Q1 2021 Trade Desk Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the trade desk first quarter 2021 earnings conference call.
Time, all participants have been placed on listen only mode and the floor will be opened for questions and comments after the presentation.
And it's now my pleasure to turn the floor over to your host Chris Toth, Sir the floor is yours.
Thank you operator, Hello, and good afternoon to everyone and welcome to the trade desk and first quarter 2021 earnings Conference call.
And on the call today are our founder and CEO, Jeff Green and Chief Financial Officer Blake Grayson.
Copy of our earnings press release can be found on our website at the trade desk Dot com and the Investor Relations section.
Before we begin I would like to remind you that except for historical information some of the discussion and our responses in Q&A and may contain forward looking statements, which are dependent upon certain risks and uncertainties.
In particular, our expectations around the impact of the COVID-19 pandemic on our business and results of our operations are subject to change.
So any of these risks 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 statements.
I encourage you to refer to the risk factors referenced in our press release and included in our most recent SEC filings and addition to reporting our GAAP financial results.
We also present supplemental non-GAAP financial data a reconciliation of the GAAP to non-GAAP measures can be found in our earnings press release, we believe the providing non-GAAP measures combined with our GAAP results provide the more meaningful representation of the company's operational performance.
I will now turn the call over the founder and CEO, Jeff Green Jeff.
Thanks, Chris and thank you all for joining US today as you can see from our earnings press release, the trade desk for reported a very strong first quarter of this year.
This performance is especially encouraging because of the annual advertising budgets are often being reset and the reconsidered and Q1, making them historically harder to predict and this year it was especially challenging because of the global pandemic the.
Of unique worldwide business environment helped accelerate digital advertising and most parts of the world as we exited 2020. However, several verticals are still to come as.
As we all March up and out of the recovery curve.
For the quarter, we exceeded our own expectations and this is another positive sign that the trade desk has emerged as the default demand side platform for the open Internet.
A steady stream of new brands and agencies started to work with us for the first time and Q1 and we continue to win additional spend from existing customers industry momentum around key drivers such as CTV and UAV too could not be stronger the challenges of the past year have only served to focus our attention on how we can.
<unk> real business value for our customers and partners and that has enabled us to forge closer relationships with the biggest brands and the world.
As a result revenue was $219 8 million and increase of 37% compared with a year ago adjust.
Adjusted EBITDA increased two of Q1 record of $70 5 million.
This Q1 record is on both an absolute basis and the percentage of revenue basis.
As we continue to grow and represent more and more large brands and a larger percentage of AD agencies and brands. We will continue to become a more accurate bellwether for the open internet and advertising spend.
When you consider our performance and the context of the health of the overall advertising and industry you can see how we continue to outperform our industry and gain share for example of WPS group and predicts worldwide and advertising revenue increased 10% and 2021 equivalents. This group's zenith expects overall U S ad.
Pending to rise three 2% and 2021 following the drop of five 4% last year.
And I'm also predicts digital advertising will surge, 14% to nearly 400 billion.
We are growing at a pace well ahead of the industry.
CTV continues to lead our growth and our international expansion continues to yield very encouraging results overall international spend grew much faster than spend and North America growth and EMEA was especially strong.
We are starting to see green shoots from the investments, we've been making and CTV and Europe.
And also outgrew the U S, which is very encouraging that is what we expect for the foreseeable future as the most rapid economic growth driven by the rise of the largest middle class and history will come out of Asia and the next decade.
In order to provide some color on our results I'd like to focus on three major points first is the evolution of CTV as I mentioned CTV continues to be a major driver of our growth, but it's also the catalyst of broader change across the advertising landscape.
Second I'd like to touch on identity Theres, a ton of discussion about identity and the industry right now with a fair number of misperceptions.
And third as we head into the summer, we'll be getting ready to launch our new platform. So Lamar.
And I'd like to spend a moment on what's new about the platform and why we think it's the right platform to meet the emerging needs of advertisers around the world.
First the <unk> TV with so much attention on the CTV market today.
Thanks for easy to forget how far we've come in just a short amount of time.
After all the CTV is a fairly young and advertising channel at for.
First the early mover markets, such as the U S and Australia operated with fairly limited supply as you would expect back then most connected TV was that spot subscriptions paid for the content not ads for.
And for most of the last few years that created scarcity and the Avon portion of the CTV market that scarcity by itself kept the CPM as high.
As the market evolved more consumers shifted the CTV over the last couple of years, almost all major content owners put more premium and inventory online.
Today TV providers are fighting for consumer attention and there is more competition than ever the GAAP.
GAAP and cost adjusted efficacy between linear and CTV has stayed strong however, as advertisers embrace CTV to leverage data and relevance ttm's remained high and not because of scarcity.
The power of data driven targeting is quickly becoming more apparent only effective data driven targeting can achieve the value of sought after by advertisers and just as important and preserve the high CPM for publishers as premium inventory impressions increase in other words TV advertisers now have choice they have the ability.
<unk> to differentiate between content and across channels more than ever.
And that's critical to of healthy and competitive CTV market.
TV is often the most effective part of the media plan. It's also generally the biggest.
It is my prediction that Avon will outpace the growth of <unk> over the coming years, but for that to happen Avon and we'll need to get better at relevance and efficacy through products like solar more more to come on total of more later.
Now just to put the CTV market scale and perspective. According to <unk> latest research. There are now more than 200 million active <unk> users and the U S alone by 2020 for Omnia predicts the annual CTV advertising revenue will top of $120 billion.
Outperforming subscription revenue by more than 20%.
<unk> also predicts that market such as the UK and Germany will be the fastest growing CTV markets outside of the United States driven by very similar consumer shifts the.
These trends are very consistent with what we're seeing.
And that's why we're investing so heavily in CTV.
For example, we recently announced a new partnership with Sky TV, one of the major broadcasting platforms and the U K and.
And more broadly across Europe, giving us access to one of the richest sources of premium inventory content and that region.
Through our platform advertisers now have the ability to be more deliberate about what CTV ads they buy and.
And to apply data driven decisioning and TV at increased scale.
And the increased scale and deliberate choices are affecting everything about the television advertising business.
Just look at the upfront process, which is kicking off again this month.
