No. of Recommendations: 5
what's up (or actually down) with TTD today? Spoiled an otherwise good day for me.
Maybe just pre earnings jitters

https://finance.yahoo.com/news/trade-desk-stock-lot-prove-19...

NVDA is my biggest holding and TTD is a substantial one so I will be glad when the suspense is over. Many times the stock goes opposite from the news post earnings. Real expectations often do not coincide with what the analysts say publicly.

Meanwhile SHOP just slogs around making little progress. I think it will take the next earnings report to revive it.

ANET looks like the best bet for new money.
Both TSLA and SHOP are at even number inflection points. The longer they stay there the more meaningful the price point becomes
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Mauser,
Agree.
Sq just reported and it looks like it might stall for 3 mo. Thinking of selling and putting $ in anet.

Will c w ttd tomorrow, may do same pending results.
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what's up (or actually down) with TTD today? Spoiled an otherwise good day for me.
Maybe just pre earnings jitters


I just listed to the earnings conference call which I found very exciting. Advertising is in transition from throwing money at "eyeballs" without knowing how well it worked to ads directed to a pair of identified (but anonymous) eyeballs and The Trade Desk is the leading contender to capture the largest part of that emerging market. They are confident of the coming demise of the walled gardens. Their revenue growth rate looks like a tornado, 50% overall, and 100% plus in many foreign markets.

It's well worth your time to listen to the CC and the Q&A

https://edge.media-server.com/m6/p/y2nmt2sm

Denny Schlesinger
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No. of Recommendations: 14
Thanks Denny.

Before commenting on the earnings, it is important to remember that TTD has at least a couple headwinds that we have mentioned in prior extensive threads:

1) Programmable advertising has suffered numerous company casualties in recent past so it will be some time before Wallstreet looks on this sector with anything but with a jaundice eye.

2) TTD will be very susceptible to any downturn in the economy since that will likely reduce advertising dollars. In that sense, TTD is dependent on the successes of the many companies it represents and not as a direct to consumer business.

3) TTD is focused on agencies and not directly with companies so in effect, it is removed once over again from the actual consumer and therefore has a more focused narrow customer base.

4) CRTO was mentioned in my original post about TTD and the thought that it would be reasonable to assume that TTD could at least reach parity to CRTO......that has now happened but largely because CRTO has been crushed from a high of $54 down to $35 since May 2017.....a loss of 35%. Note that CRTO reports before TTD and may serve in the future as a proxy to what we might expect with TTD.....they reported 33% revenue growth and they have a forward PE of 13 vs what I calculate for TTD of 22. But the fact is, TTD is growing faster and in sectors that are likely most important for future revenue potential like mobile, TV, Asia.

In the previous threads on TTD, it was clear about these risks and that TTD likely wasn't a longterm hold IMO.....I don't feel different about that now either. This is largely because its destiny is so dependent on 3 levels of consumers.....the buyer of goods, the seller of goods and the agencies representing the sellers. All three of these levels must be doing well for the 4th in line to get theirs....TTD. In this past quarter, all the major advertising agencies reported suboptimal earnings and Toys R Us went under in bankruptcy (on TTD's platform).

I would also offer over the observation that there was some painful stock action on TTD leading into the earnings.....drops of 6% and 8% in the two days prior to earnings announcement. That was probably not a good sign since either momentum players weren't going to take a risk of a miss or someone knew they would be a little light on guidance.

Note that CRTO has fallen 16% since the day before its announcement.....another potential sign that it could be a proxy for what to expect in TTD with future earnings.

So what did I like about the earnings?

These few items were the biggest wow for me:

One of the most exciting data points from the quarter was that for the first time, mobile, which includes in-app, mobile video and mobile web, was 40% of our total spend

That is HUGE imo because most of the younger generations get their advertising through mobile and in those countries without the more expensive landline infrastructure, mobile is the main vector.

We continue to gain market share in programmatic advertising. We continue to grow faster than any scale player in programmatic advertising. Year-over-year, our international operations grew over two times as fast as those of the United States

Taking market share is a very powerful message IMO.

Concerning our own data, we believe that we are sitting on one of the greatest assets on the Internet. As we speak, we receive over 9 million ad requests per second. We get to listen to most of the websites in the world and learn millions of things every second.

We have commented on this in the past.....the potential for AI blending with programmatic and the huge data trove that TTD has collected.

Adbrain is a cross-device technology that stitches together activities of the same user from all of their devices. This acquisition will help our customers better reach a user with unified messaging across all devices a user is using, whether it be a mobile phone, a desktop, web browser, connected TV or any other identifiable device.

Their first acquisition.....and attempt to bridge all communication devices into one advertising platform.

As we continue to expand globally, we’ve been watching carefully what impact Apple’s intelligent tracking is having on our business. Since its launch in September, we have seen no impact in our mobile spend as a result of Apple’s intelligent tracking prevention.

