Q3 2021 Trade Desk Inc Earnings Call

November 8, 2021

Good morning, ladies and gentlemen, and welcome to the Trade Desk third quarter 2021 earnings conference call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation.

If you have a question or comment please press star one to join the queue. To withdraw, press star two. It is 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 third quarter 2021 earnings conference call. On the call today are 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 tradedesk.com in 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 may contain forward-looking statements, which are dependent upon certain risks and uncertainties in particular, our expectations around the impact the COVID-19 pandemic on our business and results of our operations. In addition to potential supply chain disruptions that could disrupt advertising spend are all subject to change. Should 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.

The COVID-19 pandemic on our business and results of our operations. In addition to potential supply chain disruptions that could disrupt advertising spend are all subject to change should 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. 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 in our earnings press release, we believe that providing non-GAAP 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. Jeff.

provides a more meaningful representation of the company's operational performance. I will now turn the call over to founder and CEO, Jeff Green. Jeff.

Thanks, Chris and thank you all for joining us today. I'm here in Europe this week meeting with some of our colleagues customers and partners. And I'm thrilled to be joining you from our recently reopened a London office. For Q3, I am pleased to report that the Trade Desk had another very strong quarter. Revenue was $301 million or 39% increase from a year ago. Once again exceeding our own expectations. Excluding political spend related to the US elections in Q3 of last year, our growth was about 47% from a year ago. This performance builds on our momentum year to date. I'd like to start by sharing five major highlights from this last quarter.

Q3, I am pleased to report that the trade desk had another very strong quarter revenue was $301 million or 39% increase from a year ago once again exceeding our own expectations.

Excluding political spend related to the U S elections in Q3 of last year, our growth was about 47% from a year ago. This performance builds on our momentum year to date I'd like to start by sharing five major highlights from this last quarter.

The first video, which excludes connected TV accounted for nearly 40% of our business, our highest ratio ever. And our CTV growth is not just here in the U S. Like last quarter CTV spend grew more rapidly in EMEA than any region in the world. In Q3, our international growth once again outpaced the domestic growth.

In Q3, our international growth once again outpaced the domestic growth.

A trend that we expect to continue over the long term. International expansion also continued at a strong pace. Third, the Walmart DSP recently launched which is of course built on top of the Trade Desk platform. It is early days, but we are starting to see test budgets from some of the largest brands in the world flow through the platform. And perhaps most exciting, these budgets are incremental. Fourth, unified ID continued its strong industry wide momentum and is reaching critical scale in the market.

These budgets are incremental.

Fourth unified I'd continued its strong industry wide momentum and is reaching critical scale in the market.

And fifth, our mobile business continues to be resilient as we predicted the most recent Iowa changes have had no material impact on our business. And we expect that to remain the case. With that, I'd like to give you our perspective on the state of the market and then get into a few ways in which we are innovating to drive growth in this market. I get asked every day about where this market is heading.

Every day about where this market is heading.

Because of the pandemic has changed everything. Because it has massively adjusted the media and tech landscape. It has accelerated the shift to CTV. It forced brand marketers to embrace data and has driven a higher focus on real-time agility for everyone in our industry.

I think this is an important backdrop to why we're doing so well and why our prospects are so bright for the future and why I'm so optimistic about the future of the open internet.

Just as a reminder, according to IDC. The total advertising market today is estimated to be at about $750 billion.

In just a few years that is estimated to exceed $1 trillion. And over time, I believe that nearly all advertising will be digital and nearly all of it will be executed programmatically.

And over time, I believe that nearly all advertising will be digital and nearly all of it will be executed programmatically.

As that shift happen, accelerated by the pandemic our commitment to the open Internet only intensified. Everything we do in terms of our investments are engineering priorities, our partnerships and our go to market model are designed to create a better internet. And we wanted to Internet is open privacy safe and competitive, not one that's just owned by a few companies.

And as we work to advance the open Internet, we have a level of support from AD agencies, advertisers industry bodies, TV content owners and the independent AD Tech that is unprecedented.

We never thought that our vision would be shared by so many companies outside of our own company.

More than ever companies and marketers are concerned about the internet being fair and competitive. And many of them are looking to us to help the internet reach its potential.

And many of them are looking to us to help the internet reach its potential.

It's also in that context that many people in recent weeks have asked about our response to the unredacted version of the antitrust complaint against Google filed by a multistate coalition led by the Texas Attorney General.

Of course, the majority of the complaint alleges among other things, that Google has engaged in unfair and anti competitive conduct using its market power built on top of DSP, which is Google's AD server product for publishers. I expect that Google will take steps to make the market fair given the scrutiny that they are under. While that would be a positive development for the industry as well as good for the Trade Desk.

It would be a positive development for the industry as well as good for the trade desk.

I want to remind everyone that we have been, we are and we expect to continue to do very well regardless of Google's policy choices. A very small percentage of our business runs through Google's AD exchange and we're not dependent on Google for our business.

A very small percentage of our business runs through Google's AD exchange and we're not dependent on Google for our business.

The bottom line for us is that the market will always ultimately gravitate to transparency and competition over time.

And we will continue to innovate to drive the industry in that direction and to deliver more value to our advertising customers. And if we get that right and I believe we are as you can see in our performance, we will grab more share of ad spend.

To that end I'm obsessed with the supply chain, the healthier and the supply chain the more competitive and transparent the open internet will be. Certainly in contrast to walled gardens.

Certainly in contrast to walled gardens.

Of course, we only serve the buy side and that will never change, but serving the buy side demand that we do our part working with the industry to make sure the supply chain is as efficient as possible. So that everyone in the ecosystem provides more value than they extract.

And we are innovating in the supply chain in ways that are not always obvious. In the last few months for example, we've been working with the supply side to further reduce the duplication of ad inventory.

Because publishers use multiple supply side platforms or SSP, we often have access to the same inventory from multiple sources. We've asked those SSPs to put in place a solution that identifies duplicative inventory.

We've asked those SSP to put in place a solution that identifies duplicative inventory.

So that we ensure bidding on the right impression at the right time, all the time. There has been overwhelming support and adoption for this approach as it increases the overall efficiency of supply chain.

There has been overwhelming support and adoption for this approach is that increases the overall efficiency of supply chain.

In the same vein I also want to address the future of identity for the open Internet. UAV is setting new benchmarks every week and every month. The growth is phenomenal.

UAV and setting new benchmarks every week and every month the growth is phenomenal.

As I've said before I've never seen the industry come together like this around a common agenda, collaborating on new technology that benefits all participants.

The daily Avails on our platform with UAV reached an all time high just last week, having broken record dozens of times through August, September and October.

The scale, we have been able to build in a relatively short amount of time has been outstanding and that's thanks to unprecedented industry wide commitment and collaboration.

Every one of the open Internet is aware that Google has announced that they intend to get rid of third-party cookies in 2023. I maintain that this is a strategic mistake for Google to do that, but their policy changes have created collaboration among the open internet that probably wouldn't have happened otherwise.

<unk>. This is a strategic mistake for Google to do that but there are policy changes have created collaboration among the open internet that probably wouldnt have happened otherwise when.

When fully implemented we believe UIV creates a better internet for consumers with higher standards for consumer privacy than anything possible with cookies.

And the momentum and adoption of UIV2 underscores that. Even some of the walled gardens are passing and encrypted version of UIV2 in their marketplaces and ecosystems.

Even some of the walled gardens are passing and encrypted version of <unk> in their marketplaces and ecosystems.

But one of the amazing new milestone is that many of the largest advertisers on our platform are now transacting on UIV2 or are in the process of implementing them.

As you would imagine some of these are among the biggest advertisers in the world and nearly all of the major AD agencies and holding companies like Omnicom, Publicis, IPG and even independent agencies like Horizon have also adopted UIV2.

And the case studies are just starting to roll in because of common currency makes it easier for our brand to use first-party data than cookies ever could. They are using that data more often and more safely. One early case study is with [made in]. [Made in] is one of the fastest growing cookware companies in the US. They are using UIV2, the new industry identity currency in their campaigns and seen amazing results.

To the new industry identity currency and their campaigns and seen amazing results.

They have seen a 20% improvement in cost per acquisition. Not just that but they're seeing their time to convert per user improved by 33% compared to when they don't use UIV2. That means they're driving campaign precision and putting their advertising dollars to work as hard as possible.

Not just that but they're seeing their time to convert per user improved by 33% compared to when they don't use <unk> that means theyre driving campaign precision and putting their advertising dollars to work as hard as possible.

As a reminder, UIV2 started with us but it belongs to the Internet today. It is open source and being used around the world and across many functions of the internet. From payments companies to cloud companies, to beverage companies, to agencies to exchanges.

UIV2 is making the open internet more effective. Meanwhile, CTV is expanding the open internet in new ways.

Meanwhile, CTV is expanding the open internet and new ways.

Since March of 2020, everything has changed about TV. The move to CTV over that time has been the fastest secular shift we've seen at the Trade Desk ever.

Before the pandemic, CTV was getting premium CPMs because of scarcity of [AVOD] inventory. Now [AVOD] inventory is growing rapidly and premiums required improvements in efficacy.

Now as inventory is growing rapidly and premiums required improvements in efficacy.

That means advertisers need and objective platform more than ever. A platform that does not own content or its own content channel. A platform that helped advertisers decide what to buy objectively, while managing reach and frequency.

Platform that helped advertisers decide what to buy objectively, while managing reach and frequency.

And that's a major reason so much CTV demand is gravitating to the Trade Desk. Lastly, concerning the state of global advertising market today.

Lastly concerning the state of global advertising market today.

Roughly two thirds of the total advertising market is outside of North America. That's why we invest so heavily in key growth markets globally. In recent months, we've established a presence in markets like India, Italy, and the Nordics and Taiwan.

That's why we invest so heavily in key growth markets globally. In recent months, we've established a presence in markets like India, Italy, and the Nordics and Taiwan.

And we're making very encouraging strides in every region, where we are located. To wrap up our perspective on the state of the market, I'd like to circle back to where this all started for us.

Very encouraging strides in every region, where we are located.

To wrap up our perspective on the state of the market I'd like to circle back to where this all started for us.

I believe digital advertising is still a relatively young industry. I got into this business initially because I thought there was a better way to price advertising, that we could build something like the stock market or the markets for commodity where there is transparency of information and mechanisms that drive efficiency.

Because these are the kinds of characteristics that any market demand, that any mature market creates overtime.

This approach remains central to our mission at the Trade Desk. We believe that an open competitive market for digital advertising is the only way that we build long-term trust of marketers. It's how we unlocked that one trillion dollar industry Tam the bulk of which will be digital.

But now given all the opportunities created for us in this fast changing landscape, I'd like to talk about a few things that are driving us to win more share during this unique moment in time. On 77 we launched the biggest upgrade to our system ever. In terms of adoption, we're exactly where we expect it to be.

707, we launched the biggest upgrade to our system ever in terms of adoption, we're exactly where we expect it to be.

The beginning of 2022, the majority of impressions on our platform will be bought via Solimar. Feedback from our customers has been very positive. They value of the platform's ease of use, the ability to be more granular and setting goals and how Solimar activates on those goals. Everything from campaign optimization to more meaningful measurement just as important the use of both precise goal setting and activation for first party data has increased the ability of our AI to better optimize every campaign with data. Our goal is for advertisers who activate Solimar to utilize more data per impression and achieve measurable improvement in return on AD spend. In doing so that helps the advertising flywheel spin much faster.

Feedback from our customers has been very positive the value of the platform's ease of use the ability to be more granular and setting goals and household Lamar activates on those tools everything from campaign optimization to more meaningful measurement just as important the use of both precise goal setting and activation for first party data.

has increased the ability of our AI to better optimize every campaign with data. Our goal is for advertisers who activate Solimar to utilize more data per impression and achieve measurable improvement in return on AD spend. In doing so that helps the advertising flywheel spin much faster.

We're also getting very positive feedback from industry analysts. Gartner just released their AD Tech magic quadrant for 2021. The Trade Desk continues to be a market leader, scoring highest for completeness of vision.

Gartner just released their AD Tech magic quadrant for 2021.

The trade desk continues to be a market leader, scoring highest for it.

Completeness of vision.

I have some more interesting, though Gartner measures all participants across four critical capabilities. The Trade Desk ranked number one for three of those, media planning, campaign piloting and campaign results analysis. Each of these are key elements of solar more when you consider that we're going up against some of the tech industry.

Its heaviest hitter, such as Google and Amazon, it's pretty remarkable to be leading the pack in these categories. And that's credit to our amazing engineering and product teams and the work that they put into Solimar.

It also speaks to the focus we have on customer service. We're always looking to provide more value than we extract. But I think what is perhaps less well understood is the role that Solimar is playing in driving innovation for our customers and for the industry. Solimar is allowing us to advance ideas and efficiencies that are benefiting the entire digital advertising ecosystem.

<unk> is allowing us to advance ideas and efficiencies that are benefiting the entire digital advertising ecosystem.

One of those areas is our measurement marketplace. Instead of only using our metrics, we've created an entire marketplace to measure success. Having this marketplace mix end to end measurement possible at unprecedented scale. And nowhere is this more apparent than in retail. You all know about the partnership with Walmart, which is now available to many of the world's largest advertisers.

We've created an entire marketplace to measure success having.

Having this marketplace mix end to end measurement possible at unprecedented scale.

And nowhere is this more apparent than in retail you all know about the partnership with Walmart, which is now available to many of the world's largest advertisers.

Major brands, such as PepsiCo are already active testing campaigns in the Walmart DSP Walmart is clearly a pioneer here what they are doing is unleashing their shopper data so that advertisers can understand the relationship between their advertising tactics and actual in store or e-commerce activity. We think about this a closing the loop for many of our largest CPG advertisers for example, the bulk of their products are still sold in physical stores.

the loop for many of our largest CPG advertisers for example, the bulk of their products are still sold in physical stores.

If they run an AD for toothpaste. They can now get a much better sense of how that actually drove sales. Thanks to in store shopper data. This means that advertisers can be much more precise and agile in everything they do at every stage of the advertising funnel.