More and more of the world's top advertisers are making programmatic buys a larger component of their upfront commitment as you may have heard from many advertisers publicly they want more data driven flexibility and their TV advertising campaign.
Believe their digital buys and should be a core element of their upfront commitment.
And the networks are adapting to that demand pull.
Ultimately this will lead to the development of our new programmatic forward market for CTV inventory.
We are pioneering this work collaborating with companies such as <unk> and freewheel.
Our goal is to significantly improve the legacy upfront process by using more data and measurement to make better deals for both advertisers and content owners.
This won't happen overnight and will be a multiyear effort.
But these kinds of innovations that are making the trade desk, such an integral component of the tech showcases the major platforms, such as Disney NBC U and Nielsen are putting together as a part of the upfront this year.
I'm encouraged by how traditional TV companies and broadcasters are thinking about this.
Standing still are waiting around and they are leading with NBC. Universal for example, we're working on the innovative ways to bring e-commerce into the CTV experience.
So if you see and add for a product you can interact with it and purchase it with one click right on the screen.
Broadcasters are also applying the same innovation focus to the world of identity.
And the last couple of weeks, we've announced collaborations with open AP and block graph. These companies are each owned by some of the largest television networks and the United States. They.
And they are both working on creating new approaches to identity that work for CTV.
Which bridge between CTV and of linear TV.
Both organizations have announced that their technology will be interoperable with you I'd too.
Which brings me and my second point, the evolving the world of identity let.
Let me start the discussion of identity by clarifying what we're talking about this discussion of identity is bigger than cookies, it's bigger than any company or any channel.
<unk> are not present in CTV.
However, our privacy safe identifier for CTV will be a major factor and driving relevant ads and.
And managing reach and frequency across apps channels and devices.
TV needs. This kind of approach in order to maintain or increase CPM and a way to help fund the amazing content that has kept most consumers, saying during this pandemic the <unk>.
Current TV content arms race cannot be financially sustained for providers or consumers without relevant net.
You can see how the identity of discussion is bigger than cookies or even the CTV or google's decision to deprecate cookies for the browsing. The Internet. This is a discussion about how the internet pays for itself.
So of discussion about control.
Is the internet going to be controlled by a few large tech companies or willpower be distributed and will choice sit with consumers and their relationship with each content owner.
We launched the <unk> project, but the goal to improve the internet.
This is not merely of marketing campaign about how deeply we care about consumers the quality of the internet for consumer privacy of course, we deeply value all of those things, which is why this is not about marketing, but about action. It is the movement.
We are working with the leaders and the open internet to build a better internet.
We want consumers to have control and of privacy forward manner that transcends our single companies ecosystem.
And Thats why identity and continues to be the hottest topic of conversation and our industry. It for you.
Like every media outlet from the Wall Street Journal to the advertising trade is covering the identity of these days.
<unk> has issued several blogs over the past couple of months clarifying their position on identity.
And to use of Google log in at the core part of their identity solution, but at the same time and some cases, they've been critical of others doing something very similar.
We'd like to see Google support the open Internet more publicly given doubleclick is one of the most important open internet players.
They are doing the good thing by making privacy priority for Google.
Fortunately for the trade desk.
<unk> founding the company back in 2009 to help the <unk>.
The higher digital advertising ecosystem.
Has been of core value of our company.
Cared deeply about improving the entire internet not just our small corner of it.
We have a guiding principle that informs every product we ship.
What do I as the consumer want the experience to be for me for.
For my family.
We entered these questions first and then of course work to make sure that everything conforms to book the letter and spirit of the law.
The idea is built for consumers with better content and and the Internet where power is distributed not consolidated.
It is designed to operate with the clear consent framework better explanations about the value of exchange of free content and improved consumer controls. We've always believed that taking of consumer first approach is the only way to address the identity over the long term and a way that.
It meets the growing regulatory and consumer focus on privacy.
Skeptical about solutions got lean on opaque cohorts or solutions the <unk>.
Try to make decisions for consumers instead of providing consumer choice.
We do not believe those options are sustainable as privacy conscious and the long term they don't empower consumers sufficiently and that.
It's also why the open internet is rapidly adopting the <unk> because this is much bigger than the trade desk.
Two is about a better internet will be open sourced with independent governance personally I was inspired this last quarter when working directly with our tour.
Oh of approval of this to make sure that their I'd and <unk> two were interoperable.
<unk> sure there are so many people and leaders across the open internet are engaging with us and recognizing the significance of this moment.
And some behind the <unk> two is beyond anything I could of scripted and for me, it's probably the most inspiring movement that I've experienced in this industry.
I don't think Ive explained well for Wall Street, how you items two has gotten so much scale, so quickly and why and so positive about this movement, let me try to add more clarity.
Remember, how you idea where consumers sign and once for their email address.
And then opt in and side by side, just once per site or App for channel.
This is the significant improvement to the consumer Internet experience today, where intrusive toast or cookie pop ups appear on almost every premium content site and seemingly every time you go there.
Some have mistakenly thought the UAV too.
As in SSO or a single sign on and that we are trying to build something like Gmail with the hope of attracting billions to a new brand and a new consumer facing and the logging service and it isn't it's a common I'd that can be used by many different advertisers and publishers and.
It often originates from publishers with existing and sign on systems.
<unk> and engage with privacy settings, and opt outs directly from the services. They now.
And while we're partnering with several industry leaders like <unk> to build of new SSO to help medium and smaller publishers those efforts our innovation on top of unit two.
With regard to the first email authentication and provides the consumer with the explanation of the value of exchange of the Internet and.
The goal is to make it clear and consistent and with adoption by a who's who of leading publishers of supply side partners. The.
Two community has already achieved significant scale uhm.
<unk> does not need some magic number of single finance to be on par with the billions of cookies out there to be successful we are already seeing widespread adoption by integrating with existing publisher sign on systems.
The Wall Street Journal reported 50 million authenticated users and the U S. A couple of months ago, and we have seen more partners adopt since then.
Multiplying that user number and remember we're only a few weeks into beta testing the list of publishers advertisers and data partners that are currently in the integration process or committed to USD. Two is larger than those that we've announced publicly the progress we've made on UAV to the momentum we have.
We're seeing is all beyond anything we could have envisioned this early.