This was a big fear against programmatic advertisers but thus far.....no negative impact.

There is certainly much more in their earnings call but for me.....these things stood out.
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This post is an example of why we need Duma on this MF board.

I have had bad luck with these advertising related companies. I owned CRTO, sold it at small profit to buy TTD. Sold TTD at a small loss post earnings.

Now that I no longer have any ownership bias it's time to re-think. I think advertising is broken , advertisers are throwing most of their money away. But I'm unsure whether TTD is the one to fill that gap. Worse yet TTD is focused outside the US and I understand foreign advertising even less than US advertising.
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The primary issue with TTD is their concern of advertising weakness. The largest advertisers are becoming more picky and are not buying the hype of easy effective advertising if you just turn your dollars over to me.

It is the same sort of conclusion I came to when I used programmatic advertising (although I did not know that term at the time) with promises from “my people” that we will target the proper people, from income, location, and some other criteria. And I was told it would just get better over time, so you need to give us at least 3 months.

I ended up getting lots of calls (and every call related to one of these adds came with its own introduction from a marketing number so you knew where the call was coming from) and not a single person who called turned out to be financially able (or qualified as I use the term) to retain my services. It was astounding just how wrong an ad campaign designed specifically to bring in qualified leads brought in nothing but unqualified leads.

I had another solicitation from another agency earlier this year making the same sort of claims, but being more precise and more good sounding positive things that sounds like the things one would want to hear. I sent them packing. The prior attempt at programmatic advertising nearly bankrupted me. My entire marketing plan these days costs less than half my monthly home mortgage payment each month and is far, far, far, more effective.

I am sure these big brands are having more success, because they have more scale, and their products are often such low cost that almost anyone is qualified to buy them. But I would wager they have been sold the moon and delivered a build it yourself spherical puzzle instead in many cases.

Thus, advertisers are spending less on programmatic as part of their spend. And we should be at the peak part of their spend because BLACK FRIDAY is upon us. The biggest shopping day of the year.

I read two analysts talking about TTD having long-term 20% growth rates. Not talking about reaccelerating revenues.

TTD’s problem is not its platform per se, but the industry it is in, programmatic. It does not deliver what its proponents say it delivers. If TTD can overcome this, then TTD will reaccelearte growth and go boom and actually deliver the moon.

That is what I think the problem is presently with TTD. Lack of faith from large brand advertisers who gave it a shot and who are now rethinking the entire concept, and while doing so spending less money on it.

Tinker
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Before commenting on the earnings, it is important to remember that TTD has at least a couple headwinds that we have mentioned in prior extensive threads:

Some of these are false perceptions, not reality.

1) Programmable advertising has suffered numerous company casualties in recent past so it will be some time before Wallstreet looks on this sector with anything but with a jaundice eye.

True but based on false perceptions. TTD is not like the failed companies. I don't recall the details off hand but Jeff Green has explained the issue in some depth in one (or more?) of his presentations. Besides, with the nose bleeding stock price it is hard to believe that Wall Street is looking the other way.


2) TTD will be very susceptible to any downturn in the economy since that will likely reduce advertising dollars. In that sense, TTD is dependent on the successes of the many companies it represents and not as a direct to consumer business.

This is true but with TTD in so many markets, and growing at twice the speed in foreign markets, unless all markets collapse in unison, which can happen, TTD has some protection in the diversification.


3) TTD is focused on agencies and not directly with companies so in effect, it is removed once over again from the actual consumer and therefore has a more focused narrow customer base.

This is false. In the CC Jeff Green made a lot of emphasis that they cover both segments, agencies and "brands" as Jeff calls them. The word "brands" appears 37 times in the CC and counting the singular, 47 times. That should give you an idea of the importance of brands to TTD. A couple of quotes:

For Q3, Germany grew 131%. The U.K. grew 82% and Southeast Asia grew 123% year-over-year. You may recall we are now doing business in France and Spain, opening offices there earlier this year. Those investments are already paying dividends as brands grew over 600% compared with last year.

and

Two of the top four biggest ad spending brands just started spending with us in 2017. In fact, six of the top nine have only begun spending with us in the last 24 months. We think 2017 has mostly been a year of winning trust with these big advertisers. Perhaps the most bullish step I can share from this quarter about our hope for 2018, is that in Q3, we added three large global brands that collectively spent over $3 billion in the U.S. on ad spending last year according to Ad Age.


In the previous threads on TTD, it was clear about these risks and that TTD likely wasn't a longterm hold IMO.....I don't feel different about that now either.