Thanks to in store shopper data. This means that advertisers can be much more precise and agile in everything they do at every stage of the advertising funnel.

Advertisers can understand the impact of their campaigns at a micro level in a particular region of the store, or in different times of day.

Or or at different times of day.

You can also look at their impact across different channels, which ones are working and what kind of creative. But it's not just Walmart. We are now working with many of the major retailers in the United States and many more around the world.

But it's not just Walmart we are now working with many of the major retailers in the United States and many more around the world.

They will each approach it in their own way, but major retailers everywhere are looking to make the most of their own shopper data. So that they can provide the same kind of closed loop measurement via our platform to the buy side.

And they are joining forces with us because they trust us. They know we don't compete with them and they know they will retain control of their data.

When an operating system is upgraded, there were many upgrades to key features on Solimar. One of those features and pulp predictive clearing. What it means is that we use our data tools and our AI to predict the clearing price of first price auctions.

Advertisers can then bid as close to the winning price as possible without overpaying.

With Solimar's upgraded predictive clearing, we massively upgraded the product to use AI to help our customers save collectively tens of millions of dollars. That's because this upgrade allows us to be much more aggressive in bidding and budget management significantly lowering CPMs and increasing advertisers return on AD spend. We are seeing predictive clearing improvements, resulting in the reduction of CPM across the board of customers that have activated this feature thanks to the Solimar upgrade.

AD spend. We are seeing predictive clearing improvements, resulting in the reduction of CPM across the board of customers that have activated this feature thanks to the Solimar upgrade.

These kinds of efficiencies are important to all of our customers. But they are particularly attracted to the brand marketers who are increasingly paying attention to programmatic and to efficacy. One long term effects of the COVID pandemic is that there is more pressure than ever on brand marketers to show ROI for their marketing investment. And to show how their campaigns are driving business growth.

But they are particularly attracted to the brand marketers who are increasingly paying attention to programmatic and two efficacy one long term effects of the Covid pandemic is that there is more pressure than ever on brand marketers to show ROI for their marketing investment and to show how their campaigns are driving business growth.

As a result, brand marketers are putting a premium on data and measurability. And Solimar is proving to be tremendously beneficial here. One area where we're making a great deal of progress is new ways of thinking about the marketplace for data and how Solimar insurance we surface the right data at the right price.

And so Lamar is proving to be tremendously beneficial here, one area, where we're making a great deal of progress is new ways of thinking about the marketplace for data and how solid our insurers we surface the right data at the right price.

Of course, our customers have always use data to drive their campaign. But the market for that data has not always been efficient. Advertisers would have a sense of what kind of data they want to apply.

But the market for that data has not always been efficient.

Advertisers would have a sense of what kind of data they want to apply.

It adds grew AD group, our geolocation and they would go find the data for the campaigns in a fairly analogue way. With Solimar the process of finding the right data for each impression is way more automated.

We sold more of the process of finding the right data for each impression is way more automated.

Because of more first party data usage and more precise goal setting and Solimar, our AI tools automatically find the right data for each impression that our platform is hitting them.

What that also means though is that Solimar may surface many more points of data that are relevant and valuable to our campaign and its goals. If an advertiser has been using two or three data points yesterday, on Solimar they will be using more.

Advertiser has been using two or three data points yesterday on Soma, they will be using more.

As a result of more data, the AD impression is much more enriched, it's more valuable and precise and drive better return on ad spend.

Lastly, I would like to touch on is our continued growth in CTV. I spoke at an event a few weeks ago called media in Montana. Because of Covid. It was actually held in the 10th in Manhattan and a few of you may have actually been there. The event brought together many of the leaders of the media industry and there were some fascinating discussions around the future of TV.

Because of Covid. It was actually held in the 10th in Manhattan and a few of you may have actually been there.

The event brought together many of the leaders of the media industry and there were some fascinating discussions around the future of TV.

I noticed that when I commented, as I have before, that linear or cable TV is a ticking time bomb. And soon, everyone will consume content via CTV, there was much more agreement than in years past.

Assume everyone will consume content via CTV, there was much more agreement than in years past.

The notion that TV is moving to the Internet is not nearly as controversial as it was two years ago.

Certainly not lost on the industry COVID has accelerated the consumer shift to digital streaming platforms. I think perhaps what may be a little less appreciated is the scale, the speed and the permanent of that shift is happening fast.

In terms of scale, we've already reached the tipping point. Today, we reach more US household via CTV than via traditional linear TV.

<unk> via traditional linear TV.

But the points about speed was really driven home at the Ad week conference a couple weeks ago.

Our Chief revenue Officer, Tim Sims was onstage with brand leaders that Anheuser Busch, Volkswagen and Colgate Palmolive and unprompted those advertisers said they believe that the majority of TV advertising will be executed programmatically on CTV within three years.

It was a fascinating insight into the future of TV [that's worth] a replay if you want to understand where this industry is headed. Pre-pandemic, we have much longer sense of the time horizon for that kind of transformation, but changing consumer habits have accelerated everything. So that we have access to the best and broadest portfolio of premium CTV inventory, both here and around the world. Nowhere is that more apparent than in live sports.

A replay if you want to understand where this industry is headed.

Pre pandemic, we have much longer sense of the time horizon for that kind of transformation, but changing consumer habits have accelerated everything so that we have access to the best and broadest portfolio of premium CTV inventory, both here and around the world.

Nowhere is that more apparent than in live sports.

For a long time, many TV industry insiders felt that live sports would be the tentpole that would prop up linear TV, but once again consumers have voted and they are switching to digital platforms to watch their favorite teams.

We added the NBA League pass package from Turner sports to our CTV inventory lift this season. Viewership on this platform increased around 50% last season and their head of digital strategy Festival Ateste believes that digital viewers are much more leaned in to quote him directly.

Viewership on this platform increased around 50% last season and their head of digital strategy Festival Ateste believes that digital viewers are much more leaned in to quote him directly.

The digital audience, we see tends to be stickier. Because they're really seeking out the content, specifically there's deeper engagement versus someone sitting back on the couch and watching it.

They're really seeking out the content, specifically theres deeper engagement versus someone sitting back on the couch and watching it.

eMarketer estimates that there are almost 60 million digital sports viewers in the US right now rising to more than $90 million over the next three years. The notion that live sports will save linear television is fanciful.

Which is why so many broadcasters are pivoting rapidly. The number of impressions, we see for the NFL for example is up almost six fold this year. We're also very excited that we recently added Peacock, which in addition to amazing original content, also closed pretty widespread franchises such as the NFL, the English premier league and of course the Olympics.

and of course the Olympics.

As you can see from our results demand for CTV continues to outpace all other channels, both inside and outside North America. I don't see that trend changing for the foreseeable future. Video is the most effective way to reach consumers' hearts and minds and advertisers are following the television audience to new digital platforms. At the same time, content providers are working with us directly so that we have access to premium CTV inventory at scale.

Don't see that trend changing for the foreseeable future.

Video is the most effective way to reach consumers Hearts and minds and advertisers are following the television audience to new digital platforms. At the same time content providers are working with us directly so that we have access to premium CTV inventory at scale.

I'd like to wrap this up by bringing this back to the market opportunity. The total advertising industry is moving rapidly towards that one trillion dollars. The bulk of that will be digital and marketers are embracing data driven decisioning more aggressively than ever.

The total advertising industry is moving rapidly towards that one trillion the.

The bulk of that will be digital and marketers are embracing data driven decisioning more aggressively than ever.

Our long-term investments have positioned the company to capture this opportunity in the years ahead. Solimar is an innovation platform that is creating new value for advertisers because of how it unleashes data and drive greater return on ad spend. UIV2 is becoming a more widely used identity currency across the entire global open internet.

Innovation platform that is creating new value for advertisers because of how it unleashes data and drive greater return on ad spend.

<unk> is becoming a more widely used identity currency across the entire global open internet.

And we continue to invest so that we can lead in CTV. The fastest growing channel and digital advertising. Consumers are driving advertisers and TV content providers to rethink the future of TV and that's going to be data-driven.

The fastest growing channel and digital advertising consumers are driving advertisers and TV content providers to rethink the future of TV and that's going to be data driven.

These are our priorities because this is how we see the industry evolving. I hear the same things in every customer conversation that I have regardless of industry or geography.

And that's why more of the worlds, leading advertisers are standardizing on our platform and our retention rate remains over 95%. It's why the major holding companies are embracing new IGT. It's why Walmart is partnering with us as they unleash their retail data. It's why SSPs are working with us to optimize the supply chain. I could not be more excited about our growth prospects as we close out this year and head into 2022 and beyond. Now I'd like to turn the call over to Blake before moving to Q&A. Blake.

Why the major holding companies are embracing new IGT.

It's why Walmart is partnering with us as they unleash their retail data.

<unk> are working with us to optimize the supply chain I could not be more excited about our growth prospects as we close out this year and head into 2022 and beyond.

Now I'd like to turn the call over to Blake before moving to Q&A Blake.

Thank you, Jeff and good morning, everyone. As our financial performance in Q3 indicates, we continue to execute well in the current environment. Connected TV continues to be our fastest-growing channel at scale around the world. Solimar is ramping on plan. The Walmart DSP is now available and as we have consistently stated, we have seen no material impact on our business from the recent iOS platform changes.

As our financial performance in Q3 indicates we continue to execute well in the current environment.

<unk> TV continues to be our fastest growing channel at scale around the world solo Mara is ramping on plan. The Walmart DSP is now available and as we have consistently stated we have seen no material impact on our business from the recent iOS platform changes.

The value of our business model being the largest independent DSP focused on the open Internet continues to resonate strongly with our customers and has allowed us to build trust over the long term.

Our appeal is the simplicity of our partnership. We focus exclusively on the buy side, hunting for the impression opportunities that are the most valuable for our customers without the conflicts of owning inventory when we deliver value for customers on the campaign. They almost always returned for future ones, which has led to a retention rate of over 95% across the previous seven years.

5% across the previous seven years.

Q3 was an incredibly strong quarter and a testament to our belief that advertisers are accelerating their shift to data driven advertising in 2021 revenue.

Revenue of $301 million was up 39% from a year ago, excluding political spend related to the US elections last year, which represented a mid single digit percentage share of our business in Q3 of 2020 revenue increased approximately 47% year over year.

During the quarter, we benefited from continued growth in the digital advertising environment from both agencies and brands. Our performance in Q3 was broad based across all channels regions and nearly all verticals.

We continue to grow our top line quickly while scaling our cost structure efficiently, helping drive meaningfully positive EBITDA in Q3, we generated 123 million in adjusted EBITDA or about 41% of revenue.

During the quarter, our EBIT continued to benefit from temporarily lower than expected operating expenses, partly driven by the virtual environment. This includes items such as travel and life company events that are very gradually starting to return to our cost structure.

From a scaled channel perspective CTV by a wide margin led our growth again during the quarter exiting Q3 video, which includes CTV and separately mobile represented just about 40% each as a percentage share of our business.

Video, as a percent of our mix, specifically continued to grow rapidly. Similar to last quarter. The increase in video was driven by CTV. Display and audio represented about 15% and 5% of our business respectively.

Similar to last quarter. The increase in video was driven by CTV display and audio represented about 15% and 5% of our business respectively.

Geographically, North America represented 88% and international represented 12% of our business for the quarter.

APAC led our growth across all regions this quarter. Shanghai, and Hong Kong drove spend growth in northern APAC, and Australia, and Indonesia led our growth in southern APAC. In terms of EMEA, London led the way nearly doubling year over year in Q3.

As Jeff highlighted, CTV across EMEA was again very strong growing faster than any other region in Q3. CTV continues to rapidly increase its relative share of spend in Europe.

CTV continues to rapidly increase its relative share of spend in Europe.

While still small compared to the share of CTV spend produced in North America. We are optimistic about the trends we are seeing that set us up well for next year.

In terms of the verticals that represent at least 1% of our spend nearly all of them grew very nicely during the quarter travel. Travel, shopping and home and garden were the strongest performers in Q3.

Travel shopping and home and garden were the strongest performers in Q3.

We believe there is still the potential for share gains and improvement in most of our verticals. Operating expenses were 221 million in Q3 up 27% year over year.

Operating expenses were 221 million in Q3 up 27% year over year.

The growth in operating expenses during the quarter were primarily driven by investments in our team, particularly in areas like technology and development and sales and marketing. It is these areas that drive our business as we continue to scale for longer term growth.

During the quarter, we saw encouraging leverage from both our platform operations and G&A expenses, as we scaled the business. Stock-based compensation expense increased 28% year over year.

Stock based compensation expense increased 28% year over year.

As expected this marked a sharp deceleration from the first half of the year as expenses related to the company's employee stock purchase plan moderated significantly.

Income tax was approximately $20 million for the quarter, representing a tax rate of about 25%. Adjusted net income for the quarter was $89 million or 18 cents per fully diluted share.

Adjusted net income for the quarter was $89 million or <unk> 18 per fully diluted share.

Net cash provided by operating activities was $130 million and free cash flow was $103 million in Q3. Our strong cash generation during the quarter was driven predominantly by our operating results.

Our strong cash generation during the quarter was driven predominantly by our operating results.

I would like to remind you that the timing of cash collections and payments can significantly impact cash from operating activities and free cash flow results on a quarterly basis.

DSOs exiting Q3 were 87 days, down 14 days from a year ago. DTOs were 73 days, down nine days from a year ago. We exited Q3 with a strong cash and liquidity position.

We exited Q3 with a strong cash and liquidity position.

Our balance sheet had $799 million in cash cash equivalents and short term investments at the end of the quarter, we have no debt on the balance sheet.

Turning to our outlook for the fourth quarter, we estimate Q4 revenue to be at least $388 million, which would represent growth of 21% on a year over year basis.

Excluding US political elections spend which represented a high single-digit percent of spend that we benefited from in Q4 of 2020, our estimated growth rate in Q4 this year would be about 33% on a year over year basis.

