Q1 2020 Trade Desk Inc Earnings Call
That's more apparent than in connected T.V. and even though it is too early to predict exactly when the economy will start firing on all cylinders again, we do have a sense of the role advertising will play in that and I'm confident that the trade desk will be on the front lines of recovery. It will present, a major land grab.
<unk> and our ability to be successful in that environment rest solely in our own hands.
As it relates to what global recovery looks like keep in mind that in order to grow and reopen for business companies need to get the word out we believed that data driven advertising is on the front lines of recovery, where advertising fuels and even ignites growth and where growth fuel was more advertising as it tried to us because one of the lead.
<unk> and data driven advertising, we strongly believed that we will play a critical role in the global economic recovery.
So first our financial foundation and how we are operating in this environment.
As we said many times on this call from the beginning we have always prioritize profitability and building a strong balance sheet. We could have raised more venture capital in the beginning all of our competitors did in the last few years, we could've spent more of our earnings like many of our sass peers did given our unique combination of high growth and profit.
Ability, we didn't because we wanted to grow responsibly, we want it to instill good discipline that would serve as well and moments like bees in short from the beginning we wanted our business to be sustainable.
Discipline and commitment to sustainability is what enables us to focus on what's valuable to our customers. It allows us to prioritize innovate and invest wisely. It also has put us in the enviable position of being able to invest in our technology to ensure we stayed years ahead of our competition.
That's why we have historically grown so rapidly and we will never be a commoditize player.
It also ensures that we can manage our way through this global crisis, we can whether near term impacts and continue to invest in our business.
Our goal is to emerge from this environment a much stronger company beyond the balance sheet, we started asking our employees in Asia to work from home starting at the end of January.
By the Middle of March we've closed all of our offices and the vast majority of them remain closed.
Shanghai in Hong Kong, among the few where most of our employees are already working from the office again.
Nevertheless globally almost everyone is still working remotely our teams around the world have responded and we are operating almost a seamlessly as if we were all in the office.
As a technology company, we're pretty damn good at utilizing the most effective collaboration technology, whether it's for customer meetings internal collaboration bar scene development or agile engineering programs, we operate virtually shoulder to shoulder as much as we possibly can without being in the same physical proximity.
Since I found the company in 2009, our leadership has had regular communication with all employees on a weekly basis.
A weekly all hands and that sort of this well in this environment and turn we are all well connected and informed there have been some really critical all hands meetings over the years meetings, where we announced fund raising meetings, where we explained we were going public but I'm not sure any was more important than are all hands on Monday March 16th when all employees were working.
From home and we tried to offer our teams reassurance and guidance, we reminded them that panicking is not a strategy and we have a critical role to play in the economic recovery.
This is a moment for our team to make a difference every week. Since then we've had over a thousand people live on every weeks all hands.
Our team is incredibly resilient I've always been impressed by the powerful combination of talent and dedication in our people. They believe in our mission to make data driven advertising as ubiquitous as electronic trading inequities and they believe in our vision of a healthy thriving added funded open internet.
Incredibly proud of them in every corner of the world.
<unk>, let me move onto my second point and provide some color on what's happening in digital advertising and our business beginning with a sense of how the last couple of months have progressed.
We had an amazing start to 2020.
161 million and revenue up 33% year over year, we were tracking ahead of our original projections in January and February connected T.V. was on pace to more than double through the first two months of the year.
That strength was partially offset by rapid declines in the second half of March as most advertisers started indiscriminately pausing budgets and indiscriminately reducing budget.
For a brief period of time Programatic was hurt by one of its greatest features it's agility.
Can easily start and stop Programatic campaigns in ways that are not possible in most other mediums like linear television don't move so fast.
The strong growth rates, we saw the first two months of the quarter serve as a reminder of how strong the secular tailwinds are for data driven advertising and the trade.
In early April we saw more advertisers slow spend or hit the pause button across every channel some verticals cut most of their budget such as the travel vertical of course.
Some did remain active, particularly in health and fitness and technology and computing and home and garden.
In late March and early April some budgets were canceled to stop expensive at businesses that new their businesses were taking a hit from the shelter in place movements around the world. However, many businesses were simply pausing campaigns, not cancelling them to refresh the message <unk>.
The way a C.P.G. or a farm accompany plan to message in January had to be read messaging had to be reworked.
Overall by mid April the year over year span decline stabilized and as April progressed, we started to see stabilization and even some improvement.
I believe that's because there was growing realization among advertisers that panic is not a strategy advertisers started to adapt to the current environment. For example, restaurants shifted their messaging too we are open or we deliver consumer products companies turn their focus to pantry loading products and some travel companies started to message.
They would waive all change our cancellation fees for bookings.
And beyond the present, many advertisers started to strategize about how they emerge on the other side of this pandemic.
Let me give you an analogy I've shared with our team like many of you I'm I'm sure I found myself watching a little more T.V. in the evenings, while we've been working from home one movie I joined a lot was four versus Ferrari, there's a scene in the movie where there's a crash and there's a cloud of smoke over the track as racing cars come into the cloud they can't see for the next 15.
I mean are 50 meters every scene in that moment is uncertain, but they know exactly how the track is laid out once they emerged from the smoke clap.
So all they can really do with any certainty start to plan for that.
That's where we are with the advertising industry right. Now we are still in that smoke cloud, we don't know exactly when it well lit and we don't know exactly what the next few meters look like but we do have confidence up what will happen. Once we emerged from this and we know what the trap looks like we've lived at so many times, but now the opportunity is even greater this.
