Q2 2020 Trade Desk Inc Earnings Call

[music].

Good day, everyone and welcome to todays the trade desk second quarter 2020 earnings conference call.

At this time, all participants are in listen only mode.

Peter you will have the opportunity to ask questions. During the question answer session.

Give me a registered ask the question at any time by pressing the star and one on your Touchtone phone.

I will be standing by should you need any assistance is now my pleasure to turn the conference over to Vice President of Investor Relations Crystal.

Thank you operator, Hello, and good afternoon, everyone welcome to the trade desk second quarter 2020, <unk> earnings conference call on the call today, our founder and CEO, Jeff Green and Chief Financial Officer Blake Grayson.

A copy of our earnings press release can be found on our website at the trade Dot Dot com any investor Relations section.

Before we begin I would like to remind you that except for historical information some of the discussion in our responses in Q and I may contain forward looking statements, which are dependent upon certain risks and uncertainties in particular, our expectations around the impact of the cobot 19 pandemic on our business and results of operations are subject to change should.

Any of these rest materialized or should our assumptions prove to be incorrect actual financial results could differ materially from our projections or those implied by these forward looking statements.

I encourage you to refer to the risk factors referenced in our press release and included in our most recent SEC filing.

In addition to reporting our GAAP financial results, we present supplemental non-GAAP financial data.

A reconciliation of the GAAP to non-GAAP measures can be found on our earnings press release, we believe the providing nongaap measures combined with our GAAP results provides a more meaningful representation of the company's operational performance I will now turn the call over to founder and CEO, Jeff Green jobs.

Hello, everyone and thank you for joining us it's no secret the last several months have been among the most trying times for all of US the global pandemic has changed the way every business in the World operates.

For us the trade desk team continues to be resilient supporting our families and friends and customers and partners. The fact that we have always been so mission driven with a clear conviction that our greatest asset is our people has served as a solid foundation.

Has allowed us to continue to expand our business during these times.

While our revenue growth rate continued to be impacted by the disruptions from the coven pandemic in the second quarter, we're starting to get a clearer picture of the role that advertising is playing as markets reopened.

We talked last time about how data driven advertising would be on the front foot as that happens.

As much as a global financial crisis of 2008, and nine caused many advertisers to consider data driven strategies for the first time I believe this crisis will cause advertisers to leverage more data more aggressively than ever as they look to make every dollar work as hard as possible.

And we started to see this play out through our second quarter and into the start of the third.

Since I've been Troughed in mid April advertisers have been returning that reactivating campaigns, but most of them, what new approaches and new creatives given the environment. We're in.

They realize that as markets reopened they have a unique opportunity to gain share. Many paused in mid to late March and even early April but some advertisers in all categories have seen this is an opportunity to gain share.

To do that they've had to be more flexible and agile than ever as markets opened in different ways at different rates, even within the same country. They are under pressure from their cfos to prove the value of every advertising dollar, forcing them to prioritize advertising that has measurable and comparable and they are dealing with a consumer base that.

As rapidly shifting away from traditional linear television.

All of this puts data driven advertising in the front seat.

We saw this reflected in our performance throughout the second quarter.

While we ended Q2 with a negative 12.9% year over year revenue decline since April we saw spend on our platform increased every month and nearly every consecutive week.

As advertisers have been more deliberate AD spend turned positive on a year over year basis in mid June and that trend has continued through the month of July.

On a personal note I was surprised at how unified the added industry was an pausing activity starting in mid March.

We took a healthy economy, a healthy industry and collectively hit the pause but.

Im not sure that sort of synchronize responses ever happened before.

At the same time I was equally surprised at how unified the early phases of recovery have been so far.

Not just that advertisers have returned in the consistent way with a renewed focus on programmatic in fact, nearly all of the largest brands have increased their spend on our platform. This includes spend from industries, such as Cpgs food and beverage technology healthcare and even automotive.

Even travel while still negative year over year has improved significantly up its mid April lows, but.

But it's more than that.

It's about the unified view I've heard from the market regarding the direction of the advertising industry over the last four months I've met with more executives at brands and agencies than ever before in such a short period of time.

So today I want to share some of that feedback with you and in particular the convergence of three forces that are shaping the world of digital advertising I think this feedback will shed some light on our strategy and our performance and why we are well positioned for the future.

The first is how the industry is coming to terms with user generated content.

The second is an important inflection point in connected TV, which has not unrelated to the advertisers coming to terms with that on what that user generated content.

And lastly, I want to touch on the future of identity.

Because creating this solution that works for consumers advertisers and publishers is the only way, we'll be able to create a better internet.

So perhaps the most important area, where I have seen a unified front from advertisers in the last few months is in their approach to user generated content or UGC.

Our use the term UGC deliberately rather than social media platforms. Our video platforms like you too because in my discussion with advertisers, it's the nature of the content rather than the platform the problem.

To quote Unilever, there is much more to be done, especially in the areas of divisiveness and hate speech. During this polarized election period in the United States or Diosdado, we strive to promote inclusion and diversity, including through our marketing programs. We will continue to discuss with media partners, how they will deal with unacceptable.

Content or Starbucks, we will continue discussions with our media partners and was civil rights organizations in the effort to stop the spread of hate speech.

Pretty much every major brand has made public statements to the same affect the statements were all made as they pulled or suspended advertising from the major platforms that are built around user generated content.

The issue is not necessarily the platforms themselves in fact, I think many advertisers believe those platforms are in a very tough spot and I agree.

The content on these platforms reflect the divisiveness in public discourse today and that divisiveness is only exaggerated as people worked through the implications of cobot 19, as social Justice issues take center stage and as we gear up for a major election.

Asking social media platforms to be the arbiter of truth on a range of device of issues is a really tough ask in some cases, such as with hate content. It might appear straightforward, but broadly speaking it requires applying judgment and when you're making judgment you're always at risk of alienating someone it isn't it.

Possible task for UGC platforms to be asked to judge what is true or what is hate, especially the largest companies given the amount of content that has posted to their platforms. Every day, there's simply no way to keep up.

But for advertisers increasingly.

It's a risk they don't want to take brand safety is a critical issue. They don't want the device of argument of the day played out on social media sponsored by their brand.

I don't think this in in of itself is the wakeup call that advertisers were waiting for I think it's the strother breaks the camels back advertisers have long had their doubts about advertising on UGC, but today, it's been an easy way to reach audience at scale.

But what these issues have highlighted is that advertisers have very little transparency and control in spending dollars on user generated content. They don't know exactly what the content their ads will show up against and they don't know, which consumers have interacted with their brand by contrast, advertisers increasingly understand that the trade desk provides the tools.

They need to buy only the premium inventory they want to support and reached only the audiences they value.

These conversations have accelerated considerably in the last few months than we are winning spend from traditional video and social media platforms as a result.

One second quarter example of this was a multinational food and drink company that through their global agency began to think differently about how to allocate their digital AD spend and move it away from user generated content. In this case they chose to trade desk for two main reasons, one was the ability to apply measurement and offline attribution tools to.

Understand exactly who they were reaching the second was the tools and breadth of premium inventory on the platform for buying CTV instead of UGC.

Of course, the rapid emergence of CTV as a viable option is key here for advertisers access to growing base of brand safe premium content.

Could not contrast, more with what is available today and user generated content, which brings me my second point the surge in connected TV in Q2, despite the impact from Covance CTV grew about 40% year over year in Q3, we anticipate that the CTV spend growth rate.

We will more than doubled Q2.

We believe the co bid pandemic has permanently accelerated the growth of connected television changing the TV landscape forever and no company is better positioned to grab share and CTV than the trade desk.

As one leading CMO said to me recently and I quote I want to move as much budget from social to CTV as possible as soon as possible.

And that's not an isolated comment advertisers our unified about this they understand that data driven advertising is a better place to measure performance and target key audiences.

And now they can bring that approach to their massive TV AD campaigns and it's not just our concerns about user generated content that are forcing this there are two other major forces at work one is the rapidly increasing inventory of premium the CTV content.

The other is the consumer shift toward CTV accelerated by the Pogo dependable.

Let me quickly remind you what we discussed last time on our earnings call. Our research suggested that 11% of us households, with cut the cable TV court by the end of the year.

That's about triple the rate of cord cutting that we've come to expect the last few years that cord cutting rate rises to 18% for the very coveted 18 to 34 year old demo.

And the number one reason households, with keep cable TV live sports, 60% of them cited live sports as the primary reason they hang on to cable.

And you don't have to take my word for it fast forward three months Roku recently issued its annual survey into TV viewing trends and according to their research 32% of us households have now cut the cord or never had.

And a further 25% our shaving their cable TV costs, 45% of those cord Shavers said, they expect to fully cut the cord by year end that number one reason cost savings in the current environment. Many households are looking at their home entertainment cost and their cable TV Bill as often the most expensive part.

Of their TV content lineup.

But related to that the number two reason.

Access to free streaming TV services as more broadcasters make their content available through a Vod services. The cost equation for many households is something of a no brainer and according to the same survey, even if live sports make a comeback less than one in five cord cutters said that rethink their decision.

Because those same sports events are now available over streaming services.

So whatever assumptions you had about the shift toward CTV and how many years. It would take you can throw those out because co bid has changed everything.

Advertisers can't ignore the shifts in consumer behavior, and they don't want to.

As I said.

They are growing concern about user generated content, which is only exacerbated by recent events represent a strong breaking the camels back.

They want to shift to the premium content that CTV now enables their consumers are there and in addition, not only has NBC launched its new streaming service Peacock on July 15th, but Pluto reported three times the viewing hours in April that ahead at the beginning the year to be were reported that they're viewing hours were up 100.

Percent in April move to reported an increase of 55% in the stay at home environment.

Such as the growth of Avon that these platforms have recently been acquired by Viacom Fox and NBC you respectively.

In addition to moving to where viewers are advertisers also benefit from applying data to their TV campaigns for the very first time for example, after the Kobin Lockdown started a large us insurance company wanted to be more data driven in their TV spend their goal is to extend the reach while managing frequency.

Using a third party measurement from through our platform. The results were transformative even though CTV cpms are roughly three times those of linear cpms using CTV lowered the cost per unique household by over two point fivex, even more eye opening for the brand using CTV on our.

Platform, they were able to reduce add frequency to the consumer by over 80% compared with our previous linear campaigns. In this case site visits were two X more efficient when using data driven CTV versus publisher data. Overall. This resulted in a significant reduction in cost per acquisition.

As I see advertisers question the value of user generated content and as they make CTV are more important element of their media mix.

Also pick up a more unified sense from advertisers that they want to put more pressure on the industry to uphold certain standards.