We estimate adjusted EBITDA to be approximately $175 million in Q4. Finally, we anticipate our stock based compensation to rise in Q4 from our normal run rate.

Finally, we anticipate our stock based compensation to rise in Q4 from our normal run rate.

This is being driven by approximately $95 million of incremental stock based compensation expense. We expect to include in Q4 related to a long-term CEO performance Award granted on October 6th.

The performance option has a grant date fair value of $819 million in stock based compensation, which is expected to be included in our G&A expense over approximately five years.

The total amount of expenses unrelated to whether any of the performance award thresholds are ever match. Only shares that have met the threshold criteria outlined in the performance plan are factored into our total shares outstanding.

Only shares that have met the threshold criteria outlined in the performance plan are factored into our total shares outstanding.

In closing, we are pleased with the momentum of our business with large growth drivers such as CTV, our international business, our shopper marketing opportunity, which just kicked off with the Walmart DSP a few weeks ago, and our recent platform upgrade in Solimar. We remain highly optimistic about the long term prospects for our business in 2022 and beyond. I believe we have the structure in place to continue driving long-term growth, while scaling our business efficiently and I'm cautiously optimistic about continued improvement in the future. That concludes our prepared remarks, and with that operator, let's open up the call for questions.

In 2022 and beyond.

I believe we have the structure in place to continue driving long term growth, while scaling our business efficiently and I'm cautiously optimistic about continued improvement in the future.

That concludes our prepared remarks, and with that operator, let's open up the call for questions.

Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. If you wish to withdraw your question you may press star two. We do ask that if you were listening on speakerphone. Please pick up your handset for optimum sound quality. Please hold for just a moment, while we poll for questions. And our first question today is coming from Sean Patel. Your line is live, you may begin.

Wish to withdraw your question you May press Star Q, we do ask that if you were listening on speakerphone. Please pick up your handset for optimum sound quality. Please hold for just a moment, while we poll for questions.

And our first question today is coming from Sean Patel.

Your line is live you may begin.

Hey, guys congrats on the results. I had a couple of questions. First one for Jeff, you guys reported a great 3Q, 4Q outlook when a lot of your peers are struggling and call that macro issues. I wanted to ask a question about next year just at a high level.

I had a couple of questions.

First one for <unk>.

Jeff you guys reported a great <unk> outlook when a lot of your peers are struggling and call that macro issues.

I wanted to ask a question about about next year just at a high level.

Can you just talk about how you view the setup and the key drivers as you head into next year? I know you touched on a lot of them in your prepared remarks, but just asking in the context that next year. I know you guys add CTD shopper marketing international, Solimar, political.

And then second one for Blake. I know you guys haven't given specific guidance for next year, yet, but could you just talk a little bit about how you're thinking about revenue seasonality next year? Given that the past couple of years, maybe having a little bit abnormal just how you think about revenue seasonality next year.

And then second one for Blake I.

I know you guys haven't given specific guidance for next year, yet, but could you just talk a little bit about how you're thinking about revenue seasonality next year.

Given that the past couple of years, maybe having a little bit abnormal just how you think about revenue seasonality next year.

And then I guess, specifically 1Q revenue tends to be down about 25, 26% sequentially. Is that a reasonable assumption at this point? Thanks, guys.

A reasonable assumption at this point thanks, guys.

You bet so. First of all, Sean. Thank you for wishing us congratulations as well as just the question. I'm really excited about 2002, I don't know that I've gone into a year more excited than I am going into '22. A part of that's because of things that are happening outside of our control. So the first is the regulatory environment is actually a really net positive. So if Google and Facebook are a little bit more controlled or making it hard for us to make more deliberate decisions or what's even more likely is that they would go a little bit slower. That's a net positive for us given how much they've gained share over the years. Of course, due to changes in iOS, and lots of discussion this earnings season about supply chain challenges, we don't see any material impact from iOS, and we don't see any material impact from supply chain so given that.

First of all Sean Thank you.

Wishing us congratulations as well as just the question Im really excited about 2002, I don't know that Ive gone into a year more excited than I am going into 'twenty two.

Part of that's because of things that are happening outside of our control. So the first is.

the regulatory environment is actually a really net positive. So if Google and Facebook are a little bit more controlled or making it hard for us to make more deliberate decisions or what's even more likely is that they would go a little bit slower. That's a net positive for us given how much they've gained share over the years. Of course, due to changes in iOS, and lots of discussion this earnings season about supply chain challenges, we don't see any material impact from iOS, and we don't see any material impact from supply chain so given that.

The regulatory environment is actually a really net positive so Google and Facebook are.

A little bit more controlled or making it hard for us to make more deliberate decisions or what's even more likely that they would go a little bit slower.

That's a net positive for us given how much they've gained share over the years.

Of course things outside of us to change.

Changes in Iowa, and lots of discussion this earnings season about.

Supply chain challenges, we don't see any material impact from Iowa, and we don't see any material impact from supply chain so given that.

It makes me even more excited about the things that are going really well. So first of all we're consistently grabbing share, constantly getting more than the space is growing.

It makes me even more excited about the things that are going really well. So first of all we're consistently grabbing share.

Constantly getting more than the <unk>. The space is growing.

The space is growing.

Second, we've never seen what's happening in CTV happened in any channel ever before. And I don't know that we'll ever see something like that happen again, but cord cutting accelerating I mentioned that cable subscriptions are a bit of a ticking time bomb if that weren't enough. There's also subscription fatigue in live sports returning.

Cable subscriptions are a bit of a ticking time bomb if that weren't enough. There's also subscription fatigue in live sports returning.

Upfront last year were a little bit of a struggle, we anticipate that that's going to create more and more opportunity for CTV and spot market, which is always programmatic. And then here right now I'm in London, just what's happening here in the UK as well as across EMEA and CTV is incredibly bullish. Then across the world and international CTV is growing faster than in the United States.

The struggle, we anticipate that that's going to create more and more opportunity for CTV.

Spot market, which is always programmatic and then here right now.

London, just what's happening here in the U K as well as across EMEA and CTV is incredibly bullish.

Then.

Across the World and international the Tam in CTV is growing faster than in the United States.

If that's not enough shopper marketing is going incredibly well, we just went live with the largest retailer in the world, which is creating closed loop measurement and that's the first of what I predict to be many to come like this in '22. We have mid term election, which we think, there's been some forecasts that basically the spend in digital will be the same as the presidential election year.

I predicted to be many to come like this in 'twenty. Two we have mid term election, which we think.

Yes.

Ben some forecasts.

that basically the spend in digital will be the same as the presidential election year.

So we think that macro estimation is is good for us as well. And then we just shipped a new product in Solimar. So that's going incredibly well. I'm sure we'll talk more about. And then UIV is just going incredibly well so everything is going great just give 30 seconds on the seasonality before. In general, the market was heading towards digital being always on. So there's less of a ramp in a difference between Q1 to Q4, where there was this ramp that was caused by seasonality. It's just an always on mindset inside of digital which changes everything.

I'm sure we'll talk more about.

And then you I E just going incredibly well so everything is going great just give 30 seconds on the seasonality before.

Like the answer.

In general.

The market was heading towards digital being always on so there's less of a ramp in a difference between Q1 to Q4, where there was this ramp that was caused by seasonality.

It's just an always on mindset inside of digital which is.

It changes everything.

But before 2020, we were heading sort of toward what we predicted to be 45, 55. where 45% of the spend is in the first half of the year and 55% is in the back half of the year. It's really important to note that 2020 because of the global pandemic changed all of that. It's such an anomaly. 2021 is a little bit more normal but both of those are anomalies given just all the changes in the world. And we expect '22 to be a bit more normal, but I'm sure Blake has more to say about that.

45% of the spend is in the first half of the year and 55% is in the back half of the year, It's really important to note that 2020 because of the global pandemic.

Changed all of that it's such an anomaly 2021 is a little bit more normal but both of those are anomalies given just all the changes in the world and we expect 22 to be a bit more normal, but im sure Blake has more to say about that.

Sure. Thanks, Jeff. Yeah, just to reiterate what Jeff said. I think the sequential growth seasonality, it's obviously changed a bit over the last 18 months or so during dealing with the impacts of COVID. I do believe were seeming to move closer back to that normal historic seasonality trend, but you know, it's still a little bit early difficult. Difficult to say exactly where the new normal seasonality ends up but it does feel like we're getting back on that more normal historical trends.

Difficult to say exactly where the new normal seasonality ends up but it does feel like we're getting back on that more normal historical trends.

Got it thank you guys. Thanks, John Thank you. Our next question is coming from Vasili Chrystia at Cannonball Research. Your line is live, you may begin.

Thanks, John Thank you.

Our next question is coming from Vasili Chrystia at Cannonball Research. Your line is live you may begin.

Are you there, Vasili? Hello, I'm sorry. Can you hear me? Yes.

They're drilling.

Hello, I'm sorry.

Can you hear me.

Yes.

Okay, Jeff, I wanted to ask you to go into more detail about what you're seeing after Walmart DSP went live. What what kind of additional color on takeaways you have now? And how does that inform your view of the size of the opportunity for the company? And then are you having any discussions without the retail. So if you could give us some update on that would be great.

What youre seeing after Wal Mart DSP went live what what kind of additional color on takeaways you have now.

And.

How does that inform your view of the size of the opportunity for the company and then are you having any discussions without the retail. So if you could give us some update.

So on that would be great.

Also your view on how material of an opportunity is the closed loop measurement can be for the Trade Desk and we were getting important business line or if it's going to be just a nice incremental revenue.

Just an incremental nice incremental revenue.

Yeah. Thanks for the question. As it relates to the Walmart DSP so it's always best to start with the very biggest in the world, it's just a phenomenon that we were able to create that partnership and closing the loop with the biggest retailer in the world.

As it relates to the Walmart DSP so.

It's always best to start with the very biggest in the world just a phenomenon that we were able to create that partnership and closing the loop with the biggest retailer in the world.

But we're only a couple of weeks in so of course, all we're looking at is green shoots and the potential is ahead of us. That potential is obviously massive with shopper marketing being a $200 billion industry.

All we're looking at is green shoots and the potential.

Is ahead of us that potential is obviously massive with shopper marketing being a $200 billion industry.

When you look at what we're doing in spend and revenue that's interesting tiny tiny percentage of our entire company. It is a tiny percentage of that shopper marketing Tam.

Our entire company is a tiny percentage of that shopper marketing Tam.

We think we're as eligible as anybody for that and that to me is the real hope of the shopper marketing and what we're demonstrating here with Walmart. Because still especially in the United States, most purchases are still made offline. The fact that most of the advertising spend is online there is this deep need to bridge the gap. To connect the dots between those two.

To bridge the gap.

To connect the dots between those two.

And what has been happening over the years is that retailers like Walmart have tried to monetize their data by creating what we used to call AD networks, which are these little silos, whether they would sell their data on their own.

What we used to call AD networks, which are these little silos, whether they would sell their data on their own.

To me the most exciting thing is that retailers are recognizing that in order to compete with Amazon. They have to put their data to work in a much bigger way. And that is to close the loop so that instead of getting $10 million from one of the biggest brands in the world, they spend billions to instead get those big CPGs or soda companies or whatever optimized spending their billions to selling products inside of those brick and mortar stores.

$10 million from one of the biggest brands in the world.

Spent billions too.

instead get those big CPGs or soda companies or whatever optimized spending their billions to selling products inside of those brick and mortar stores.

Optimized spending their billions to selling products inside of those brick and mortar stores.

Or even in their e-commerce efforts, so that they're measuring all of their marketing spend success by how they sell product in those stores. So for the first time ever I believe the retailers and the product owners are aligned in what they want which is something much much bigger.

So because Walmart the biggest has gone first. Is not a surprise that all other retailers all over the world are saying we need to execute the same playbook and we need to do more.

Is not a surprise.

All other retailers all over the world are saying, we need to execute the same playbook and we need to do more.

We're talking to dozens of retailers, all the names I suspect that you would predict.

And when you look at that in totality. It is definitely one of the most bullish things that we're working on right now and I'm really encouraged, excited and proud to be Walmart partner. But I'm just equally excited about all the partnerships ahead for us.

Cited and proud to be Walmart partner.

But I'm just equally excited about all the partnerships ahead for us.

And for Us.

Thank you. Thank you. Our next question today is coming from Tim Nolan at Macquarie. Your line is live, you may begin.

Thank you. Our next question today is coming from Tim Nolan at Macquarie. Your line is live you may begin.

Thanks a lot Jeff. I wanted to ask how the Solimar rollout is going and maybe how that goes if it's a matter of converting existing users to this new platform or just basically how you're progressing with that.

To ask how the <unk> rollout is going and maybe how that goes if it's a matter of converting existing users to this new platform or just basically how you're progressing with that.

And relatedly as part of Solimar, you've talked about the data and the measurement marketplaces.

I think I understand and principal how a data marketplace might work, I think you described that. But how does the measurement marketplace actually work? What does that mean? I guess you use a UIV2.0 means of identifying users, but what are the sorts of measurement are you including in that? And how does the marketplace works?

It means of identifying users, but what are the sorts of measurement.

Are you, including in that and how does the marketplace works.

You bet. First let me just say. We launched this product on 77. And so we're only and that's about four months. The reception, especially given that it was our biggest release in the history of the company has been unbelievably strong. And it's relearning a new platform.

First let me just say.

We launched this product on 77.

And so we've only we're only and that's about four months.

The reception, especially given that it was our biggest release in the history of the company has been unbelievable unbelievably strong.

<unk> re learning a new platform.

When you are relearning, especially in a year that's been as busy as this one and especially with the talent shortages that exist inside of AD agencies and even brands.

And even to some extent across tech. That has made it so that training on something new it takes more work. And you really have to entice people to do so. It's a commentary on how strong the product is.

That has made it so that.

Training on something new it takes more work and you really have to entice people to do so it's a commentary on how strong the product is.

That we are on track to have the majority of our impressions bought on a new product by the beginning of next year.