Says, where I asked our teams to focus most of their efforts preparing for the opportunity on the other side of this class. The other side of this uncertainty which brings us to my third main point the opportunity for advertisers in the trade desk on the other side of this while advertisers are indiscriminate and what they pause or cancel on the way down.
Down they are very deliberate on the way up.
While we can be sure that AD spending will return.
We expect it to look a little different than it did immediately before the global health emergency, especially at first.
We expect there will be a staggered to return some industries will lead while others, such as travel and entertainment may lack a little.
Some countries will reopen earlier than others here in the United States, we're already seeing different time lines from different states and localities.
This makes flexibility in agility super important for advertisers.
But overall, there will be a massive land grab opportunity and I expect that marketing will be a critical success factor in that land grab.
Think about it if you're over a list for example, your business is largely on pause and you're not advertising much right now, but as we start to emerge from this companies will start marketing more heavily because that's the moment accompany can gain awareness loyalty and share.
Whichever those two companies markets more effective legal gainshare.
Same scenario will play on across every industry, where there's marianne versus Hilton or Domino's pizza hut or Toyota versus board.
All of these companies and every other company out there is figuring out right now how they use advertising to connect with consumers and gainshare once the gears of the economy start cranking again.
What will they advertise it using what kind of creative to what kinds of audiences in precise location using what kind of channel, it's all being strategize right now.
And as they increase their spanned again not only will they do so aggressively but they will do so much more deliberately than ever before with this kind of market disruption companies are under maximum pressure to be as effective as possible with every dollar expenditure, including maybe even especially in advertising.
And that way this is not a similar to the 2008 recession remember for automatic advertising came of age during that recession, and that's because add spend migrated to wear advertising dollars, where measurable and comparable.
G.F.C. and downturn in 2008, and nine wasn't important learning experience to prepare for this.
Back then display and mobile advertising, where the big winners.
They want despite being weaker at winning hearts and minds than video T.V. or audio they one share because measurable and comparable are what it takes to win the outside budgets during their recovery C.M.O.s more than ever have to defend their spending the C.F.O.s. That's of course bass done in data driven advertising the same dynamic well.
Happen here span will migrate to what works best today, it's connected T.V. and digital audio advertisers will apply data driven advertising more aggressively than they did before this they won't place more value on those AD impressions that are measurable and comparable.
Nowhere will this be more apparent than in T.V. advertising.
We've talked about the C.T.V. opportunity many times before we've talked about the consumer shift to streaming services. We talk about how broadcasters are moving to streaming platforms. We've talked about how advertisers are eager to apply data to their massive T.V. AD campaigns for the first time.
We thought the C.T.V. Revolution would play out across the next two years, but the last eight to 10 weeks of change all of that I believe that the media landscape has changed forever starting in the middle of March every channel and every participant is in a different position today versus a few months ago because of one dramatic shift.
Linear T.V.'s shelf life has shortened and as viewers have moved in mass to C.T.V. The biggest loser and all this is traditional linear television and C.T.V. is without a doubt the biggest winter.
Less outlined by linear is losing.
First consumers are under pressure cable is the most expensive item on the T.V. menu and there are more choices on the menu then ever with all of the new O.T.T. options coming from the likes of Disney and N.B.C.
The market are predicted in the summer of 2019 that the U.S. would have what's become standard 4% annual declined from 86.5 million households, having cable <unk> 82.9, we did a survey a few weeks ago with thousands of consumers across all households, 11% of those who still have cable plan.
To cut the cord by the end of the year.
That number goes up to 18% for the 18 to 34 year old age group compared with E. marketers estimates that would be a massive an unprecedented acceleration to court cutting.
Second according to the same survey of those that still have cable then number one reason they were hanging onto it was for sports in fact, according to our research 60% of those with cable keeping primarily for life sports.
The longer lives sports remain suspended the more these audiences move away from those expensive TV packages sports being cancelled is a big hit to the traditional linear T.V. business model third not only is the T.V. audience shifting but perhaps just as important the linear T.V. revenue model.
Is jeopardized often the majority of T.V. ads are sold in the up front process. The all fronts are usually done in late April and early may and those events are largely suspended this year. According to the new eye it'd be survey of 390 media buyers planners and brands.
Linear T.V. ads fanned will fall an estimated 41% in March and April and buyers expect to spend 20% less in the upcoming front marketplace than they had initially planned that's because those big in person fall preview events in New York City in L.A. or not happen and for the most part they don't even have.
Any new fall content to preview because production to shut down.
There's only so much advertiser interest in Jimmy Kimmel, and Ellen Degeneres Broadcasting from home much as we love those entertainers for advertisers. This can be liberating I hear it from brands and agencies every day for them the up front for a bit of a burden.
Were asked to commit billions of dollars to content. They don't know that much about and chasing audiences that they can't measure quite as well as anywhere else now they have the freedom to be more deliberate agile and data driven in their T.V. AD investments now before I transition to discuss why C.T.V. is the biggest winter in the shifted landscape let me make.
One thing clear.
This isn't a case of new media companies versus old media companies, It isn't Disney and N.B.C.U. versus Amazon Netflix all foreign companies and hundreds of others can and do create amazing content.
A linear pipes will eventually go away because consumers prefer to watch on demand content.
But traditional media companies are adapting even faster to the on demand nature of C.T.V. and here's why C.T.V. is winning first with the vast majority of consumers largely confined to home the consumption of on demand T.V. content has skyrocketed you only have to look at the incredible numbers posted by both the subscription platforms anti AD supported.
Services.
<unk>, there's proved to be a really great moment for new Avon launches like N.B.C.P. cop at a moment, it's hard to make content at harder to charge for it on demand Avon is skyrocketing AD inventory on these platforms has skyrocketed to Adam rounds are up as much as 30% over the last several weeks as contact.