I'm so glad to have worked with executives at the biggest brands and biggest agencies and biggest TV companies biggest websites to implement something bigger than any one of us and all.
Honored to partner with so many companies and to you I need to evolve as something that belongs to the community.
And this is not just the U S phenomenon.
Even though we are early and the journey outside of the U S.
Seeing rapid progress and key markets, such as Australia, Southeast Asia, and in Europe, with major publishers and advertisers joining this industry wide effort.
I am convinced that over the past month, the momentum behind the <unk> has only been hastened by Google's latest position statements those blogs galvanized and the entire industry on a new approach the trade desk, our agency partners advertisers and premium content partners.
Cared deeply about consumer privacy and remember that most major brands and many premium content providers have a decades long relationship with their consumers I've never met a large brands are of content owner that wants to ever violate consumer truck or even just be seen the violate trust.
And it worked so hard to build that trust over many years and Thats why trusted brands such as Hershey's have declared their support for <unk> and because of our commitment to trust and transparency. Many content owners are happy to partner and share data with companies like the trade desk, it's the companies and the middle of that they're concerned about and.
And that's why we're excited about one of the innovations where we're building on top of <unk>.
It's being developed initially for certain broadcast networks, and it's called double encryption for publishers or GDP.
The E&P allows publishers to encrypt <unk> and.
And only unencrypted for designated party touches of particular advertiser or partner.
The E&P protects against data leakage and the publisher has the power to control the process with precision.
As such the AEP.
As an important innovation for publishers.
Integrate their single sign on process into a broader ecosystem. This can be used to prevent the company in the middle even and the AD serving walled garden.
From taking data or insight.
By the way. This is just one example of how <unk> allows for innovation on top of the core open source technology and this way.
<unk> will ultimately prove to be in the innovation that supports more than just today's privacy expectations.
At the same time, it's also important to note how <unk> could accelerate the goals of the California consumer Privacy Act.
And Europe GDP are.
We believe the UAV to best meet the evolving regulatory principles around privacy that are being put into place around the world.
So you have to focus on the principles and those principles focus on consumer control.
Which is the design point of view of IDT.
In many ways. We believe <unk> is the vehicle that enables regulations, such as <unk> to realize their full potential and.
Another important aspect of USD two beyond the core identity service is at the emerging role as a new common currency of the open internet.
Advertisers have the ability to deterministic measure more effectively across channels and to better manage the frequency across channels and devices and a way that is simply not possible with cookies for example.
And it is also in this context and our partnership with publicists becomes important.
And just recently announced that they would make their epsilon core I'd interoperable with USB two.
And that the trade desk could become the exclusive third party of DSP.
For approval of assesses core IV services.
The Epsilon core I'd graph includes <unk> for more than 215 billion users and a wide range of onsite and Offsite data the.
The ability to integrate with this kind of off site data is critical as advertisers think about activating their own first party data and a new identity environment.
Whether we are talking business performance measurement or broadening the audience segments or brand safety partnerships with companies such as approval of <unk> and Walmart are so important to realizing the full potential of data driven advertising and there are many more and the works.
Take the shopper marketing industry as an example.
According to some estimates the Tam for shopper marketing, that's well over 100 billion.
More and more retailers are recognizing the value and power of their shopper data lift.
Listen to almost any retail earnings conference call of these days and you see how companies want to activate.
And our first party data or monetize their proprietary data retailers are starting to work with us on strategies to liberate data so their suppliers can market more effectively and the secure privacy safe way.
The go to market approach for each retailer may be slightly different but the common thread is that these retailers understand that the only way to realize the full value of their data is on the open internet.
No point and building walls around it.
Brands will over time always gravitate to places, where they can be deliberate and where they can measure of AD impressions across channels.
There are some companies, mostly those with the dominant walled garden approach that believe the internet can be controlled by a few.
And then there is the rest of US who believed that and open competitive and internet marketplace and the only real viable approach the preserves value and opportunity for all participants.
By the way I don't think Theres anything and the advertising world that will unite fierce competitors today more than the principal.
Many of our largest customers are fierce adversaries with each other every single day, but they agree on this.
And we are honored to be working with all of them to improve privacy standards and practices across the internet. We all agree that the open internet the best way to activate the first party data and.
And the measure campaign performance against real business goals with a much clearer understanding of the actual consumer actions, which brings me to the third point I want to cover today the launch of our new solar power platform. Later this summer which incorporates many of these principles.
Just think about of the pressures that today's marketers are under proving the ROI of every advertising dollar, which means that advertisers want and better measurement and the ability to tie measurement for actual business outcomes like sales and a Walmart store for foot traffic.
Onto our auto dealership.
Activating valuable first party data and our secure way that respects of consumer privacy, all and a new identity environment.
And completely rethinking how to approach TV advertising, which is the largest channel for many of our advertisers.
All of them are has been many years and the making and is the biggest platform upgrade in our history and it has been designed and engineered to meet these evolving needs of the modern marketer.
For one thing and the U S is completely redesigned it brings all of the features of our platform together and are very easy to use interface. It starts with your goals the marketer, whether those are marketing goals or business goals or some combination.
And more expressive more detailed goal setting and at the outset. It means that the co op AI systems can be more effective for the media trader optimizing campaigns on the fly.
<unk> will have the industry's easiest on ramps for our customers' valuable first party data.
And of new identity environment that data becomes even more important but advertisers want to unleash it and of <unk>.
Secure trusted environment. So Lamar provides that and the innovation such as <unk> and <unk> will only increase the advertiser trust and the platform.
And so Lamar is the closed loop system. It does more of the work for you engaging a much richer measurement marketplace.
Incorporating onsite and Offsite data so on the advertiser and better tie of marketing campaign to a real business outcome and.
Again think about the shopper data example, advertisers wanted to understand and how their campaigns are driving and sort of in store sales. We are building that off site data into the solar Maher.
Whether it's retail stores or auto dealerships or ticket sales or any other form of business performance data. So the.
The advertising campaign can seamlessly optimized for those business calls and doing so so lamar liberate the media trade or to focus on campaign performance.
Rather than having to turn the dials on every aspect of campaign management solar market and manage the details of allowing the media trader to focus on more strategic objectives.