One of the attractions of connected TV is that it's a more competitive market than user generated content with the standards that typically come with competition No studio No channel No cable company No MPPD no. One company has the leverage or the resources to achieved the market dominance enjoyed.

By Google in search and by Facebook in social and because we continue to predict video in all of its forms will account for about half of the trillion dollar advertising market. We believe that CTV may well be the catalyst that eventually forces all walled gardens to change course.

It's important to remember that in the great scheme of things the digital advertising industry is relatively young.

As with any market that emerges there comes a time when key participants demand certain market rules things like transparency and objectivity and that's what I see happening now ctb, maybe the most vivid example, but you can also look at how advertisers are now having to do more with less how they're demanding better match.

Drummond transparency and more market objectivity, you can even look at various regulatory initiatives within our industry, whether it's here in the us or in Australia or Europe.

There's pressure on all fronts within this system to have the advertising market conform to the norms of other mature markets and as I speak with advertisers. They put the debate regarding the future of identity in that exact same context, which is the third point I want to touch on today.

We can discuss the specifics of any one identity offering.

And we are examining all of them.

But at the core of it there are two critical questions that advertisers and publishers think about.

How do we explain the value exchange of the internet and the role of relevant advertising to consumers.

And how do we ensure power doesnt become too concentrated in one place.

The moves that Apple announced recently with idea they represent a step forward when a consumer logs into an iOS app. They will be asked to opt in to tracking in return for personalized that's that's a partial step towards explaining the value exchange of the internet the understanding that we get to enjoy premium content and experiences in return for.

Irrelevant advertising.

Google is going through the same process, but the issue is complicated for them by the dominant position they enjoy.

In digital advertising.

If they remove cookies from the open internet and chrome and rely on proprietary log ins for the advertising business, which makes up almost our entire revenue stream.

Even if using privacy as a shield it may be seen as an over reach by regulators in dollars and sense I don't think the risk is worth it to them and I expect as they will find a way to preserve relevant advertising for all of the reputable advertisers and advertising platforms and chrome, but regardless.

We have to prepare for world without third party cookies.

Fortunately, we've successfully launched and built a ubiquitous I'd before our unified open I'd.

When we develop the first iteration of our unified I'd solution. The core idea was to make sure certain players, particularly Google Didnt have an unfair cookie coverage advantage over the rest of the internet.

And particularly the open internet.

This was a huge success as every major SSP and exchange has adopted this I'd, which is more important than ever as more advertisers embrace data driven advertising, especially with the CTV surge they want to ensure that the market is competitive and that they can compare one media property to another.

That kind of measurement and comparability is key and it's not possible within walled gardens.

Following the guidelines outlined by the Ibds project re arc.

We've been focused on ensuring the next phase of unified I'd will help and power. The open Internet beyond just cookies development is underway with a focus on a few core characteristics.

First and most importantly, we need an open I'd.

Which is a major upgrade over the current cookie technology.

This will include a hashed and encrypted I'd with improved accountability measures. Unlike a cookie. This I'd does not live in the browser. This I'd can be used in a browser or on any type of device, including a phone are connected TV and this I'd will be free and open.

Source.

Second granular an understandable consumer controls with the option to opt out.

Third a simplified content framework for publishers, which explains the value exchange of content.

In exchange.

For a relevant advertising for consumers and fourth the single sign on capabilities across the open internet. So consumers don't have to consent over and over again.

We won't go this alone of course as with our initial unified I'd solution, we will work with the industry to drive consensus and standards and to ensure we build a solution that will drive the required critical mass of adoption.

We are in development and we expect to have beta versions of this solution in market very soon.

This work is important because third party cookies are archaic technology that need to be upgraded that said I'm still not convinced that Google in the end, we'll get rid of third party cookies and even if they do cookies will be replaced with something else that enables targeted advertising I do not believe that Google will have the ability to turn off targeted advertising for everyone.

But them.

As I said advertisers and publishers are starting to demand the kinds of market rules for digital advertising that we've come to expect with other mature markets such as the financial markets.

Independence objectivity and audible measurement are more important to advertisers than ever before.

We are driven to maintain and build a free and open internet that honors the quid pro quo. The Internet, we want an internet that is better for consumers as well as advertisers and publishers.

As advertisers commit more of their budgets to digital, especially as they shift more of their TV dollars to CTV. They want to know that they can reach the right audiences that they can measure and compare performance and that they can support the right content for them.

The move toward a more contemporary approach identity will be key and building that trust for advertisers.

So let me close by or just reiterating the consistency of these teams among advertisers if like me during cobot, you've been sucked into the world of online Webinars and events, you've all heard many of the same themes, but I'm excited by advertisers are more tuned into the power of data driven advertising than ever before they understand the role.

And can play in helping them be agile in the midst of today's uncertainty and they understand it can help them gain market share and as they embrace it across their advertising channels. They are demanding more of our industry.

This has been an important moment for the trade desk 2020 is a moment, where the culture. We've built for the last decade is paying dividends, perhaps more than ever also where we've always been a company.

With a vision and admission.

And thats been more valuable in 2020 than perhaps any moment in our past.

Thats always been our approach we've spent 10 years getting ready for this moment, while we still have a great deal of uncertainty in front of US. We're very excited about the future now let me turn the call over to Blake to discuss our financial performance. Thank you and good afternoon, everyone I hope, you're all doing as well as possible in this challenging environments before turning to results.

I wanted to comment briefly on the status of our company's operations.

Today, we are currently operating with the majority of our full time employees working from home.

Safety is the number one priority for our team.

We fully support our employees as they either continued to work from home or return to the office based on their preference and were allowed by local regulations and in Q2. We were pleased to continue to onboard positive net new employees every month investing in talent that we believe will deliver future value to our clients.

Given the circumstances I really can't say enough about the dedication focus and professionalism with which the trade. This team is tackling the challenges presented during this period.

Now moving onto our results.

In Q2 revenue was 139.4 million, representing a decline of 12.9% year over year that said however, the story that developed over the quarter was a positive one.

Coming off the lows, we experienced in mid April spending trends improved throughout the period and by mid June turn positive on a year over year basis, and then has continued into July.

As we began to see those improvements we've started to increase the pace of our investments to further capitalize on the opportunity that is presenting itself in our business, particularly into TV.

For Q2, despite the year over year revenue decline, we generated 14.6 million in adjusted EBITDA or about 10.5% of revenue.

With the investments, we're making our people and our solid working capital situation. We believe we are well positioned for future growth acceleration as conditions continue to improve.

From the channel perspective, Q2 included strong year over year spend growth relatively speaking in branded channels, where advertisers can really connect with customers.

Highlights included connected TV, which was up roughly 40% and audio which was up 23% year over year in Q2.

During the month of July we continue to see improvements across all of these channels.

Geographically in Q2, similar to last quarter, North America represented 88% of spend and international represented 12% of spend.

Some of the spending trends that I mentioned earlier applied to our regions as North America, APAC and Europe. Each improved every month during the quarter on a year over year basis.

In terms of our verticals that represent at least 1% of our spend nearly every category improved between April and June with many exhibiting strong resilience in particular health and fitness our largest vertical in 2019, as well as technology and computing home and garden in education continued to perform well.

While still improving materially from their April lows travel and automotive lagged behind although in the last few weeks, we have seen automotive turned positive year over year and are encouraged about that.

We are actively working with large automotive companies and their agencies to activate more campaigns on the platform.

Our early May CTV launch provided an opportunity to showcase our ability to deliver incremental reach with frequency controls and measurement of real business outcomes.

As a result, CTV represented a significant amount of these brands AD spend on our platform in Q2.

We believe this represents a growing opportunity in the back half of 2020 and into next year.

Operating expenses were 155 million in Q2 up 21% year over year. This increase reflects continued investment across areas such as our technical talent in business development teams, but also being mindful of our cost structure in this environment and decelerated from 30% year over year growth in Q1.

This approach to our operating expenses continues to reflect how we actively allocate capital within the company toward areas that can drive future growth.

Spend started to recover we began allocating resources to incremental investments our goal is to invest heavily in the areas that can drive growth. So we can grab share during the recovery.

Adjusted EBITDA was 14.6 million in Q2, representing a 10.5% margin.

Income tax was a benefit of that 41 million in the quarter, mainly due to the tax benefits associated with employee stock based awards, the timing of which can be variable.

Adjusted net income for the quarter was 44.8 million or 92 cents per fully diluted share.

Net cash provided by operating activities was 96.3 million for Q2 and free cash flow was 75.5 million.

The primary driver for the increase was a change in working capital the can vary from quarter to quarter, depending on the timing of payments in receivables.

Dsos exiting the quarter were 96 days down six days from a year ago depots were 74 days down seven days from a year ago.

We exited Q2 with a strong cash and liquidity position our balance sheet had 555 million in cash cash equivalents in short term investments at the end of the quarter.

I'd like to remind you that depending on the shape of the recovery curve, our liquidity position will fluctuate as we fund our gross.

Im going to use the remainder of the time today to discuss Q3 in how we're managing the company through the current environment.

Last quarter, we do not intend to provide financial guidance for the full year.

However, we do want to provide direction for Q3.

Please be aware our business has been impacted by the Kobin 19 pandemic that has significantly impacted advertiser demand.

Like many companies that are add funded we are facing a period of higher uncertainty in our business outlook, we expect our business performance could be impacted by issues beyond our control such as shelter in place orders that may or may not occur.

Assuming that the economy continues to open up and we do not have any major cobot related setbacks that may cause economic conditions to deteriorate, we estimate revenue growth in Q3 to increase 8% to 10% on the year over year basis.

Under this assumption, we estimate adjusted EBITDA to be at least 30 million in Q3.

We also continued to be mindful of cash management, maintaining liquidity and investing in working capital spend continues to increase from an expense management perspective, while we are increasing our investments today in light of the current environment I want to remind you that we do have flexibility should things deteriorate.

Im proud of the agility, we exhibited in Q2.

However, we are certainly encouraged and remain motivated by the stabilization trend in spend we have seen since the middle of April. We believe we have the structure in place to accelerate growth and gain shares economic conditions improve and are cautiously optimistic about continued measured improvement through the remainder of the year.

That concludes our prepared remarks, operator, let's open it up for questions.

This time, if you would like to ask a question. Please press star one on your Touchtone phone.

Withdraw your question any time, bypassing the town key.

Once again, adding star.

Line.

First to Brian Schwartz with Oppenheimer <unk> co. Please go ahead.

Yes. Thank you for taking my question. This afternoon, we the question Jeff on the long term impact from Koby 19 on the connected TV market. There is some investor concerns here that coal that might be pulling in accelerating span for connected TV given your guidance here for connected TV to more than double in Threeq would still.