Providers Chase these eyeballs and make more content available on more platforms, 30% in three weeks, that's something no. One could have predicted this has led to out performance in connected T.V. through the first 20 days in April we estimated connected T.V. spend on our platform increased by about 20% year over year over the last.
10 days in April connected T.V. spend accelerated even more during that period, we estimated that connected TV spend increased about 40%.
Third I mentioned before that program addicts agility heard it when advertisers were mostly cutting and pausing campaigns, however, be agility and data driven nature of our platform is hugely helpful and winning budgets as I said according to the market are totally U.S. households, with cable would fall below 82.9 million this year.
Our research suggests that could be below 80 million.
This year, we expect to reach well over 80 million households, B.S.C.T.V. in the United States. This is an important point the trade dusk is the largest aggregator of C.T.V. AD impressions across every major content provider and that massive scale is a great leading indicator of future spend.
On our platform.
All of this means that in 2020.
Betrayed desk will likely surpassed traditional T.V. in reach capabilities for the first time in our history were already seen this shift as brand strategize on our platform. For example, a large U.S. based restaurant chain was wary of committing millions to the upfronts while their business remain.
Severely impacted they wanted flexibility in their outspend and on our platform. They can time their campaign launches when they have more certainty on consumer attitudes and intentions. They also can target by location, where their stores or open with large out from commitments on national T.V. ads. This is simply not possible we are seeing this.
Demand for flexibility and precision across all verticals.
Other reason example was the largest technology company that was looking to run a major C.T.V. campaign in that short timeframe. They needed the flexibility to act quickly and to activate against our target audience at the scale something that could never be accomplished when this within the confines of an upfront arrangement.
On our platform they were able to successfully meet their reach and frequency goals for their campaign to quote them directly C.T.V. scale on the trade desk is a given but it's the ultimate flexibility on your platform that makes you the D.S.P. of choice.
Fourth C.T.V. is getting what linear as losing from the expectedly week Upfronts. It's one main reason why C.T.V. spend has been steadily increasing we are winning incremental spend that would have historically been committed in the up fronts I do not mean to imply that traditional T.V. broadcasters are not adopting quickly.
They are every one of them has either launched towards about to launch a major Avon platform. Disney has who moved Fox has to be Viacom a T.V.S. has Pluto Comcast has peacock and zummo and recently acquired Voodoo from Walmart and we are higher end with all of them directly we recently announced that were integrating with Comcast.
We will unified yield products, which allows advertisers to work across direct buying an programatic buying seamlessly.
Premium content providers are value is only increasing.
Relevant ads higher cpms at lower add loads are the only way content owners can compete with subscription services.
To capture this opportunity our engineers have shipped one of the most important product releases in our history.
The most interesting features of this launches the ability for advertisers to manage frequency in T.V. advertising across all channels and devices.
This is a breakthrough for C.T.V. advertisers not only is add frequency the number one consumer frustration about T.V. advertising. It's an issue that has been a problem for advertisers as they shift more spend to C.T.V. They want the ability to manage frequency as a consumer moves between streaming platforms and there.
Multiple devices and now for the first time, they can do that.
We also continue to strike partnerships that bring the best premium video content and work close to our clients, whether it's a partnership with tick tock in a pack, which we've recently announced or deals with samba T.V. dish T.V.R.T.L. channel four or free will.
We continue to out work, our competitors and building an ecosystem that allows them to apply data to the widest variety a premium inventory.
You might think I'm a bit of a broken record on C.T.V., but let me reiterate why I spent so much time on it.
Advertisers view C.T.V. as a way to break their dependence on walled gardens.
There is no one dominant player and T.V. as there is in search and social T.V. is a much more fragmented market and the cost of content development means that a single dominant player is very unlikely to emerge no studio no channel No cable company no M.V.P.D. no one.
Has the leverage to pull that off and T.V.
And because we think video in all of its forms will be about half of the trillion dollar advertising pie. We continue to predict that C.T.V. will be the Trojan horse that eventually forces all walled gardens to change course.
I know company is better position then the trying to grab share from the 200 billion linear T.V. worldwide market as it moves to digital so to summarize the hardships for linear T.V. number one that consumers under an economic pressure that they weren't a few months ago number two lives sports are completely cancelled number three the off fronts are mostly cancelled number four.
On demand is a way better way to watch everything that isn't live and consumers are benji and right now.
Number five one through four all add up to what looks to be an unprecedented year in court cut it.
Let me summarize Y.C.T.V. is winning.
One every one is consuming more right now to on demand is better for everything, especially when life sports or pause three H.T.T.V. is data driven it's measurable and comparable in a way that linear isn't number for the agility programatic, it's picking up dollars that would've otherwise gone to the up front and number five.
On T.T.V. now has close to the same reach in households that linear does and 2020 may represent the changing of the guard for all television content as a result of the changes in the media landscape.
Let me around doesn't buy reiterating that we are operating in unprecedented times as I said earlier, we don't know exactly when to smoke climate list.
But we do have some uncertainty on what it will look like once where through it and we are already starting to see some bright spots emerge such as in connected T.V.
The secular transition to data driven advertising was incredibly robust in January and February.
But then advertisers just hit the pause button and they didn't show somewhat indiscriminately, we were impacted because programatic advertising is easy to just switch off when you have to very rapidly take stock of changing environment.
But what we've seen since then is a much more delivered approach advertisers are being much more strategic and data driven in their decisions as they adjust for the present and plan for the future.
And we will benefit more than most in this recovery as a result.