I disagree. Advertising, propaganda, persuasion are not going to go away any time soon. It's part of nature in every species to attract partners, to attract food, to repel predators. You can't sell if you don't advertise. You have to put the product or service if front of buyers' eyes. I'll agree that the industry might be cyclical but world wide diversification and the huge number of brands they manage should put a damper on the cyclicality. At one point in the CC Jeff Green talks about this.

What I see is a total remake of the advertising industry with the possibility of a gorilla like company taking a huge share of the market, like Oracle in database and others in high tech. Advertising used to be 90% creativity but the placement of the ads was ad hoc based on "experience" and "expedience." The word was that half of the money spent on advertising was wasted, they just didn't know which half! There was a lot of guesswork. High tech is changing all that, advertising is becoming more valuable because it will be better directed with less waste. If The Trade Desk can become that gorilla the returns will be huge. I'm not saying it's a given but I'm a lot more optimistic than you are.

BTW, if the gap at $40 fills, it will be a great buying opportunity. Look for it!

Denny Schlesinger
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Tinker,

This is pure conjecture, but I believe Jeff Greene (CEO of TTD) would agree wholeheartedly with your assessment; however, he would view it as their primary opportunity. Advertising dollars currently have little visibility as to a real return. You and I can invest in a company and know exactly what our return is to the second. Advertising dollars get spent into a vacuum and for the most part always have. Programmatic was supposed to solve that and failed. TTD is trying to fix that.

The market likely beat up TTD due to revenue guiding to 40% growth versus last year's quarter and brings the TTM revenue growth down to 51%. TTM revenue growth for the past several quarters has been: 184% --> 122% --> 69% --> 60% --> 51%. Further, EPS growth is slowing as well.

There are a lot of positives to consider here too. TTD says international is 2/3 the overall $700B spend in advertising. International is growing 100% for the company and they are still growing at multiples of the overall programmatic market growth.

As both a positive and a negative, China seems to bee a huge part of the puzzle for the company in the long term. This is a gargantuan opportunity that is fraught with potential perils simply because it is China.

Regards,
A.J.
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TTD’s problem is not its platform per se, but the industry it is in, programmatic. It does not deliver what its proponents say it delivers. If TTD can overcome this, then TTD will reaccelearte growth and go boom and actually deliver the moon.

This is the crux of the matter! Advertising is a broken industry that has lagged high tech adoption. Historically it has relied on either great creativity or low cost mass distribution. There was no way to measure the effectiveness of most campaigns. That is that TTD is changing. It's the difference between throwing darts at a stock sheet and proper security analysis.

I'm hearing a lot of pessimism and I should take that into consideration in accumulating this stock. With enough pessimism there should be a lot of dips to take advantage of...

Denny Schlesinger
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Where in all this new era is the sort of advertising genius that pulled off what Coke did in building a brand?

I'm long both PEP and KO but IMHO there's a world of difference between the two in terms of advertising.

Pepsi sells you a product. Cokes sells you a feeling.
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Where in all this new era is the sort of advertising genius that pulled off what Coke did in building a brand?

Good question, but TTD is not creating the advertising, they are figuring out the best way to deliver it (hopefully). Coke has to create the "Coke Feeling". TTD has to deliver it to the right people. Presumably, TTD would have a way to filter out those who hate high fructose corn syrup in their diet and make sure ads aren't delivered to them (using the Coke example).

Regards,
A.J.
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How about the creative "genius" in the early advertising for Toyota's entry into the US auto
market--"from those wonderful folks who gave us Pearl Harbor" ???
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No way, did they actually use Pearl Harbor in their advertising campaign?!????

Tinker
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Some of these are false perceptions, not reality

The market doesn't care really....perceptions are reality.

This is false. In the CC Jeff Green made a lot of emphasis that they cover both segments, agencies and "brands" as Jeff calls them.

Yes that is correct.....they do work with larger brands. I suppose I should have said that the majority of their revenue comes from agencies.....a point that has previously been one of their defining differences with other programmatic advertisers. But yes, it would seem wise that they diversify to direct to seller customers.

What I see is a total remake of the advertising industry with the possibility of a gorilla like company taking a huge share of the market,

There is only one way that happens IMO.....that is related to his comment:

Concerning our own data, we believe that we are sitting on one of the greatest assets on the Internet. As we speak, we receive over 9 million ad requests per second. We get to listen to most of the websites in the world and learn millions of things every second.

If they can leverage that data.....that sounds gorilla like....especially as it dovetails into our many previous discussions about AI and which companies will have the most power......heavy data companies as argued by Dr. Ng and many others.

TTD has yet to monetize that "greatest asset on the internet".......I believe the CEO admitted as such?

But if they can pull that off.....would be an incredible investment IMO.

I'm hearing a lot of pessimism and I should take that into consideration in accumulating this stock

LOL.....I know you are saying this in tongue and cheek.....I think there is not pessimism so much as that the stock has run hard and it has fallen back hard.....for some who came in later, they are now under water. Obviously, this is a good time to re-assess and ask if the investment thesis still holds. FWIW, I have not sold.....but I also had significant cushion in gains so still remain ahead on paper.

