The Trade Desk, Inc.

Q2 2021 Earnings Conference Call

8/9/2021

spk_0: the day ladies and gentlemen and welcome to the trade desk a second quarter twenty twenty one earnings conference calls at this time or participants have been placed on the snow old and a store will be open for questions and comments after the presentation is not my pleasure to turn to for to your host kristoff vice president price vice president of investor relations at the trade desk sir the sore as yours
spk_1: thank you operator allow and good afternoon to everyone welcome to the trade that second quarter two thousand and twenty one earning a conference call on a call today or founder and ceo jeff green and chief financial officer like great than a copy of are earning a press release can be done on our website at the trade does doc on an investor relations thaksin before he began i would like to remind you that except for historical information some of the discussion and i responded and q and a may contain forward looking statements which are dependent upon certain risks and uncertainties in particular our expectations around the impact and the coven dang pandemic on our business and results of operations are subject to change shoot any of these rift materialize or share our assumptions proved to be incorrect actual financial results to differ materially from our projections are those implied by the forward looking statements i encourage you to refer to the risk factors reference in our press release and included in our most recent effigy piling in a dish in to report our got financial results we prevent supplemental non gaap financial data a reconciliation of the gap and on got measures can be found in our earnings press release we believe that providing non gaap measures combined with our gap results provide a more meaningful representation of the companies operational performance or now turn up all over the founder and ceo jeff green jobs thanks growth of thank you all for joining us i'm pleased to report that the trade that had a very strong second quarter this year or revenue was up a hundred and one percent from a year ago to two hundred and eighty million dollars significantly surpassing our own expectations our growth was across all channels and speaks to our position at the leading the at p for the open internet more of the world's top advertisers and their agency find up or expanded their use of our platform which just continues to validate our business strategy they are increasingly embracing the opportunities of the open internet in contrast to the limitations of
spk_2: lol gardens or her warrant this quarter and year to date had led by ctv and premium video the move and broadcast and cable to digital on demand content is happening all over the world while each major media market and nation have different dynamic impacting adoption rates every major market in the world
spk_1: is heading towards consumption of premium tv and movie content over the internet because of our products including our new platform solemn are are objectivity and market shifts ctv at the percentage of our business continues to grow very rapidly and is by far our fastest growing channel heading into the pandemic rctv growth had been driven by are leading position in the us that australia and we continue to enjoy outsize growth in these markets but now we're starting to see rctv strategy scale more broadly around the world for example rctv revenue and europe with up more than ten fold in the second quarter or and on it's been a moment but i could not be more optimistic about rctv business
spk_2: overall we fire on all cylinders in the second quarter in large part because we realize the value of the investments we have made in our business over the last few years just as important these investment leave us very strongly positioned for growth moving forward and of course we continue to invest our latest platform last summer is the result
spk_1: more than two years of engineering work and addresses many of the opportunities in front of agencies and brand today or pajamas and a minute to in order to provide some more color on these results and are optimism for the future i'd like to focus on three key areas first is our strength and ctv even as our overall business doubled over the second quarter last year rctv been significantly outpaced that growth and i'd like to spend a moment on the various factors driving our progress there and i want to touch on how major advertisers are thinking about the value of the open internet in contrast to the limitations of walled gardens especially in terms of how they think about identity first party data and performance measurement and third i like a focus on international growth like last quarter our international growth outpace north america and we are seen some trend lines the give me great optimism for the years ahead so first ctv just to provide some context and are broken ctv through just the first half of this year the number of brand spending more than one million dollars and ctv on our platform has already more than doubled year over year and it's not just larger advertisers that are taking advantage of ctv anymore the number of advertisers spending over one hundred thousand dollars has also doubled in total we have nearly ten thousand cpb advertisers on our platform up over fifty percent compared to last year large and medium sized advertisers are like are
spk_2: turning to us at the objective dsp poor all digital media but especially ctv and premium video that exponential growth speaks to how rapidly the tv landscape is evolving we've spoken before about the accelerated consumer shifted digital video including easy t v and that shows no signs of slowing down and fact we reach more households via cpv and the us to date and are reachable through linear tv
spk_1: today we read more than eighty seven million households those trends are now well established what is perhaps a little less appreciated is what's happening on the inventory side of tv and how advertiser demand for that inventory and also fuel in a shift as he tv and cue wanting you to have twenty twenty nearly every major advertiser had to pause or rethink their advertising campaigns due to the global pandemic some adjusted and weeks some took months summer still adjusting some companies grew faster because of the pandemic and of course some companies are still below their growth and revenue levels prevent them it
spk_2: many companies such as cpg is and pharma companies have enjoyed significant growth in that one year
spk_1: they were able to adapt their businesses pivot their message and appeal to consumers as their lives were abandoned and changed
spk_2: others such as those in the hotel cruise and airline industries have been largely treading water because of the various new restrictions we've all been living with
spk_1: but regardless of where a company is on the gross spectrum we're seeing the same response today those companies that enjoyed accelerated growth now me to market affectively to sustain that growth those the were struggling and hit the pause button or now playing catch up aggressively marketing to make up for lost time advertising and marketing matters more than ever in the formula for business success the demand for growth regardless of where a company is on the recovery curve have major implications for advertising brands are looking to their cmos defined find i'll you in advertising that can help your new growth the only way to find advertising efficiency in this market is with objective data driven technology and within that context vtb offer some of the most effective advertising in the history of the space the combination of moving picture sound and data creates effectiveness and value that are unprecedented we have significant premium cpb and venturi upscale the our platform and partnerships
spk_2: as ctv growth moves to a vod instead of the as vod models that powered early adoption in the category
spk_3: indeed
spk_1: moffat nathan some recently reported that the ad supported video on demand market is growing from four point four billion dollars and twenty twenty two about eighteen billion dollars as early as twenty twenty five and every major ad supported platform whether it's disney sulu peacock discovery plus by a company b s's paramount
spk_2: ten pluto boxes to be or fumo tv and many others all are reporting record viewership or add spend figures and we see the rapid growth in a bought in rctv spend every quarter