We are already seen some very positive signs the frontline industries in the recovery things like technology home and garden consumer package goods. They represent some of our largest sectors.
We will be on the front lines with them, helping them make every advertising dollar account data driven precision will be more important than ever think about it even today and the United States cities are opening at different speeds in different ways. If you're an advertiser you need to be able to tailor your message to specific regions at specific times.
Can only be accomplished on a platform like cars.
And the advertisers are eager to jump back in some are already doing it because they understand the recovery will present, an opportunity to grow share in that crucial land grab time, they understand the role advertising plays and driving their gross and net growth will drive more advertising. Indeed in the last 10 days of April.
We saw a gradual improvement in spend.
On our platform to.
Two a negative high teens year over year decline witches and encouraging early signal a major contributor to this is the relative performance of C.T.V., which has increased about 40% in those same 10 days.
While programatic may have been dial back indiscriminately at the beginning of this crisis. It will be turned back on more aggressively as we recover from it because advertisers understand the role it plays in driving their own gross and no company is better position to be on the front lines with them than the trade desk and this.
Gives me confidence in our future as I said at the outset, where financially healthy enough to be able to ride out uncertainty.
And because of our continued investment in our platform in our inventory partnerships and in our amazing team I'm confident that we will gain share an out perform our competitors as this starts to happen.
The close with something that has been a bit of an upside surprise.
They work through planning with us many advertisers an agency partners are using this time to upgrade their skills.
We recently relaunched our training platform that trade desk edge Academy, and we made it available to anyone free of charge for the first time through the end of the year.
We've already had more than 12000 advertisers an agency staff and brand marketers sign up for the New course, where the single month since we relaunched.
Just for a little perspective through the first six years of the original trading Academy, we handed out 11000 professional certifications that one data point alone should provide some indication of the skyrocketing demand for data driven education. During this uncertain time.
Personally that too gives me confidence about the future. Let me turn the time to Blake to discuss the financial performance.
And he was good afternoon, everyone I hope you and your families are all doing well in staying the same because you came in this unique situation.
[laughter]. He one was on pay used to be a strong quarter revenue for the quarter was 160.7 million representing 33% of your rear gross and adjust could even though it was 39 million.
Like other ads from the companies we saw deceleration the second half would merge the trade you ask one graphical revenue growth acceleration to start this here and we believe we are well position for future growth acceleration wouldn't macro conditions improve.
The channel perspective to one includes strong your rear spend gross and connected T.V. mobile video mobile in having an audio channels.
Graphically into one North America represented 80, 80% of span and international representing 12% to spend.
Highlighted in terms of our rules during the last Tuesday March April auto shopping style and fashion and travel were a week as vertical for those that represent at least 1% or more spam.
We saw resilience in health and fitness or largest vertical and 2019 technology in computing homing already in education.
Operating expenses were 150 million into 130% you every year, while sales and marketing some technology and development costs, both grew more rapidly than our revenue.
Operations in G.N.A. calls, both gritty much slower paced can rapidly.
Do you need to celebration was given partly by delayed corporate events do to cope with 19.
Approach for operating expenses continues <unk> actively allocating capital within the company important areas I can drive gross inefficiencies in the future and that we discussed in our two 420 19 Everything's cool.
Just leave it was 39 million q. on opportunities per cent year over year, and representing a 24% Morgan.
Income tax was the benefit of 13.7 million in the courtroom, mainly due to the tax benefits associated with employees spontaneous towards the timing of was can be variable.
And then income for the quarter was 43.4 million or 90 cents per fully diluted sure.
No calf provided by offering activities was $53 million Cookie one free cash flow is three 3.4 million.
I'm going to use the remainder of the time today to walk you through and I believe in the key considerations and how we manage the company through the current environment.
Everything in the mirror.
Mindful of cash management, maintaining a fair level of liquidity.
All the weather in the store painting or operational flexibility with a strong cash position in managing expenses deliberately to make sure. We continue to focus on the areas. We believe will drive our future growth like C.T.V.
We exit interview ones are very strong castle liquidity position or bounce you'd have 446 million cash cash equivalent some short term investments at the end of the quarter.
In the third March.
<unk>, we pulled down <unk>.
While we do not for you need to use additional capital in the foreseeable future. We've only once cruising pigs funds cause amount to to provide ample liquidity. We believe the capital on hand provides flexibility for a number of different scenarios, whether the slower than expected recovery or providing ready working capital discipline broken a rapid recovery or opportunistic.
I'm in a similar to our approach to that bring the company, we acquired and 2017.
So at the end up to one was 92 days a decrease or improvement of three days from the same period a year ago.
<unk> 69 days, a decrease of seven days from the same period a year ago.
When the uncertainty in this environment at this point, we're not providing specific gross band revenue origins could either the guidance for the second quarter old Fool, you're 2020, because of this and to be experienced parents possible I will provide an overview current trends in our platform. The job also alluded to earlier.
Like other I'm going to be companies, we saw a short decelerations spam during the second half of March.
The last week in March and in in a negative <unk>.
Early April Dear reader decline and spend continue to increase by mid April.
Requirements been stabilized.
During the last 10 days in April we started to see more stabilization and then some improvement.
Primarily during my C.P.B. <unk> had this frog.
Over that period total spending proved to a negative higher teams your your decline.
There's still a significant amount of uncertainty in this macro environment. So I caution you extrapolating. This most recent data. However, we are emerging consciously optimistic but stabilization trim and improvements in late April from an expense management perspective, we've already taken a number of actions in light of the current environment.
And still have additional whatever's available to I should things deteriorate from today, although it was going to sit earlier, we seem very reasons signals improvement.
