The Trade Desk Didn’t Break - The Model Did
The Trade Desk’s stock is down about 75% from its 52-week high. NewsCase and Sharper Trades cite reasons such as disappointing earnings reports, removal from the Nasdaq-100, increased competition, and internal challenges.
When a company gets big enough, problems migrate to the macro. There’s usually a top-down analysis of financial problems that explains the stock price decrease. But if you simply look at TTD’s core offering, maybe this decline was predictable.
Advertising on the open web is like advertising in the wild west. Your ad can basically end up anywhere, and as long as the live dashboard shows attributed clicks, no one bats an eye. According to an ANA report, about 36 cents of every dollar spent on programmatic web ads actually reaches the consumer.
It’s hard to ignore the low costs, especially when the transaction seems as simple as “Pay x dollar amount for x amount of new customers”. This doesn’t work in the long term from a holistic marketing perspective. Over time, the advertising world has allowed a very complex ad system to be simplified in this way by the sellers of the system.
This isn’t all TTD’s fault. They have to sell a product that relies on a flawed model from an advertiser's perspective. It’s out of TTD’s control when Colossus (supply-side platform) sends mismatched user IDs to their demand-side platform algorithm. They’re also constantly battling the innovative fraudsters that explicitly game the programmatic ad system. The point is, many marketers are starting to believe that playing in a more traditional advertising arena, where they know their ads are at least being seen/acknowledged, has the edge on this alternative.
Walled gardens get their fair share of stick from marketers. They are synonymous with higher prices and less ‘transparency’ (even if the transparency that other platforms and publications offer isn’t ‘accurate’). However, sometimes, as marketers, we overcomplicate things. If you take a step back, do you think it’s more likely your ad was seen on Meta/New York Times or that your 30-second video ad was watched in its entirety 50k times on “funcookies.com”?
Of course, nothing is one-size-fits-all. A small B2B company isn’t going to pay out big budgets on a premium B2C publication. At the same time, overthinking this budgeting problem can lead to a similar budget amount being poured into small campaigns that are actually completely ineffective. In general, when a walled garden isn’t going to back out positively for an advertiser, it becomes obvious pretty quickly. Many walled gardens either don’t care about the advertising experience on their content or slowly allow the quality of their product to erode. It’s up to an advertiser to spot signs like rate increases with no quantifiable change in the product, adding too many ad slots, not maintaining/growing their list, etc. These challenges are much more manageable than trying to bob and weave through an entire system filled with nuanced problems.
There is a lot of quality out there, but a lot of junk too. You don’t need to throw every non-AAA ad publisher to the wayside. It’s about approaching with a full-funnel strategy and caution/care for real outcomes. How does this source impact sales, not just impressions? Look for precision over scale unless it’s ultimately a branding campaign. Most of these are basic rules of thumb, but marketers as a whole should be simplifying anyway.
As our favorite ad tech skeptic Dr. Fou would recommend, run only programmatic budget for a month, and then only direct-to-publisher for the next month. Looking at the ROAS during those time frames gives a rough estimate of which is more effective. In general, ad tech has a very convoluted supply chain, and removing layers of vendors simply to increase scale is not worth the inefficiencies you see from the spend.
The Trade Desk is a multi-billion dollar company for a reason – they've been historically very good at what they do. However, it seems like every year more of the marketing world wakes up to the limits of modern digital advertising. The system is completely dependent on audience verification, and privacy regulation continues to mount. Maybe TTD has just run into some misfortune with a bit of bad publicity from agencies sprinkled in. Or maybe advertisers are matching an environment where ads are served to banner-blind, low-intent audiences/bots to their bottom-line spend.
By: Phil Brown | Account Assistant + Marketing Coordinator