spk_1: the ship from legacy tv to connect the tv was especially apparent in this year's of brunswick wrapped up in the second quarter for the first time in the history of that annual profit every major broadcast are included programatic packages and there's a wide range of reasons for that not least because ctv represents a greater percentage of their revenue the never before but perhaps most important broadcasters recognize that the traditional upfront process is a mismatch it doesn't work in a digital world where data and personalization are required to succeed the legacy of from process is really hard to run in an environment with lots of change and lot of uncertainty i believe that this year will mark a turning point in how the process has managed in today's fragmented tv environment linear audience has continued to a road linear supplies shrinking and the prices are rising simply because of the scarcity this year broadcasters use that scarcity to their advantage and lockup commitments as the demand for growth intensified but it is becoming increasingly difficult to predict who will watch which show for which live sports them which means linear viewership commitments are harder to make and standby advertisers will then have a rethink and then seek out greater value in a data driven spot market and a data driven forward market for digital than the opacity and uncertainty of the legacy up front market don't take budget back they'll demand a new conversation next year and broadcasters are adapting by making ctv and programmatic a more significant part of the process
spk_2: that conversation will also look at how to evolve the traditional focus on high gross rating points or gr peace
spk_1: in the chase for high grp is many advertisers are finding that they are under reaching some percentage of their target audience and way over reaching others more than ever the average may be in their target range but the actual consumer experience at the edges is highly inefficient on the extreme over retired brands are actually pain to make consumers dislike them showing the same add over and over again to the same person
spk_2: on the under retired showing the ad so rarely that it isn't noticed or even remembered
spk_1: as a result more advertisers are demanding that the data driven agility of he tv become a larger component of the overall tv ad spend that includes more measurement precision grp has become less important and a digital environment when you can have a direct interaction with the viewer and more precise measurement for example we recently work with for to help build the ctv campaign that directly targeted households that were in market for a new car that's very different from the traditional mass market linear tv campaign where there's a great deal of waste in precision marketing using custom audience tools that identify when a consumer is coming off a lease are buying a car for the very first time with ctv board can then reach that audience with add that are relevant to the time and place that the ads are being consumed this level of marketing precision is simply not possible on linear are broadcast television just as important in this equation is a large and growing ctv footprint when you combine premium quality data and inventory scale ppv becomes a very compelling proposition for advertisers and their agencies in that same work with for we found that forty eight percent of the households reached were incremental to anything addressable through linear that means if you're limiting yourself to linear you're missing out on almost half of your potential target market it was the same story with large farmer and a medical device company when compared to parallel linear tv ad campaigns ctv delivered a fifty one percent incremental reach and up for acts improvement when analyzing cost per household reach these are not isolated cases we are seen many brands ship tv budget to the data driven precision of ctv and i expect this trend to accelerate through the next year's upfronts one major global food company is working with at the ship almost a quarter of it's tv budget to ctv by next year so that they can better manage targeting and frequency a global entertainment brand is doubling down on ctv with us because it allows them to measure the for customer journey from exposure to purchased and a major telco is enjoying measurable failed left by shifting a significant portion of it's tv budget to decisions cpv on our platform the evolution of tv advertising is a great barometer for the advertising industry overall more and more brands want to be able to apply data to optimize their cpb and premium video advertising they want to be able to measure campaign performance across all channels their focus on the quality of the tv supply chain and they i want to ensure that their partners including the trade desk or delivering more value than they are extracting we prove that in the us and we're seeing markets around the world of all similarly and i still believe we are merely at the very beginning of the ctv innovation cycle
spk_2: i can put it any better than john halverson vice president of consumer experience at that global food giant maanda lease speaking last week without age he said and i quote and then positively surprised by the advancements that the trade desk and other partners and ctv have made vs digital platforms their focus on advertisers
spk_1: needs for advanced targeting inventory management and guarantees are setting them apart from you tube and the rest of the marketplace
spk_4: one last point on t tv
spk_1: as the tv ecosystem gets more crowded and competitive our strategic focus on objectivity is more valuable than ever some platforms that claim to be open and then primarily push their own content will lose favor with other content owners as the market progressive we have great partnerships with content owners because we bring them objective demand from our customers and we do not compete with them we deliberately don't own or faber content
spk_2: there's also brings been my second point because he tv is also highly indicative of how advertisers are increasingly embracing the open internet both as an alternative to walled gardens and as a part of their digital media plans and i noticed this in various dimensions
spk_1: if you notice some of the recent deal that we've signed and talked about publicly some of the world's largest advertisers have signed new contracts with that in recent weeks and months increasing and extending their commitment to our platform we're just scratching the surface and demand for our platform is growing across industries around the world and as these brands work with us they're making a commitment to the open internet this may be summed up by something that a room kumar cheap date officer and i pg said at an ad week event with me a couple of weeks ago he talked about how brands had relationships with consumers long before the major walled garden platforms came along
spk_2: and how those brands are working harder than ever to preserve those direct relationship even as platforms tried to deter mediate them he believes there's so much collaborative innovation going on to support the open internet precisely for this reason why he's also eating out there is a point that i think it off
spk_1: the and misunderstood about the motivations of brand advertisers most brands have decade long relationships with their consumers these relationships have been nurtured and curated carefully over a wide range of interactions including long term loyalty programs in many cases consumers volunteer preference information in britain turn for some kind of value given the effort the they put into this over many years brands have no interest in jeopardizing the trust they have established with their customers brands want to provide a relevant and enjoyable advertising experience that respect their relationship with customers and that experience is best manage and delivered across the open internet where the advertiser has more insight and flexibility in addition the managing their existing customer relationships for the long term brands also want to find the next generation of customers who share some of the same characteristics as their most loyal ones and that in a nutshell as why their first party data it's so important brands know a lot about their most loyal customers and they want to put some of that data to work to find others like them or ad impressions that their prospects are most likely to interact with but unleashing the potential of that first party data requires a few things first it must respect the privacy of the customer and preserve the trusted relationship between the advertiser and the consumer