The access we pick him, so far including reducing our 2020 hiring expectations by over 50% pulling back on to to marketing costs by over 50 per cent pondering discretionary expenses like company events, along with the natural Balding opinion, you do the current situation and Rightsizing computer facilities capital investments where we.
<unk> hiring plans.
We entered this crisis period in a position strength.
More profitable business model would healthy either the Martin's allows for flexibility to handle reduction to them pop line relatively well, adding that tour additional liquidity we believe.
To weather the storm better than most companies in our space.
While lower spending the short term hurts and or even that will be impacted we're well this emerging from us to gain trust from our customers and suppliers differentiate ourselves from peers and gain market share.
Conditions were to get worse, we have the numbers available to us coming in this cost even further.
At the same talking we believe we have the structure in place to salary grows in games here when things get better as we believe they will.
By balancing the decisions, we believe that once we get through to the other side of this crisis, we will be more ready to add value to our customers by helping memory to more of their customers than we ever have before.
That concludes are prepared remarks, operator, let's open an upper questions.
Thank you.
OPEC for question.
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Ladies and gentlemen.
Question or comment please.
On your telephone keypad at this time.
Take our first question from Michael.
A little research for please go ahead Sir.
Two questions one for just one for Blake, So Jeff I I'd love to dig in a little bit more around T.T.V. and your optimism I mean, I guess based on what I feel like been hearing out in the marketplace configured grieder probability that the up front conceivably breaks and you know, there's certainly should be a lot more scatter.
Inventory is part of the mix looking into 2021 I think for some of the reasons you outline I'd love to see I'd love to get you to synch on how you think the company's able to adapt to that and and become a better partner to the media companies and then and then for Blake I'd Love to hear more about your your expense management philosophy, just in terms of areas.
You're going to leaning more aggressively versus not be on the the <unk> you call that.
Remarks.
Okay first of all things for the question Michael Yeah, I'm I'm excited just start by talking about connected T.V. because it's the part of our business that I'm absolutely. Most bullish about of course, we we started the year on paste them more than double and connect the T.V. and that's in large part because.
There were lots of Avon options being presented to consumers even before the pandemic. It's really just spend a perfect storm for linear television I was I was talking to a woman. This morning who's been in in television for the last 30 years and just talk.
We've never seen anything like.
And that it's it's it's really a an unfortunate timing for television in the sense that the.
Typically up front end guarantees are made at the end of April and an early may that's a moment where people have some visibility in the line up for for a linear television.
For the year and this year, there's just no visibility that will push things to the scatter market, but will also push things to the spot market, which is what programatic is.
All of them are doing is scrambling to make more of their programs available in connected T.V. options because they know that people are watching on demand as we highlighted in the survey that we did which I I find that to be one of the most insightful pieces of research that we've ever done.
We highlighted that the primary reason that people are hanging on to linear television subscriptions or or or to their cable bill.
60% of the time is because they want lives sports and of course. This is an environment, where you don't have that so I think the upfronts, coupled with just the current environment or making it. So there's lots of moves to connect to T.V. <unk> and and that is another way of saying the spot market.
The data driven spot market.
Oh, well, if you want to take the expense.
I see her things. So the question of Michael you know I guess when I wouldn't have to say about are expensive lots of features that are hard guiding principle is.
To continue generating quality positive either over the long term the focus right now and we want to take us to balance or expense space to stay flexible thing.
Thing flexible in order to be ready to grabs here, you know recovery or and also be disciplined.
The recovery takes longer than we expected and we have additional little number is still available to us one being appointed that might be helpful. The excluding stunk B. is cool actions that we've taken to date that I referred to in the prepared remarks, they reduced our cosby's by over 10% from our original plan actions.
There are two include reducing hiring expectations by more than 50 per cent, reducing Q.T. marketing costs by more than 50 per cent pausing various discretionary spending like events in T.V. and other areas and it's important to remember we'd have other lover is still available to us and we'll just adapt based on how the macro environment unfolds.
Great. Thank you so much.
Yeah.
As a reminder, ladies and gentlemen, please press star one in your telephone keypad at this time, if you have a question.
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Go ahead.
Yeah, I forgot to noon thanks for all the color on the current trends just as you mentioned on the call. You know this is a time of significant uncertainty, but over time add things return to normal.
You see yourself getting back to the growth rate that you were at previously you know that that 30% to 40% or higher growth rate.
If you can just talk about that and just kinda how you see that in terms of the key drivers. Thank you.
And thanks for the question.
So this is a moment, where there's just not a lot of his ability. So I'm I'm I'm I'm not eager to sign up for specific numbers.
Over the long term.
But I will say that the opportunity that's in front of US now is bigger than it's ever been I'm more bullish on the long term and because of the fact that we started January and February accelerating our growth again.
It's certainly not out of the question that we could see that acceleration resume you know you have to make a lot of assumptions about what happens in the macro in order to get there.
But I I you know what has really just happened is that.
In my view linear television with decaying at a three or 4% rate pretty steadily for the last five years and that has just accelerated because of all the things that we talked about in the prepared remarks, so because of that acceleration our opportunity has gotten bigger and it just happens to be that this is the year.
We also project that the reach of connected T.V., well rival and even surpass the reach of linear T.V., that's a which I would argue is the greatest feature of linear T.V.. So I'm more bullish than I was three months ago on the future of connect the T.V. and our role.
In it.
But there's a lot of uncertainty on specific numbers and whatnot. So just not able to sign up for that at this moment, but I bullishness is higher than ever.
Great. Thank you guys.
Yeah.
