The Trade Desk, Inc.

from our objectivity, our focus, our scale, and the loyalty of our buyers. We're already seeing the results of Co-Kai performance today, but we're just getting started. The fourth factor that is changing the entire landscape of digital advertising and ad tech are the changes happening at Google. Google has an incredibly dominant money-making business in search, and another in YouTube. They also have an incredible opportunity in cloud and AI, most notably in Gemini. Because of the AI race in big tech and these opportunities, Google could continue to downgrade their network business to focus on those prospects. After all, they operate at a disadvantage in the large buyers of the buy side of the open internet to the trade desk because Google lacks objectivity. If these pressures weren't enough on Google, they also have a pending antitrust trial that has created massive ripples throughout the global ad tech ecosystem. The outcome of the trial itself is less important than the change in behavior that will likely come at Google no matter what. Whatever the outcome of the trial, I do believe that Google will become more cautious, if not less involved in the part of their business where they compete with us. First off, they are and will remain under tremendous scrutiny in this market, whether it's from US regulators or their many equivalents around the world. By contrast, the convoluted role they play, laid out very clearly by the US Department of Justice in their network business, is likely to play more fairly one way or another. I point this out because it presents tremendous opportunity for our business and for the broader ad tech ecosystem. I have never been more excited about the value of the premium content at scale on the open internet, combined with new approaches to performance efficacy, especially in contrast to the murkiness of cheap reach dynamics within walled gardens, such as Google. The fifth macro vector creating incremental secular tailwinds are changes in the market dynamics of CTV. It's hard not to be bullish about CTV when it's both our largest channel and our fastest growing. Advertisers can see more clearly the contrast of our offering and the role we play with brands and agencies with walled gardens than ever before. This year, we've really started showcasing the strengths of the sellers and publishers available on our platform and on the open internet. We've even published a list of 100 of the best destinations on the open internet. When you contrast the quality of the open internet with the perils of UGC, it's easy to see that the best of movies, the best of TV, the best of sports, the best of journalism and the best of music and podcasts represent something more valuable to society and to advertisers than short videos and user generated content surrounded by comment sections that are often not good for brands. At the trade desk, we've also been talking a lot about the premium open internet because that is where consumers are increasingly spending most of their time. Companies like Netflix, Roku, NBC, Spotify, Disney and Fox, along with many others, have redefined the consumer's internet experience over the last few years. They all recognize the power of advertising to fund the amazing content experiences that their consumers have now come to expect and they are all investing in the capabilities to capitalize on advertiser domain. This point is worth reiterating because of some of the macro inventory dynamics in digital advertising. You may recall three or four years ago, I would talk on these calls about inventory scarcity, especially in CTV in the fourth quarter, which was enjoying a significant surge because of people spending more time streaming at home during the global pandemic. As advertisers chase those viewer eyeballs to new streaming platforms, advertising inventory was scarce and with demand rising, CPMs went up. But CTV inventory isn't scarce in the same way anymore because over the last couple of years, every major media company has launched a streaming service and all of them have embraced advertising as a key way to fund their content and grow. As inventory scales and scarcity decreases, advertisers have a lot more choice. They also have a harder job, which is assigning value to a lot more inventory. Now, it's about the quality of the inventory as well as the quality of the signal. You may remember at our last investor day that we showed a graph of what our clients were willing to pay for CTV ad impressions on the open market. In many cases, we bid significantly higher than the price that the media companies were negotiating in direct deals. The content arms race is more intense and more expensive than ever, and media companies need to monetize their content as effectively as possible. Two weeks ago, Variety reported that the top six media companies will increase content spending this year by 9% to a record $126 billion, all of which needs to be funded. Without the benefit of scarcity, media companies now need to provide advertisers with more insight. What am I buying? Who am I reaching? Tools like UID2 and OpenPath are helping provide that signal. And it's no surprise that platforms like Fox, who were among the first to embrace these tools, are benefiting the most. One major news publisher who has deployed OpenPath so that they can gain a clearer understanding of what our clients are willing to pay, saw their fill rate increased by 7x, leading to a revenue increase of more than 25%. The sixth positive secular force helping the trade desk is pressure to make the supply chain better. Advertisers and publishers are two endpoints of the supply chain, and pressure on the edges, meaning the endpoints, means pressure on the whole supply chain. How is this good for us is perhaps counterintuitive. There are many players in ad tech that are focused on extracting the highest margin possible. In contrast, we have been focused on adding more value than we cost or charge. We do this because it is the right thing to do, but also because it engenders loyalty from our clients and because it is the very essence of economically sustainable. At this moment, the advertising ecosystem is in the process of refining its supply chain to become definitively more efficient than walled gardens with more objective and independent measurement to prove its efficacy. Companies focused on extraction will likely lose share, while companies focused on adding value will likely gain market share. There are many in our industry who share the ethos to add value, and we're aiming to partner with nearly all of them. However, there are many that don't. Some who take a more short-term approach and are just looking for arbitrage opportunities or places where they can create the quick illusion of value at the expense of agencies, advertisers, or sellers and publishers. I do believe, like most markets, that ad tech will go through a long arc that will bend toward market efficiency and transparency. It's just a question of how quickly we get there. And in this moment, we have an opportunity to accelerate that progress. There will be more focus than ever on who is adding value and at what cost to advertisers and sellers and publishers. Consider the potential prioritization changes happening at Google. In a world where Google is more cautious on the open internet, a brighter light will shine on the value that everyone