Step up from two Q, but I wanted to ask if you really agree with that or do you think what has happened so far as the structural change in the market. So essentially Jeff what is the shape of this post pandemic demand picture on the connected TV Marquette look like for the trade desk. Thank you and congratulations thanks, Brian I appreciate that.

Question and the kind words so.

Yes, So let me let me start with the Punch line. So I think connected TV and television in general has changed for ever because of connected or because of Coca 19.

And nothing is going to undo that change that has been instigated.

Is there some amount of viewership that is currently on a Vod that will go back to sports or somebody like that there is some amount of that but I'm really drawn to a couple of the of the big factor number. So first of all we highlighted in the prepared remarks that cord cutting has typically been around 3% year.

As is according to our research expected to be around 11%, that's largely because the number one reason the people hang on to cable is sports at 60% of people, saying that there are number one reason for hanging onto it.

Even esports come back.

Oh, the sports aren't nearly as as water is desirable as they were but internally, it's really important to note that as they are coming back we're getting access to all of them. So even in our limited formed where a lot of people are seeing them on demand and we're showing ads for the MBA The major League baseball.

A major league soccer 10, as Stephen U.S.C., So we're showing ads across all the sports that are coming back.

Of course.

We've also seen a large surge in unemployment and that of course makes everybody and those that have been affected negatively economically which is almost everyone to look at their TV lineup and say, what's the most expensive part and where do I need to cut and not almost always leads the cable television.

It's really important and I didnt emphasize this enough in the prepared remarks that cable television and connected TV. Our full I think at a really important point, which is that.

The number households that we can reach just passed in this quarter 80 million households, and according to the projections that we have for this year.

Cable households are subscribers will drop below 80 million for the first time in many years.

So there's a bit of a changing of the garden, what's happening right now and I don't expect that to ever ever change again, so I.

I guess the punch line to your question.

Is that.

CTV has changed the landscape for ever.

The effects of Cnineteen have changed forever, there might be some some noise.

As things get back to normal, but as they get back to normal people are moving where they want to go which is on demand.

Thank you Brian.

Next to Sean tell.

Okay Honda. Please go ahead.

Hey, guys congrats on the unimpressive execution.

I had a couple of questions.

First one John.

Can you talk a little bit more about.

Even the upcoming idea at the changes.

What they need for the trade Dash and also how do you think Android will react to that.

Great.

So.

I'll first.

Whenever we started talking about idea, it's really easy for me to lose people in the in the technical details and so I always like to start with the headline and then just reinforce the headline as we finished which is.

I'm extremely confident that the trade desk is going to be fine no matter, what I'm extremely confident that the quid pro quo of the internet cannot be disrupted by a single company, whether they are dependent directly on advertising or indirectly on advertising.

With that as profits Apple is indirectly dependent on advertising for what I believe to be the most valuable asset that Apple has which is our app marketplace. So people often make the point that Apple is not in the advertising business and that's true they're not directly in the advertising business, but they are indirectly in the advertising business, which is most of their app.

And they're ecosystem again, which I believed to be there most valuable asset are dependent on adds in some form all of that said, it's only about 10% of our spend uses I'd say and anyway.

And one thing that I, just I think is really important remind everybody out is that.

We look at millions and millions of out opportunities every single second.

A ballpark caught 11 million and with that 11 million. If you were to take away a million.

And say now you have to fulfill all of your budgets with only 10 million as available every single second.

We would be just fine we budget by a different 10 million.

So if I'd epay, where to go completely away or everybody were to opt out we would just by different app.

So it wouldn't have much impact that said because apple is dependent on a I don't expect that and there might be some short term surge in opt outs, but because awful Apple has made clear that they will do a better job of explaining the quid pro quo Internet, which by the way is amazing progress that's good news for everybody.

I do think long term when people go to apps and find that they don't work as well because in fact, you do need to share your location with Yelp in order to port to work at all.

The.

Long term everybody is going to become more familiar with the quid pro quo of the Internet and will have access to nearly the same amount of inventory that we have today. So I don't expect there to be any major disruption in the short term or the long term I'm, even more confident that there won't be any meaningful disruption in the long term.

Which comes to the second part of your question, which is Google.

If I am Google, especially when I've already made the announcement about the future of of cookies inside of chrome and they've been Sundar was asked about it directly multiple times in the recent hearings up I'm not going to start with.

I'm not going to start a fight.

On another front.

And especially because here at Google and I'm speaking as if I'm them, we are dependent on ads. So unlike apple which has indirectly dependent on ads. We are 95 plus percent of our revenue I think comes from from ads.

So we're going to wait and learn from what happens with Apple and then make changes, but if apple overreaches.

We will benefit.

Because at providers will then start built into our platform first instead of the apples.

And then we will gain more market share.

So if I'm working at Google I'm secretly hoping that Apple mess. It up so that we can win share, but given the number of places that that sort of Google is under attack.

I would be waiting and watching.

Before acted so I think both of the strategic positions as our end means.

At the quid pro quo. The Internet is just fine and that brings me back to our headline which is the trade desk is just fine.

Thanks, that's very helpful. If I can sneak in one more.

Sure you Blake.

Thank you for the for the color on the on the treat you didn't investment levels. I was just wondering I know you don't want to guide beyond Threeq you, but just in terms of can how you're thinking about opex or investment for the fourth quarter is there is there any kind of framework you could provide us. Thank you.

Sure. Thanks, So the question Tom appreciate it.

Yes.

Tobacco quickly I was really pleased with how we manage the second quarter from an expense standpoint, despite the cobot headwinds, we still generated nearly $15 million and positive EBITDA for the quarter.

Our expense growth. These cells, we were up around 30% in Q1, and we do sell top 21% in Q2 so.

That said, even with the D cell from Q1, we're still investing materially in the business, we and we continue to do so.

Like we discussed in the prepared remarks, we did release more investment as we saw trends improved during the quarter.

Additional color I can try to help you with is on the Q1 call you might recall, we were targeting our full year 2020 hiring more than 50% under our original plan today that that figure has been reduced its probably closer to 30% to 40% as of today. So.

Because of that the expense growth in the second half its likely if I had to say, it's likely closer to what we saw in Q1 from a year over year growth perspective than what we saw in Q2.

But maybe we know I also would want to add remember, we really don't manage to an EBITDA target, we invest where the opportunity is we invest where we believe the long term value is will always trying influx around that and then also we have levers available to us. If there was a macro deterioration of any kind. So we showed that agility.

In Q2, and I'm really proud of that and so we have not only those levers that we were able to use in Q2, but we also others available with needed. So we'll like our positioning where we can invest in growth, but also showed the flexibility as needed based on overall macro trends to make the right choices for the company in the long term.

Okay. Thank you guys.

And next to Michael the pivotal Research group. Please go ahead.

Thanks for the question. So question for you, Jeff I wanted to talk a little bit where that Oh that connected TV I mean, obviously, great numbers for the quarter and where you're looking at any outlook, but to really unlock this opportunity too much greater degree what are the structural changes you feel like me to happen within the industry you know a few.

Thank you, let's say the advertising agencies, the media companies behavior that you're seeing a clients on so the I'd love to hear your too sensitive.

Oh, yeah personal thanks for the question.

So so one of them I think it's happening right now and it sort of indirectly related to connected TV and that is you know for the first time, a massive amount of really premium content has come into data driven internet fuel media.

And that you know Avon and all the content that's come in to connected TV over the last few years and so that just changes.

A number of choices that advertisers have and so on what's really important that they do and this has really been instigated and accelerated this year is evaluate.

What is the value of premium content on a relative basis everything else.

Specially user generated content.

And so I am really impressed by number one how much content has come online and how much viewership has come on line I I noticed the Wall Street Journal made the comment that Disney plus.

It has.

Picked up as many subscribers in the last roughly year as Netflix did in its first eight years.

Peacock just launched in July and is off to a good start we quoted numbers from Pluto and to be and others. When we're talking three X growth in April at 100% growth in April.

All of that coming online at the same time that people are having a discussion about the relative value of premium to UGC is a really important thing to keep unlocking dollars.

Also just in general measurement is probably the long pole.

In connected TV. So this relative value is an important discussion and it also just impacts the measurement discussion which is.

The way that GE, Rps and reach our measured in linear television it doesn't really.

Penalize.

Advertisers or media companies to show you the same add over and over and over again and sometimes that even create negative brand affinity where if you show me. The same at 100 times I start liking your brand left Oh.

The way traditional television measurement works it doesnt penalize that behavior.

Rectifying, just price and measuring reach and frequency.

And and the fact that you have way more control and connected TV than than what you can get with cheap GRP than traditional television rectifying. The way we measure between all TV and new TV is a really important thing that just has to continue to get better and you'll see us continue to invest in product we made some big high.

Buyers to help us with this in fact in this quarter.

So it's something very top of mind, because that is definitely one of the things that will unlock more spend but as you can see by the by the prediction that we'll do more than double our growth rate of Q2 at 40%.

Uh huh.

We are extremely confident that in the short term will continue to fit.

Improve.

Thanks, so much.

Next question please.

Thanks to.

Sealy cars show with Cannonball Research. Please go ahead.

Good afternoon, Thank you very much.

Jeff you were talking about Webinars, you were doing now all quarter and I listen to a couple of those and you spoke about a unified they D.

And I know you've touched on it up in the prepared remarks, but I think it's such an important topic given how much identity resolution on privacy is how central that is to everyone's thoughts about the space. I was wondering if you can talk a little more about it in a little more detail and maybe explain to us and assume.

What terms, what do think potential implications could be and why you are paying so much attach on why.

You are leading the charge on that then the industry now. Thank you yeah. Thanks. So you know I've been I've been talking publicly for a few years now about how is satisfied I am.

With no way companies like Apple and and sometimes even Google.

I have talked about privacy and especially in the way that Dave explains the quid pro quo the internet.

And so you know we don't always know why were typing in our Apple I'd for the 9000 time in a month, but.

It often is because.

You are getting consent for something that they're not explaining not finding well.

And so.

We look at the current state of discussion on cookies.

And it's especially the really that started with GDPR where.

Regulators rightfully said.

Internet players need to better explain the quick broke on the Internet and you need to just give notice in the case, where you're providing targeted advertising to pay for your content.

And the response to GDPR in part because people quite didnt quite know what to do a was often just say things like there are cookies. There are cookies on my on my side instead of explaining what those cookies do and explain how to quid pro quo of the Internet works.

So what we want to do and what we've announced and we've developed is a framework for making that quid pro quo of the Internet better.

So we spent a lot of time thinking about how cookies can be improved upon how how we could create an alternative to cookies and make that available to everyone else.

So unlike many of the big players and tech who come up with a solution like this and then say great now I can have proprietary advantage over everyone else.