IMO, if the company disappointed, I would be out....as you know I have most frequently suggested that more disappointments are likely coming. But, they didn't disappoint....rather that exceeded consensus......but their main customers...the ad agencies.....they have been disappointing so perhaps a word of caution is reasonable.

BTW, if the gap at $40 fills, it will be a great buying opportunity. Look for it!

I sincerely hope not....because that would mean that the significant support at $50 was taken out as well as the 200 d MA.....that would be bad IMO. I was thinking the stock would more likely fill some of the gap upward before falling back again but if it falls all the way back to $40.....ugh.

Quite honestly, I am not usually inclined to buy the falling knives.....much prefer to follow momentum so for now, I am not taking any real action.
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Good question, but TTD is not creating the advertising

The agencies core job is to do the creative ad campaigns and because there was no better alternative they also advised the selection of media placement. But this last was mostly guess work based on experience because there was no way to really measure the results. As the business got more competitive the agencies were taking a cut off the ad placement creating a conflict of interest and distrust by their clients. This is where The Trade Desk fits in. They provide the tools to pick the best ad placements without getting a commission for doing this. When Jeff Greene talks about creating trust, this is what he is referring to, winning the trust that agencies lost.

I have not heard it mentioned, but if brands start placing the ads with TTD tools the agencies will be disintermediated in this part of the job reducing the cost to the brands.

Denny Schlesinger
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LOL.....I know you are saying this in tongue and cheek.....I think there is not pessimism so much as that the stock has run hard and it has fallen back hard.....for some who came in later, they are now under water.

Call me Captain Nautilus!


Quite honestly, I am not usually inclined to buy the falling knives.....much prefer to follow momentum so for now, I am not taking any real action.

I agree about the falling knives but after the fall and if they create a base then the story changes. There is nothing I can do about the stock I already bought but I would much prefer to buy lower than higher. There is no telling which gap will fill but considering that fast growers often drop by 50% and TTD's high is 67.30, and all this pessimistic market perception and all...

Yesterday I made a bit of cash on a call option round trip.

Denny Schlesinger
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Hello Duma,

Yes that is correct.....they do work with larger brands. I suppose I should have said that the majority of their revenue comes from agencies.....a point that has previously been one of their defining differences with other programmatic advertisers. But yes, it would seem wise that they diversify to direct to seller customers.

I believe that Jeff Green made very clear that they did not go around the agency, but in some cases were actually led to the agency by the brand. I think he referenced that a brand successfully used their platform in one region thru an agency and then introduced TTD to a different agency in another region.

There seems to be a perception that brands are backing away from programmatic. I don't believe that is the case as programmatic is growing as a percentage of the advertising dollar and TTD is gaining a bigger share of programmatic. The reference to some of the largest brands slowing down spend was to spend in general and not specific to programmatic.

Best regards,

Mike
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Making plenty of unwarranted assumptions, $34M (company's guidance) in Adjusted EBITDA would yield $0.48 EPS next quarter or roughly the same growth as this quarter at 46%. Based on recent history, there is a good chance they will beat.

I have a decent size position in TTD and while I don't need to accumulate at this price, if it drops considerably, I would not be afraid to. If the $40 price alluded to above comes, I'll be buying. The industry has been a disaster, but TTD is showing enough signs they are solving the industry's problems that my investment remains worthwhile.

Yes, it is tougher to own a stock that has declined in a bull market, but I'm not ready to sell TTD yet, not after reading the conference call transcript.

I don't like this company as much as Arista, but I certainly do like it.

A.J.
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Yikes! TTD might just hit the $40 target. Miss by $1 million out of $80 million or so in revenues and bam! Then again, it is Q4 in the biggest Christmas season in history. I will be very surprised if this Christmas does not break records. If it does not, then we will need to examine why not.

Tinker
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Yep. TTD continuing its slide. If it does go down to that $40 range, I will be a buyer assuming no new news. I get the slide to some degree, and I won't say it is unwarranted. Really no slide is unwarranted unless someone is forcing the hand of the sellers (like holding a gun to them which would take a lot of guns). The slide is partially due to somewhat restrained guidance and likely more due to frets about FB and GOOG along with the general concern about the programmatic landscape. Those are all good reasons to be concerned.

TTD seems to be going about this in a bit different way than all the other's who are trying or have tried, and I just don't see a reason to sell at this time. It goes against Mauser's rule of only investing in companies with rising stock prices, but I am optimistic about the company's prospects especially internationally and the company isn't highly valued for one who turned last year's $200M in revenues to $300M this year, all while doing so in a profitable fashion.

I'm hanging on.

A.J.
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