Oh My next question comes from $10.
Okay, So I had sorry.
Okay I've got another question about C.T.D. and you have friends yeah.
A green basically everything you're staying in general you know the offense typically run on Nielsen ratings. So I'd add to your comments about how difficult the offense will be to get done this year that it will be very difficult to do guarantees. So I'm wondering what things are buyers and sellers looking at now what are you talking with them about and.
Into the up from yeah reaches even to recuse <unk>, reaching a large number of consumers of what at now it's about reaching consumers in your household that you couldn't reach on T.V. anymore. He just went extra what things are you talking with advertisers <unk>.
As you go into this up front or not.
Yeah, So I I love the question because one of the the the gaiting issues for growth in connected T.V. from an advertiser perspective has been the ability to measure and it's not because measurement isn't better and connect the T.V. it as far better in connected T.V. and in all things.
Digital than it is and linear television, but it's new and the one of the thing that C.T.V. has going for it is that Nielsen is sort of a gold standard the only way really to measure and so the way that we have competed with that and the way that we've made the transition relatively easy is that we've ilene.
On on Nielsen I'm, the same way of measuring linear television to give that as a baseline.
Digital and then add to that and every report on every impression wrong additional amount of data on where you're reaching people how frequently you're reaching them. You know one of the biggest issues that linear television has is that you can't really managed to reach in frequency. So if you go do a a deal with.
Media company or on one station or even on one show and then do it on another one you don't necessarily know how many times are reaching the same user and there's no way Adam fine grain to know how much weight. There is you're just measuring how off.
If you reached them not how often you touch them.
Something that digital has improved on dramatically and that's one of the way that that connected T.V. and digital is able to afford to reduce the AD load and increase the relevant.
While making all the content possible. So all all of that is working in our favor, but it's coming from.
Start with the baseline of the same sort of measurements that we have in linear T.V. I'm done improve upon it so we're already giving customers both of those things today.
Next question please.
Alright next question comes from Boston Castillo Cannon Ball Research. Please go ahead Sir.
Yes. Good afternoon. So we hear a lot. These days when people talk about at fun give companies.
Direct response direct response, how resilient it is in this environment and so on so Jeff I Wonder if you could spend a few minutes talking about brand versus directors Pond response, how it the balls on the other side of this environment hopefully would come out of it soon and what is the mix of your business between Brampton deal.
Thank you.
I I was so glad that you've out. This question, it's not one that we've ever feel did before and the reason why is because I like many of you listen to lots of other companies that I've been surprised at how often we've heard the term direct response Ah I struggled to define.
Which adds you put in the direct response buckets, and which ones you don't because if you're just talking about it from an advertiser perspective is geico or progressive a direct response company or Iran Company.
They both have amazing brand, but they put a one 800 number and <unk> and the U.R.L. at the end of every single commercial they are trying to get you to respond directly.
As quickly as possible.
<unk> what has become more synonymous with direct response or performance advertising is actually the way things are transacted and this is actually really important for us to pick a minute and just deconstruct and that's the impressions our austin's a lot of C.P.M., that's the way that we <unk>.
That is the finest grain metric to transacting, because you're selling every single impression individually.
You can of course on a T.P.C., which is the way most search is sold on a clip basis on an action.
So what sometimes you see happen with companies to kind of control the ecosystem and at whether that's a snap or a facebook or or Google and number of other companies. Twitter is when you have an end to end solution you can take ads on a C.P.C. or a C.P.A. basis.
And then effectively arbitrage into a C.P.M. So you can take an advertiser, okay. I know your AD budgets have been caught.
All show the ads and only you only pay when we sell something.
And then what you can use you can increase the number of ads that you show <unk> contact you can have seven ads for page instead of for the way you did before and it gives you the ability to to to maintain some amount of advertiser budget. It's a good way to monetize during the downturn. If you control things end to end it's.
Many of the walls guards have done well because we're not a lot of garden, we don't operate in any form of arbitrage, we're trying to be transparent and open and we've we've traded that ability to arbitrage, but for transparency and trust. So that we are transacting on a C.P.
I'm basis, and the finest brain possible. So that we enable them most of them out a a price discovery and transparency available in advertising what happens is markets get healthy as they moved back toward C.P.M.
Back towards just price discovery, and and just healthy transaction methodology.
I mean that searches ever changing from C.P.C. or anything like that but on the rest of the business where things are are are most.
Transparently transacted on a C.P.M. basis.
She movement back to that and less sort of arbitrage. So I I I don't I don't really count m- much of our business and <unk> indirect responses I don't think it's about the way that the added actually encouraging action.
More about the way things are transacted and will continue to stick with with with the C.P.M.
Metric because of all the benefits that I just said most notably is it does not compromise our objectivity.
Thank you.
Alright next question comes from Brian Fitzgerald with <unk>, Okay. So I had sir.
<unk> a quick question one was on frequency caffeine and connect to T.V. and it it seems to be a bit of a problem, it's getting better.
But we were listening to Disney recently, and they said look we're removing across or despair brands, who U.S.P.M. moving to connect to T.V. and we're gonna leaning on Programatic partners to help to solve this frequency tapping problem. Because then you get a better per view across the whole universe.
And so they can with their their help we can help to manage to frequency camping. So first question is what are you seeing with respect to to that dynamic frequency capping unconnected T.V.
Maybe getting better is getting worse, especially is inventory and advertising move into and leaned into connected T.V.
And then second question was just in in with respect to your partnership with free will for video.
Do you see that panning out similar to what happened with had her bidding on the display senses and that was look it it added transparency to a market and so that was good. There's this locations in terms of pricing and so you got some better yields on C.B.M.'s you guys.