Now I'd like next week that should take one to one and half years to go from zero to 100% and it always starts with sort of enticing or more seductive phase, where we're just trying to entice them to move over. And then the stragglers or is there some amount that you always just have to put a new one on. And you have got a lot of confidence in order to do that in order to push people to do it.

More seductive phase, where we're just trying to entice them to move over and then the stragglers or is there. Some amount that you always just have to put a new one on and you have got a lot of confidence in order to do that in order to push people to do it.

And we're getting closer to that, much closer to that just based on how strong the reception has been from the majority of our clients.

As it relates to the data marketplace and the measurement marketplace.

So there's been a whole bunch of inefficiencies in the way that we price data and when I say we I mean, the entire AD tech industry.

So the way that we price data, especially third-party data has been bad, the way that we selected paper data has been bad. And it's largely because there hasn't been a good way to find the data.

Third party data has been bad the way that we selected paper data has been bad.

And it's largely because there hasnt been a good way to find the data.

And so because of unified I'd and because of all the tools that we built in Solimar to make onboarding a brand's first party data easier. Now it makes it easy for them to discover which data they should be buying. So it's a little bit like if you're on Netflix and you've never watched anything before, Netflix has nothing to recommend for you. That's where we're in the data ecosystem five years ago. Now that everybody has watched a lot of shows if you will they would use more data, our recommendation for what they should be buying is better than any recommendation engine for data I think ever anywhere.

we're in the data ecosystem five years ago. Now that everybody has watched a lot of shows if you will they would use more data on a recommendation for what they should be buying is better than any recommendation engine for data I think ever anywhere.

So that makes it possible for us to have the most robust third party data ecosystem. As it relates to the measurement marketplace. It's highly related to what we're talking about with Walmart. Where instead of doing what the walled gardens have done and once again, it's really important that the way that we win against a walled garden admin, especially the way you win in CTV is not to play the game that way the walled gardens have been playing, which is to grade your own homework. We want to make it possible for other people to determine what success looks like and the brand then has an opportunity in a marketplace to say this is the way that I want a grade my success.

We're.

Instead of doing what the walled gardens have done and once again, it's really important that the way that we win against a wildcard admin, especially the way you win in CTV is not to play the game that way the walled gardens have been plane, which is great.

Grade your own homework, we want to make it possible for other people.

<unk> determined what success looks like and the brand then has an opportunity in a marketplace to say.

this is the way that I want a grade my success.

So for instance, today using the Walmart DSP, that's built on top of our platform. They can decide to determine success is when I sell a product inside of a Walmart store.

Inside of a Walmart store.

And then I can use that as a proxy for how I spend money on ads across everywhere else in the ecosystem. So whether that's leveraging Walmart data or not that makes choices around reach and frequency and a whole bunch of other thing way better. But then we also have the benefit of saying we didn't determined success and we didn't write our own homework.

Money on ads across everywhere else in the ecosystem.

So whether that's leveraging <unk>.

Walmart data or not that makes.

Choices around reach and frequency and a whole bunch of other thing way better. But then we also have the benefit of saying we didn't determined success and we didnt write our own homework we.

We were just trying to do the right thing leveraging the dataset of other companies that were selected by the brands and agencies themselves, instead of us just doing it on our own. You put all of those together while it takes some work to integrate all of that win hearts and minds and develop an open internet.

That is way more sophisticated than the one of the past. It is a way better internet than one that's just held hostage or captive by walled garden.

Thanks, Tim.

Thank you. Our next question today is coming from Youssef Squali at true Securities. Your line is live you may begin.

Great. Thank you very much, so hey, guys. Congrats on a really strong performance there. So two questions for me. One, Jeff could you maybe speak to the level of adoption of USD two that are particularly by brands? You've done a great job, bringing on a lot of AD Tech partners, but you gave the example of made in which was super helpful. Thank you, but what are the gating factors to you guys bring on a lot more brands over time, which clearly is to the Holy Grail. And then on 2022 just at a high level kind of what's the setup for connected TV beyond some of the color that you've given particularly I'm thinking about accelerating adoption in Europe? If you can maybe just quantify and in Asia in particular, any if you can update us on where you think current penetration of connected TV stands in US versus Europe versus rest of world. That would be super helpful. Thank you.

Performance there so two questions for me one Jeff could you maybe speak to the level of adoption of USD two that are particularly by brands you've done a great job, bringing on a lot of AD Tech partners, but you.

You gave the example of made in which was super helpful. Thank you, but what are the gating factors to you guys bring on a lot more brands over time, which clearly is to.

The Holy Grail, and then on 2022 just at a high level kind of what's the setup for connected TV beyond some of the color that you've given particularly I'm thinking about accelerating.

Accelerating adoption in Europe, if you can maybe just quantify and in Asia in particular, any if you can update us on where you think current penetration of connected TV.

Stands in U S versus Europe versus rest of world that would be super helpful. Thank you.

So as it relates to the scale of UIV. So we have produced hundreds of millions of unique users inside of UIV. And the growth rates are breaking records seemingly every week I think we mentioned in the prepared remarks.

So.

No.

As it relates to the scale of UAV. So.

We have produce hundreds of millions of unique users inside of <unk>.

And the growth rates are breaking records every seemingly every week I think we mentioned in the prepared remarks.

I think we broke a record something like 12 times in the quarter and just every week feels like we're hitting a new watermark and getting more and more users. So the month over month games being in triple digits, while we're talking about billions of unified [IVs].

Games being in triple digits, while we're talking about billions of unified I'd.

It's just unbelievable and as I've said before the momentum around this initiative, there's nothing I've ever seen like it. The collaboration is phenomenal. The fact that we're collaborating with competitors across the board is fantastic.

Factset, even walled gardens are creating paths.

Past history, Paul it's encrypted and they may not necessarily consume it they are supporting customers. So that they can use it if they want to and then you've got infrastructure plays like snowflake adopting it that's of course.

Not necessarily because they share the same vision or have the same concern about an open internet that we do but it is because having a currency that makes it so they can activate data improve their value proposition.

You look at whether it's them or a library and for Nielsen.

All the companies, including all the agencies with all of the data products that.

Data companies that they bought.

That's making them interoperable has just created a tremendous amount of momentum you are right to point out that.

We're entering the phase, where it's really important for advertisers and publishers to adopt it.

What's fantastic with the case studies like the one we mentioned for made in is that we are proving the lift.

So advertisers now know that if they onboard their first party data using unified I'd.

They will get better results it doesn't take long for other advertisers and say Oh, Wow I need to do that too and if that weren't enough at the current margin up there as the stick that is in 2023 third party cookies are expected to go away.

These sorts of initiatives are the only way that they can put data to work.

So with all of that it's similar to my opening remarks on just all of the secular tailwind as well as all the ways that we're operating to gamble to grab land.

It's a very similar phenomenon with <unk>, there's a bunch of external forces that are pushing people to use this and then there's a bunch of benefits and a bunch of things that we've created and the product itself.

Get us in that direction I do want to underline that with unified I'd.

This is not a trade desk initiative any more while we may have instigated that we've open sourced it we have lots of other companies, including other DSP, but are using it. This is bigger than us. This is something that we wanted to create as a currency to raise all boats recognizing that the collective open inner.

That would be better for it that even consumers will be better for it and arguably especially consumers will be better for us because they'll have more centralized controls that they can take with them and they won't just be managing privacy settings from one wildcard into the net and especially when you only do that on a device that means that.

Consumers will be forced to manage their privacy and a double digit number of places and very few understand or can coordinate well enough to do that well this will really create a better internet for the consumer.

On the second part of your question on expanding CTV to the rest of the world. So we've started with some phenomenal partnerships all over the world and I'm really excited about some of those things that we talked about.

During the prepared remarks, one that I just want to underline.

We have an expanded relationship with peacock.

And Youll remember that Peacock has rights the NHL has rights to the NFL has.

Rights to the Olympics and of course here in the U K to the English Premier League to say nothing of the other $31 billion of content that they have.

So doing more partnerships like that with content owners all over the world is the most important theme that we can continue to do because.

And most of the major markets, we already have a starting point that is really strong not dissimilar from what we did in retail where we started with the biggest.

We've done very similar things like that in CTV all around the world. We just have to keep doing more of it.

Thanks, Steve.

Thank you. Our next question today is coming from Justin Patterson at Keybanc. Your line is live you may begin.

Great. Thank you.

Jeff you're crossing the $1 billion in revenue level. This year and there is clearly strong retention characteristics with this model.

What does the company to do to get to $2 billion or even $5 billion in revenue over the next few years and then as a follow up to that perhaps you could expand on the supply chain efficiency initiatives Youre working on and really how that can create opportunities for you going forward. Thank you.

You bet.

Thanks for the question.

This.

This might be the most important question for us as a company.

I'm always reminded of the locker seen at the end of the movie Hoosiers.

They're talking about how do we win this game.

Smaller team from a smaller town competing with with teams that are much bigger than them in every way.

It's not dissimilar from what we're doing with some of the biggest companies in tech.

The history of the World.

And the way I'd look at it as we cannot lose sight, just like that locker room speech in that movie.

Ignore the fan ignore.

All the outside.

Horses, and just play your game do it the right way and this is essentially the same thing on saying to our team over and over again.

We just stick to what we do really well we continue to win in CTV. We continue to service our customers. The way we have we focus on the buy side. The way that we always have we tried to make the supply chain more efficient we add more value than we extract if we keep doing all the same things that we've done for the last 10 plus years.

I think we're going to get from 1% to 5 billion.

Ahead of anybody else playing the same game. So this is one of those.

Not about us trying to exploit the weaknesses of other companies. This is about us just focusing on fundamentals protecting our culture and continuing to build test the way that we have.

Focus on recruiting the best talent.

And if we do that we'll be successful. So that's number one number two I would say is we have to win in CTV.

So.

The good news is in CTV that that market around the world is perfectly fragmented.

Not broken into so many pieces that you have to aggregate millions the way you would have to and websites or apps.

We do gravitate to markets and those have been very good to us.

But there is a way for us to integrate almost directly and create a more efficient supply chain and CTV more easily than we can in the rest of it.

And then of course outside the United States. So we've been investing outside the United States.

Heavily for a long time, where our employees are our third.

All of our employee base outside the U S. While our revenue is low teens.

And that differential is because we are investing ahead most of the open internet competitors cannot afford to make those investments the way that we have which is why we continue to win share.

Doing more and more to invest in those and we're going to get better.

Need more aggressively and growing more quickly there as the open Internet led by CTV continues to move in our direction as it relates to the supply chain.

I should mention Google a little bit here because.

As we mentioned in the prepared remarks.

There has been just a lot of discussion around.

The complaint led by the Texas Attorney General Office I, just want to reiterate our strategy has always been to compete.

And prepare for the market to be stair uncompetitive.

We expect that and take that market always trend towards fair and competitive.

And to whatever extent that the market currently is both inefficient and not competitive we think it's going to move in that direction. It has already been moving in that direction at a macro level in the sense that.

Google's AD exchange used to be the very biggest exchange, it's not for us anymore, it's not for the industry anymore.

While they have really strong market share in DSP itself as it relates to their AD exchange that's all for me.

And literally we plugged in the hundreds of them all over the world.

So as a result, I believe Google need us more than ever.

And we are going to succeed regardless of any policy decisions that Google mix or not.

Okay.

Thank you. Our next question today is coming from Laura Martin Needham. Your line is live you may begin.

Hi, guys great results.

Maybe one.

For you Jonathan that one for you like so.

On the shopper marketing, which Walmart.

He said that Walmart has started and you're negotiating with a lot of other people to join how big.

This closing the loop feels like it is best practice. They do you feel just closing the loop kind of shopper marketing could be bigger than your core business today at maturity. That's the one for you and then Blake you were very careful to say the word nearly all verticals.

Grew in the quarter, so I'm really intrigued by what did it grow in the quarter and what percent of digital AD revenue would that represent as it starts to return inevitably in 2022. Thanks guys.

You bet.

I think over time, the same way that I've looked at it.

Actually let me back up.

I am constantly looking at the trillion dollar Tam that is traditional advertising and just looking at all the different ways to slice that.

For instance, the fact that two thirds of that pie is outside the United States as part of the reason why we've just been obsessive about.

Growing our business outside the United States.

And we've invested ahead and we are ahead in lots of markets.

Markets like India, which have huge potential in China, which is our fastest growing office in the world.

All of our expansions that we highlighted in places like.

Italy in Taiwan.

All of these are because we see growth potential to get to that other two thirds of the pie and we'd be silly to only FERC only focus on one third of the pie.

Shopper marketing and incremental to that not all of that is captured in that one trillion, but it collectively it's about a $200 billion Tam so that is incremental.

Instead, I expect that to be.

Our share to be in.

In as.

As a percentage similar to our percentage of the one trillion dollars part.

And so I don't expect it to ever surpass our business, we might win more than our share in that particular Tam just because of closing the loop is the Holy Grail and because I think we're in a great position to continue to partner across all of retail.

But I do think that our core business and the theme that we've been working at for the last 10 years, we will always be the lion's share of our spend but we merely scratched the surface in both categories. So it's a little early to tell because we're just we're just a tiny tiny.

First of all we're yet to the company.

And then I'll follow up Jeff on the second question, Laura with regards to the verticals.

Obviously, one that.

Showed pressure on a year over year basis. This quarter was the politics. So obviously you know that vertical.

Super High last year because of the elections and so you obviously see some pressure there I would say the only other one that to call out and it's and it's not a significant share of our mix, we do see some volatility in the family and parenting vertical a bit and so it was a little bit lower than normal for Q3, but nothing nothing of major concern.

And for Us and so those are the ones that.

That move around that that we see and then there's others. Obviously stood that we believe there is opportunity.

Still remaining but political as the large NEC.

Negative year over year in Q3, which is expected.

Thanks very much congratulations.

Thanks, Laura.

Okay.

Thank you. Our next question today is coming from Mark <unk> at.

At Rosenblatt Securities. Your line is live you may begin.

Thank you just a couple on you I D. Geoff you mentioned USD two daily deals are now in the billions.