All we want as an ecosystem that is better.

And we're fine benefit, everyone, including Google and Facebook and others and as our product we expect to be successful and part of the reason we expected to be successful is because it is better for all the major players and therefore, it's easier for us to invite them to participate.

So you know as we mentioned one part of this is that there will be an I'd.

Historically all this in in the third party Cookie isn't I'd a random number.

And at this I'd would actually be encrypted. It would also come with terms in terms of service at a regulated by the IB, which is better than cookies on both fronts.

Also comes with better opt out so that publishers can actually a better explain the quid pro quo, the internet and we're going to be more prescriptive with publishers as to what we expect them to say so that they better explain that we're going to spend more money with the publishers that do a better job of explaining that quid pro quo. We're also going to give a framework to companies like Apple.

So when they update Iowa like they are about two and they give consumers control will give them a place to send us that information so that we can honor.

And then will also create a the most lightweight simple SSL available so that especially long tail publishers will continue to be competitive.

If in fact, Google or to get rid of third party cookies and say well we have log ins. So we'll we'll use those two are benefit.

The long tail publishers in particular would be the ones to get hurt.

And so by offering them something that is very lightweight and it as well as not trying to take anything from them.

We think it makes it possible to create a much better internet for everybody. So just like unified I'd and I want to be very clear on this.

We do not need to go get billions of consumers to find out for something in order for us to succeed on that's all we need to do as good a few of the most.

Forward thinking publishers and SSP than exchanges to understand and adopt and then it will be successful because we've already shared this was one of the biggest advertisers in the world who responded by saying what can we do to help we'll do everything including getting on stage and talking about how important this is which I know that they will come.

Secondly, we've already presented this that several of the most sophisticated Sps and exchanges and Dave said one of their CEO said.

This is going to work it couldn't be pulled off by anybody, but you guys because of the position you play an ecosystem and it's going to work what do we have to do to help.

Tell us what we can do to be a good Parker.

And that's the general sentiment across the space.

It all it requires in order to be successful.

His adoption from the most sophisticated players in our space and we're extremely confident that just like with unified I'd 1.0, we can do that again.

So it's a very bold initiative, which will really benefit the entire internet and we're optimistic that we can do it again.

Thank you very much.

We take our next question momentarily.

One second please.

Did you drop off clothing.

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Hi, Mark I'm here first okay great.

Hi, great, Okay, and I went back on their okay. So why don't see TV, one on China Ctb. So we had 40% growth in a quarter. Just reported were total AD revenue was down Tony Robbins down, 13% and now we're gonna double that 40% growth to 80% next quarter I assume it'll be more robust in the fourth quarter.

Jeff can you size for us how big do you think as a percent of total revenue.

TV is by the end of 2024, the trade desk and how much is benefiting from the upfront 7 billion last seen spend in upfront. So that's the scatter where you're going to be right and how much is 80, you from like sports coming back sounds like you're getting access to that inventory I think for the first time. So that's the CTV question and then try.

Uh huh geopolitical risk pensions, we're throwing out tick tock and we got revenue under pressure in your core business. How do you think about the investment levels and the geopolitical risks of investing in China going forward from here. Thank you.

Thank you Oh, thanks for the for the question so.

In CTV that it is definitely the case that we have benefited from upfronts being weak in the you know as we talk about a perfect storm in traditional television that that could never be more apparent than what happened to this year's upfronts, especially because the sharp downturn that the economy, especially advertising.

Experience between the middle of margin and Middle of April is also the exact time of when the upfront is which is again end of March and April so.

So we definitely benefited from that being taken out and we definitely benefited from live sports being taken out of traditional television as as sports comes back I think more and more people are going to be watching it streaming and will benefit from that as it relates to the mix and total percentage of revenue, we just don't comment on that yet and the.

And the reason why we don't just just.

As it's growing at such an amazing rate.

We we don't want to have to constantly be explaining any change in the shape of the curve that are just blips, but the general direction as all up into the right. We expect that to continue and of course, when we're growing it as you point out 40% this quarter over 80% next quarter.

Where of course connected TV is leading the way so that if theres any other color I can give on that that's more a qualitative it's simply that our sales team is leading every conversation with connected TV and connected TV is leading the recovery.

Inside of programmatic on the second question as it relates to China.

And just international expansion.

There are definitely market that have been more negatively impacted from.

From a co bid.

Then to others.

And so I think this is going to have a disproportionate effect for good and bad on on every market. So every market will be different than they were before.

Important to note that of the 25 offices that we have around the world.

We only have a handful of them that are open today and the very first one that opened with China they've been back to work very first.

The numbers that they're putting up specifically are very impressive as as a growth rate, but it's also you know compared against relatively low numbers and you know as as we would say easy comps.

So I'm really encouraged by what's happening in China as it relates the geopolitical and just the whatever increased pension has come through.

The back and forth of leaders and and tension between the two countries.

I think I've noted before I think theres, an economic dependence between each other meeting between the U.S. in China.

That no one can really disrupt it's not dissimilar from when I talk about the quid pro quo, the internet cannot be disrupted the way that products are manufactured and where the biggest consumers in the world are the biggest manufacturers in the world. Our it that creates a dependent or a co dependence that is so great that I don't think that that can be.

Meaningfully disrupted even though speed bumps can be created.

But I just keep looking at it as it's the second largest media market in the world.

Where we we've definitely say that one for later in our growth cycle, but we have amazing relationships with Baidu Alibaba Tencent, our tick tock relationship that started in Asia started very strong and we continue to have great expectations for that around the world.

And just continue to make investments and we continue to see things move up into the right.

We'll take our next question from Youssef Squali you with truly please go ahead.

Great. Thank you very much I have two quick questions. One Jeff Thiede have revenues has been has been very very important piece of the trade desk story and margins. Maybe can you just actually or kind of highlight where breakdown how much of the revenues last quarter did come from data.

How should we thinking about it going forward in particular.

In light of all the changes that you spoke to earlier I'd have chrome et cetera, and then just a quick one on political spending and maybe to likely impact you're you're right you're expecting potentially into second half. Thank you.

Oh, great. So so first as it relates to a percentage of our revenue we've never broken that out and.

If we don't we don't break it out for a number of reasons not least of which is that Oh I look at data as something that at times I'm willing to give away.

In an effort to just help people buy more media more intelligently and if that makes our clients.

More sticky and more invested and especially see more ROI.

I can make up the money that I could have made in charging for that.

By getting another dollar if you will.

So I mean getting another dollar media spend.

So.

We're always making that tradeoff, but I'd like to address the do it sort of bigger picture question that you framed because I think thats really important.

And if I, even rephrase your question, which is to say hey, there's there's a lot of discussion happening with idea.

With a third party cookies gone away inside of Chrome, there's a lot of things that are saying.

The way that that the quid pro quo Internet works May may change and if that change at not that the quid pro quo will change, but the mechanics of that quid pro quo may change.

If they change well that'd be good or bad for data companies and the short answer is I think it's good for data companies.

So right now cookies in particular create a really difficult way for data to be Onboarded, it's actually created more of a barrier than anything else.

Data gets applied more easily to things like direct mail and almost every other form of advertising than it does the browsing the internet and as the Internet grows and as devices get more fragmented.

Having something that's more common as well as just better consent.

No actually create more opportunities for data companies that do the right thing.

You know data companies that have been aggressive our deceitful, they're going away data companies that do the right thing and operate without being too aggressive on collection or on deployment are gonna do really well and I think if you look forward 20 years. There's more of them. Then there are now, but there is a way less.

The seat on the Internet at 20 years from now than there is now just like there is less now than there was a 10 years ago.

Political the political side sorry.

So.

A lot of questions about how is political gonna be different given the environment. You know there's lots of discussions about even how people are going to vote and this upcoming election, but I don't think theres not much debate, though about the fact that more people are going to be home.

More of the debate and discussion is going to be hosted over the internet largely because people are having this discussion and debate in their own homes, just because of the nature of Cnineteen. I think also the amount of uncertainty has put a little bit more budget closer to the actual election.

Time, there will be that it's possible that there's fewer debate and meaning actual debates where the candidates get next to each other and if thats. It Thats. The case, then I think every Canada and every party is dependent more on the discussion that happens in digital ecosystems.

And that includes programmatic advertising. So I think all of that means that this one is going to be more of a digital election. If you will then any ever before.

Your next to 10 normally with Macquarie. Please go ahead.

Thanks, very much Jeff as always a lot of great color around the CTV universe and I wanted to follow up with another question on CTV and that's we're hearing a lot from media companies on them, establishing linear slash TV AD sales platforms, you got another announcement today from Viacom CBS.

My understanding is these media companies are not really putting a whole lot of inventory into real time bidding, but it's more private market.

Transactions and things and I just wonder if you could maybe address this topic and what I'm wondering is sort of how much real time bidding actually goes on and see TV ads with the media companies I'm, assuming it's still very low, but I'm also assuming they will be putting more into exchanges and doing more real time bidding.

Impressions and that I would guess is very good for the growth of CTV in general So I Wonder if you could just addressed this topic. Please yeah you bet I appreciate you asking.

There's a there's a lot of nuanced in this topic.

So let me let me, let me take a step back and try to describe what's happening in and CTV as it relates to the mechanics.

I'll have data driven advertising, so when you're starting a new market.

There is this chicken and egg problem and tell you have something to sell nobody wants to come to your store.

If somebody comes your started you don't have enough products the south they don't want to come back, but if you put way too many products in your store than you have people showing up.

Then.

You're not going to want to sell the products that way anymore. So there is this chicken and egg problem.

And one of the way that that's getting solved in CTV and has been getting salt over the last few years is to just agree on what the price is going to be or agree on who's going to buy it and so.

Where the ideal marketplace is to let the market in real time decide what to pay and decide what inventory to buy.

You might not rightsize, the inventory and you might not rightsize the demand and also because of scarcity because as as CPV has been taking off right up until this year there wasn't enough inventory there.

Oh for people to feel comfortable that they were going to spend the right amount.

So they like to be something a little bit more like a reserve or to have a little bit more of a a reassurance that they're actually going to spend so one of the way they've done that is to create these private marketplaces, where you basically create a deal and you agree on some of the vectors that would otherwise be variables in the future that includes.

Things like price.

So real time bidding is just a another way of saying to leverage more data in real time. So that you have more of a chance to inspect.

What's the most sophisticated buyers in the world have made very clear and that includes people or or brands like Procter and gamble. They if they have said very loudly they want the power of choice and they would rather play pay a premium and choose what they what they get and what they pay them to just lost something.

In and then.

Handover decisioning to the sell side that will be more the norm going forward as more and more inventory has come online more brands are going to say I'm willing to pay a premium.

