Consumer demand weakened in 2022 amid high inflationary pressures, forcing many brands to cut advertising budgets. These headwinds hit ad-tech giants Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) particularly well into the third quarter.
Alphabet’s overall revenue grew 6% year over year, but Google’s ad revenue, which comes from Google Search, YouTube, and third-party web properties, grew just 3%. Worse, Meta Platform even reported a 4% year-over-year decline in revenue, marking its second straight quarter of decline. Both companies blame the economic climate, but not all ad tech vendors are suffering equally.
Trading Office (NASDAQ:TTD) reported a 31% year-over-year increase in revenue in the third quarter, and CEO Jeff Green said the company gained more market share than at any time in its history. Additionally, the trading desk is well positioned to do well and the stock is a dead buy at its current valuation.
Investors need to know that.
The trading table is structured differently than the competition
The trading office operates a demand-side platform (DSP). Its software leverages artificial intelligence to help marketers plan, measure, and optimize data-driven campaigns across digital channels. Trade Desk is built on the DSP Bid Factor architecture, a unique system that improves campaign results by allowing marketers to set the right targeting parameters with just a few clicks. Any other DSP is based on a linear element based architecture, a more complex ad targeting system.
In addition, The Trade Desk is an independent ad technology company, which means that it does not own any web content and therefore has no reason to direct ad buyers to a specific ad agency. This removes a conflict of interest for companies like Alphabet and Meta Platforms, both of which have clear incentives to direct ad buyers to their inventory on Google Search, YouTube, Facebook and Instagram.
Simply put, the trading desk benefits from an innovative platform architecture and a more transparent business model. These features have helped the company maintain its customer retention rate above 95% for eight straight years and establish The Trade Desk as a leading independent DSP.
Digital advertising is on track to become a $1 trillion addressable market
According to eMarketer, global digital advertising spending is projected to grow nearly 10% annually and reach $876 billion by 2026. This is a huge opportunity for Commerce Office, but the company is particularly focused on connected television (CTV) advertising and shopper marketing. .
CTV commercial. As consumers continue to shift to streaming media, advertisers are slowly moving away from traditional television. To that end, according to eMarketer, U.S. CTV ad spend will grow nearly 20% annually to reach $44 billion by 2026, and analysts at BMO Capital Markets predict that figure could reach $100 billion by 2026. in 2030
Trade Desk receives inventory from all major ad-supported streaming services, including Warner Bros. Discovery ‘s HBO Max, Comcast ‘s Peacock, and FuboTV . Better still, it recently expanded its partnership with Walt Disney to improve automated ad targeting to Disney-owned content. This is particularly interesting as the ad-supported Disney+ tier launches in early December, although benefits will extend to Hulu, ESPN, and other properties as well.
Trade Desk allows advertisers to reach consumers across multiple channels, including desktop, mobile, and audio, but CTV continued to be the fastest-growing part of its business in the third quarter.
consumer marketing. Search giant Google is unleashing the first wave of digital advertising, social media mogul Meta Platform is driving the second, and retailers are driving the third. US retail advertising spending is projected to grow 22% annually and reach $61 billion by 2024. However, some analysts say that shopper marketing will eventually become the largest of the three channels, meaning it could overtake spending on advertising and social media.
More than 80% of the largest US retailers are partners with The Trade Desk, including Albertsons , Target and Walmart . The partnership went into effect a year ago, but is already paying off as the Commerce Department found buyers nearly doubled their marketing spend between the second and third quarters of this year.
Bull work is clean and the price is right
The Trade Desk’s growth is clear. The company operates the largest independent DSP in the ad tech industry, a position it has earned through its transparent business model and ability to innovate. In addition to its unique platform architecture, The Trade Desk has built “the most advanced data marketplace in the world,” according to Green. This helps marketers target their ads more effectively, which in turn leads to more clicks and conversions. These benefits will keep Trading Desk at the forefront of the ad tech industry.
With that in mind, the stock currently trades at 16.2x, which is a bargain compared to its three-year moving average of 30.7x. That’s why it’s worth buying this growing stock.
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Randy Zuckerberg, former director of market development and Facebook spokesperson and sister of meta-platform CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. Alphabet CEO Susan Frey is a member of The Motley Fool’s board of directors. Trevor Genuine has held positions at The Trade Desk, Walt Disney and FuboTV, Inc. The Motley Fool positions and recommends Alphabet (A shares), Alphabet (C shares), Meta Platforms, Inc., Target, The Trade Desk, Walmart Inc. , Walt Disney, and fuboTV, Inc. The Motley Fool recommends Comcast and Warner Bros. Discovery, Inc. and has the following options: a $145 long call on January 2024 Walt Disney and a $155 short call on January 2024 Walt Disney. The Motley Fool has an open policy.