I was wondering if you could share what percentage of the media that you've sold year to date was resolvable to close the bills.

And what you expect that media mix to trend to in the first half of next year and then I just had a quick follow up thanks.

Yes.

So.

Yes.

As it relates to smooth out the entire media chain.

There's still a lot of work to be done for it to be present from publishers to every link in the chain to be available to the advertiser.

The bigger thing right now is where it's available in the in the graph if you will where we do all the measurement.

And that is probably the most promising thing that's happened with UIV to date. If you combine device IVs plus UIVs, that sum is greater than device IV plus cookies. It's already creating more traction.

Probably the most promising thing Thats happened with you IV to date.

If you combine device Ids, plus Uavs that sum is greater than you IV I am sorry, then then device Ids cookies.

No.

It's already creating more traction.

And that modeling or that graph than what we have.

Before you idea existed.

But theres still a lot of work to do it and it just relates to the question that I answered earlier, which we especially need more advertisers and publishers will be connecting it throughout the entire chain, we expect the advertisers to start and because they bring incremental dollars that that makes all the publishers connect but the fact that we've gotten to.

1 billion creates incentives for both sides to do that now and its just implementation. So the difficult part is not actually winning hearts and minds, it's just getting from winning hearts and minds throughout the entire organization to implementation and that just takes time.

At this point I believe it is just a matter of time before that happens.

And maybe just to follow up on that point.

In terms of implementation just on the specific to large publishers, how many have committed to you already to date.

What might be holding them back, particularly as you brought on more and more.

AD Tech partners.

It would seem to me that you talked a lot about advertisers I'm hurting first party data.

But isn't.

Isn't the.

And the large publisher.

More of the impetus to sort of get.

I'd sort.

Sort of off the ground than just <unk>.

Appreciate that I guess specifically.

How many large publishers you have committed to date and sort of whats.

What we should be thinking about in terms of milestones in the first half of next year. Thanks.

Yes so.

One of the things that we've done a lot of it's just pushing inside of journalism and so you might have seen some of the press releases, whether thats buzzfeed or whether that's Washington post and the the 300.

Local journalistic outlets they support technologically.

Newsweek.

It doesn't.

Dozens and dozens of.

Top 200 publishers, who already been public about their support let alone those who are implementing that behind the scenes I'm talking about NBC earlier.

<unk> been public about their interoperability with new idea as well, which by the way is all that matters.

There are interoperable with already.

You are right, though that it is important for both advertisers and publishers to adopt <unk> in order for it to be successful it does not matter, which one goes first there is a chicken and egg challenge.

If publishers go first an advertiser.

We're incentivized to quickly onboard their data so that they can leverage the <unk>.

<unk> are making available to them.

Advertisers go first then.

Publishers to quickly implement so that they can get higher CPM because advertisers are telling them. If you can just help me connect my data to this I won't pay more for your inventory.

That is what we're seeing.

Efficacy goes up by three X.

The cost goes up by one and a half to two acts and everybody wins and so it makes it very very.

Incentivising for both publishers and advertisers to do that and that's largely because we started in the middle with infrastructure, where we get to big scale pretty quickly and that part we have already done so theres strong incentive for both sides to act now and Thats all working.

Okay, and just real quickly is there an inflection point I guess, just speaking to the milestone Jeff.

Obscene.

Can you talk about implement implementation being a hurdle is there an inflection point, where that implementation is no longer a hurdle and we see sort of X number of large pubs sign up in the first half of next year. Thanks.

It's just playing it out after this we have to go to the next question.

It's just playing it out in the sense that Oh I believe that we've already reached the inflection point, where anybody who is not implementing <unk> is operating at a disadvantage to those who have it's just a matter of.

Doing the work to get it integrated and then of course these are big strategic decisions that have to be understood at least at some level in multiple parts of nearly every organization. So that just takes some time in order to do the ramp up.

But we already have so many users and it is such a dominant currency than any other currency should be interoperable with that in order to get some benefit.

It is not rational not to be interoperable with that.

That point that inflection point has already passed.

Thanks, Mark and we have time for one more question Gabe.

Thank you. Our final question today is coming from Brian Fitzgerald at Wells Fargo. Your line is live you may begin.

Thanks, I'll be quick two things that stood out to us at Adweek, one was the the benefits of using new idea across the web and CTV for Universal frequency capping. So wanted to know if you could.

Talk about how much of a pinpoint that as for advertisers.

And unpack that a bit and then the second one was also from Adweek and that was AMC networks talking about how they are partnering with you guys.

To enable programmatic addressable ads in linear TV they call. It a first theyre kind of wrapping a digital wrapper around linear impressions and then getting it across the transom that you guys to be filled so how quickly are you seeing the evolution.

From that standpoint thanks.

You bet. Thanks, Brian for the question really appreciate it.

I'll take the first one and then I'm actually joined here by our Chief revenue Officer, Tim Sims.

I will take the second part of the question is Tim feel free of course to add any color on the first part as well.

No.

I Love the first part of the second part is great as well that AMC has been just such a phenomenal partner but.

Yes.

But you're absolutely right. So one thing that has not been discussed enough is that nearly everything in CTV is consumed on the other side or on the inside of a logging. So in other words you are logged in using an email address to consume the content that you have.

Watching them pretty much every app.

On every operating system that you have whether that's a roku or an Amazon.

Or something else.

And because it's on the other side of a login.

Yes.

The benefit to using a common currency across all of those.

You think about it from a consumer standpoint.

More than ever we are watching content on multiple apps like five years ago, we mostly want some Amazon and Netflix and now we watch on lots of apps and the fastest growing have Ben Ewald apps, where you've now seen AD, whether that's on peacock for paramount or or any of the others.

There are are as being shown across all of them.

Of course, an advertiser would like.

Control reach and frequency across all of the apps and not just one.

They just do it one app at a time and we're going to waste money and that way it is.

Totally unacceptable in connected TV, because the costs are higher.

So as I mentioned in the prepared remarks, the cost initially were higher because of scarcity. That's unacceptable anymore. Your costs have to be justified with increased efficacy and efficacy cannot be justified if you do not control reach and frequency universally.

Why a unified idea is so strategically important for us, but it's also what is so strategically important for every major brand in the world where as they are looking at CTV. The perfectly fragmented ecosystem. They are looking at that saying I have to control reach and frequency centrally.

I don't do that I can go.

Go into operated a disadvantage and I'm going to waste money compared to what I did in linear and given the increased cost of content. The content owners are equally interested in making ads more effective because you can't win by showing an AD loads that has been as the one that we had in linear so whether you're a content owner.

Whether you're an advertiser or whether you're the DSP like us.

We all want universal reach and frequency and the only way that that can be done with a common currency like USD 10 from second part great. Yes, Brian. Thank you for the question on AMC.

Zoom out for a second in that one of the things that we're constantly striving to do on the Cte partnerships front is how do we continue to expand and grow.

The amount of available inventory in TV and one of the interesting things that came out of the E&P releases that that's exactly what we're doing here, we're looking at a new albeit small, but a new area, where we can create more inventory and that is with addressable linear CTD.

Now, what's really important to call out of the distinction here is that this looks exactly like what we're doing in CTV with all of our other partners, but it's in the linear feed. So this is an open RTD requests to the trade desk, where we can make a decision on an impression by impression basis to deliver an add back to AMC and so it's unique in that it's expanding into a new area.

<unk> and linear but look to us is exactly like connected TV, where we get a request and we're able to bid back in real time on linear TV, it's really exciting it's early days, but it's a very exciting new corner of TV that can be made addressable and available platforms like the trade desk and the last thing I'll say on this is that one of the.

The reason that we're able to partner, so well with folks like AMC and one of the reasons that we've been able to partner everywhere in the world is because of our objective placed in the market. So whenever networks like AMC or looking to try new things and to push the boundaries and test new areas of available inventory they come to us first because of our objective point in the market. So it's an exciting thing.

To watch it's still early days, but definitely an interesting area of where we're going to expand inventory.

Thank you, Brian and thank you so much for everyone being on the call today I know, we ran a few minutes over but we normally do but appreciate everyones.

Attendance. Thank you thanks, everyone.

Yeah.

Thank you ladies and gentlemen, this does conclude todays event you may disconnect at this time and have a wonderful day goodbye. Thank you for your participation.

[music].

Good morning, ladies and gentlemen, and welcome to the trade desk third quarter 2021 earnings conference call. At this time, all participants have been placed on listen only mode and the floor will be opened for questions and comments after the presentation.

If you have a question or comment please press star one to join the queue to withdraw press star two it is now my pleasure to turn the floor over to your host Chris Toth, Sir the floor is yours. Thank.

Thank you operator, Hello, and good afternoon to everyone and welcome to the trade desk third quarter 2021 earnings conference call on the call today are founder and CEO, Jeff Green and Chief Financial Officer, Blake Grayson, a copy of our earnings press release can be found on our web site at the trade desk Dot com in the Investor Relations section.

As we begin I would like to remind you that except for historical information some of the discussion and our responses in Q&A may contains 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. In addition to potential supply chain disruptions.

That could disrupt advertising spend are all subject to change.

At 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. 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 in our earnings press release, we believe that providing non-GAAP measures combined with our GAAP result.

<unk> provides a more meaningful representation of the company's operational performance I will now turn the call over to founder and CEO, Jeff Green Jeff.

Thanks, Chris and thank you all for joining us today I'm here in Europe.

Even with some of our colleagues customers and partners.

And I'm thrilled to be joining you from our recently reopened a London office.

Q3, I am pleased to report that the trade desk had another very strong quarter revenue was $301 million up 39% increase from a year ago, once again exceeding our own expectations.

First video, which excludes connected TV accounted for nearly 40% of our business our highest ratio ever and are thinking of your growth is not just here in the U S. Like last quarter CTV spend grew more rapidly in EMEA than any region in the world. The second in Q3, our international growth once again outpaced the domestic.

Yep.

A trend that we expect to continue over the long term international expansion also continued at a strong pace.

Third the Walmart DSP recently launched which is of course built on top of the trade desk platform. It is early days, but we are starting to see test budgets from some of the largest brands in the world flow through the platform and perhaps most exciting news.

Budgets are incremental.

Fourth unified I'd continued its strong industry wide momentum and is reaching critical scale in the market.

And fifth our mobile business continues to be resilient as we predicted at the most recent Iowa changes have had no material impact on our business and we expect that to remain the case with that I'd like to give you our perspective on the state of the market and then get into a few ways in which we are innovating to drive growth in this market I get asked.

Every day about where this market is heading.

The pandemic has changed everything because it has massively adjusted the media and tech landscape. It has accelerated the shift to CTV at forest brand marketers to embrace data and it's driven a higher focus on real time agility for everyone in our industry.

I think this is an important backdrop to why we're doing so well and why our prospects are so bright for the future and why I'm. So optimistic about the future of the open internet.

Just as a reminder, according to IDC. The total advertising market today is estimated to be at about 750 billion.

Just a few years it is estimated to exceed one trillion.

And over time, I believe that nearly all advertising will be digital and nearly all of it will be executed programmatically.

That shift happens accelerated by the pandemic our commitment to the open Internet only intensifies everything we do in terms of our investments are engineering priorities, our partnerships and our go to market model are designed to create a better internet and we wanted to Internet is open privacy safe and competitive not one that's just down by a few companies.

And as we work to advance the open Internet, we have a level of support from AD agencies advertisers industry bodies, TV content owners and the independent AD Tech that is unprecedented.

Never thought that our vision would be shared by so many companies outside of our own company.

More than ever companies and marketers are concerned about the internet being fair and competitive and many of them are looking to us to help the internet reach its potential.

It is also in that context that many people in recent weeks have asked about our response to the Unredacted version of the antitrust complaint against Google filed by a Multistate coalition led by the Texas Attorney General.

Of course, the majority of the complaint alleges among other things that Google has engaged in unfair and anti competitive conduct using this Martha power built on top of DSP, which is Google's AD server product for publishers I expect that Google will take steps to make the market fair given the scrutiny that they're under that.

Would be a positive development for the industry as well as good for the trade desk.

I want to remind everyone that we have been we are and we expect to continue to do very well regardless of Google's policy choices.

A very small percentage of our business runs through Google's AD exchange and we're not dependent on Google for our business the.

The bottom line for US is that the market will always ultimately gravitate to transparency and competition over time.

And we will continue to innovate and drive the industry in that direction and to deliver more value to our advertising customers and if we get that right and I believe we are as you can see in our performance, we will grab more share of ad spend.

And I'm obsessed with the supply chain the healthier the supply chain, the more competitive and transparent the open internet will be.

Certainly in contrast to walled gardens.

Of course, we only serve the buy side and that will never change, but serving the buy side demand that we do our part working with the industry to make sure. The supply chain is as efficient as possible. So that everyone in the ecosystem provides more value than they extract.

And we are innovating in the supply chain in ways that are not always obvious in the last few months. For example, we've been working with the supply side to further reduce the duplication of AD inventory.

Because publishers use multiple supply side platforms or SSP, we often have access to the same inventory from multiple sources.

We've asked those SSP to put in place a solution that identifies duplicative inventory.

So that we ensure bidding on the right impression at the right time, all the time.

Theres been overwhelming support and adoption for this approach as it increases the overall efficiency of the supply chain.

In the same vein I also want to address the future of identity for the open Internet.

UAV and setting new benchmarks every week and every month.

Growth is phenomenal.

As I've said before I've never seen the industry come together like this around a common agenda collaborating on new technology that benefits all participants.

The daily Avails on our platform with <unk> reached an all time high just last week, having broken record dozens of times through August September and October the.

The scale, we have been able to build in a relatively short amount of time has been outstanding and it's tanks to unprecedented industry wide commitment and collaborations.

Every one of the open Internet is aware that Google has announced that they intend to get rid of third party cookies in 2023.

Maintained that this is a strategic mistake for Google to do that but there are policy changes have created collaboration among the open internet that probably wouldnt have happened otherwise when.

When fully implemented we believe it creates a better internet for consumers with higher standards for consumer privacy than anything possible with cookies.