For choice and given that Theres more supply coming on that's actually an important thing for the supply side to do in order to get that premium.

So that is very good for us that's very good for the industry. In fact, it's really essential for connected TV that things start to move in that direction. So that prices continue to be able to to fund the amazing content that all of us get to experience as consumers right now so.

Really important question and the trend is heading in the right direction.

Right.

Next to Brian Fitzgerald with Wells Fargo. Please go ahead.

Thanks, Jeff in your prepared remarks, you mentioned that the CMO, telling you they want to move them from social that CPV as rapidly as possible beyond some of the near term pressure in near term pressures that you're seeing with boycotts and social unrest in the election, you get a sense at some brand advertisers are kind of beginning to delay.

Who stayed in C based advertising no because they're they're increasingly they're not just getting in front of their consumers within the feed but no they're being that.

I couldn't position, where they're kind of responsible or you're going to you're going to continue to see too.

Do you see that trend resonate with advertisers yeah. So it's an interesting way to put it which is feed based advertising versus user generated content.

I I do think.

The bigger issue is user generated content, even though you could also make the argument about the key based simply because it's harder to determine context.

But.

I I think you know when you're very high level about this.

Advertisers have more choices than they've ever had and they have more more data and more insight and they are smarter than they've ever been and so I think.

We're having a very important discussion on the internet right now about.

What is the the value and the risk of user generated content.

And I just didn't surprise.

And I mentioned this in the prepared remarks about how coordinated it seems the internet has been especially the advertisers the founders of the Internet.

How coordinated they've been in saying, hey, especially as we move in to a a pretty heated and competitive election.

And you know more people are saying in user generated spaces.

Your politics Soc.

Urinating yet.

You just don't want that.

To be a brand that says this conversations brought to you by brand X.

And so as a result, there just looking at that same.

Where are safer places and if there were anything else to contribute to the perfect storm.

Oh traditional television that's contributing to connected TV is that because they are then saying Wow. There is this alternative which is all this premium content.

That I can advertise on and you know its premium video, it's a big video on a big screen that I know will run and I know, what I guess I know what I'm running next to it it's a very compelling alternatives as people are struggling with what UGC or as you put it feed based.

Adds represents so.

There are definitely we thinking.

It does appear there no further questions at this time I would now like turn it back to Chris Tucker for any closing remarks.

Great. Thank you all for joining US today, we really appreciate your time and look forward to speaking you again in about a three month have a good evening everyone.

Does conclude today's program. Thank you for your participation you may disconnect at any time.

[noise].

[music].

[music].

Good day, everyone and welcome to todays the trade desk second quarter 2020 earnings conference call.

At this time, all participants are in listen only mode.

Later, you will have the opportunity to ask questions. During the question and answer session you.

Give me registered ask a question that any time by pressing star and one on your Touchtone phone.

I will be standing by should you need any assistance.

It is now my pleasure to turn the conference over to Vice President of Investor Relations Cristo.

Thank you operator, Hello, and good afternoon, everyone welcome to the trade that second quarter 2020 earnings conference call on the call today, our founder and CEO, Jeff Green and Chief Financial Officer Blake Grayson.

A copy of our earnings press release can be found on our website at the trade Dot Dot com any investor Relations section.

Before we begin I would like to remind you that except for historical information some of the discussion in our responses in Q1 I may contain forward looking statements, which are dependent upon certain risks and uncertainties in particular, our expectations around the impact of the cobot 19 pandemic on our business and results of operations are subject to change should.

Any of these rest materialize or should our assumptions prove to be incorrect actual financial results could differ materially from our projections or those implied by these forward looking statement.

I encourage you to refer to the risk factors reference in our press release and included in our most recent SEC filings.

In addition to reporting our GAAP financial results, we present supplemental non-GAAP financial data.

A reconciliation of the GAAP to non-GAAP measures can be found on our earnings press release, we believe that providing non-GAAP measure its combined with our GAAP results provide a more meaningful representation of the company's operational performance I'll now turn the call over to founder and CEO, Jeff brain job.

Hello, everyone and thank you for joining us it's no secret that the last several months have been among the most trying times for all of US the global pandemic has changed the way every business in the World operates for US the trade desk team continues to be resilient supporting our families and friends and customers and partners.

The fact that we've always been so mission driven with a clear conviction that our greatest asset as our people has served as a solid foundation that has allowed us to continue to expand our business. During these times.

While our revenue growth rate continued to be impacted by the disruptions from the Covance pandemic in the second quarter, we're starting to get a clearer picture of the role that advertising is playing as markets reopen.

We talked last time about how data driven advertising would be on the front, but as that happens.

As much as a global financial crisis of 2008, and nine caused many advertisers to consider data driven strategies for the first time I believe this crisis will cause advertisers to leverage more data more aggressively than ever as they look to make every dollar work as hard as possible.

And we started to see this play out through our second quarter and into the start of the third since Aspen Troughed in mid April advertisers have been returning that reactivating campaigns, but most of them with new approaches and new creative is given the environment. We're in.

They realized that as markets reopened they havent unique opportunity to gain share.

Many caused in mid to late March and even early April but some advertisers in all categories have seen this as an opportunity to gain share.

To do that they've had to be more flexible an agile than ever as markets opened in different ways at different rates, even within the same country. They are under pressure from their cfos to prove the value of every advertising dollar, forcing them to prioritize advertising that is measurable and comparable and they are dealing with a consumer base that.

As rapidly shifting away from traditional linear television.

All of this puts data German advertising in the front seat.

We saw this reflected in our performance throughout the second quarter.

While we ended Q2 with a negative 12.9% year over year revenue decline since April we saw spend on our platform increased every month and nearly every consecutive week.

As advertisers have been more deliberate AD spend turn positive on a year over year basis in mid June and that trend has continued through the month of July.

On a personal note I was surprised at how unified the at industry wasn't causing activities starting in mid March we took a healthy economy, a healthy industry and collectively hit the pause button.

Not sure that sort of synchronize respond to the ever happened before.

At the same time I was equally surprised how unified the early phases of recovery have been so far.

Not just that advertisers have returned in the consistent way with a renewed focus on programmatic in fact, nearly all of the largest brands have increased their spend on our platform. This includes spend from industries, such as Cpgs food and beverage technology healthcare and even automotive.

Even travel while still negative year over year has improved significantly opitz mid April lows.

But it's more than that.

It's about the unified view I've heard from the market regarding the direction of the advertising industry over the last four month I met with more executives at brands and agencies than ever before in such a short period of time.

So today I want to share some of that feedback with you and in particular the convergence of three forces that are shaping the world to digital advertising.

I think this feedback will shed some light on our strategy and our performance and why we are well positioned for the future.

The first is how the industry is coming to terms with user generated content.

The second is an important inflection point in connected TV, which has not unrelated to the advertisers coming to terms with that on what that user generated content.

And lastly, I want to touch on the future of identity.

Because creating this solution that works for consumers advertisers and publishers is the only way, we'll be able to create a better internet.

So perhaps the most important area, where I have seen a unified front from advertisers in the last few months is in their approach to user generated content or UGC.

Use the term UGC deliberately.

Rather than social media platforms, our video platforms like you too.

In my discussion with advertisers, it's the nature of the content rather than the platform that's the problem.

Quote you know LIBOR there is much more to be done, especially in the areas of divisiveness and hate speech. During this polarized election period in the United States or Diosdado, we strive to promote inclusion and diversity, including through our marketing programs. We will continue to discuss with media partners, how they will deal with unacceptable.

Content or Starbucks, we will continue discussions with our media partners and with civil rights organizations in the effort to stop the spread of speech.

Pretty much every major brand has made public statements to the same effect. The statements were all made as they pulled or suspended advertising from the major platforms that are built around user generated content.

The issue is not necessarily the platforms themselves in fact, I think many advertisers believe those platforms are in a very tough spot and I agree.

The content on these platforms reflect the divisiveness in public discourse today and that divisiveness has only exaggerated as people worked with the implications of cobot 19.

So she'll justice issues take center stage and as we gear up for a major election.

Asking social media platforms to be the arbiter of truth on a range of device of issues is a really tough ask in some cases, such as with hate content. It might appear straightforward, but broadly speaking it requires applying judgment and when you're making judgments you're always at risk of Aley niobium someone it isn't.

Impossible task for UGC platforms to be App to judge what is true or what is paid.

Especially the largest companies given the amount of content that has posted to their platform every day, there simply no way to keep up.

But for advertisers increasingly.

It's a risk they don't want to take brand safety as a critical issue. They don't want the device of argument of the day played out on social media sponsored by their brand.

I don't think this in of itself is the wakeup call that advertisers were waiting for I think it's the stronger breaks the camels back advertisers have long had their doubts about advertising on UGC, but today, it's been an easy way to reach audience at scale.

But what these issues have highlighted is that advertisers have very little transparency and control when spending dollars on user generated content. They don't know exactly what the content their ads will show up against and they don't know, which consumers have interacted with their brand by contrast, advertisers increasingly understand that the trade desk provides the tools.

They need to buy only the premium inventory they want to support and reached only the audiences they value.

These conversations have accelerated considerably in the last few months than we are winning spend from traditional video and social media platforms as a result.

One second quarter example of this was a multinational food and drink company that through their global agency began to think differently about how to allocate their digital AD spend and moving away from user generated content.

In this case they chose to trade desk for two main reasons, one was the ability to apply measurement and offline attribution tools to understand exactly who they were reaching the second was the tools and Brett the premium inventory on the platform for buying CTV instead of UGC.

Of course, the rapid emergence of CTV as a viable option is key here for advertisers access to growing base of brand say premium content.

Could not contrast, more with what is available today and user generated content, which brings me my second point the surge in connected TV in Q2, despite the impact from Covance Ctb grew about 40% year over year in Q3, we anticipate that the CTV spend growth rate.

Will more than doubled Q2.

We believe the cobot pandemic has permanently accelerated the growth of connected television changing the TV landscape forever and no company is better positioned to grab share and CTV than the trade desk.

As one leading CMO said to me recently and I quote I want to move as much budget from social to CTV as possible as soon as possible.

And thats not an isolated comment advertisers our unified about this they understand the data driven advertising is a better place to measure performance and target key audiences.

And now they can bring that approach to their massive TV AD campaigns and it's not just our concerns about user generated content that are forcing this.

Our two other major forces at work one is the rapidly increasing inventory a premium CTV content.

The other is the consumer shift toward CTV.

Accelerated by the Pogo pins demo.

Let me quickly remind you what we discussed last time on our earnings call. Our research suggested that 11% of us households, with cut the cable TV cord by the end of the year.

That's about triple the rate of cord cutting that we come to expect the last few years that cord cutting rate rises to 18% for the very coveted 18 to 34 year old demo.

