“The data asymmetry between buy-side and sell-side is humongous and that creates a power position as it relates to price discovery for the buy-side. Especially as TV comes online, because people are protecting their content, there will be more fragmentation. We will have to do more integrations. That creates more barrier to entry and that creates more asymmetry between the buy-side and sell-side.” - Jeffrey Green, Founder and CEO of the Trade Desk, Investor Day 2019
TTD is a buy-side platform for advertising on the ‘open internet’. It allows advertisers to target users on the millions of websites outside of the three main walled gardens: Google, Facebook, and Amazon.
In 2020, eMarketer estimates the US digital advertising market was ~$150bn with ~$30bn spent on the ‘open internet’. The Trade Desk competes with Google and Facebook’s ad network and currently powers over 15% of open internet ad spend. The majority of this spend today is on desktop and mobile web - although connected-TV (CTV) is estimated to double to $25bn by 2025. US linear TV ad spend was around $60bn in 2020 and is stagnating. Over time, as eyeballs move to streaming and CTV, a larger share of linear TV ad spend will transition to OTT and create a new game for media players to compete in.
We interviewed the former Chief Revenue Officer at The Trade Desk (TTD) to understand the CTV value chain and TTD’s long-term strategic positioning.
It’s hard to fully grasp the difference in the level of targeting between linear and CTV. In some cases, linear TV was measured by using a sample of a few thousand households:
“The big fundamental change is that, in linear television and my old Nielsen world, we were working off very small sample sizes because it was very expensive to get an accurate measurement. You had to literally go into a consumer's household and Nielsen would send out a service tech to go into the house, breakout a soldering gun and start tearing apart their television to install a bunch of custom hardware. Because of that cost, the samples you were working with were a relatively small number of individuals. In the United States it was 50,000 households and in smaller European countries it might only be a thousand households. That meant you were dealing with small amounts of data, which led to segmentation and targeting, all being done at very high-level demographics” - Former Chief Revenue Officer at The Trade Desk
The ability of CTV to instantaneously track and target users creates prime advertising inventory. More granular data helps drive return on ad spend and could potentially allow users to better align online spend and offline attribution:
“the big difference with CTV is that because it is delivered digitally over traditional internet protocol, you have a tremendous amount of depth of data. As an industry, we see every stream and individual ad which is delivered, and have tremendous granularity. We move from this very small scientific sample to big data which allows an ecosystem to be created around that big data, to enable very precise targeting and measurement, in theory.” - Former Chief Revenue Officer at The Trade Desk