So with the soul of our launch we will be heading into the second half of the year with a great deal of excitement and momentum about our ability to best serve the needs of the modern marketer.
And let me wrap things up on this point.
We're off to a very positive start in 2021 exceeding our expectations.
And thats because of advertisers are increasingly gravitating to our platform as the default DSP of the open internet.
But we are not resting on our laurels as you know we are consistently investing and our business. So we can continue to lead our industry, whether that's international expansion and innovative partnerships with companies such as Walmart improved with this.
New channels, such as CTV major platform upgrades, such as solar Maher for integrating valuable new data and measurement capabilities.
And all of those investment decisions are informed by the emerging needs of our customers.
Advertising agencies and major brand advertisers of the world.
They are becoming more data driven and everything that they do and their expectations of how they and lease data are only growing.
And that more than anything is what makes me so excited and confident about the future.
We're excited to compete for every digital advertising dollar when we compete we usually win and.
With that let me hand, it over to Blake could talk about the financials. Thank you, Jeff and good afternoon, everyone.
As you've seen and our results 2021 has started out strong despite the lingering challenges faced around the world.
Q1 revenue was $220 million of 37% increase from a year ago.
Excluding political spend related to the U S elections last year, which represented the mid single digit percentage share of our business from Q1 of 2020 revenue increased around 42% year over year in Q1 of this year.
This represents a material acceleration on a sequential basis from Q4 of 2020 after excluding the election spend in.
In Q1, we benefited from continued improvement and the digital advertising environment from both the agencies and brands.
Growth was broad based across all regions and channels with particular strength from CTV, which again led our growth from the channel perspective our.
Our year over year revenue growth also benefited from lapping COVID-19 related headwinds that we experienced towards the end of March last year.
With the continued strong topline performance in Q1, we generated $75 million and adjusted EBITDA or about 32% of revenue.
EBITDA continues to benefit from temporarily lower than expected operating expenses, partly driven by the virtual environment. The <unk>.
<unk> the items, such as travel and live company events that have not yet started to resume.
Even recognizing that I'm proud of our continued ability to consistently grow our top line revenue, while generating meaningfully positive EBITDA and cash flow.
From the channel perspective video audio mobile and display all grew well into the double digits and Q1.
Video, which includes CTV again led our growth during the quarter followed by audio.
Geographically North America represented 87% of spend and international represented 13% of spend into.
The nationals overall share grew slightly from Q4 and the prior year due to faster growth and APAC and Europe relative to North America.
That said spend growth accelerated and all of our major regions as North America, APAC and Europe grew spend well into the double digits again year over year and Q1.
Our offices and Europe showed particularly encouraging results as each office grew spend faster year over year, and Q1 and total company spend and.
And APAC, Shanghai, Hong Kong, and Tokyo spend all of more than doubled.
It is still early days for us internationally, but we are optimistic on the trends we are seeing at the start of 2021.
In terms of the verticals the representing at least 1% of our spend the majority of them grew in double digits during the quarter home and garden technology and computing and shopping were all very strong with both home and garden and technology and computing and more than doubling during the quarter.
And our motive continued its return growing faster than the rest of the business during the months of February and March while improving the travel and entertainment vertical still lag compared to others, but both are showing signs of promise so far and Q2.
There is still of lot of recovery ahead of us and these segments and we are starting to see potential signs of optimism.
Operating expenses for $212 million, and Q1 up 41% year over year.
And the growth and operating expenses in Q1 was primarily driven by stock based compensation.
Operating expenses, excluding stock based compensation grew 26% year over year and.
The majority of the growth and stock based compensation expense from Q1 was related to the company's employee stock purchase plan. We currently estimate the stock based compensation growth should moderate from current levels and the second half of the year.
Income tax was the benefit of $14 6 million and the quarter, mainly due to the tax benefits associated with employee stock based awards and the timing of which can be variable.
Adjusted net income for the quarter was $70 million or $1 41 per fully diluted share net.
Net cash provided by operating activities was $75 million and Q1 and free cash flow was $61 million.
Dsos exited in the quarter were <unk> 93 days up of day from a year ago depots were 75 days up six days from a year ago.
We exited Q1 with the strong cash and liquidity position, our balance sheet had $680 million and cash cash equivalents and short term investments at the end of the quarter, we have no debt on the balance sheet.
In addition, our board of Directors has approved the 10 to one stock split to make the stock more accessible to our employees and to a broader base of investors trading of the trade. The stock will begin on the stock split adjusted basis on June 17th 2021.
Turning to our outlook for the second quarter, we expect Q2 year over year total revenue growth to significantly accelerate relative to the growth rate. We saw in Q1, as we lap slower growth related to the pandemic during the second quarter of 2020.
We estimate Q2 revenue to be between $259 million and $262 million, which would represent growth of between 86% to 88% on the year over year basis.
We estimate adjusted EBITDA to be at least $84 million in Q2.
I would remind you that the relative strength and our EBITDA forecast continues to benefit due to the virtual environment. Our teams are working.
As we think about the full year, we continue to model for and improving digital advertising environment, and we continue to expect a reasonable acceleration and our revenue growth relative to 2020.
That said and the second half of 2021, we expect year over year total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly strong growth.
In particular, our Q4 growth rate will comp against the significant spend we generated in Q4 of last year, driven by the rebound and digital advertising as well as material U S. Political elections spend that we benefited from in that period. If you recall U S. Political elections spend represented the high single digit percentage share of.
Our total spend in Q4 of 2020.
In closing, while the past year has been far different from anything we could have expected, we continue to grab share and deliver sustainable topline growth and profitability, all while building better relationships with our customers and partners.
Im extremely proud of the way that our employees and navigated the challenges of the past year with grit and resilience and with an unwavering commitment to our values of the company.
That concludes our prepared remarks, and with that operator, let's open up the call for questions.
Certainly ladies and gentlemen, the floor is now open for questions do you have any questions or comments. Please press star one on your phone at this time.
Some are posing your question you. Please pick up your handset of listening on speaker phone to provide the optimal sound quality.
Hold of it we pull for questions.
And the first question is coming from Shyam Patil from Sig, Sean Your line of lives.
Hey, guys nice job on the continued execution I just had one question.