And the number one reason households would keep cable TV live sports, 60% of them cited live sports as the primary reason that hang on to cable.

And you don't have to take my word for it fast forward three months Roku recently issued its annual survey into TV viewing trends and according to their research 32% of us households have now cut the cord or never had and a further 25% our shaving their cable TV costs, 45% of those.

Cord Shavers said, they expect to folding cut the court by year end. The number one reason cost savings in the current environment. Many households are looking at their home entertainment costs in their cable TV Bill as often the most expensive part of their TV content lineup.

But related to that the number two reason.

Access to free streaming TV services as more broadcasters make their content available through a Vod services the cost equation for many households is something of a no brainer.

And according to the same survey, even if live sports make a comeback less than one in five cord cutters said that rethink their decision.

Because those same sports events are now available over streaming services.

So whatever assumptions you had about the shift toward CTV and how many years. It would take you can throw those out because co bid has changed everything.

Advertisers can't ignore the shifts in consumer behavior, and they don't want to.

As I said.

They are growing concern about user generated content, which is only exacerbated by recent events represent a strong breaking the camels back.

They want to shift to the premium content that CTV now enables their consumers are there.

And in addition, not only has NBC launched its new streaming service Peacock on July 15th, but Pluto reported three times the viewing hours in April that ahead of the beginning of the year to be were reported that they're viewing hours were up 100% in April Moody's reported an increase of 55% in the stay at home environment.

Such as the growth of Avon that these platforms have recently been acquired by Viacom Fox and NBC you respectively.

In addition to moving to where viewers are advertisers also benefit from applying data to their TV campaigns for the very first time for example, after the co bit Lockdown started a large U.S. insurance company wanted to be more data driven in their TV spend their goal is to extend the reach while managing frequency.

Using a third party measurement from through our platform the results were transformative.

Even though CTV cpms are roughly three times those of linear cpms using CTV lowered the cost per unique household by over two point fivex, even more eye opening for the brand using CCB on our platform they were able to reduce add frequency to the consumer by over 80% compared with.

Our previous linear campaigns in this case site visits were Qs more efficient when using data driven CTV versus publisher data. Overall. This resulted in a significant reduction in cost per acquisition.

As I see advertisers question the value of user generated content and as they make CTV are more important element of their media mix.

Also pick up a more unified sense from advertisers that they want to put more pressure on the industry to uphold certain standards.

One of the attractions of connected TV is that it's a more competitive market than user generated content with the standards that typically come with competition No studio No channel No cable company No MPPD no. One company has the leverage or the resources to achieve the market dominance enjoy.

By Google in search and by Facebook, and social and because we continue to predict video in all of its forms will account for about half of the trillion dollar advertising market. We believe that CTV may well be the catalyst that eventually forces all walled gardens to change course.

It's important to remember that in the great scheme of things the digital advertising industry is relatively young.

As with any market that emerges there comes a time when key participants demand certain market rules things like transparency and objectivity and that's what I see happening now ctb, maybe the most vivid example, but you can also look at how advertisers are now having to do more with less how they're demanding better match.

Drummond transparency and more market objectivity, you can even look at various regulatory initiatives within our industry, whether it's here in the US we're in Australia or Europe.

Theres pressure on all fronts within the system to have the advertising market conform to the norms of other mature markets and as I speak with advertisers. They put the debate regarding the future of identity in that exact same context, which is the third point I want to touch on today.

We can discuss the specifics of any one identity offering.

And we are examining all of them.

But at the core event there are two critical questions that advertisers and publishers think about.

How do we explained the value exchange of the Internet and the role of relevant advertising to consumers.

How do we ensure power doesnt become too concentrated in one place.

The moves that Apple announced recently with idea they represent a step forward when a consumer logs into an iOS app there will be asked to opt in to tracking in return for personalized that's that's a partial step towards explaining the value exchange of the internet the understanding that we get to enjoy premium content and experiences in return for.

From an advertising.

Google is going through the same process, but the issue is complicated for them by the dominant position they enjoy.

In digital advertising.

If they remove cookies from the open internet and chrome and rely on proprietary log ins for the advertising business, which makes up almost our entire revenue stream.

Even if using privacy as a shield it may be seeing as an over reach by regulators in dollars and sense I don't think the risk is worth it to them and I expect that they will find a way to preserve relevant advertising for all of the reputable advertisers and advertising platforms and chrome, but regardless.

We have to prepare for world without third party cookies.

Fortunately, we've successfully launched and built a ubiquitous I'd before our unified open I'd.

When we developed the first iteration of our unified IB solution. The core idea was to make sure certain players, particularly Google Didnt have an unfair cookie coverage advantage over the rest of the internet.

And particularly the open internet.

This was a huge success as every major SSP and exchange has adopted this I'd, which is more important than ever as more advertisers embrace data driven advertising, especially with the CTV search they want to ensure that the market is competitive and that they can compare one media property to another.

That kind of measurement and comparability is key and it's not possible within walled gardens.

Following the guidelines outlined by the Ibds project re arc.

We've been focused on ensuring the next phase of unified I'd will help and power. The open Internet beyond just cookies development is underway with a focus on a few core characteristics.

First and most importantly, we need an open I'd, which has a major upgrade over the current cookie technology.

This will include a hatched and encrypted I'd with improved accountability measures. Unlike a cookie. This I'd does not live in the browser. This I'd can be used in a browser or on any type of device, including a phone are connected TV and this ivy will be free and open.

In source.

Second.

Granular an understandable consumer controls with the option to opt out.

Third a simplified content framework for publishers, which explains the value exchange of content.

In exchange.

For a relevant advertising for consumers and fourth.

The single sign on capabilities across the open internet, so consumers don't have to consent over and over again.

We won't go this alone of course as with our initial unified I'd solution, we will work with the industry to drive consensus and standards and to ensure we build a solution that will drive the required critical mass of adoption.

We are in development and we expect to have beta versions of this solution end market very soon.

This work is important because third party cookies are archaic technology that need to be upgraded that said I'm still not convinced that Google in the end, we'll get rid of third party cookies and even if they do cookies will be replaced with something else that enables targeted advertising I do not believe that Google will have the ability to turn off targeted advertising for everyone.

But them.

As I said advertisers and publishers are starting to demand the kinds of market rules for digital advertising that we've come to expect with other mature markets such as the financial markets.

Independence objectivity and audible measurement are more important to advertisers than ever before.

We are driven to maintain and build a free and open internet that honors the quid pro quo. The Internet, we want an internet that is better for consumers as well as advertisers and publishers.

As advertisers commit more of their budgets to digital, especially as they shift more of their TV dollars to CCV. They want to know that they can reach the right audiences that they can measure and compare performance and that they can support the right content for them.

The move toward a more contemporary approach identity will be key and building that trust for advertisers.

So let me close by or just reiterating the consistency of these teams among advertisers if like major encoded you've been sucked into the world of online Webinars and events, you've all heard many of the same themes, but I'm excited by what advertisers are more tuned into the power of data driven advertising than ever before they understand the role.

It can play in helping them be agile in the midst of today's uncertainty and they understand it can help them gain market share and as they embrace it across their advertising channels that are demanding more of our industry.

This has been an important moment for the trade desk 2020, as a moment, where the culture. We've built for the last decade is paying dividends, perhaps more than ever also where we've always been a company.

The vision and admission.

And thats been more valuable in 2020 than perhaps any moment in our past.

Thats always been our approach we've spent 10 years getting ready for this moment, while we still have a great deal of uncertainty in front of US. We're very excited about the future now let me turn the call over to Blake to discuss our financial performance. Thank you and good afternoon, everyone I hope, you're all doing as well as possible in this challenging environment before turning to results.

I wanted to comment briefly on the status of our company's operations.

Today, we are currently operating with the majority of our full time employees working from home.

Safety is the number one priority for our team.

We fully support our employees as they either continue to work from home or return to the office based on their preference and were allowed by local regulations and in Q2. We were pleased to continue to onboard positive net new employees every month investing in talent that we believe will deliver future value to our clients.

Given the circumstances I really can't say enough about the dedication focus and professionalism with which the trade. This team is tackling the challenges presented during this period.

Now moving onto our results.

In Q2 revenue was 139.4 million, representing a decline of 12.9% year over year that said however, the story that developed over the quarter was a positive one.

Coming off the lows, we experienced in mid April spending trends improved throughout the period and by mid June turned positive on a year over year basis, and then has continued into July.

As we began to see those improvements we started to increase the pace of our investments to further capitalize on the opportunity that is presenting itself in our business, particularly in two TV.

For Q2, despite the year over year revenue decline, we generated 14.6 million in adjusted EBITDA or about 10.5% of revenue.

With the investments, we're making our people and our solid working capital situation. We believe we are well positioned for future growth acceleration as conditions continue to improve.

From the channel perspective, Q2 included strong year over year spend growth relatively speaking in branded channels, where advertisers can really connect with customers.

Highlights included connected TV, which was up roughly 40% and audio which was up 23% year over year in Q2.

During the month of July we continue to see improvements across all of these channels.

Geographically in Q2, similar to last quarter, North America represented 88% of spend and international represented 12% of spend.

Some of the spending trends that I mentioned earlier applied to our regions as North America, APAC and Europe. Each improved every month during the quarter on a year over year basis.

In terms of our verticals that represent at least 1% of our spend nearly every category improve between April and June with many exhibiting strong resilience in particular health and fitness our largest vertical in 2019, as well as technology and computing home and garden in education continued to perform well.

While still improving materially from their April lows travel in automotive lagged behind although in the last few weeks, we have seen automotive turn positive year over year end are encouraged about that.

We are actively working with large automotive companies and their agencies to activate more campaigns on the platform.

Our early May CTV launch provided an opportunity to showcase our ability to deliver incremental reach with frequency controls and measurement of real business outcomes.

As a result, CTV represented a significant amount of these brands AD spend on our platform in Q2.

We believe this represents a growing opportunity in the back half of 2020 and into next year.

Operating expenses were 155 million in Q2 up 21% year over year. This increase reflects continued investment across areas such as our technical talent in business development teams, but also being mindful of our cost structure in this environment and decelerated from 30% year over year gross in Q1.

This approach to our operating expenses continues to reflect how we actively allocate capital within the company toward areas that can drive future growth.

Spend started to recover we began allocating resources to incremental investments our goal is to invest heavily in the areas that can drive growth. So we can grab share during the recovery.

Adjusted EBITDA was 14.6 million in Q2, representing a 10.5% margin.

Income tax was a benefit of that 41 million in the quarter, mainly due to the tax benefits associated with employee stock based awards, the timing of which can be variable.

Adjusted net income for the quarter was 44.8 million or 92 cents per fully diluted share.