spk_2: second it has to be secure and not just from a data protection perspective but also in terms of brands retaining control of their data it must be easy you have to have simple integrations and on ramps and unlikely they put their first party data to work brands have to get the metric performance data back that to know whether it's working and
spk_1: how their prospects are reacting each of these requirements is challenging in a walled garden none more so than the asymmetrical data relationship and he did our brand put into a walled garden is often usable by that platform to as media owners they will put that data to work to their own benefit
spk_5: as well as the advertisers
spk_2: and the advertiser won't get the same grain of data back on their campaign performance
spk_1: go get a report card saying that the campaign was successful which is a bit like writing your own homework but the result they get won't be the same kind of information that the brand can use to continue to refine their campaigns and that's why quarter after quarter brands are gravitating to our platform and to the open internet walled gardens may provide easy access to scale you can meet a lot of people very quickly but they don't provide the precision and decision in that are becoming so vital to today's market marketer and they don't provide much clarity on what content the brand showing up against what content they are funding and support supporting and how to refine their campaigns into the future on july seventh we launched a new version of our platform so lamar it is the biggest released in the history the company and the reception has been fantastic again and beat our own hopes and expectations and has great traction at the current pace of adoption by the beginning of next year we expect the majority of the impressions on our platform to be bought using solar more of you have you joined us at our launch of in new york and some of you joined the many thousands who watched online i believe the remarkable interest in these of and speaks to how rapidly our industry has evolved over the last eighteen months and how solemn are it's helping solve for many of the issues and opportunities in front of marketers today perhaps most important with solemn are we believe we have created the industry's most advanced measurement marketplace not only can advertisers measure against traditional campaign performance metrics but they can now integrate offsite measurement performance in a way that only possible on the open internet they can finally reached that holy grail of connecting their ads band to actual business goals whether it's in store sales or foot traffic into a dealership or demand for tickets solemn are has an ever growing roster of third party measurement data sources including retailers who are eager to leverage the value of their shopper data so that they can attract more advertising demand but you don't get to build that kind of measurement marketplace without simple and secure data on boarding and without the ability of brands and partners to protect their data and make sure it's only been used for the intended purposes and you don't get her real performance measurement without the ability to enter more precise campaign goals and solemn are provides for all about and much more we launched omar the time when you id to is also reaching critical scale in the market this is important because you id to allows advertisers and partners to on board their data in a manner that provides more consumer control and protect their data in recent months three of the major advertising holding companies proven that omnicom and i pg have announced their support for you i need you in addition many of the major independent agencies such as horizon are also now leveraging you id to as well as the world's major agencies many of the world leading brands are also starting to use it were also working with many of the worldly intact platforms as they look at use cases were you id to the public inside is also embracing you id to from a ctv perspective major cpb industry text consortiums which our own by the major networks including block rap and open a p are making their identifiers or operable with you id to that's in addition to network has has a m c and poop tv who are integrating directly and then traditional publishing group such as maven who on sports illustrated in the street dot com and newsweek of also
spk_2: i embrace you id to a couple of weeks ago snowflake announced that it would deploy you id to this one is a little different but very indicative of the scale the you id to is achieving know play provide the cloud based data service that sits on a company's cloud infrastructure and enabled data to be managed across clouds snowflake acts as a hub for many companies customer data their first party data and that data can now be activated by using you id to identifiers was really interesting about all this momentum around you id to is that it has accelerated since google announced that it would delay the deprivation of cookies by at least two years you may remember that when google first announced their intentions i was somewhat skeptical and that's because the fundamental value exchange of the internet free content in exchange for relevant advertising the not gonna change what will change is how we give consumers more information about that value of change and how we provide better tools to pay a
spk_1: that exchange in a way that improves the experience for advertisers publishers and consumers and gives consumers more control that's what the industry is created new id to is one leading the gamble but more important is the way that the industry is mobilizing to create a better approach to identity one the reply at the fast moving cross channel nature of today's digital advertising landscape i could not put this urgency any better than joy robins cheap revenue officer of the washington post organization who spoke are reasons hallmark of and in new york city
spk_2: the post as you may know to it zeus platform also power the outset that for more than a hundred other publications across the us including many daily newspapers so joys perspective is very insightful to quote her directly she said we need to make sure we're controlling our destiny if we do nothing we give our ad revenue stream
spk_1: to the walled gardens it's that sentiment across the industry and around the world that driving so much collaborative innovation in support of the open internet the lottery that i want to touch on is our international growth once again or international markets grew faster than the you at in the second quarter and this is particularly encouraging as this industry speeds towards a trillion dollar town about two thirds of that will be outside the united states and we are investing to capitalize on that international growth and serve a global advertiser customer base let me give just a couple of examples that put our investments and our growth into perspective
spk_2: we started planting the seeds of connected tv in europe a few years ago and we are now seen the green shoots ctv in europe is still relatively early in it's life cycle compared to the united states but with the exponential revenue growth i mentioned earlier it was a small for very long
spk_1: in europe there is a significant consumer shift to streaming platforms even for live sports european broadcaster or them develop their own streaming platforms which is driving the inventory scaled that is so important to advertisers for example we're working with sky the largest media company and europe as they make their own content avail hubble over the internet and fact our partnership has significantly expanded this year sky has a huge presence in the uk but they also enjoy strong marketshare across europe like so many broadcasters today sky is also investing heavily in original content to attract new viewers they are a dominant force in the european tv landscape and hold significant cloud with brands and agencies there along with our that in partnership with channel four as well as premium content providers in france germany spain and italy our relationship with sky gives us access to the majority of ctv ad impressions across the continent i want to again underlined the significance of our objectivity in our inventory partnerships as we expand around the world
spk_2: because we don't own content we are able to cleanly and clearly partner with the biggest content and broadcast companies around the world