When you look at the year. It seems like there are a lot of moving parts.
With comps and seasonality kind of as you talked about Blake.
And also have sold them are yes, the shopper marketing and going live.
You have continued momentum of TBD I was just wondering if you could talk a little bit more about how you're thinking about the business and the growth. Let me take all of these things into account for the rest of the year.
Yes, Thanks, Sean and also I appreciate the kind of words.
Yes, there is there and so much that I'm excited about for this year and I think it's fair to say that I've never been.
More bullish on our business, and especially I've never been more business or more.
Bullish about CTV and our business.
The CTV in Q1, and once again more than doubled spend.
Paired to Q1.
Of last year.
So once again the trend just highlighting just how impressive the trends and CTV actually are of course, the move to CTV away from from linear traditional TV just continues to accelerate.
Blake I'll talk and just the second time.
Let him add some color on this question.
Relating to what that means.
When you extract.
The political.
Net.
To me the.
The macro trend is the thing to focus on most which is.
COVID-19 and the core and team made everybody.
Stay at home and stream more TV and also put pressure on the consumer so that there.
Looking at our entire TV experience and essentially looking for value and looking for things to cut.
And that has meant the cord cutting and.
And linear cable cable TV.
Has accelerated.
And the people are looking more and more.
Internet fueled TV because there are also more apps and they have ever been content discovery.
It is tougher and CTV than it's ever been and is it on that offers and on that other app. That's.
The harder question than it's ever been.
And it's also harder for a for a board companies.
The two.
To actually become asphalt company. So they in fact need to sell ads and they need them to be relevant in order to be highly effective what that means is that Avon is accelerating.
More than any other part of CTV and it means that a platform that sits in the middle of like ours debt looking across all of these different apps and channels. So that we can help advertisers manage reach and frequency and help them shop for value.
And and being one of if not the largest source of demand for all of these quality content owners means that our future has never been more bright and CTV, which is the part of our business that I'm. Most excited about I imagine, we'll get a chance to talk more about <unk> and the second and I'll talk about some of the momentum there, but our overall business stays strong.
And I have left off some highlights Blake what would you add.
Sure Thanks, Jeff and thanks, Tom for the question I, just would reiterate the with.
What Jeff said, the fundamentals of the business of our re.
Really quite strong and my opinion the thing to keep in mind like you said with all of the quarterly comparisons.
Last year, when we benefited from that U S political spend Q1 accelerated and not only year over year, but on a sequential basis from Q4, once you exclude political and the <unk>.
Paired remarks, I think I mentioned that you would take the Q1 growth rate of 37% and revenue that's more like 42, when you exclude political and then that's comparing really talk of mid thirties growth rate in Q4 of 2020. So that's super optimistic that we can see that acceleration once you exclude that kind of noise, we had a bit from the pearl.
Critical side and then as we look at in the Q2 reflected and that guidance of the 86% to 88% year over year growth that also reflects an acceleration on a two year stack basis versus Q1. So that trend also is something that makes us super optimistic with all of that.
And seeing reasonable acceleration this year on a full year basis.
Let me really excited comfortable about the business and where things are in 2021, but the momentum that we've got from all of the things like and CTV and the other areas that we've talked about a number of times gives us really optimism for momentum not just in 2021, but into 2022 and beyond as well.
Great. Thank you guys. Thanks.
Thanks, Sean Thanks, Sean.
Thank you and the the next question is coming from especially cross yes from Cannonball Research facility your line of lives.
Thank you good morning, Jeff I know you kind of a day United Unified the two point, though quite extensively the question I get from investors is where we are in terms of the scale of adoption and where do we need to be for for it to be sort of seamless and or seamless transition from third party of chrome.
Book as to when you're five day did two point old World and then another quick question on unified I'd is you talked about the P and I think at.
And at least.
A little more confused about the unified the deal can you. Please remind us in layman's terms, how and how it works.
Absolutely.
Very much appreciate the question.
Theres so much the husband said, so much that needs to be said about this.
And despite our best efforts I still think Theres a lots of can be said the provide clarity.
Let me start by just saying unified I'd is of privacy first initiative that is.
It was initially started by the trade desk, but it is something that.
The movement among the entire open internet and it's so much bigger than our company at this point.
And with hundreds of companies working on this.
At this point.
And part because of our efforts to open source.
And get the entire community and.
And bolt and because of the fact that by itself is encrypted.
And as well as it comes with terms of service. It is the substantial upgrade to cookies and creates a better internet for everybody.
And Thats one of the things that I think it's just a little bit different about what we're doing here is that we're trying to create a better internet for everybody and we're not just trying to protect ourselves, which I think there are a lot of tech companies and their primary focus and we're trying to.
Create a better internet.
Part of that's been our focus when we go talk to.
The major publishers and content owners and advertisers.
About joining this movement and the.
I realize the way the test works as well as what we're after it's really easy for them to get on board.
And of course, you have to understand of the technology, which is somewhat esoteric, but because of the fact that.
We've gotten so much support.
And from from companies like <unk> and from from live ramp from Nielsen and from the Washington Post.
And the industry initiatives like ore bodies, like pre bid and cram and IV.
We're really excited to have that sort of support and momentum.
And the in the Wall Street Journal I know.
The printed a month or two ago debt there've been 50 million.
As indicated users and the United States alone.
We've seen that increase by multiples.
And then sort.
The momentum is just unbelievable and the number of companies that have.
That are in the process of implementing is exponentially higher than those that we've issued press releases on so anybody that wants to go see the caliber of companies that we've been working with you can see it.
The double digit number of press releases of companies adopting.
Adopting that and supporting it.
The multiple Cmos from the biggest brands and the world.
We are with you if theres anything we can do to help you. Please let us know we've heard the same thing from TV and content owners, the biggest content owners and the world.
So.
It's just been fantastic the momentum is unbelievable and.
And just two last points that I want to cover on this one is.
The.
Some people say well what does this mean and what does the momentum mean and what is what will the the world look like next year when cookies are deprecated and we're relying on unified I'd.
And things like that.
I personally think the internet is going to be a lot better and it's going to be a lot better because you'll get rid of those annoying toast, let's say there are cookies on the site and you lost and one time per internet with an email address so in other words, one time and then you opt in and one by one for each site and per each app.