Net cash provided by operating activities was $96.3 million for Q2 and free cash flow was 75.5 million.

The primary driver for the increase was a change in working capital the can vary from quarter to quarter, depending on the timing of payments and receivables.

Dsos exiting the quarter were 96 days down six days from a year ago depots were 74 days down seven days from a year ago.

We exited Q2 with the strong cash and liquidity position our balance sheet had 555 million cash cash equivalents in short term investments at the end of the quarter.

I'd like to remind you that depending on the shape of the recovery curve, our liquidity position will fluctuate as we fund our gross.

Im going to use the remainder of the time today to discuss Q3 and how we're managing the company through the current environment.

Like last quarter, we do not intend to provide financial guidance for the full year. However, we do want to provide direction for Q3.

Please be aware our business has been impacted by the cobot 19 pandemic that has significantly impacted advertiser demand.

Like many companies that are add funded we're facing a period of higher uncertainty in our business outlook, we expect our business performance could be impacted by issues beyond our control such as shelter in place orders that may or may not occur.

Assuming that the economy continues to open up and we do not have any major kobin related setbacks that may cause economic conditions to deteriorate, we estimate revenue growth in Q3 to increase 8% to 10% on the year over year basis.

Under this assumption, we estimate adjusted EBITDA to be at least 30 million in Q3.

We also continued to be mindful of cash management, maintaining liquidity and investing in working capital spend continues to increase from an expense management perspective, while we are increasing our investments today in light of the current environment I want to remind you that we do have flexibility should things deteriorate.

Im proud of the agility, we exhibited in Q2.

When we have those levers and additional ones depending on the environment as needed.

However, we are certainly encouraged and remain motivated by the stabilization trend in spend we have seen since the middle of April. We believe we have the structure in place to accelerate growth in gain shares economic conditions improve and are cautiously optimistic about continued measured improvement through the remainder of the year.

That concludes our prepared remarks, operator, let's open it up for questions.

At this time, if you would like to ask a question. Please press Star then one on your Touchtone phone.

Withdraw your question any time, bypassing impound key.

Once again that is star.

One.

First to Brian Schwartz with Oppenheimer <unk> co. Please go ahead.

Yes. Thank you for taking my question. This afternoon either question, Jeff on the long term impact from Koby 19 on the connected TV market. There is some investor concerns here that coal that might be pulling in accelerating span for connected TV given your guidance here for connected TV to more than double in Threeq.

Next step up from two Q, but I wanted to ask if you really agree with that or do you think what has happened so far as the structural change in the market. So essentially Jeff what is the shape of this post pandemic demand picture on the connected TV market look like for the trade desk. Thank you and congratulations thanks, Brian I appreciate the.

A question and the time were so.

Yes, So let me let me start with the Punch line. So I think connected TV and television in general has changed for ever because of connected or because of covet 19.

And nothing is going to undo that change that has been instigated.

Is there some amount of.

Viewership that is currently on Avon that will go back to sports or something like that there is some amount of that but I'm really drawn to a couple of the of the big factor number. So first of all we highlighted in the prepared remarks.

Cord cutting that typically been around 3% year as is according to our research expected to be around 11%, that's largely because the number one reason the people hang on to cable is sports at 60% of people, saying that there are number one reason for hanging onto it.

Even esports come back.

Thus far apart nearly as as was first desirable as they were exactly it's really important to note that as they are coming back well getting access to all of them. So even in their limited formed where a lot of people are seeing them on demand and we're showing adds from the FDA meeting with baseball.

A major league soccer 10, as keeping you FC So we're showing ads across all the sports that are coming back.

Of course.

We've also seen a large surge.

In unemployment and that of course makes everybody and those that have been affected negatively economically which is almost everyone to look at their TV lineup and say, what's the most expensive part and where do I need to cost and that almost always leads the cable television.

It's really important and I didnt emphasize this enough in the prepared remarks that cable television and connected TV. Our goal I think at a really important point, which is that.

The number of households that we can reach just passed in this quarter 80 million households, and according to the projections that we have for this year.

Cable households are subscribers will drop below $80 million for the first time in many years.

There's a bit of a changing of the garden is happening right now and I don't expect that to ever ever change again, so I.

I guess the punch line to your question.

That.

CTV has changed the landscape for ever.

The effects of Cnineteen have changed forever, there might be some some noise.

As things get back to normal, but as I get back to normal people are moving where they want to go which is on demand.

Thank you Brian.

Next to Shawn Poe.

Okay.

Go ahead.

Hey, guys congrats on the on the best of execution.

I had a couple of questions.

First one Jeff.

Can you talk a little bit more about.

Eating the upcoming idea changes.

What they need for the trade desk and also how do you think Android will react to that.

Great.

So.

Our first.

Whenever we started talking about idea, it's really easy for me to lose people in the in the technical details and so I always like to start with the headline and then just reinforce the headlines we finished which has.

I'm extremely confident that the trade desk is going to be fine no matter, what I'm extremely confident that.

Pro quo of the Internet cannot be disrupted by a single company, whether they are dependent directly on advertising or indirectly on advertising.

With that as profits Apple is indirectly dependent on advertising for what I believe to be the most valuable asset that Apple has which is their app marketplace. So people often make the point that Apple is not in the advertising business and Thats true theyre not directly in the advertising business, but they are indirectly in the advertising business, which is most of their app.

And they're ecosystem again, which I believe to be there most valuable asset.

Our dependent on adds in some form.

All of that said, it's only about 10%.

Our stand uses I'd say an anyway.

One thing that I, just I think is really important to remind everybody out is that.

We look at millions and millions about opportunities every single second.

Ballpark call at $11 million and with that 11 million. If you were to take away a million.

And say now you have to fulfill all of your budgets with only 10 million adds available every single second.

We wouldn't be just fine we would just by a different 10 million.

So if if anywhere to go completely away or everybody were to opt out we would just by different app.

So it wouldn't have much impact that said because apple is dependent on it I don't expect that and there might be some short term surge in opt outs, but because awful Apple has made clear that they will do a better job of explaining the quid pro quo Internet, which by the way, it's amazing progress Thats good news for everybody.

I do think long term when people go to apps and find that they don't work as well because in fact, you do need to share your location with Yelp in order to port to work at all.

The.

Long term everybody is going to become more familiar with the quid pro quo of the Internet and will have access to nearly the same amount of inventory that we have today. So I don't expect there to be any major disruption in the short term or the long term I'm, even more confident that there won't be any meaningful disruption in the long term.

Which comes in the second part of your question, which is Google.

If I am Google, especially when I've already made the announcement about the future.

Cookies inside of Chrome and Theyve been Sundar was asked about a directly multiple times in the recent hearings.

I'm not going to start.

Im not going to start a five.

On another front.

And especially because here at Google and I'm speaking as if I am them, we are dependent on AD. So unlike apple which is indirectly dependent on ads. We are 95 plus percent of our revenue I think comes from from ads.

So we're going to wait and learn from what happens with Apple and then make changes, but if apple overreaches.

We will benefit.

Because at providers will then start building into our platform first instead of the apples.

And then we will gain more market share.

So if I'm working at Google I'm secretly hoping that Apple mess. It up so that we can win share, but given the number of places.

That sort of Google is under attack.

Good.

It would be waiting and watching.

Before acting so I think both of the strategic positions that their end means.

Quid pro quo, the Internet as just fine and that brings me back to our headline which is the trade desk is just fine.

Thanks, that's very helpful. If I could sneak in one more.

Are you Blake.

Thank you for the for the color on the on the Threeq you EBITDA on investment levels. I was just wondering I know you don't want to guide beyond Threeq you, but just in terms of can how you're thinking about opex investment for the fourth quarter is there is there any kind of framework you could provide us. Thank you.

Sure. Thanks, So the question Tom appreciate it.

Yes.

Just a backup quickly I was really pleased with how we manage the second quarter from an expense standpoint, despite the cobot headwinds, we still generated nearly $15 million and positive EBITDA for the quarter.

Our expense growth the cells, we were up around 30% Q1, and we do sell top 21% in Q2 so.

That said, even with the DSL from Q1, we're still investing materially in the business, we and we continue to do so.

Like we discussed in the prepared remarks, we did release more investment as we saw trends improved during the quarter.

Additional color I can try to help you with is on the Q1 call you might recall, we were targeting our full year 2020 hiring more than 50% under our original plan today that that figure has been reduced its probably closer to 30% to 40% as of today.

So we know because of that the expense growth in the second half its likely if I had to say, it's likely closer to what we saw in Q1 from a year over year growth perspective than what we saw in Q2.

But.

No I also would want to add remember, we really don't manage to an EBITDA target, we invest where the opportunity is we invest where we believe the long term value as will always trying to flex around that and then also we have levers available to us. If there was a macro deterioration of any kind. So we showed that agility in Q2 and I'm.

I'm really proud of that and so we have not only those levers that we were able to using Q2, but we also others available with needed. So.

Like our positioning where we can invest in growth, but also show the flexibility as needed based on overall macro trends to make the right choices for the company in the long term.

Awesome. Thank you guys.

And next to Michael let the pivotal research group. Please go ahead.

Thanks for the question. So question for you, Jeff I wanted to talk a little bit where that.

That connected TV, I mean, obviously, great numbers for the quarter and where you're looking at any outlook, but really unlock this opportunity too much greater degree what are the structural changes you feel like need to happen within the industry.

Thank you, let's say the advertising agencies the media companies behavior that you are seeing clients. So I'd love to hear your two cents.

Hi, Yes, so first of all thanks for the question.

So so one of them I think it's happening right now and it sort of indirectly related to connected TV and that is.

[music].

For the first time.

Massive amount of really premium content has come into data driven internet fuel media.

And not Avon and all the content that's come in to connect the TV over the last few years.

And so thats just.

Changes.

Number of choices that advertisers have.

On what's really important that they do and this has really been instigated and accelerated this year is evaluate what is the value of premium content on a relative basis everything else.

Actually user generated content.

And so I am really impressed by number one how much content thats come online and how much viewership has come on line I I noted the Wall Street Journal made the comment that Disney plus.

As.

Picked up as many subscribers in the last roughly year as Netflix did in its first eight years.

Peacock just launched in July and is off to a good start we quoted numbers from Pluto and to be and others. When we're talking three EPS growth in April at 100% growth in April so.

So all of that coming online at the same time that people are having a discussion about the relative value of premium to UGC is a really important thing to keep unlocking dollars.

Also just in general measurement is probably the long pole and connected TV. So this relative value is an important discussion and also just impacts the measurement discussion which is.

The way that GRP that reach our measured in linear television it doesnt really.

Penalize advertisers or media companies.