spk_1: let me also spend a moment on a pack and one new market in particular india we've only recently opened an office in india earlier this year but we have already made some incredible progress it's worth reiterating how large this potential market is according to research by global lab index indians are spending and average of eight hours a day online most of it on the open internet led by oh tt content these dynamics are fueling the rapid expansion of the digital advertising market in india expected to exceed seven billion dollars by twenty twenty four up more than ten fold since twenty to team in those days market dynamics that informed are premium video and cp the first approach to india and this was somewhat a typical for us in nearly every other market we have led would display so as we opened in india the first thing we did was strike important inventory partnerships in ctv these included a deal with hamstrung ads which gives the fact that the inventory on cam some smart tv devices reaching fifty million highly coveted viewers we also struck a partnership was ya me the world's largest smartphone manufacture bigger than even apple yummy serves more than ten billion that impresses per day to those devices all of which we have access to and addition to device manufacturers we've also established relationships with the leading content providers such as disney plus hot dark the leading o t v streaming service in india and these partnerships are already yielding results brands such as gsk are working with us in india to drive more data driven precision in their ad campaigns particularly without he content and seen significant performance improvements our initial progress in india is starting from a small base but it has been very rapid and over time we will build on these relationships and scale our business methodically just as we are doing across asia and of course the rest of the world all of this progress gives us a great deal of optimism for the quarters and years ahead and this has just been a snapshot in every market where we operate north america a mere and asia and australia we are seen significant growth that's because we continue to innovate more quickly and efficiently than others in our industry whether at the future of television new approaches to identity or trading platforms that bring advertisers closer to the business result of their work we are able to invest in the success of our advertising clients we are not maximizing profit for the short term we have discipline around profitability so that we can invest for the future of our business and there's and this quarter more than ever we can see how are prior investments can yield impressive results and even as we make these investments we are still generating ebitda at rates much higher than nearly all of our high growth stop software peers and the second avenue your we expect this approach to show more green shoots as we expand our work in retail lamarr will launch a new d s p which integrates walmart shopper data and is built on our platform this is a leading example of how we are working with our advertising customers to help unlock the value of retail data estimated at a hundred to two hundred billion dollar market each retailer will approach this differently but we are working with many of them both here and around the world that one position they do all share they are all convinced that the value of their data and best realized on the open internet not within the confines of a lot gardens our progress is also increasingly rooted in our ability to drive industry consensus around important issues that build overall trust in our industry our strategy will raise all boats your seem that most clearly in the work we are doing around identity but it's also present and how we approach the supply chain broad management ctv scale and many other areas we remain convinced that the open internet is the best platform for our customers to achieve their marketing goals and there's a large and growing coalition of advertisers publishers and partners who not only share that perspective but who are actively working with us to realize it all about contributed to a great second quarter we have very strong momentum and with these investments in the hard work of the trade desk employs around the world i expect to win to stay at our backs and for that reason as pleading that the numbers are for the corner i am even more excited about the future growth prospects now i'd like to turn the call of the blake before moving to queue in any length
spk_6: thank you jeff and good afternoon everyone as you have seen in our results qt was a very strong quarter revenue of two hundred and eighty million was up one hundred and one percent from a year ago excluding political spin related to the us elections last year which represented a low single digit percentage chair of our business and que to have twenty twenty revenue increased around one hundred and three percent year over year during the quarter we benefited from continued improvement in the digital advertising environment from both agencies and brains growth was broad based across all regions channels and verticals we saw continued strength from ctv which again let our growth from the camel perspective our year over year revenue growth rates benefited from laughing slower growth related to the pandemic during the second quarter of twenty twenty with the continued strong pop lamp wanted to queue to we generated one hundred and eighteen million in adjusted ebitda or about forty two percent of revenue he be that continues to benefit from temporarily lower than expected operating expenses partly driven by the virtual environment this includes items such as travel and live company events that have only just started the slowly resume i'm proud of our sustained efforts to consistently generate meaningfully positive either death what continuing to invest in the critical areas of our business that can drive our future growth from a tail perspective video audio and even display all more than doubled and que to from a year ago exiting que to mobile currently our largest channel represented a low forties percentage share of our business
spk_2: video which include ctv represented a high thirty percent a chair of our business
spk_6: video is a percent of our mix continue to grow very rapidly the in video was driven by ctv with by a wide margin again let our growth during the quarter and finally display an audio represented about fifteen percent and five percent of our business respectively geographically north america represented eighty seven percent of spend an international represented thirteen percent as international's faster growth theory or resulted in a rising share of spend in a pack shanghai in hong kong spend growth were both very strong in terms of our overall growth europe lead the way right well over one hundred percent year over year and you to all of our offices in europe london hamburg paris and madrid shirt particularly strong growth as jeff highlighted ctv drover a me a performance grown over ten fold the your t cpv more than doubled it's relative share spend in europe while still small relative to the shares he tv spend produced in north america we are optimistic about the trends we're seeing during the first half of twenty twenty one in terms of the particles that represented least one percent of our spend the majority of them at least doubled during the quarter those verticals most impacted by it showed the most improvement over all including travel shopping and automotive home and garden personal finance and food and drink were also very strong we believe that there's still a lot of recovery ahead of us in these segments and we remain cautiously optimistic as we continue to see signs of improvement operating expenses were two hundred and eighteen million and que to up forty one percent year over year the growth and operating expenses in the quarter was primarily driven by stop his compensation operating expenses excluding stock based compensation grew thirty two percent year over year as we discussed last quarter the majority of the growth and stock based compensation expense in the first half of the or was related to the company's employees not purchase our growth and operating expenses excluding stock based compensation on a year over year basis his influence not only by lower expense growth in the prior year associate with impacts related pope it but also by continued investments in our team particularly in areas like sales and marketing technology development and the team