And you are giving them consent, which I think is in line with what GDP are at Tpa and even what Apple is trying to do which is give empowerment of the consumer and better explain the quid pro quo of the Internet and because I think as a general Internet community do a better job of explaining the quid pro quo of the Internet.
Also think that data companies that are doing the right thing, meaning getting consents and operating in the way that we would all want them to be operating.
The Dell thrive and theyre going to be doing better than they've ever done before cookies were actually of really crappy methodology for them to build their businesses on top of so I think that's going to be a lot better to answer your more.
Sort of tariff of nuanced question about DDP. So.
And what unified I'd enables and.
Part because of where we're open sourcing net and we're making it so that people can innovate on top of it. That's the thing that's really great about open source code and that you can create innovation on top of it and that's where our work with <unk> and others to build a single tie non comes in that's the innovation on top.
Of the unified IV and that is also aware of GDP comes in and so let me take a stab at explaining what the fee is so it stands for double of encryption for publishers and the reason why we're calling of double is because <unk> is already and put the itself. So you can actually encrypt that again and by encrypting that.
Can you make it so that you're effectively the publisher, creating the key where you can decide who can create ken.
Unlocked that and gain any insight so as theyre passing and.
And identifier like <unk> and they could use it on any other identifier is our passing that.
And our request for a bid or and the sort of mechanics that fueled the internet. They can encrypt it and then the day at their own discretion can decide to kind of unencrypted app, which is separate from the encryption that comes with new IV. So by providing additional layers of encryption, we're providing the additional layers of security.
For consumers privacy as well as for the value chain of the Internet and hopefully that commentary and just gives you some out of color, but I could not be more excited about the momentum I never dreamed. It would go this fast.
And all of the discussion on privacy as well as identity is absolutely fueled the momentum.
Thank you.
Thanks for doing.
Thank you and.
The next question is coming from Tim Nolan from Macquarie Your line of lives.
Great. Thanks, a lot and Jeff can I come back to your comments on CTV, particularly and the upfront markets, which you are just getting underway right now and.
Give us a bit more color really on what youre doing there with networks and with advertisers and part of the question is if it's the upfront of the futures market.
Programmatic is to date and then largely of scatter market.
Maybe help us understand.
How does programmatic work its way into the upfront itself, how does things like guarantees work and and delivery of that and just any more color you can give us and really how your role of the trade desk rule and programmatic buying would work and the upfront market. Thanks very much.
Absolutely so sort of first big picture on the CTV and just want to underline that our CTV spend more than doubled in Q1, which just gives us a tremendous amount of momentum and thats, while were just merely breaking ground.
On an improving the upfront process and so upfronts are as you highlight a form of of forward market or buying in advance.
But it's a little bit different than what's happened and tied of programmatic where with programmatic. We bring so much more data to the table than what's been used to transact TV for the last many decades.
Debt programmatic can be way more effective it's what enables content owners to have fewer ads and the commercial break and it's what enables them to get ttm's that are multiples higher than what they can get and traditional television.
So running and upfront and traditional television with lower CPM.
While running a scatter of spot market.
And with higher CPM is a bit counterintuitive to the way that the TV has historically worked where you're paying a little bit extra for the assurance of it running and and.
<unk> net of dance, which.
<unk> benefits.
Which benefits both sides.
So in order for US we think the upfront market to evolve you have to create a new marketplace, where you lay of more data on top of it. So that you can get those same premiums and.
And we think that there is no way for that to exist at any scale without us being actively involved which is why we highlighted in our prepared remarks that we're working with some of the biggest names and TV.
And to make that of reality.
And really excited about.
Our new structure for.
The forward market that just enables more data to be brought to the table in the meantime, irrespective of those engineering efforts because of the lack of predictability.
Because of COVID-19 and.
And just the.
And the state of.
Of the world and the future.
But but also because of cord cutting has accelerated.
Because TV is just a little bit harder to predict and and of itself.
There are more dollars that are sort of sitting on the sidelines of of the.
Fronts as well as looking for things and programmatic to buy on and always on basis, instead of having to make really huge commitments at the moment, where you have less visibility.
And you put all of that together, we're in a phenomenal position we're taking.
Incremental dollars that are coming from upfront into digital and programmatic and we expect as we continue to rollout the.
Long term effort to revamp the.
The upfronts, where the forward market of programmatic forward market debt will move more and more dollars and years to come so.
A ton of bullishness on what's happening and CTV and the Upfronts specifically.
Thank you.
Thanks, Tim.
Right.
Thank you and the next question is coming from David <unk> from Bahrenburg and David Your line of lives.
Great. Thanks, so much for the questions I have two on <unk> two.
It sounds like there's been significant progress on the authenticated users and machine.
Multiples of the 50 and that was previously reported but I did pick up on the comment Jeff that you made about the.
Needing to be a magic number of.
Syndicated users if I'm interpreting that right to be sort of on par with the efficacy of cookies and I'm wondering if you could just expand on that a little bit because I think there was some confusion among investors exactly how many people need to be signed up.
To replicate that and effectiveness, but it sounds to me like Youre, saying thats not even the right way to look at things necessarily that's the first question and then second just on sort.
Some of the larger platforms, and Google, obviously, and and Apple have sort.
And sort of cast aspersions about the acceptance of cash email identifiers like presumably you are the two.
Do you anticipate a reconciliation at some point with those platforms to get them onboard for the way that you look at privacy through you I D too. Thanks.
Awesome. Thank you very much so.
So for.
<unk>.
<unk>.
Let me, let me talk a little bit about why.
There is no need for the sort of magic number. So there's a couple of reasons why we frame it that way and.
I think youre right that it is a different paradigm that's required.
So we're and this really phenomenal position, which is we essentially get to listen.
And and and opportunity to buy roughly 12 million ads every single second on the Internet and it's just a massive amount of volume.
Of ads that are available across the entire open internet.
Every second every day all.
Day.
And so when you get the listen and look at that many impressed and impressions and then choose which ones you want to bid on.
As long as you have.
Got.
Insight on a good portion of those.
You are and the phenomenal position to pick ones that you know will be effective.
And so whether that's on 71% of ads are on 63% of that is less important than do you have enough critical mass.