And the momentum and adoption of <unk> underscores that.

Even some of the walled gardens are passing an encrypted version of <unk> in their marketplaces and ecosystems.

But one way amazing new milestone is that many of the largest advertisers on our platform are now transacting on UAV too or are in the process of implementing them.

As you would imagine some of these are among the biggest advertisers in the world in nearly all of the major AD agencies and holding companies like Omnicom, Publicis, IPG and even independent agencies like horizon have also adopted <unk>.

And the case studies are just starting to roll in because of common currency makes it easier for our brand to use first party data than cookies ever could they are using that data more often and more safely. One early case study is with made in made in as one of the fastest growing cookware companies in the U S. They are using <unk>.

The new industry identity currency and their campaigns and seen amazing result.

<unk> seen a 20% improvement in cost per acquisition, not just that but they're seeing their time to convert per user improved by 33% compared to when they don't use <unk> that means theyre driving campaign precision and putting their advertising dollars to work as hard as possible.

As a reminder, you already to start up with us, but it belongs to the Internet today. It is open source and being used around the world and across many functions of the internet from payment companies to cloud companies to beverage companies to agencies to exchanges.

He is making the open internet more effective.

Meanwhile, the CTV is expanding the open internet and new ways.

Since March of 2020, everything has changed about PV the move to CTV over that time has been the fastest secular shift we've seen that the trade desk ever.

Before the pandemic CTV was getting premium CPM because of scarcity of Avon inventory now.

Now as inventory is growing rapidly and premiums required improvements in efficacy.

That means advertisers need and objective platform more than ever a platform that does not own content or its own content channel.

Platform that helps advertisers decide what to buy objectively, while managing reach and frequency and that's a major reason so much CTV demand is gravitating to the trade desk.

Lastly concerning the state of the global advertising market today.

Roughly two thirds of the total advertising market is outside of North America.

That's why we invest so heavily in key growth markets globally. In recent months, we've established a presence in markets like India, Italy, and the Nordics and Taiwan.

And we're making.

Very encouraging strides in every region, where we are located.

To wrap up our perspective on the state of the market I'd like to circle back to where this all started for us either.

I believe digital advertising is still a relatively young industry I got into this business initially because I thought there was a better way to price advertising that we could build something like the stock market or the markets for commodity where there is transparency of information and mechanisms that drive efficiency. Because these are the kinds of characteristics.

That any market demand that any mature market creates overtime.

This approach remains central to our mission at the trade desk, we believe that an open competitive market for digital advertising is the only way that we build long term trust of marketers is.

That's how we unlocked that one trillion dollar industry Tam the bulk of which will be digital.

Now given all the opportunities created for us in this fast changing landscape I'd like to talk about a few things that are driving us to win more share. During this unique moment in time.

707, we launched the biggest upgrade to our system ever in terms of adoption, we're exactly where we expect it to be.

At the beginning of 2022, the majority of impressions on our platform will be bought via solar more deeper.

Feedback from our customers has been very positive the value of the platform's ease of use the ability to be more granular and setting goals.

And household Lamar activates on those tools everything from campaign optimization to more meaningful measurement just as important the use of bulk precise goal setting and activation for first party data has increased the ability of our AI to better optimize every campaign with data our goal is for advertisers who are.

Activate solar mark to utilize more data per impression and achieve measurable improvement in return on AD spend and doing so that helps the advertising flywheel spin much faster.

We're also getting very positive feedback from industry analysts.

Gartner just released their AD Tech magic quadrant for 2021.

Trade desk continues to be a market leader, scoring higher for completeness of vision.

Perhaps more interesting, though gartner measures all participants across four critical capabilities.

Trade desk ranked number one for three of those media planning campaign piloting and campaign results analysis. Each of these are key elements of solar more when you consider that we're going up against some of the tech industries heaviest hitter, such as Google and Amazon, it's pretty remarkable to be leading the pack in these categories.

And that's a credit to our amazing engineering and product teams and the work that they've put into solar model.

It also speaks to the focus we have on customer service, we're always looking to provide more value than we extract but I think what is perhaps less well understood is the role that solara plain and driving innovation for our customers and for the industry. So.

<unk> is allowing us to advance ideas and efficiencies that are benefiting the entire digital advertising ecosystem.

One of those areas as our measurement marketplace instead of only using our metrics.

We've created an entire marketplace to measure success having.

Having this marketplace mix end to end measurement possible at unprecedented scale.

And nowhere is this more apparent than in retail you all know about the partnership with Walmart, which is now available to many of the world's largest advertisers.

Major brands such as Pepsi co are already asking testing campaigns in the Walmart DSP Walmart is clearly a pioneer here well. They are doing is unleashing their shopper data so that advertisers can understand the relationship between their advertising tactics and actual in store or E. Commerce activity. We think about this is Claude.

In the loop for many of our largest CPG advertisers for example, the bulk of their products are still sold in physical stores.

Running out for toothpaste. They can now get a much better sense of how that actually drove sales.

Thanks to in store shopper data. This means that advertisers can be much more precise and agile in everything they do at every stage of the advertising funnel.

Advertisers can understand the impact of their campaigns at a micro level in a particular region.

Or or at different times of day.

You can also look at their impacts across different channels, which ones are working and what kind of creative.

But it's not just Walmart we are now working with many of the major retailers in the United States and many more around the world.

Each approach it in their own way, but major retailers everywhere are looking to make the most of their own shopper data. So that they can provide the same kind of closed loop measurement via our platform to the buy side.

And they are joining forces with us because they trust us. They know we don't compete with them and they know they will retain control of their data.

Melissa when an operating system is upgraded there were many upgrades to key features on Soma one of those features and called predictive clearing what it means is that we use our data tools and our AI to predict the clearing price of first price auctions.

Advertisers can then bid as close to the winning price as possible without overpaying.

With solar Mars upgraded predictive clearing we've massively upgraded the product to use AI to help our customers save collectively tens of millions of dollars. That's because this upgrade allows us to be much more aggressive in bidding and budget management significantly lowering cpm's and increasing and advertisers return on.

But we are seeing predictive clearing improvements, resulting in the reduction of CPM across the board are customers that have activated this feature thanks to the total of our upgrade.

These kinds of efficiencies or are important to all of our customers.

But they are particularly attracted to the brand marketers who are increasingly paying attention to programmatic and two efficacy one long term effects of the Covid pandemic is that there is more pressure than ever on brand marketers to show ROI for their marketing investments and to show how their campaigns are driving business growth.

As a result brand marketers are putting a premium on data and measure ability.

<unk> is proving to be tremendously beneficial here, one area, where we're making a great deal of progress is new ways of thinking about the marketplace for data and how solid our insurers we surface the right data at the right price of.

Of course, our customers have always use data to drive their campaign, but the market for that data has not always been efficient.

Advertisers would have a sense of what kind of data they want to apply.

It adds to add group, our geolocation and they would go find the data for the campaigns and a fairly analog way.

With solar or are the process of finding the right data for each impression is way more automated.

Because of more first party data usage and more precise goal setting and so lamar our AI tools automatically find the right data for each impression that our platform is bidding them.

What that also means though is that solar Maher may surface. Many more points of data that are relevant and valuable to our campaign and its goals.

Advertiser has been using two or three data points yesterday on Soma, they will be using more.

As a result of more data the AD impression is much more enriched its more valuable and precise and drive better return on ad spend.

Also I'd like to touch on is our continued growth in CTV I supposed to be at an event a few weeks ago called media in Montana.

Because of Covid. It was actually held in the 10th in Manhattan and a few of you may have actually been there.

The event brought together many of the leaders of the media industry and there were some fascinating discussions around the future of TV.

I noticed that when I commented as I have before that linear or cable TV is a ticking time bomb.

Assume everyone will consume content via CTV, there was much more agreement than in years past.

Notion that TV is moving to the Internet is not nearly as controversial as it was two years ago.

Clearly not lost on the industry Covid has accelerated the consumer shift to digital streaming platforms I think perhaps what may be a little less appreciated is the scale the speed and the permanent of that shift is happening fast.

In terms of scale, we've already reached the tipping point today, we reach more U S household via CTV than via traditional linear TV.

But the points about speed was really driven home at the Adweek conference a couple of weeks ago.

Was a fascinating insight into the future of TV.

A replay if you want to understand where this industry is headed.

Pre pandemic, we had a much longer sense of the time horizon for that kind of transformation.

Changing consumer habits have accelerated everything so that we have access to the best and broadest portfolio of premium CTV inventory, both here and around the world.

Nowhere is that more apparent than in live sport.

We added the NBA League pass package from Turner sports to our CTV inventory lift this season.

Viewership on this platform increased around 50% last season and their head of digital strategy Cest La Pesky believes that digital viewers are much more leaned in to quote him directly.

The digital audience, we see tends to be stickier, because they're really seeking out the content specifically.

Theres deeper engagement versus someone sitting back on the couch and Washington.

Emarketer estimates that there are almost 60 million digital sports viewers in the U S. Right now rising to more than $90 million over the next three years the notion that live sports will save linear television is fanciful.

Which is why so many broadcasters are pivoting rapidly the number of impressions, we see for the NFL. For example is up almost six fold this year.

Also very excited that we recently added Peacock, which in addition to amazing original content also closed premium live sports franchises, such as the NFL The English Premier League and of course the Olympics.

As you can see our results demand for CTV continues to outpace all other channels, both inside and outside North America.

Don't see that trend changing for the foreseeable future.

I'd like to wrap this up by bringing this back to the market opportunity in front of us.

The total advertising industry is moving rapidly towards that one trillion.

The bulk of that will be digital and marketers are embracing data driven decisioning more aggressively than ever.

Our long term investments have positioned the company to capture this opportunity in the years ahead, so lamar and isn't.

Innovation platform that is creating new value for advertisers because of how it unleashes data and drive greater return on ad spend.

<unk> is becoming a more widely used identity currency across the entire global open internet.

And we continue to invest so that we can lead in CTV.

The fastest growing channel and digital advertising consumers are driving advertisers and TV content providers to rethink the future of TV and that's going to be data driven.

These are our priorities because this is how we see the industry evolving I hear the same things in every customer conversation that I have regardless of industry or geography.

And that's why more of the worlds, leading advertisers are standardizing on our platform and our retention rate remains over 95%.

Why the major holding companies are embracing UAV too.

It's why Walmart is partnering with us as they unleash their retail data.

Why ssp's are working with us to optimize the supply chain.

Could not be more excited about our growth prospects as we close out this year and head into 2022 and beyond.

Now I'd like to turn the call over to Blake before moving to Q&A Blake.

Thank you, Jeff and good morning, everyone.

As our financial performance in Q3 indicates we continue to execute well in the current environment.

Connected TV continued to be our fastest growing channel at scale around the world. So Lamar is ramping on plan. The Walmart DSP is now available and as we have consistently stated we have seen no material impact on our business from the recent iOS platform changes.

The value of our business model being the largest independent DSP focused on the open Internet continues to resonate strongly with our customers and has allowed us to build trust over the long term.

Our appeal is the simplicity of our partnership we focus exclusively on the buy side hunting for the impression opportunities that are the most valuable for our customers without the conflicts of owning inventory when we deliver value for customers on the campaign. They almost always return for future ones, which has led to a retention rate of over 90.

5% across the previous seven years.

Q3 was an incredibly strong quarter and a testament to our belief that advertisers are accelerating their shift to data driven advertising in 2021.

Revenue of $301 million was up 39% from a year ago, excluding political spend related to the U S elections last year, which represented a mid single digit percentage share of our business in Q3 of 2020 revenue increased approximately 47% year over year.

During the quarter, our EBIT continued to benefit from temporarily lower than expected operating expenses, partly driven by the virtual environments. This includes items such as travel and life company events that are very gradually starting to return to our cost structure.

From a scaled channel perspective, CTV by a wide margin led our growth again during the quarter exiting Q3 video, which includes CTV and separately mobile represented just about 40% each as a percentage share of our business.

Video as a percent of our mix specifically continued to grow rapidly.

Similar to last quarter. The increase in video was driven by CTV display and audio represented about 15% and 5% of our business respectively.

Geographically North America represented 88% and international represented 12% of our business for the quarter.

APAC led our growth across all regions this quarter, Shanghai, and Hong Kong drove spend growth in northern APAC, and Australia, and Indonesia led our growth in southern APAC in terms of EMEA, London led the way nearly doubling year over year in Q3.

As Jeff highlighted CTV across EMEA was again very strong growing faster than any other region in Q3.

CTV continues to rapidly increase its relative share of spend in Europe.

While still small compared to the share of CTV spend Bruce in North America. We are optimistic about the trends we are seeing that set us up well for next year.

In terms of the verticals that represent at least 1% of our spend nearly all of them grew very nicely during the quarter travel.

Travel shopping and home and garden were the strongest performers in Q3.

We believe there is still the potential for share gains and improvement in most of our verticals.

Operating expenses were $221 million in Q3 up 27% year over year.

During the quarter, we saw encouraging leverage from both our platform operations and G&A expenses as we scaled the business.

Stock based compensation expense increased 28% year over year.

As expected this marked a sharp deceleration from the first half of the year as expenses related to the company's employee stock purchase plan moderated significantly.

Income tax was approximately $20 million for the quarter, representing a tax rate of about 25%.

Adjusted net income for the quarter was 89 million or <unk> 18 per fully diluted share.

Net cash provided by operating activities was $130 million and free cash flow was $103 million in Q3 the.

Our strong cash generation during the quarter was driven predominantly by our operating results.

I would like to remind you that the timing of cash collections and payments can significantly impact cash from operating activities and free cash flow results on a quarterly basis.

Dsos exit in Q3 were 87 days down 14 days from a year ago depots were 73 days down nine days from a year ago.

We exited Q3 with a strong cash and liquidity position.

Our balance sheet had $799 million in cash cash equivalents and short term investments at the end of the quarter, we have no debt on the balance sheet.

Turning to our outlook for the fourth quarter, we estimate Q4 revenue to be at least $388 million, which would represent growth of 21% on a year over year basis.