supporting that prague dress as we continue to scale or longer term growth income taxes thirteen point nine million for the quarter representing a tax rate of about twenty three percent adjusted net income for the quarter with eighty eight million or eighteen cents per fully diluted share net cash provided by operating activities was ten point four million and cute it this is driven by changing working capital driven by strong sequential growth from if you want you to i would like to remind you that the timing of cash collections and payments can significantly impact quarterly results ps i was exiting and you two were eighty two days down fourteen days from a year ago the pls were sixty seven days down eight days from a year ago the resulting fifteen day gap between be a thousand pp as is the smallest in the company's history we exited qt with a strong cash and liquidity position or balance sheet had seven one hundred and five million in cash cash equivalents in short term investments of the end of the quarter we have no doubt on the algae in june we refinanced a new revolving credit facility and currently have four hundred and forty three million available under the facility in addition we also executed a ten for one xbox for it turning to our outlook for the third quarter we estimate kitty revenue to be at least two hundred and eighty two million which will represent growth of thirty point five percent on a year over year basis excluding us political election spent which represented a mid single digits percent of spam and we benefited from and que three twenty twenty are as animated growth rate and que three of this year with be about thirty percent on a year over year basis we estimate adjusted ebitda to be approximately one hundred million if you three in closing were extremely pleased with are stronger ones in the quarter we continue to execute and build are solid foundation and i could not be more excited about building on our progress in the second half of the year that concludes are prepared remarks and with that operator let's open up the call for questions
spk_0: thank you ladies and gentlemen the floors now open for questions you have any questions or comments please press star one on your phone at this time we asked our posing a question you please pick up the handset is listening on speakerphone to provide optimum sound quality once again please press star one if you have any questions and the first question is coming from tim nolan from the quarry tim your line of life
spk_7: thanks so much jeff had like to talk about ctv a bit more if i could you mentioned your growth and cute to i think it said significantly outpaced your overall growth wonder if you could comment about how that difference looks in the second half and even into next year ctv vs over off traders growth and also you know queue to you talked about the upfront que to was the quarter that the upfront market occurred so i'm intrigued by your comments on an eventual decline in the role that the up front will play for tv or literally for linear tv the question is what did the try do with advertisers and network groups in the up front or should we think really of your role more it's helping expand the scatter market reaching all of the criminal households that that are other way by slipping away from linear and i guess the scatter market having been so strong going into the up front of guess that's what must have supported your growth so dishonest and how that continues from here thanks
spk_1: text him at ah so so first other on a macro related a ctv so you know on a year where nearly everything double year over year and this this quarter over quarter basis that ctv once again lead the way with massive growth it in it
spk_2: in the quarter we just reported we of course expect a tv to continue to drive our growth over the next couple years and beyond as as the leader it as it relates to channels in terms of what what's happening across everything and digital ctv as the lead for the open internet the i'm i do believe up browser diving more to see tv as well i got that of i answer your second question in just a second but one thing i want to highlight about ctv is that unlike any other channel this is being driven by users of so you know programmatic first outside it was because a bunch of be the be companies like ourselves wanted to create them be more efficient a for the at their that that's very different than the trend that happening and ctv which is users are moving from from their cable subscriptions to the internet because it's better at it's on demand content is just a better way to them so they can watch what they want when they want and that something that can't be stop that that secular tailwind that is gonna benefit us the poor as far as i can see in the future and and then likely on cpb trends before i got the up front yeah there is a lot of subscription of fatigue especially and at bought a so you know what what has happened over the last year to it i think it's fairly indicative of what most of us have experience with individuals which is we consumed most of our be content the from netflix or amazon three or four years ago and now today we have lots more choices lot more channels that we're going to were asking questions like to that and the shower that on that channel a lot more often than we did before when were a logging into aren't of are are are are are ctv that at at and most of those incremental a channel that we're adding are able to there's more and more inventory coming online for one of the things that were constantly thing to advertisers
spk_1: whatever you thought you knew about scale and reach a of cpv ah six months ago while it's changed dramatically and that underlined by the fact that we said seventy nine million households or reached on t t v which is more than a linear inside of a lotta
spk_2: the art of of linear or cable television as a c t ctv has an edge that it didn't have a year ago so i you go on and on but i want to answer your question about up front so did not from was really interesting in that the tpm that or the cost per unit went up in because of scarcity so despite the fact that you're reaching fewer people are the price went up a and so we think that puts a lot of pressure on the up front
spk_8: and it's setting it up for and some amount of under delivery
spk_2: most of the forecast that were given to advertisers i i would say advertisers don't believe they go into a skeptical and are saying or we need to be prepared to be flexible and for in fact one of the large advertisers using our platform said we are looking to go to an annual calendar and looking to take as much
spk_1: commitment out of the commitment as possible essentially maximizing flexibility i think that sort of summarizes what happened and so as a result at you're seeing people move into the scatter and spot market and we benefit from members the from that so right now you can edit there's the a market that are which is that you know historically then ah i get together a party which is a relatively inefficient forward market and then there's a spot market and that has more and more move to be a a a programatic driven marco
spk_2: but i think there there's some insight to be gleaned from the a radio that were reported on the olympics which are of course down forty five percent over path olympics
spk_1: and and in i don't think that's because and be he did anything wrong a it was just an open question of discovery and just the nuance of the pandemic and whatnot but that does make it so people are asking the question ah what what what can i expect out of shows in this environment and people are look team for more and more flexibility and and that it and that maybe it just brings me and my last point which had maybe at the very heart of your question which is what role where we play in the upfronts going forward one of the biggest opportunities that our company has and it's future into play a central role in a more sophisticated forward market that replaces the opera where did you can put data to work and it's not a a r and a band or or a party where everyone gets together but it's and always on forward market that a of data driven and built on top of the spot market where people can make commitments and forecasting is better than it ever been done and television because the data in the mail
spk_2: playable that's something that we're working very closely with some of the biggest names m t v and some of the biggest brands in the world and some of the big agency from the world to make certain that we upgrade the front but that will make it so the problematic is no longer will primarily in the spot market but it's also in the forward month