Actually crafted day.
I'm a tool does that dislocation into chaos predicted clearing built in the Carolina. So is is that tucked into your predictive clearing product or their opportunities there to help solve that.
This location with video.
Thanks, <unk>. Thanks friends, a lot of the the nuance questions and it gives us a chance to dive into the details. Thank you on on the frequency for for C.T.V. <unk>. Yeah brings me a lot of joy to hear Disney talking in that way because one where we're also really excited about the partnership with them as we are with.
So many of the printed media companies in the world. It is true that because.
Television content, especially in digital is so fragmented it is really hard to manage frequency I was just talking a second ago about how it's really hard do that and linear it's hard to do in linear and you <unk> your isolated to the number of television sets are set top boxes that you have potentially in order to.
To manage frequency, but now in a world where you have phones and you have computers and just so many ways to consume connect the T.V. contents. It makes it so managing frequency it can be even harder because there's just more devices involved let alone managing people.
Across all those devices.
I saw connect the T.V. got a better job of this them linear ever can just because of the nature of the technology or the pipes, we've been doing a good job of it as you point out the industry can improve dramatically <unk>. That's one of the reasons why I I spend a little bit of time talking about the release that we just good.
About a week and a half ago, which we were already planning to do it. We we we put all hands on deck to make this one of the most important releases in the history of the company one of the biggest features maybe the biggest that we shipped in this is just enhancements to frequency caffeine to do exactly what.
And he is asking us to do which is just make it better for the consumer make it better for the advertiser to eliminate waste.
As of this moment, we're doing a better job of it the the has has ever been done before.
And we'll continue to expand on it because partners like Disney leaning in.
I didn't relate to the partnership with free will.
Yeah, we call it had her between for T.V. only because had her bidding is the closest technological comparison to what's been shipped by free will it's not necessarily in the header of course, because it's not a a web page.
Concept is exactly the same.
The only thing is if you're not fine sort of these silos of demand that are a little bit different between what was happening on browser based traffic versus C.T.V. traffic and and and let me explain the difference.
And an AD server like double click on the browser you have these priorities that effectively silo the demand and it just makes sense for somebody to write some code so that I could walk as a publisher I I could look and he of all that a man I have which one's going to make the most.
Amount of money on this particular impression at this moment and it just enables better price discovery.
So how debating was very successful in and just sort of working around the AD servers. So that publishers had better visibility and not just printed a more robust market for everyone.
This is happening a little bit less about the AD server priority, although that might be a little bit of it is more about the direct sales force in television where your direct sales forces out selling something usually without very much targeting at all and that is in comparison to the data driven or or targeted advertising where.
T.M.'s are higher than their data attached to it and figuring out I wished bought catch I put this particular impression and how does it create yield free will is done on an amazing job of unified all that yield so that coffin owners can maximize the revenue from the content and they've taken a page out of the the browser.
But you old management playbook and that is definitely serving them well definitely starving oswell as we continue to increase spend with that.
I think it's also very good for their their counterpart and N.B.C.. So I'm really excited at at the technology that no shipping in my view, they're doing absolutely the reibstein and combining visibility so that demand is no longer five load and you're creating the optimal level of modernization for a publisher.
So they can continue to afford to produce amazing content, which we all just needs to be focused on perpetuating because it's the best time and arguably the history of television for credit content.
Great. Thanks.
Right next question comes from.
Please go ahead Sir.
Good afternoon, Jeff many are curious about your vision of the shape of the I'd spend return.
Mentioned, a a negative high teen your be your decline in the last 10 days, if you listen to some of the commentaries from a lot of the companies that are reporting they're saying you know the U.S. feels like it's bomb you're seen improvement we could per week and you know it seems like I'm a senior seen a lag here can you just talk to how you think this rebuild and.
The shape of this and what it looks like throughout the year. Thank you.
Yeah. So so you know there's a there's a lot of macro that has to be taken into account to make any really good predictions.
I mean, I can talk a little bit about or what we've seen in our business and just to reiterate that some of the things that Blake said and maybe get a little bit more detail.
And by the way when I'm finished like if there's anything you want to clarify or add to it. So so free of course. So <unk> you know there was a a slowdown that started in the second half of March there were some amount of acceleration into April in the middle of April we saw some stabilization.
And then we've seen improvement.
Since then.
I think it's really important to talk about where where we're seeing those green shoots <unk> in the in the time since since mid April when we saw that you know near bottom to to today.
First companies are not all going to recover at the same pace and if you think about this from a consumer's standpoint that you're you're probably more likely to go back to work and be comfortable being in your office. Then you are on an airplane tomorrow. So there's just going to be some differences as to when you're willing to go do certain activities.
Even though the recovery you know lots of people are are optimistic that things happen very quickly I'm not certain themes will be back to normal right away certainly into verticals that we're seeing spanned there's some indication that's the way the rest of the world looks at it too not just from a consumer's standpoint, but but that that's the way that companies are sort of putting their money.
Their mouth is so not surprisingly, you're seeing things like health and fitness, which includes farm, you're seeing technology, and and and computing and you're seeing home and garden and some education a category all doing very well at the front end up the recovery not surprising.
Those are the companies that are more likely to be spending right now if you're a travel company or an automotive you're more likely to be on the back part of the recovery, which there's just you are green shoots to point to at this moment.
But overall I'm encouraged by the trend I see I definitely see green shoots in those categories, but where I get of course, most optimistic is in connected T.V. and audio where we're just seeing some pretty strong numbers were.