Excluding U S political elections spend which represented a high single digit percent of spend that we benefited from in Q4 of 2020, our estimated growth rate in Q4. This year would be about 33% on a year over year basis.

We estimate adjusted EBITDA to be approximately $175 million in Q4.

And finally, we anticipate our stock based compensation to rise in Q4 from our normal run rate.

This is being driven by approximately $95 million of incremental stock based compensation expense. We expect to include in Q4 related to a long term CEO performance Award granted on October six the <unk>.

Performance option has a grant date fair value of $819 million in stock based compensation, which is expected to be included in our G&A expense over approximately five years.

The total amount of expenses unrelated to whether any of the performance award thresholds are ever match.

Only shares that have met the threshold criteria outlined in the performance plan are factored into our total shares outstanding.

In closing we are pleased with the momentum of our business with large growth drivers such as CTV, Our international business. Our shopper marketing opportunity was just kicked off with the Walmart DSP a few weeks ago and our recent platform upgrade and solar month, we remain highly optimistic about the long term prospects for our business.

2022 and beyond.

I believe we have the structure in place to continue driving long term growth, while scaling our business efficiently and I'm cautiously optimistic about continued improvement in the future.

That concludes our prepared remarks, and with that operator, let's open up the call for questions.

Thank you ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time.

And our first question today is coming from Sean Patel.

Your line is live you may begin.

Hey, guys congrats on the results.

I had a couple of questions.

First one for <unk>.

Jeff you guys reported and a great <unk> of what's your outlook when a lot of your peers are struggling and call it a macro issues.

I wanted to ask a question about about next year just at a high level.

Can you can you just talk about how you view the setup and the key drivers as you head into next year I know you touched on a lot of them on your prepared remarks, but just asking in the context of next year you guys added CTD shopper marketing international saw ups Omar political.

And then second one for Blake.

I know you guys haven't given specific guidance for next year yet.

Could you just talk a little bit about how you're thinking about revenue seasonality next year, just given that the past couple of years, maybe it had been a bit abnormal just how you think about revenue seasonality next year.

And then I guess, specifically <unk> revenue tends to be down about 25, 26% sequentially is that is that a reasonable assumption at this point thanks guys.

You bet so.

First of all Sean Thank you portable.

Wishing us congratulations as well as just the question I'm really excited about 2002, I don't know that I have gone into the year more excited than I am going into 'twenty two.

Part of that's because of things that are happening outside of our control. So the first is.

That.

The regulatory environment is actually a really net positive so Google and Facebook are.

There are a little bit more control or making it hard for us to make more deliberate decisions or what's even more likely that they go a little bit slower.

That's a net positive for us given how much they've gained share over the years.

Of course things outside of us to change.

Changes in Iowa, and lots of discussion this earning season about.

Supply chain challenges, we don't see any material impact from Iowa, and we don't see any material impact from supply chain so given that.

Okay.

It makes me even more excited about the things that are going really well. So first of all we're consistently grabbing share.

Constantly getting more than the <unk>.

The space is growing.

Second we've never seen whats happening in CTV happen in any channel ever before and I don't know that we'll ever see something like that happen again, but cord cutting accelerating I mentioned that.

That cable subscriptions are a bit of a ticking time bomb if that weren't enough. There's also subscription fatigue in live sports returning.

Upfronts last year were a little bit.

Of a struggle, we anticipate that that's going to create more and more opportunity for CTV.

And spot market, which is always programmatic and then here right now.

London, just what's happening here in the U K as well as across EMEA and CTV is incredibly bullish.

Then.

Across the World and international the Tam in CTV is growing faster than in the United States.

That's not enough shopper marketing is going incredibly well, we just went live with the largest retailer in the world, which is creating closed loop measurement and that's the first one.

I predicted to be many to come like this in 'twenty two we have mid term election.

Think.

Yes.

It's been some forecasts.

Uh huh.

Basically the spend in digital will be the same as the presidential election year.

So we think that macro estimation.

Is good for us as well and then we just shipped a new product in solar bar, So that's going incredibly well.

I'm sure we'll talk more about.

And then you I E just going incredibly well so everything is going great just give 30 seconds on the seasonality before.

Like the answer.

In general.

The market was heading towards digital being always on and so.

Theres less of a ramp in a difference between Q1 to Q4, where there was this ramp that was caused by seasonality.

<unk>.

It's just an always on mindset inside of digital which should it changes everything.

But before 2020, we were heading sort of toward what we predicted to be $45 55.

<unk>, 45% of the spend is in the first half of the year and 55% is in the back half of the year.

Really important to note that 2020 because of a global pandemic.

Changed all of that is such an anomaly 2021 is a little bit more normal but both of those are anomalies given just all the changes in the world and we expect 22 to be a bit more normal, but im sure Blake has more to say about that.

Sure. Thanks, Jeff Yeah, just to reiterate what Jeff said I think the sequential growth seasonality, it's obviously changed a bit over the last 18 months or so during dealing with the impacts of Covid I do believe were seeming to move closer back to that normal historic seasonality trend, but you know, it's still a little bit early difficult.

Difficult to say exactly where the new normal seasonality ends up but it does feel like we're getting back on that more normal historical trends.

Got it thank you guys.

Thanks, John Thank you.

Our next question is coming from Vasili Chrystia at Cannonball Research. Your line is live you may begin.

Okay.

These are compelling.

Hello, I'm sorry.

Can you hear me.

Yes.

Okay, Jeff wanted to ask you to go into more detail about.

What youre seeing after Wal Mart DSP went live.

What kind of additional color on takeaways you have now.

And.

How does that inform your view of the size of the opportunity for the company and then are you having any discussions we've got the retail so if you could give us some.

So on that would be great.

Also your view on how material of an opportunity is the closed loop measurement can be for the trade desk and we would be an important business line or is it going to be just an incremental nice incremental revenue.

Yes, thanks for the question facility so.

As it relates to the Walmart DSP so.

It's always best to start with the very biggest in the world just phenomenal that we were able to create this partnership and closing the loop with the biggest retailer in the world.

But we're only a couple of weeks in so of course.

All we're looking at is green shoots and the potential.

Ahead of us that potential is obviously massive with shopper marketing being at $200 billion industry.

When you look at what we're doing in spend and revenue that's interest a tiny tiny percentage.

Our entire company is a tiny percentage of that shopper marketing Tam.

We think we're as eligible as anybody for that and that to me is the real hope of the shopper marketing and what we're demonstrating here with Walmart because still especially in the United States. Most purchases are still made it offline. The fact that most of the advertising spend is online there is this deep need.

To bridge the gap.

The dots between those two.

And what has been happening over the years is that retailers like Walmart have tried to monetize their data by creating.

What we used to call AD networks, which are these little silos, where they would sell their data on their own to me. The most exciting thing is that the retailers are recognizing that in order to compete with Amazon. They have to put their data to work in a much bigger way and that is to close the loop so that instead of getting.

$10 million from one of the biggest brands in the world.

<unk> billion to.

Instead, getting those big CPG is or soda companies or whatever to optimize spending their billions to selling product inside of those brick and mortar stores or even in their E. Commerce efforts, so that they're measuring all of their marketing spend success by how they sell product.

In those stores so for the first time ever I believe the retailers and the product owners are aligned in what they want which is something much much bigger.

So because Walmart the biggest has gone first.

It is not a surprise.

All other retailers all over the world are saying, we need to execute the same playbook and we need to do more.

So we're talking to dozens of retailers all the names I suspect that you would predict.

And when you look at that in totality. It is definitely one of the most bullish things that we're working on right now and I'm really encouraged.

Excited and proud to be Walmart's partner.

But im just equally excited about all the partnerships ahead for us.

Thank you.

Thank you. Our next question today is coming from Tim Nolan at Macquarie. Your line is live you may begin.

Alright, Thanks, a lot Jeff.

Wanted to ask how the solar rollout is going and maybe how that goes.

If it's a matter of converting existing users to this new platform or just basically how you progress with that and Relatedly as part of solar more you've talked about the data and the measurement marketplaces I.

I think I understand in principle, how a data marketplace might work I think you described that but how does the measurement marketplace actually work what does that mean I mean, I guess you use a USD 2.0 as means of identifying users, but what are the sorts of measurement.

Are you, including in that and how does the marketplace works.

You bet so.

First let me just say.

We launched this product on 77.

And so we've only we're only and that's about four months.

The reception, especially given that it was our biggest release in the history of the company has been unbelievable unbelievably strong.

And it's really learning a new platform.

When you are when you re learning, especially in a year that's been as busy as this one and especially with the talent shortages that exist inside of AD agencies and even brands.

And even to some extent across tech.

That has made it so.

Training on something new it takes more work and you really have to entice people to do so it is a commentary on how strong the product is.

We are on track to have the majority of our impressions bought on a new product by the beginning of next year.

So now I'd like to next week that should take one to one and a half years to go from zero to 100% and it always starts with sort of enticing or more seductive phase, where we're just trying to entice them to move over and then the stragglers. There. Some amount that you always just have to put the new one on and you have to have a lot of confidence in.

Order to do that in order to push people to do it.

And we're getting closer to that much closer to that just based on how strong. The reception has been from the majority of our of our clients.

As it relates to the data marketplace and the measurement marketplace. So there's been a whole bunch of inefficiencies in the way that we price data.

When I say, we I mean, the entire AD tech industry.

Way that we price data, especially third party data has been bad the way that we selected paper data has been bad.

And it's largely because there hasnt been a good way to find the data.

And so because of unified I'd and because of all the tools that we built and sold tomorrow to make Onboarding a brand's first party data easier now it makes it easy for them to discover which data they should be buying so it's a little bit like if youre on Netflix and you've never watched anything before Netflix has nothing to recommend for you that's why.

We were in the data ecosystem five years ago now that everybody has watched a lot of shows if you will they would use more data.

Our recommendation for what they should be buying is better than any recommendation engine for data I think ever anywhere.

So that makes it possible for us to have the most robust third party data ecosystem.

As it relates to the measurement marketplace, it's highly related to what we're talking about with Walmart.

Where.

Instead of doing what the walled gardens have done.

Once again, it's really important that the way that we win against a wildcard admin, especially the way you win in CTV.

Not to play the game that way the walled gardens have been playing which is to grade your own homework, we want to make it possible for other people.

Determined what success looks like.

And the brand then has an opportunity in a marketplace to say.

This is the way that I want a grade my success so.

So for instance, today using the Walmart DSP, that's built on top of our platform. They can decide to determine success is when I sell a product.

Inside of a Walmart store.

And then I can use that as a proxy for how I spend.

Money on ads across everywhere else in the ecosystem.

So whether that's leveraging.

Our data or not that makes choices around reach and frequency and a whole bunch of other things way better. But then we also have the benefit of saying we didn't determined success and we didnt great our own homework.

We were just trying to do the right thing leveraging the dataset of other companies that were selected by the brands and agencies themselves instead of US just doing it on our own you put all of those together while it takes some work to integrate all that win hearts and minds and develop an open internet.

Way more sophisticated than the one of the past.

Way better Internet than one that's just held hostage or captive walled garden.

Thanks, Tim.

Thank you. Our next question today is coming from Youssef Squali at true Securities. Your line is live you may begin.

Great. Thank you very much that's you said discovery, so hey, guys. Congrats on a really strong.

A form S. There. So two questions for me one Jeff can you maybe speak to the level of adoption of USD two that are particularly by brand. So you've done a great job, bringing on a lot of AD Tech partners, but.

You gave the example of made in which was super helpful. Thank you, but what are the gating factors to you guys bring on a lot more brands over time, which clearly is to.

The Holy Grail, and then on 2022 just at a high level kind of what's the setup for connected TV beyond some of the color that you've given particularly I'm thinking about.

Accelerating adoption in Europe, if you can maybe just quantify and in Asia in particular, any if you can update us on where you think current penetration of connected TV.

Stands in U S versus Europe versus rest of world will be super helpful. Thank you.

Okay.

So so.

So.

As it relates to the scale of UAV.

We have a produce hundreds of millions of unique users inside of <unk>.

And the growth rates are breaking records every seemingly every week I think we mentioned in the prepared remarks.

I think we broke our record something like 12 times in the quarter. Just every week feels like we're hitting a new watermark and getting more and more users. So the month over month.

Gains being in triple digits, while we're talking about billions of unified I'd.

It is just unbelievable and as I've said before the momentum around this initiative.

Nothing that I've ever seen like the collaboration is phenomenal. The fact that we're collaborating with competitors across the board is fantastic.

The fact that even walled gardens.

Our our trading paths.

Pass through Paul it's encrypted and they may not necessarily consume it.

Supporting customers so that they can use it if they want to and then you've got infrastructure players like snowflake adopting it that's of course.

Not necessarily because they share the same vision or have the same concern about an open internet that we do but it is because having a currency that makes it. So they can activate data improve their value proposition. So when you look at whether it's them or a library and for Nielsen.

And just all the companies, including all the agencies with all of the data products that day.

Data companies that they bought.

Making them interoperable has just created a tremendous amount of momentum you are right to point out that.

We're entering the phase, where it's really important for advertisers and publishers to adopt it.

What's fantastic with the case studies like the one we mentioned for made in is that we are proving the lift.

So advertisers now know that if they onboard their first party data using the unified I'd.

Is that they will get better results. It doesn't take long for other advertisers and say Oh, Wow I need to do that too and if that weren't enough at the current margin up there as the stick that is in 2023 third party cookies are expected to go away.

These sorts of initiatives are the only way that they can put data to work.

So with all of that it's similar to my opening remarks, I'm, just all the secular tailwind as well as all the ways that we're operating to gamble to grab land.

So that direction I do want to underline that with unified I'd.

This is not a trade desk initiative any more while we may have instigated that we've open sourced it we have lots of other companies, including other DSP that are using this this is bigger than us. This is something that we wanted to create as a currency to raise all boats recognizing that the collective open <unk>.

Consumers would be forced to manage their privacy and a double digit number of places and very few understand or can coordinate well enough to do that well this will really create a better internet to the consumer.