spk_9: thanks to him
spk_10: thank you
spk_0: and the next question is coming from vasily cassius from cannonball research vessel your elaine is nice
spk_11: thank you good morning i'm so jeff you have you had highlighted growth and connected to the outside of the us can you talk a little more about the growth your thing and europe where i think you mentioned that over can fold their rates of increases and would you characterize as growth as an inflection point i think adjust their below base effect and as a follow up be a can talk about a pack a little more i'm and special about the premium d oh and fifty the growth that your highlighted may be a can explain to us than a little more detail but difference between premium video which i assume it's mainly mobile bow and connected to be all about thank you very much
spk_2: ah absolutely thank you so maybe one of the most bullish numbers that we shared and in this report is that a ctv growth in a me i grew a leather next year over year at that numbers really astounding and really surpass our own expectations ah yeah i think one way to characterize what happened for up and ctv of the say at the trade that would leading in australia and the united states going into the pandemic that and over the last eighteen months or so everything in the world is changed consumption has changed we had three four five years worth of change it in television happen in that period of time at at and it so what i say it's one of the most bullish that the think that we've reported in this report or in this quarterly report of is it because i do believe is it that those represent green shoots i do believe it's the start of a change and where we were leading just in the us and australia where now at the scene
spk_1: amazing results in germany and the uk and scandinavian france and spain know and you know we continue to maintain that all of that will eventually be traded programatic lee a bot programmatic lee or because that is the data driven way that is more effective and it's the only way to preserve the amazing state of tv around the world which is you get premium content if you are more relevant ads and that up create a better user experience which can find more confident that virtuous cycle can only be perpetuated with a data driven marketplace art and it and because that's just the math that that's just the way that of works at ah it it impossible for that not to take on everywhere around the world and were seen that play out now
spk_2: and as a really the a pack a a pack is a little bit different it in net ah a c t v it is not always the place where premium content start that that's much more common in the us but because it it's such a mobile a region where where mobile phones are often the place where upon the content of even premium content is consumed you have to think of it as premium video empty tv kind of in one bundle especially in that market but i think it's great for look at a case study in other so many markets that we could report on but now at it because we just started in india this year
spk_1: seen as go into a market as big as ripe at as india be in the most populated country in the world and then see us create partnerships and really a matter of months with samsung ads the army which has a huge presence in india and then didn't plus hop star to have those three content a partnerships for premium content and to show as on top of that in that the most populated market in the world after only been there for months is indicative of just the momentum and as well as a as how we continue to grab land know are around the world as out and didn't really optimistic about what i'm seeing around the world and and been that are playbook that we've tested and proven in the us and australia is applicable to many other regions in the world thanks for telling
spk_0: thank you and the next question is coming from shampoo to from sake charm your lands last
spk_12: a guys back and got in the corner at a couple questions the first one jeff can you talk a little bit more about it in a city and what you're seeing in europe it seems like a it could be inflicting ah maybe maybe a few years behind the the the u s love your perspective on that and then just a quick follow up from for blake i know you not guiding our beyond the third quarter or but when we look at for q is there any color that you could offer i just in terms of how to think about ah see now different for avenue thank you
spk_2: yes ah ah ah ah yeah i'll just read or it reiterate what i just thought about it at ctv in india we had eleven next growth year over year which is one of the most boss metrics that we've shared in this report the and we still feel like we're and
spk_1: early stages but the green shoots that were seen a i think are indicative of more to come and are partnerships and content around the world whether that's and and london or germany or or spain or italy or france
spk_13: are all indicative of great things to come up like the second part shirt and think to the question i think i'm some all this talk will be lucky three and then all little told us when i came under question for the rest of the or and you for you know when kids readers the so many positive trend among men i'm in the country and you her job
spk_6: highlights most already ctv leading the way the fundamentals of the business or really strong the thing on to three is excluding political which which i would encourage people to think about it or as auto evaluate the underlying strength of the business on the your be your bases were showing significant acceleration by
spk_1: you're on your and three i think they were talking about excluding election que three of around thirty percent year on your and we're in the mid twenties out cute me in the prior year so really excited about that and as you think about and then moving on and cube or on you know does have more difficult cause them with the them bcg three your call last year and and we top of the a couple times political brought in cuba or last year was the biggest quarter that we had as a company was a high single digit percent of our been on so you don't really meaningful on a year earlier bases
spk_13: and also be recall last year cube or and driven not just by that pipes old it a political bad but we also had a rebound in digital advertising as well but i would just say regardless of the cops there isn't some that woman of breath and the fundamental that his business are so strong i'm i'm really optimistic about it
spk_9: thanks on
spk_0: thank you and the next question is coming from usaf scalia from truest security css your line his life
spk_14: great thank you very much in the morning guys grantham a solid performance again and two questions please jeff may be going back to solemn are i know it's very early i think you've only have it i'll add it up for maybe about a month now but just wondering if i you can share any early feedback from high end any improvement and campaign perform and so far relative to next wave at least within those customers the have used it for a few weeks now on am dumb any impact ah so far and overall spend get i suspect not bad just wanted to ask and then blake maybe the up performance on the but in the bottom line was particularly impressive can you may be just walk us through the biggest contributors to bottom line be eat and what non repeatable as we go into second half of the sharon and and early next year thank you
spk_15: ah yeah so
spk_1: i i'm really glad you about this question that it that i don't mind a into the just being really open here which is you know whenever the release a new ah a potentially a new platform there's always some amount of anxiety you know you do as much research as possible you had the market as much as possible you listen as much as possible both and then you help you gotta write a and so we were really excited to ship solemn are which is the biggest release in the history of the company we had more engineering hours and and people on this release than anything we've ever shipped ever at and to do most of that work during a pandemic where it a little bit
spk_2: order to do all those things like listen
spk_1: it yeah we i was i would anxious to see how would be received a of course optimistic and we're convinced we did the right thing but you always want to see it in the numbers and that's exactly what we've seen we've seen a amazing traction you were nearly a month and a and it
