space providers. So if you have a website or mobile app, you can create ad inventory [available] via the buy-side tools of Google or Facebook. These companies now sell their own advertising inventory alongside third-party advertising inventory.

Again, this just creates a conflict of interest. They are obviously encouraged to sell their own advertising inventory. The Trade Desk gets around this whole situation. The company has no content. It has no advertising space. He does not buy ad space to resell it at a higher price. It doesn’t work on the selling side of the equation. It is exclusively focused on the buy side. If you are looking to buy digital ad space, these are the types of clients that would use The Trade Desk platform.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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