You can apply data on those were at the present and then do you have of common understanding of the use of with the supply chain, which does a way better job of creating a common understanding.
And then cookies.
The ever did.
And I also think it's really important to think about of differently.
Because we are not trying to to build and SSO. So some people of sort of wrongly thought the UAV is.
One by one knocking on consumers virtual doors and trying to get to $2 billion number like at Gmail, or Facebook users or something like that and thats not the case at all and instead, what we do is we partner with consumer facing brands that are part of the open Internet which is.
Pretty much everybody except for 567 companies.
So by by partnering with all of those companies, who have logins and relationships directly with consumers.
And that being a huge source of.
The of AD demand for them, which as you know most things on the internet or AD funded.
Comes a very big co-operative, where we're all working together.
And it's a big cooperative and I think is of good segue for the second part of your question.
And you've highlighted that some big names and Tac like Google.
Said.
Hey, where are the best debt, providing privacy centric methodologies on the internet. So.
Okay.
Think that's debatable.
And I don't necessarily think that.
Debt simply hand, and all of our data over to Google or any one company is a good idea and in fact I think it's a very bad idea.
Instead, I think there needs to be of system.
You give consumers more control and you actually encouraged data.
And to stay where it is stop moving at all around and especially stopped putting it all in one place.
And so.
I don't necessarily need of Google or Apple or anybody else.
See the world the way that we do I get the this is a very important moment for them to say that there the.
The best and the world of privacy, even if I disagree with that statement.
But.
And what we do need is the community to come together and work together outside of those handful of companies.
And in part because of the strong positions of those companies have taken the community is coming together in a way we never saw with GDP or really anything else I've never seen the community the Internet community the.
And <unk> funded.
Immunity that basically powers and fund the Internet.
All of them together and collaborate and a way.
Never seen this happen just net.
Ever seen what we're experiencing right now and the way.
And that we're experiencing right now ever before and so.
That's all of that we need in order for this to be successful we don't need the all agree on everything because I don't think that will ever happen.
Great. Thanks.
Thanks, David.
Thank you.
The next question is coming from Brian Fitzgerald from Wells Fargo, Brian Your line of sight.
Thanks, guys, Jeff we got an update from Google recently on flock and since then the waters of even been muddy the bit quite frankly.
Not clear if flock will be workable under EU.
And then there are some broader concerns about weather flock.
What enabled discrimination and ads for things like housing and and mortgages. So I don't know if you had any high level thoughts on and what Google is doing but clients and potential clients are saying about it and and how you and you think of that impacts the dynamics in terms of DSP share going forward and then a quick quick of debt.
For them to that would be.
The pace of share gains you're seeing.
Versus Google's AD accelerating versus what you saw previously and in the wake of.
The Doubleclick I D deprecation.
Thanks, Bob.
Great.
And.
And.
And the first part of your question.
Let me, let me just start by saying.
Sometimes we talk about a Google like there is a collective mind that Google and there isn't.
And I think it's fair to say that the way that the.
Sundar and the executive team and manage this.
And the empower each of the local departments are each of the different departments.
Google to make their own decisions and act and their own interest and.
So if you talk to people at Chrome is we have they have a very different position than the people and adds or doubleclick and they have a very different position from the people and Android.
There's a lot of different opinions at Google and sometimes those that make it into a blog posts or things like that or into the public arena are not representative of.
Thousands of people of Google that have a different position.
So.
And maybe there's nowhere that that's more apparent and this discussion than with flocks.
So there has been a lot of question made about blocks I do think that's part of the reason why.
Google has said if we do end up using them, we won't use them and Europe.
And they've also acknowledged that if they do end up using those.
And.
As a replacement to cookies and not using.
It seems like unified I'd.
Net DB three <unk> will be operating at a disadvantage.
And that they will be operating at a substantial disadvantage in connected TV and they will also be operating at a substantial disadvantage and Europe.
So you can understand why that was.
Inspire some parts of Google to say, we really need to rethink blocks and.
And there are those that look at blocks and say there are actually more they create more privacy risk than cookies ever did and I think theres an argument to be made but that depends on the details of how they end up working and and what they actually ended up doing with blocks I think theres of.
A reasonable chance they will never see the light of day because of some of those.
Risks and concerns.
And.
And if they do it and a very basic way.
And then it could be of great supplement to you Ivy, but if the if Google and especially of <unk> 360 day.
Didn't use things like <unk> and then they did use blocked and a very basic way which would.
Not have privacy concerns.
They would be operating net at a pretty meaningful disadvantage because they wouldn't have something else.
The.
And that would do anything close to what cookies did so very much and open question.
And as it relates to share gains.
And it's really hard to answer.
At this point because of the fact, the cookies have not gone away.
One of the things that's really encouraging is that because cookies have not gone away, which often and spiders option.
And GDP are people waited until changes happened and then they started implementing what they should of and anticipation of change.
This is this is going quite the opposite of people are making changes and anticipation of what's coming however, because of cookies are still in place there hasnt been sort of fidelity lost.
And also because of the discussions have been so robust and just.
Everywhere.
It's hard to tell what's fueling share gains one over the over another I will say the.
Amount of discussion and.
Wins that we're having relative to all of our competition.
<unk> is greater than I've ever seen it so it's a really phenomenal time to be in the space.
And even though it's a little bit confusing because of all of the discussion around identity. The.
Open Internet and part fueled by CTV and Avon is doing as well as its ever done before.
Thanks Chuck.
Thanks, Brian.
Thank you and the next question is coming from Mark <unk> from Rosenblatt Securities Mark Your line is live.
Thanks, so much.
Jeff I'm, just curious is the elephant in the room here really consent rates and I'm just curious how you see the levels of considerate rates today.
Coming in and I think global almost ex.
Vacations, and if we kind of fast forward to Android I E.
Sort of following and Apple's footsteps.
Does that.
Sort of affect the rollout of <unk> to that at all thanks.
You bet. So I do think that consent is at the core of the discussion that's happening inside of identity.
And it's our Big Tech company is going to make the decision for consumers are you seeing this a little bit and the tug of war, that's happening between Apple and Facebook.
It is about where it is concerned come from.