spk_2: and the response has been fantastic
spk_1: it does represent a behavior change though the for the user so they have to read learn something
spk_2: a but those that have taken the time to do it
spk_1: i have all given a fantastic the back that it the better experience which is exactly what we expected and so because it is a better experience that's why we're so optimistic that that the majority of our as will be bought on this new platform up by the beginning of next year the and and that represents more efficiency for the user i'm especially excited about going into cute for because often what happens is to for it at all of you know it is is the biggest quarter of the year for us
spk_2: but it's also where you prove yourself because met much of a of the advertising a spend it sort of determined by a calendar cycle where the are into for use a you spend the most you perform the most and then a q one you make a decision about where you're going to spend for the next year ah and tell if we have a really strong que for it set up or art or que one really nicely for next year and time i'm i'm optimistic that that the performance will set us up for next year
spk_1: it's out that i couldn't be happier with the way solemn are has gone so far it it's very early as you as you highlighted and it represents a behavioral change or but i'm convinced that that going to happen over time and really excited about what that means for advocacy on our platform
spk_13: and then i'll just take that the second or like question on the on the be on the bottom line for but done so of your more than half of the be in the quarter on a but i was just really driven by the top line outperformance i'm in the business
spk_2: it's as many the know that we don't have a lot of variable cost associated with higher top line so when we see it come in and blows almost directly are often down even as to see that we can have some expense been a benefit as well some of that tiny your that he was broad based and with the wasn't anything like that i would major oil in a little bit lower black on op's expand little bit timing on some fix marty expense we had better bad debt than expected a and continued out the receivable but but nothing no major thou and that i would call out
spk_16: great be them
spk_0: thank you and the next question is coming from lara martian from need i'm laura your line is nice
spk_17: hey there's so just you were talking about how the city v open internet consortium was integrating into two point oh and then you said pseudo is integrated directly into to point out i was wondering how that affects your ability to target whether people are going indirect bike and affiliating vs like scuba directly integrated is to point out and then my second one is on a walmart the hell are we still on track to be fully integrated with marked my for q and as your are you get paid on up because you get the fifteen percent support the is that how you make money on the walmart deal when cpg spend money on your part one thank you
spk_2: yvette appreciate the that the question so ah as as many may know ah one of the things that is really important about preserving that the be amazing state of ctv is to provide relevant as a are on the shows that you're watching when it when a dad funded a and a because of the nature of devices in cpv iraq wired a bit more collaboration between the content owners as well as those providing that and so what we've needed a and and you know many people talk about this in the context of cookies and browsing a but that's not really but what you id was designed for the exclusively it was designed to
spk_1: create a better currently for the entire internet especially for connect the tv
spk_2: a so that a content owner you can have a the same understanding of a user past that to a
spk_1: those of us representing the advertisers so that then we have a common understanding that can provide relevant advertising as well as make certain that we don't show the same add five times in the same commercial break make certain that we don't show them an ad it's irrelevant to them and i make them more effective but so all that all the tv companies
spk_2: had a different way of integrating with a unified id to point out
spk_1: some of them have gone to coalition with like block rap or open a key and said hey you're a consortium of a at at your technology consortium so what are you do the work for all of us and there are others who have said well working in a consortium can take too long
spk_2: and we want to make certain that it integrates directly and we have data that we want to put to work directly adult and from our standpoint weren't different weather a consortium does the work whether the content owners themselves do the work at many and put them on parallel paths which is a commentary on hot critically and strategically important it is for them and for us to get the idea is a set up so that we can provide those relevant as a of but you know to both moved to do it directly to me is that exciting because they put after that another way but they have that they want to make certain that they do it as quickly as possible we expect that trend to continue just be cause the future of of a television is dependent on it and then the second walmart employee at walmart a so he our walmart is on track we continue to have really fantastic discussions with them at as as the relate the hello be paid were paid the same way that we would
spk_1: at it with any other partnership where we have ours are standard platform a fees and then they put it their data exclusively to work to it and this a version of their dfb which is a port built on top of our platform
spk_18: thanks like you very much great numbers like you
spk_0: thank you and the next question is coming from matt swanson from rbc capital markets not your line is nice
spk_19: yeah thank you so much were taken the questions i'm i've got to his wow they're both good and kennedy follow up upside to laura a second ago now i'm in great traction on your id to point i'll add it used the term critical scale produced help us with a little more color on what you think out i'll as far as what is critical scale in terms of it cookies one way to morrow what you pick up the acc of his after kiss the of the replace them and if there's any way to think about you know innings or percentages of how far you away from kind of the ideal state ah that would be really helpful the other i'm on the walmart example is just like other ways that you can use this as kind of a p o c i a proof of concept for other retailers are unsure with you know amazon doing what they are with their d s p it it's becoming you know an increasing area of focus for other retailers who maybe you don't have the internal ah pack platform that amazon dogs and it's in that that's a great place for trained us to come and
spk_20: yeah so ah
spk_2: that the term critical scale a it with it yeah you you you you pulled out a i think a very important phrase that we used in are prepared remarks in the it in the earnings report which i do think is indicative of the moment that that we're in right now as it relates to the way that the internet is going to work so and then you asked about if cookies were to go away today so and to be clear at google announced that they don't expect cookie to go away for for twenty twenty three and they said a and even then we'll just well we'll see when we get there and thought our them and maintaining from the very beginning
spk_1: that i'm not certain that it in the best strategic interests for google to get rid of cookies at all