Showing you the same add over and over and over again and sometimes that even create negative brand affinity where if you show me. The same at 100 times I start like in your brand less.

But the way traditional television measurement works it doesnt penalize that behavior.

Rectify and just price and measuring reach and frequency and and the fact that you have way more control and connected TV.

And then what you can get with cheap GRP than traditional television rectifying the way we measure between all TV and new TV is a really important thing that just has to continue to get better and you'll see us continue to invest in product. We made some big hires to help us with this in fact in this quarter.

So it's something very top line because that is definitely one of the things that will unlock more spend but as you can see by the by the prediction that we'll do more than double our growth rate of Q2 at 40%.

[music].

We are extremely confident that in the short term will continue to.

To.

The improved.

Thanks, so much.

Next question please.

Thanks to the Siloed Sealy cars show with Cannonball Research. Please go ahead.

Good afternoon, Thank you very much.

Jeff you were talking about Webinars you were doing now all quarter end I listened to a couple of those and you spoke about unified they D.

And I know you've touched on it in the prepared remarks, but I think it's such an important topic given how much identity resolution on privacy.

How central that is to everyone's thoughts about the space I was wondering if you can talk a little more about it in a little more detail and maybe explain to us and the simplest terms, what do think potential implications could be and why you're paying so much attach on why.

You are leading the charge on that than the industry now. Thank you. Yes. Thanks, So I've been I've been talking publicly for a few years now about how this satisfied I am.

With no way companies like Apple and sometimes even Google have talked about privacy and especially in the way that they've explained the quid pro quo the internet.

We don't always know why were typing in our Apple I'd for the 9000 pyme in a month, but.

It often as because.

You are giving consent for something that they're not explaining modify meanwhile.

And so.

We look at the current state of discussion on cookies.

And if specialist really that started with GDPR where.

Regulators rightfully said.

Internet players need to better explain the quick broke on the Internet and you need to just give notice in the case, where you're providing targeted advertising to pay for your content.

And the response to GDPR in part because people didnt quite know what to do.

Well, the often just say things like there are cookies theyre cookies.

My side instead of explaining what those cookies do and explain how the quid pro quo of the Internet works.

So what we want to do and what we've announced and we've developed is a framework for making that quid pro quo of the Internet better.

We spent a lot of time thinking about how cookies can be improved upon how how we could create an alternative to cookies and make that available to everyone else.

I'd like many of the big players and Tech who come up with US solution like this and then say great now I can have proprietary advantage over everyone else.

We want as an ecosystem that is better.

And we're fine benefit, everyone, including Google and Facebook and others.

And as our product we expect to be successful in part of that as we expected to be successful is because it is better for all the major players and therefore, it's easier for us to invite them to participate.

So as we mentioned one part of this is that there will be an I'd.

Historically all this in in the third party cookie as an I'd a random number.

And this I'd would actually be encrypted. It would also come with terms in terms of service that are regulated by the IB, which is better than cookies on both fronts.

Also comes with better opt out so the publishers can actually.

Better explain the quid pro quo, the internet and we're going to be more prescriptive with publishers as to what we expect them to say so that they better explain that we're going to spend more money with the publishers that do a better job of explaining that quid pro quo.

We're also going to give a framework to companies like Apple seven day update Iowa like they are about two and they give consumers control will give them a place to send us that information so that we can honor.

And then will also create.

The most lightweight simple esso available, so that especially long tail publishers will continue to be competitive.

If in fact, Google or to get rid of third party cookies and say well we have log ins. So we'll we'll use those two are benefit.

The long tail publishers in particular would be the ones to get hurt.

So by offering them something that is very lightweight and that as well as not trying to take anything from them.

We think it makes it possible to create a much better internet for everybody. So just like unified I'd and I want to be very clear on this.

We do not need to go get billions of consumers to sign up for something in order for us to succeed on them.

All we need to do ask it.

View of the most.

Forward thinking publishers, NSS PS and exchanges.

Understand and adopt and then it will be successful because we've already shared this was one of the biggest advertisers in the world who responded by saying what can we do to help we'll do everything including getting on stage and talking about how important this as which I know that they will come. The secondly, we've already presented this at several of the most sophisticated SSP.

And exchanges and Dave said, one of their CEO said.

This is going to work it couldn't be pulled off by anybody, but you guys because of the position you play an ecosystem and it's going to work what do we have to do to to help.

At tell us what we can do to be a good partner.

And thats the general sentiment across the space.

So it all it requires in order to be successful is adoption from the most sophisticated players in our space and we're extremely confident that just like with unified I'd be 1.0, we can do that again.

So.

It's a very bold initiative, which will really benefit the entire internet and we're optimistic that we can do it again.

Thank you very much.

Our next question will materially.

One second please.

Did you drop off clothing.

All right.

Right.

Remark on here Chris.

Okay great.

Hi, great. Okay, I went back on their okay. So what I'm CTV one on China.

Ctb. So we had 40% growth in a quarter just reported where total AD revenue was down total revenues down 13% and now we're going to double that 40% growth to 80% next quarter I assume will be more robust in the fourth quarter. Jeff can you size for us how big you think as a percent of total revenue CTV.

It is by the end of 2024, the trade desk and how much is benefiting from the upfront 7 billion last seen spend an upfront. So that's in scatter where you're going to be Brett and how much is 80, new from live sports coming back sounds like you're getting access to that inventory I think for the first time. So thats. The Ctb question and then China.

Geopolitical risks.

Tons were throwing out tick tock and we've got revenue under pressure in your core business. How do you think about the investment levels and the geopolitical risks of investing in China going forward from here. Thank you.

Thank you.

Thanks for the for the question so.

In CTV added definitely the case that we have benefited from.

Upfronts being weak and as we talk about a perfect storm in traditional television.

That could never be more apparent then what happened to this year's upfronts, especially because the sharp downturn.

The economy, especially advertising experience between the middle of margin and Middle of April is also the exact time of when the Upfronts is which is again end of margin.

In April so.

So we definitely benefited from that being taken out and we definitely benefited from live sports being taken out of traditional television as passports comes back I think more and more people are going to be watching it streaming and will benefit from that as it relates to the mix and total percentage of revenue, we just don't comment on that yet and the.

And the reason why we don't just yet.

As it's growing at such an amazing rate.

We we don't want to have to constantly be explaining any changes in the shape of occur that are just blips, but the general direction as all up into the right. We expect that to continue.

And of course when were growing it as you point out 40% this quarter over 80% next quarter.

Where of course connected TV at leading the way so that if theres any other color I can give on that that's more.

Qualitative it simply that our sales team is leading every conversation with connected TV and connected TV is leaving the recovery inside of programmatic.

On the second question as it relates to China.

And just international expansion.

Definitely markets that have been more negatively impacted from.

From a co bid.

Than others.

And so I think this is going to have a disproportionate effect for good and bad on on every market. So every market will be different than they were before.

Important to note that of the 25 offices that we have around the world.

We only have a handful of them that are opened today and the very first one that opened with China they've been back to work very first.

The numbers that they're putting up specifically are very impressive as as a growth rate, but it's also.

Compared against relatively low numbers and.

As we would say easy comps.

So I'm really encouraged by what's happening in China as it relates the geopolitical and just.

Whatever increased attention has come through.

The Bakken fourth of leaders and pension between the two countries.

I think I've noted before I think theres, an economic dependence between each other meaning between the us in China.

That no one can really disrupt it's not dissimilar from when I talk about the quid pro quo, the internet cannot be disrupted the way that products are manufactured and where the biggest consumers in the world are the biggest manufacturers in the world are and that creates a dependence or co dependence that is so great that I don't think that that can be.

Meaningfully disrupted even though speed bumps can be created but I just keep looking at it as it's the second largest media market in the world.

We're we've we've definitely say that one for later in our growth cycle, but we have amazing relationships with Baidu Alibaba Tencent, our tick tock relationship that started in Asia started very strong and we continue to have great expectations for that around the world.

And just continue to make investments and we continue to see things move up into the right.

We'll take our next question from Squali with Truest. Please go ahead.

Great. Thank you very much of two questions one Jack data revenues has been.

Thank you very very important piece of the trade desk story and margins maybe can you just actually.

Kind of highlight breakdown how much of the revenue last quarter did come from data how should we thinking about it going forward in particular.

In light of all the changes that you spoke to earlier I'd have chrome et cetera, and then just a quick one on political spending and that may be likely impact. Your your your expected potentially into second half. Thank you.

Great. So so first as it relates to a percentage of our revenue we've never broken that out and if we don't we don't break it out for a number of reasons, not least of which as that.

I look at data as.

Something that at times unwilling to give away.

In an effort to just help people buy more media more intelligently and if that makes our clients.

More sticky and more invested and especially Seymour ROI.

I can make up the money that I could have made and charging for that.

By getting another dollar if you will.

I mean getting another dollar media spend.

So.

We're always making that tradeoff, but I'd like to address the sort of bigger picture question that you frame because I think thats really important.

And.

If I even rephrase your question, which is to say hey, there's there's a lot of discussion happening with idea with third party companies going away in cytochrome, there's a lot of things that are saying.

The way that that.

The quid pro quo, the Internet works mate May change and if that change at not the quid pro quo will change, but the mechanics of that quid pro quo may change.

If they change will that be good or bad for data companies and the short answer as I think it's good for data companies.

So right now cookies in particular create a really difficult way for data to be Onboarded, it's actually created more of a barrier than anything else.

Data gets applied more easily to things like direct mail and almost every other form of advertising than it does the browsing internet.

And as the Internet grows and as devices get more fragmented.

Having something that's more common as well as just better consent.

We'll actually create more opportunities for data companies that do the right thing.

So.

Data companies that have been aggressive our C pulse therapy going away data companies that do the right thing and operate without being too aggressive on collection or off deployment are going to do really well and I think if you look forward 20 years. There's more of them. Then there are now, but there isn't way less deceit.

The Internet at 20 years from now than there is now just like there is less now than there was.

10 years ago.

The political political side sorry.

So.

A lot of questions about how is political going to be different given the environment theres lots of discussions about even how people are going to vote and this upcoming election, but I don't think theres not much debate, though about the fact that more people are going to be hall.

More of the debate and discussion is going to be hosted over the internet largely because people are having this discussion and debate in their own homes, just because of the nature of Cnineteen. I think also the amount of uncertainty has put a little bit more budget closer to the actual election.

And time, there will be that it's possible that theres fewer debates and meaning actual debates where the candidates getting next to each other and if thats and if thats. The case, then I think.

Great, Canada and every party is dependent more on the discussion that happened in digital ecosystems.

That includes programmatic advertising, so I think all of that.

I mean, that's what it's going to be more of a digital election. If you will then any ever before.

In the next two.