And what we're asking the internet to do is do a better job of explaining the quid pro quo of the Internet and then empower consumers make it simpler easier and more consistent but for them to understand.
And the quid pro quo, Okay I'm sharing.
And some amount of data and insight.
So that you can show me relevant ads and for that I get free content. We just think that quid pro quo. The Internet has never been explained very well.
Yeah.
We can all look at at what companies some of the Big Tech companies are doing on that front.
And.
Of our complaints and whatnot, but overall.
We're all moving towards.
And the same direction, which is giving consumers more control.
And more ability to create consent.
And it's forcing content owners to better explain that quid pro quo the internet what.
And I just want to make sure sure happened as the consumers do you have the ability to weigh in and preserve the competitive nature of the internet rather than companies, especially those debt debt.
Are very big and and maybe focus on protecting themselves more than the internet.
Can.
Can disrupt that even if it's just a speed bump, which I do think anything any single company does is just the speed bump because I don't think you can disrupt that quid pro quo of the internet and any long term.
And I respect the I guess, but I mean, it's apple and Google that are sort of controlling privacy policy I guess much more so than.
GDP or the CPA. So if we think about.
The fact that hashed emails, which is obviously the underlying.
The protocol of <unk> does.
And does not have.
And the ability to function because there are low consent rates doesn't debt.
Sort of mitigate your ability to drive scale with your <unk> effort.
So I guess I just disagree with the premise of the question that theres low consent rates.
Not the case and.
And I think some are maybe misapplying.
<unk>, the opt ins, which have numbers that have been shown all over the place. So it depends on who your sources are in terms of of.
Of.
Of what the opt in rates are in terms of <unk>.
What I predicted that long term.
People are going to opt in.
Especially for things like Facebook and Twitter and.
And these apps that have been Staples day will better explain the quid pro quo of the Internet and then consumers are going to opt in and in fact of it to our business as it relates to the idea of changes we have seen no material change and spend is the result of the IPF and changes and that's in part because of what I was saying before.
We have the ability to look at.
And at 12 million ads per second if you changed slightly which apps get consent and which don't.
But that opt in and continues to.
And to happen debt.
And then just choose from a different set of impressions, which ones are the most effective for our advertisers, but we've not seen any material change.
We do expect that we will continue to get consent.
The through our house E mail approach and through unified I'd.
Incidentally every one of the big Tech companies that you're talking about like Apple decided and my Apple IV two minutes before this call. It was based on and email address incidentally was based on the Gmail address.
And Google.
And there the footprint for providing targeted advertising are extremely dependent on E mail addresses one of the <unk>.
Reason that Gmail is such a valuable asset.
For Google.
So the idea that and email and email.
E Mail based approach to managing.
Consent and opt in and.
And privacy and somehow and question.
And those companies are leveraging the exact same approach or something very similar which is based on the email address.
I think.
Strong evidence.
There is a way to do it right and we're convinced that we're doing it right.
Thanks, Mark and Paul we have time for one more question.
Okay and final question will be coming from Tom White from D. A Davidson Tom Your line is last.
Great. Thanks for taking my question, maybe just to follow up on <unk> and then one on solar more Jeff you referenced <unk> ability to enable better cross channel measurement and attribution and what's available for cookies can you dig into.
And then we can kind of maybe quantify the benefit to efficacy or targeting and the maybe the extent to which that could act as a tailwind to spend and kind of of the initial.
Weeks or months of the transition and then just on solar market. How should we think about its impact of the business relative to say the next wave rollout, which seem to correspond to.
A nice spike and spend moving over to the platform.
Yeah.
Fantastic.
And I'm really glad you asked about the better cross channel measurement.
And.
It speaks to why one of the very first partners that we.
And when went public with with Nielsen.
Nielsen has been the gold standard of measurement and television for decades.
And.
And they of course recognize that the world is changing as it moves as TV moves to the internet.
And connected TV and that means that measurement has to change.
So they made very clear and our initial discussions that we need a currency of measurement for the open internet, which by the way of CTV is all open internet nearly all open internet and so it becomes extremely important that that gets measured.
And the ubiquitous.
Wei.
So.
And.
Unlike cookies, where theres constantly this the syncing, where youre trying to get one cookie I'd to match another one so.
The trade desk for instance would have cookie ABC that we then had to sync with Google.
B Cookie X y Z. So that we both understood that ABC and X y Z with the same so when Google's AD exchange sense of bid request, we could understand.
Have a common understanding of the user and whether that was based on our our IV are there and you didn't matter we had to have a common understanding of user.
By using a similar system that requires and both encryption as well as terms of service that makes it so that.
For instance, and the example, I just gave us of Nielsen and no longer have to do a bunch of thinking to have a common understanding of the user.
This makes measurement better and in places like TV, and where it's pretty fragmented and nobody has a large market share like there's nobody that has as much of the content on.
On television and as for instance, Facebook does and social.
Measuring the cross apps channels.
And platforms is more important and TV and arguably any other major channel and I would argue it's the most effective advertising channel it becomes really important to do that.
The second question that you asked about solar.
We're really excited this is the biggest for lease and the history of our company.
And just so much has gone into it.
And it comes with the redesigned U S again, which is very similar to the next wave as you pointed out greater ease of use were upgrading tower and and doing more and AI where.
Actually enabling a better measurement marketplace.
To the first part of your question, which is all about just improving the way that we.
<unk> it possible to compare the performance of one channel to another and one destination to another so not only can you compare for instance, Pandora Spotify and the efficacy of course, but you can also come.
Per Spotify to CBS NBC or.
Or hulu or Disney or ESPN.
And there is it enables the degree of comparison.
And measurement that has never really been offered before.
And and TV, so when we put all of that together and launched the.
And this summer.
I do think that it will be a game changer for the.
The advertising community and for our company.
Thank you I would now like to hand, the call back over to the trade desk for final remarks.
And thanks, everyone for joining I know, we ran a few minutes over the top of the hour, but again really good questions and I hope everyone appreciated the change of time.
Paul.
And the numbers on the call are much greater so we appreciate the feedback that we've received and look forward to speaking with everyone over the remainder of the quarter. So have a good afternoon, everyone and thanks everyone.
Thank you ladies and gentlemen, this does conclude today's conference you may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.