spk_2: but that's not what this with about the a create a new id was not about replacing cookies and was about creating a better internet and and that doesn't just apply to the browsing the internet which as everyone knows that ah a small minority of what the internet is ah of course it york your mobile devices and it at and the related apps as well as thing like connect the tv which is some of the most effective advertising baby the most effective advertising ah that ever been done at at scale which is all dependent on different ideas but when you get to a place where the currency is so widely accepted a become critical to doing business so think of it like deepa or mastercard a currency that if you do not accept that currency and yard local store you are going to struggle to get goodness as a you might be able to say i won't accept american express or might not accept discovery but but there are some currencies by either cash for these are mastercard that you have to accept in order to just keep the doors open ah i'm that's where i believe you idea that that inflection point where it's become so in or operable with other currencies ah that making certain that you're in or offer bullets your something new or if your a tv company you will be operating at a disadvantage if you are not in or operable up with you i do too so when i say that critical scale that's what i mean that inflection point where you can't afford not to be a part of it as it relates to that and it into retail up proof of concept you know it it it's always great to partner first with the biggest retailer in the world a and so and naturally that creates a bit of a case study and it lays down the gauntlet for everybody else it that of course has been done a and ah you know it would it would be strategically savant them off know and to say it nicely for us to tend to not be working on a bringing other retailers and and their data into the platform a especially because of what i thought about in the prepared or remarks were but you know we're we're trying to a timber helped the open internet be an amazing contrast the walled garden and that need especially in measurement and the way that results are created a and matter ah and by making everything comparable to each other you make it for the open internet as a much better place to spend the lion's share of your dollars than in walled gardens where everything is opaque and you're totally dependent on them to tell you how you did that and so it in that environment it becomes really important especially for companies that sell their products and stores
spk_1: a to have inside about how that performed and they'd of course they want to see how it performed at walmart but they're not bunch of other retailers are bunch of other stores that they also want to see where where a trend doctor and there's of course a bunch of other data about transaction that would help them discover what is actually working at
spk_2: at and that's what's really critical for the open internet is it that a moment where we can actually show what's working and whatnot which is critical given it so easy to make ads on the internet their dad everywhere so which ones are working a the question that has to be answered
spk_1: a better than ever before at because i'm was riding on which is economic growth and recovery
spk_21: thanks matt
spk_0: thank you and the next questions coming from a brain fitzgerald from wells fargo brand new line as life
spk_22: ah thanks guys that i want to go back to earth to to solo mark and you talked about new capabilities visible be around on boarding and measurement marketplace just wondering if you could discuss the the revenue opportunities in the and mechanics around those as well if the measure marketplace is that gonna be a take great model and and will on boarding have a revenue components
spk_19: and if so they're gonna be more volume than spend oriented just just numb to mourn and mechanics or
spk_2: yeah so so both of those up that making it easier to onboard your first party data as well as making it easier to measure success
spk_1: are are are not about making more money for us directly that are you know i really like the amazon metaphor of spinning the flywheel faster and there some activity that you do in your business a to make it so that your core a activity
spk_2: it goes better and that the value exchange is even more obvious that so that that eat your customers
spk_1: spend more do more with you so in both cases on and first party data and measurement marketplace my ideal is that they're both for it at other there's not an incremental take rate for those exact features up but if you get more spend on the platform you make more money and if you produce better results and you get more space
spk_2: end and you make more money and as i'm absolutely after making more on this but not on those features directly by giving them away we make advocacy on the platform better we may be open internet better and we get more about spend a and that's that's the ideal there will be catered the measure and marketplace where people
spk_23: do pay and and that's good
spk_2: kind of like paid apps on your i phone or or your android ah versus for yeah the both are are are important and and putting some amount of paid out so that they're really high quality a a and ah you know it up
spk_8: create the most competitive marketplace possible are are are are are are important so
spk_2: some of them will be paid but it it i think the default may be similar to on your phone should be for free of because that for eight more usage and create a better experience
spk_1: thanks brian and paulie have time for one more question
spk_0: certainly and final question will be coming from just and patterson from keybank just a new line as last
spk_24: great thank you very much to of i can at first jeff could you expand on the snowflake you id integration and sounds like something that could go on your reach from large advertise their said the myth that question wanna and in question to ask the solemn you talk about efforts to simplify the supply chain could you talk about what that entails and just how that creates new opportunities ahead thanks so much
spk_25: he that a job
spk_2: ah i really appreciate the question because i i i think that a snowflake adopting you id to it is one of the biggest headlines that have happened for him you id to a today the and it not enough has been said about it i don't think most people understand a book why this is so big
spk_1: that so first let me just remind everyone that you i to is is no longer a trade desk product and we did the most of the early developing but it's own by the community we worked together with the open internet if it's open source at this point so it is it is way bigger than us
spk_2: some of the proof of that his adoption from companies like snowflake so if you don't know snowflake what they do with they make it really easy for you to manage your data so he on the same way that which made it really easy for companies to build web sites
spk_8: let us know like mix of really easy a up for companies to put their data to work now they're typically much bigger companies than those that that whips works with a but that part of what makes it so exciting is that it if their front of but data to work a day of course need to be leveraging the currency that had scale
spk_2: that and so that makes it possible for that data to be more used a and and protected at so that they can do the right thing by by consumers whether they're on the content thought of whether they're on the advertiser side so when a company who is so focused on making data actionable and listening to customers so they
spk_1: you can a you can make certain that you're doing what they're asking for a snowflake using this just underscores just how how much critical mass you id to have already house
spk_2: i'm at at and then i enter relates to solemn are and it's impact on the supply chain and so you know what what we heard spending a tremendous amount of time doing as trying to shed light up on the supply chain and what were we're we're constantly asking it is are people in the supply chain adding more value than extract that's what we expect up our own company to do and that's all we expect everyone else in the supply chain to do and what and but that's not for us to decide on our own but we do want to provide transparency so that the market can to find especially because we represent so much demand as so we are working that night and day to make certain that we're signing the light of transparency on the supply chain so that anyone in the supply chain but it does extracting more value or charging more than the value they create that that that they be removed from the ecosystem the are of by the market not by off on so that ah the supply chain becomes more efficient and the reason why this is so critical is because the open market a path to compete with want gardens and one one great a in some ways advantage want on tom it is that they have a shorter supply chain because they can pull it all and so we just need the market to do a thing and in order for it to do that
spk_4: it it need transparency
spk_1: thanks justin and thanks for every one for joining the call today paul leave it with you to close it out
spk_0: thank you nice job month does concludes today's conference call you may disconnect your foment at this time have on sunday thank you for your participation
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