On the second part of your question on expanding CTV to the rest of the world. So we've started with some phenomenal partnerships all over the world and Im really excited about some of those things that we've talked about.

During the prepared remarks, one that I just want to underline.

We have an expanded relationship with peacock.

And Youll remember that Peacock has rights to NHL has rights to the NFL has.

Rights to the Olympics and of course here in the U K to the English Premier League to say nothing of the other $31 billion of content that they have.

So doing more partnerships like that with content owners all over the world is the most important thing that we can continue to do because.

And most of the major markets, we already have a starting point that is really strong not dissimilar from what we did in retail where we started with the biggest.

We've done very similar things like that in CTV all around the world. We just have to keep doing more of it.

Thanks Keith.

Thank you. Our next question today is coming from Justin Patterson at Keybanc. Your line is live you may begin.

Great. Thank you, Jeff you're crossing the $1 billion in revenue level. This year and there is clearly strong retention characteristics with this model.

Does the company need to do to get to 2 billion or even $5 billion in revenue over the next few years.

Follow up to that perhaps you could expand on the supply chain efficiency initiatives youre working on and really how that can create opportunities for you going forward. Thank you.

You bet.

Thanks for the question.

Yeah.

This might be the most important question for us as a company.

I'm always reminded of.

The locker seen at the end of the movie Hoosiers, where they're talking about how do we win this game.

This smaller team from a smaller town competing with with teams that are much bigger than them in every way.

It's not dissimilar from what we're doing with some of the biggest companies in tech.

The history of the World.

And the way I would look at it as we cannot lose sight, just like that locker room speech in that movie.

Ignore the fans ignore.

All of the outside.

Courses and just play your game do it the right way and this is essentially the same thing on saying to our team over and over again.

Can we just stick to what we do really well we continue to win in CTV, We continue to service our customers the way we.

We focus on the buy side the way that we always have we tried to make the supply chain more efficient we add more value than we extract if we keep doing all the same things that we've done for the last 10 plus years.

I think we're going to get from $1 billion to $5 billion.

Ahead of anybody else playing the same game. So this is one of those it's not about us trying to exploit the weaknesses of other companies. This is about us just focusing on fundamentals protecting our culture and continuing to build tests the way that we have.

Focus on recruiting the best talent.

And if we do that we'll be successful.

That's number one number two I would say is we have to win in CTV.

And the good news is in CTV that that market around the world is perfectly fragmented it's not broken into so many pieces that you have to aggregate millions the way you would have to and websites or apps.

Those do gravitate to markets and those have been very good to us.

But there is a way for us to integrate almost directly and create a more efficient supply chain and CTV more easily than we can in the rest of it.

And then of course outside the United States. So we've been investing outside the United States.

Heavily for a long time, where our employees are third.

All of our employee base outside the U S. While our revenue.

Low teens.

And that differential is because we are investing ahead most of the open internet competitors cannot afford to make those investments the way that we have which is why we continue to win share.

Doing more and more to invest in those and we're going to get better.

Need more aggressively and growing more quickly there as the open Internet led by CTV continues to move in our direction as it relates to the supply chain.

I should mentioned, Google a little bit here because.

As we mentioned in the prepared remarks.

There has been just a lot of discussion around the complaint led by the Texas Attorney General Office I, just want to reiterate our strategy has always been to compete.

And prepare for the market to be fair and competitive.

We expect that any state that market's always trend towards fair and competitive.

And to whatever extent that the market currently is both inefficient and not competitive we think it's going to move in that direction. It has already been moving in that direction.

At a macro level in that sense.

Google's AD exchange used to be the very biggest exchange, it's not for us and it works out for the industry anymore.

While they havent really strong market share in DSP itself as it relates to their AD exchange, it's not the biggest and literally we plugged in hundreds of them all over the world.

So as a result, I believe Google needs us more than ever.

And we are going to succeed regardless of any policy decisions that Google mix or not.

Okay.

Thank you. Our next question today is coming from Laura Martin Needham. Your line is live you may begin.

Hi, guys great results.

Maybe one for.

For you, Jeff and then one for you is like so.

Shopper marketing, which is that Walmart.

You said that Walmart has started and you're negotiating with a lot of other people to join how big is.

This closing the loop feels like it is best practice. They do you feel just closing the loop kind of shopper marketing could be bigger than your core business today at maturity Epsilon for you and then Blake you were very careful to say the word nearly all verticals.

In the quarter, so I'm really intrigued by what did it grow in the quarter and what percent of digital AD revenue would that represent as it starts to return inevitably in 2022. Thanks guys.

You bet.

I think over time, the same way that I look at it.

Actually let me back up.

I am constantly looking at the trillion dollar Tam that is traditional advertising and just looking at all the different ways to slice that.

For instance, the fact that two thirds of that pie to the outside the United States as part of the reason why we've just been obsessive about.

Our business outside the United States.

And we've invested ahead and we are ahead in lots of markets.

It's like India, which has a huge potential in China, which is our fastest growing office in the world.

All of our expansions that we highlighted in places like.

Italy in Taiwan.

All of these are because we see growth potential to get to the other two thirds of the pie and we would be silly to only FERC only focus on one third of the pie.

Shopper marketing.

Incremental to that not all of that is captured in that one trillion, but it collectively is about $200 billion Tam so that is incremental but instead I expect that to be.

Our share to be in.

And.

As a percentage similar to our percentage of the one trillion dollars path.

But I do think that our core business and the thing that we've been working at for the last 10 years.

Always be the lion's share of our spend but we merely scratched the surface in both categories.

It's early to tell because we're just we're just a tiny tiny.

And what we're yet to be accomplished.

And then I'll follow up Jeff on the second question, Laura with regards to the verticals.

The obvious one that.

Showed pressure on a year over year basis. This quarter was the politics, so obviously that vertical.

With Super High last year because of the elections and so you obviously see some pressure there I would say the only other one that to call out and it's and it's not a significant share of our mix, we do see some volatility in the family and parenting vertical a bit and so it was a little bit lower than normal for Q3, but nothing nothing major.

Concern for us and so those are the ones that you know that move around that that we see you know and then there's others. Obviously stood that we believe there is opportunity still remaining but political as the large.

Negative year over year in Q3, which is expected.

Thanks very much congratulations.

Thanks, Laura.

Thank you. Our next question today is coming from Mark Sue with Rosenblatt.

Rosenblatt Securities. Your line is live you may begin.

Thank you just a couple on <unk>, Jeff you mentioned USD two daily bills are now in the billions I was wondering if you could share what percentage of the media that you've sold year to date was resolvable to close the bills.

And what you expect that media mix to trend to in the first half and half of next year and then I just had a quick follow up thanks.

Yes.

So.

Uh huh.

As it relates to sort of the out the entire media chain.

There's still a lot of work to be done for us to be present from publisher to every link in the chain to be available to the advertiser. The bigger thing right now is where it's available in the in the graph. If you will where we do all the measurement.

And that.

Probably the most promising thing Thats happened with you IV to date, where if you combine device Ids plus Uavs that sum is greater than you IV I am sorry, Ben Swinburne device Ids cookies.

No.

It's already creating more traction.

In that modeling or that graph than what we have.

Before you idea existed.

But theres still a lot of work to do and it just relates to the question that I answered earlier, which we especially need more advertisers and publishers to be connecting it throughout the entire chain, we expect the advertisers to start and because they bring incremental dollars that that makes all the publishers connect but the fact that we've gotten.

Billions trades incentive for both sides to do that now and its just implementation. So the difficult part does not actually winning hearts and minds.

Getting from winning hearts and minds throughout the entire organization to implementation and that just takes time.

At this point I believe it is just a matter of time before that happens.

And maybe just.

To follow my point.

The implementation just on the specifics with large publishers.

Many have committed to you already to date.

What might be holding them back, particularly as you brought on more and more.

Tech partners.

It would seem to me that you've talked a lot about advertisers converting first party data.

But.

Isn't the large publisher.

More of the impetus to sort of get you.

Right.

Sort of off the ground and just just.

Appreciate it I guess specifically.

How many large publishers, who have committed to date and sort of whats.

What we should be thinking about in terms of milestones in the first half of next year. Thanks.

Yes so.

One of the things that we've done a lot of this just pushing inside of journalism and so you might have seen some of the press releases, whether thats, buzzfeed or whether Thats, Washington post and the 300.

Local journalistic outlets they support technologically.

Newsweek.

Yes.

Dozens and dozens of.

Top 200 publishers, who already been public about their support let alone those who are implementing this behind the scenes I'm talking about NBC earlier.

<unk> been public about their interoperability with your idea as well, which by the way is all that matters.

There are interoperable with already.

You are right, though that it is important for both advertisers and publishers to adopt <unk> in order for it to be successful it does not matter, which one goes first there is this chicken and egg challenge.

If publishers go first and advertiser are incentivized to quickly onboard their data so that they can leverage what the publishers are making available to them.

When advertisers go first then.

Publishers to quickly implement so that they can get higher CPM because advertisers are telling them. If you can just help me connect my data to this I will pay more for your inventory.

That is what we're seeing.

Advocacy goes up by three X.

Cost goes up by one and a half to two acts and everybody wins and so it makes it very very.

Incentivising for both publishers and advertisers to do that and that's largely because we started in the middle with infrastructure, where we get to big scale pretty quickly and that part we have already done. So there is a strong incentive for both sides to act now and Thats all working.

Okay, and just real quickly is there an inflection point I guess, just speaking to the milestones yet.

Obscene.

When you talk about implement implementation being hurdles or an inflection point, where that implementation is no longer a hurdle and we see sort of X number of large clubs sign up in the first half of next year.

It's just playing it out after this we have to go to the next question.

It's just playing it out in the sense that Oh I believe we've already reached the inflection point, where anybody who is not implementing <unk> is operating at a disadvantage to those who have it's just a matter of doing the work to get it integrated and then of course these are big strategic decisions.

It has to be understood at least at some level in multiple parts of nearly every organization. So that just takes some time in order to do the ramp up.

But we already have so many users and it is such a dominant currency than any other currency shouldnt be interoperable with that in order to get some benefit.

It is not rational not to be interoperable with that.

That point and that inflection point has already passed.

Thanks, Mark and we have time for one more question Gabe.

Thank you. Our final question today is coming from Brian Fitzgerald at Wells Fargo. Your line is live you may begin.

Thanks, I'll be quick two things that stood out to us at Adweek, one was the benefits of using new idea across the web and television for Universal frequency capping. So wanted to know if you could.

Talk about how much of a pinpoint that as for advertisers.

And unpack that a bit and then second one was also from Adweek and that was AMC networks talking about how they're partnering with you guys.

To enable programmatic addressable ads in linear TV or they call. It a first theyre kind of wrapping a digital wrapper around linear impressions and then getting them across the transom that you guys could be filled so how quickly are you seeing the evolution.

From that standpoint thanks.

You bet. Thanks, Brian for the question really appreciate it.

I'll take the first one and then I'm actually joined here by our Chief revenue Officer Tim.

I'll take the second part of the question Tim feel free of course to add any color on the first part as well.

No.

I Love the first part of the second part is great as well as that AMC has been just such a phenomenal partner but.

Yes.

We're watching them pretty much every app.

On every operating system that you have whether that's a roku or an Amazon.

Or something else.

And because it's on the other side of the log in.

Yeah.

The benefit to using a common currency across all of them. If you think about it from a consumer standpoint more.

More than ever we are watching content on multiple apps like five years ago, we mostly want some Amazon and Netflix and now we watch on lots of apps and the fastest growing have been Avon apps, where you are now seeing AD, whether that's on peacock for paramount or or any of the others.

There are our ads being shown across all of them.

Of course, an advertiser would like.

To control reach and frequency across all the apps and not just one.

They just do it one app at a time and we're going to waste money and that way it is.

Totally unacceptable in connected TV, because the costs are higher.

So as I mentioned in the prepared remarks, the cost initially were higher because of scarcity.

Unacceptable anymore your costs have to be justified with increased efficacy and efficacy cannot be justified if you do not control reach and frequency universally. This is why a unified idea is so strategically important for us, but it's also why so strategically important for every major brand in the world.

Whereas they are looking at CTV to perfectly fragmented ecosystem. They are looking at that saying I have to control reach and frequency centrally and if I don't do that I am going to operate at a disadvantage and I am going to waste money compared to what I did in linear and given the increased cost of content.

The content owners are equally interested in making ads more effective because you can't win by showing an AD load that as dense as the <unk>.

One that we had in linear so whether you're a content owner, whether you're an advertiser or whether you're the DSP like us.

We all want universal reach and frequency and the only way that that can be done is with the common currency like USD, Tim for the second part great. Yes, Brian. Thank you for the question on AMC.

I'll just zoom out for a second in that one of the things that we're constantly striving to do on the Cte partnerships front is how do we continue to expand and grow.

Look exactly like what we're doing in CTV with all of our other partners, but it's in the linear feed. So this is an open RTD requests to the trade desk, where we can make a decision on an impression by impression basis to deliver an add back to AMC and so it's unique in that it's expanding into a new area of TV and linear but look to us.

US is exactly like connected TV, where we get a request and we're able to bid back in real time on linear TV, it's really exciting. It's early days, but it is a very exciting new corner of TV that can be made addressable and available platforms like the trade desk and the last thing I'll say on this is that one of the reasons that we're able to partner so well with those like.

AMC and one of the reasons that we've been able to partner everywhere in the world is because of our objective place in the market. So whenever networks like AMC or looking to try new things and to push the boundaries and test new areas of available inventory they come to us first because of our objective point in the market. So it's an exciting thing to watch is still early days, but definitely an interesting area.

We're going to expand inventory.

Thank you, Brian and thank you so much for everyone being on the call today I know, we ran a few minutes over than what we normally do but appreciate everyone.

Attendance. Thank you thanks, everyone.

Thank you ladies and gentlemen, this does conclude todays event you may disconnect at this time and have a wonderful day Goodbye you for your participation.

Q3 2021 Trade Desk Inc Earnings Call

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