Leading a sort of out of that that bottom <unk>. What I think are the most effective channels, which to me is the reason he bullish about those is <unk> advertising is really about winning hearts and minds that I'm not certain that there's anything more effective than than video.
Advertising and audio advertising and the fact that those are are are leading the recovery in those specific vertical it to me. It's a it's a very positive sign.
Anything I got wrong or you want to ask for that.
No I think you you covered as well.
The next question comes from Mark <unk> with our B.C. capital markets. Please go ahead.
Okay. This has been on for Mark too if I could one it just in terms of you know we've obviously all seen now the numbers reported and the rates acceleration from the the walled garden companies looking just based on what you just closed in March and April Jeff <unk>, why do you think the rates of decelerate.
<unk> on trade desk, X.C.T.V. are kind of more pronounced than the walled gardens.
And how do you think the recovery each shapes us versus them and then in terms of just kind of clients coming you too you directly versus spending through agencies.
How's that been trending I think you know you've been getting more spend come you directly has this crisis kind of accelerated that and then what do you think are the kind of the P.N.L. implications of that long term. Thank you.
So the as it relates to the rates of deceleration why are there more with US then there there there was with the walled gardens.
You know the the wall gardens, often don't break things out much and because of the performance advertising or having control over the inventory itself <unk>. When you put all those numbers together.
Not surprising that for instance, if you're in you tube and you have an increase of impressions, that's double digits increase because everybody's shelter in place.
And then you also take on advertisers on a performance a basis to supplement your demand.
<unk> offset some of the law that comes from that so the Phoenix nothing about what what the <unk> the situation that we're in.
Let's say that yesterday I got to look at 100 impressions that I bought 50 of them.
Today, I guess I'll look at 150 of them and I buy let's say 40 of them, just because of pauses or or or decreases in budget.
That as well as the reason I went from 100 to 150 is because just more impressions available because people are consuming more.
<unk>.
<unk> I don't want a garden scenario, that's going to go into their pockets in our scenario that's going to go into consumer surplus sorts through our client's advantage, where we are now doing a better job of selecting which impressions work for them. So it all gets translated into the advocacy yeah, which is part of the reason why I'm so bold.
<unk> about our ability to win share during this downturn because just the mathematics of Programatic, our I get to look at more impressions during an environment like this and I have to buy fewer of them. So I get to be more selective that difference plus the way things are transacted.
Amounts to a difference in our numbers in the short term but.
In my view in the long term that will work to our advantage.
Oh, and then a different part of your question sorry about the the the.
Ah direct versus agency and so well it is absolutely true that we're having more conversations with with brands directly than we ever have before largely at their request often at the agency's request, where they're asking us to go arm in arm with them to talk to brand so that.
We can service them better.
We definitely have no brand signing directly with us more than ever be so that they can control the activation of their data and then they are are leaning on their agencies for guidance and for strategy and and for execution, we see more and more of that but.
We're we're really optimistic about the continued relationship between well brand as well as the agencies I think there's a little bit more pressure on the agencies and this environment than there was before which might create a little bit more in housing death.
Minutely this environment definitely makes it so that brands are being more scrutinizing of where every single sin is being spent.
I think it almost all cases, that's very good for Programatic and it. It makes it so that brands are going to be more deliberate about spending where things are measurable and comparable and there's no place where I think that's better than in Programatic. So it's an opportunity for the agencies to to add more value in this moment, but without without a doubt.
The the brands are going to be more involved going forward because they want to make deliver choices.
Thank you very much.
Alright next question comes from Brian Chore with Oppenheimer. Please go ahead.
Yeah, I think for take my question. This afternoon chaplain to ask a question about your investment strategy here during the downturn clearly articulating throughout the entire call on how excited you are about the shared chefs that that you expect to happen and Programatic and connected T.V.C.R. and how the opportunity just got bad Guy.
Kind of wine to ask you a a different question you know I realize there if they cost here to the margin, but the balance sheet as strong so.
Makes sense for you to potentially not slow down hiring here to get the best thing and all that.
Even in Bath more to scale, the international business faster or.
Eight for in organic alright.
Thanks.
I'd to hit the gas again.
I'm really happy that we have such a strong balance sheet that unlike so many other companies who their car was going 100 miles an hour and they had to come to a screeching halt.
We took ours from 100 miles an hour to 80 miles an hour.
And now we're in a position where we can accelerate if we decide to.
So we are in that position, where we could do that and we'll gain market share during that time.
No I don't I don't mind sharing with everybody that during that time with scrutinize every single piece of incremental headcount every single role I personally looked at all of them Blake and I and team reviews. The mall just trying to go as aggressively as we possibly can while also just accommodating to the uncertainty as of the moment.
But we absolutely have the ability to hit the gas again, and it's not that hard to go from 80 to 100 or 110.
Not nearly as hard as is go from zero to 110.
Yeah, the only thing I'll add to what Jeff said is we did we were super dual due out about where.
We choose to higher for the near term. So just to give you. Some idea we say we reduced hiring from our full year plan by 50% of the remaining hires that we have opened right now 75% of those are in sales and marketing and technology and development and those are the areas that will give us a.
Ability to be a catalyst to continue our growth. So we're not slowing the business down Thats really important we're really what we're trying to do as big as flexible as possible in order to gain share in the recovery, but also be adaptable depending on where this whole goes and so that's the kind of the balance mechanism that we're trying to use.
And that does conclude our time for questions today, we'll turn the floor back over to our hosts Chris.
Great. Thanks, Karen Hey, thanks, everyone for joining today, we really appreciate your time. This afternoon stay safe everybody and we look forward to speaking you again. Thank you.
Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.
Hi.
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