provides in the ad tech supply chain. I have long said that everyone in our industry should provide more value to the market than they extract. That's a principle we've always followed. Advertisers are under more pressure than ever to do more with less. Sellers and publishers, which is of course our term for content owners and the companies who own that content, are fighting harder than ever to take home as much of the CPM as possible and simultaneously increase their fill rates. And they want the advertising ecosystem to be as efficient and transparent as possible. That's why most are so eager to partner with us on initiatives like UID2 and Open Path. So they can provide advertisers with as much signal and transparency as possible. And so advertisers can value their ad impressions as accurately as possible in the context of reaching their target audiences. The seventh macro vector that I wanna talk about today are the trends happening in audio. I wanna highlight that many have wrongly defined the advertising TAM of audio to some sort of comparison to legacy radio. Because the biggest players in audio are global and because digital provides potential for far fewer and more relevant ads, I'm convinced if the biggest players move correctly, they can capture one of the biggest opportunities in advertising and media today, which is the delta between time spent in the audio channel and the amount of ad budget heading to that channel. Digital audio is at the early stages of its evolution. The channel is in a similar position to where CTV was a few years ago. Consumers in the US spend an average of three hours per day consuming digital audio, up significantly over the last five years. And advertisers are eager to capitalize on this emerging advertising channel. At the moment, advertisers are looking for clear, trusted signals to inform what they buy. Trust but verify has become a mantra around the open internet. Just a few weeks ago, media reported on our major expanded partnership with Spotify. They will be deploying both UID2 and Open Path so that advertisers can find as much addressability and insight as possible for Spotify's high value at impressions. I don't think there's a company in the media universe that's been more successful than Spotify at building the subscription model. In the audio world, Spotify gives us access to almost all of the world's music for a low monthly subscription. In many ways, Spotify has been at the forefront of this mass consumer shift to digital audio. I think they are in the process of becoming well positioned to get incremental users due to a good ad experience and to get incremental ad budgets for the exact same reason. You only have to listen to their most recent earnings report to understand how seriously they are taking the ad supported side of their business and building out their programmatic capabilities over the next several years. We are very excited to partner with them in this work and to help our advertiser clients make the most of this fast growing channel where listeners are highly engaged and leaned in. Our partnership with Spotify is one of the inventory partnerships that I'm most optimistic about. The eighth macro vector aiding in our outsized growth is the massive opportunity around retail media. To summarize this at a high level, Amazon has showcased to retailers around the world the benefit of using retail purchase data to make retail businesses work better. If advertisers advertise products people like and want and frequently buy at their stores like Walmart or Target or Albertsons or Dollar General or many, many others, those retailers of course will sell more product. So do the companies making and selling the products. The significance of this vector and the role it's played in our success the past few years deserves a much larger space of time which I expect to do in the coming quarters. The ninth macro tailwind is the changes happening in live sports. Of course, sports is some of the most premium and most expensive content and media because it is often scarce and often highly sought out by brands and it changes very quickly. It really is built for programmatic advertising. The best moments in sports are surprises and unpredictable. That's what makes them so exciting. However, it's also what makes them hard to plan around and to price properly. I expect over the coming years to see programmatic spot markets and sports become best friends. We are enjoying our strongest year to date with live sports. As the football season has kicked off here in the United States, we are looking at on average 1.5 billion ad impressions per weekend. We have dozens of major brands buying football through our platform for the first time and many others increasing spend in the triple digit range. One example is a major quick serve restaurant chain here in the United States. This client had been advertising on traditional linear television but with its customer base mostly aged over 45 and restaurant visits among that demographic decreasing, they wanted to expand their customer base to reach younger adults and young families using CTV. Working with their agency, Happy Cog and their partner, Clever, this restaurant chain worked with us to target their audience with a specific focus on live football opportunities on CTV, followed up with online video and display, all in an omni-channel approach. Our platform enabled the restaurant to target their audiences with precision and use new measurement tools to understand the impact of those ads on brand intent. As a result, this client saw a 15% increase in brand awareness among their target audience and a 9% increase in mobile transactions where CTV was the first ad serve. This is a great example of how programmatic on our platform is driving high value business results. The 10th macro trend helping us grow is this net effect of all of these changes at once. I've said publicly a few times that the biggest thing Google has going for it in its defense against the Department of Justice is complexity. It's hard to make sense of this industry and all of the forces changing it so rapidly. Our clients need help. They're navigating unprecedented change and unprecedented pressure. Fortunately, our buy side focus and our objectivity aligns our interest with our clients and positions us to stand with agencies and brands shoulder to shoulder as we face supply chain changes that ultimately benefit the open internet and the market, but will require adjustments across the ecosystem. We're here to help and have proven ourselves to be one of the leaders of the open internet. All of these 10 macro forces, when joined with our amazing team, our global footprint, our buy side focus and our amazing product, including the recent platform overhaul found in Co-Kai are showing the early signs of the future promise of our innovations, our objectivity, our AI and our company. Clients are seeing performance upgrades around the world, many of whom are embracing new approaches to the objective data-driven measurement the trade desk offers. So as we exit 2024 and look forward to 2025, the trade desk is better positioned than we have ever been. 2024 has been a banner year for CTV and we have further cemented our position as the first choice platform to help leading brands as they continue to shift their budgets from linear TV and UGC into CTV. Retail media has rapidly become one of the fastest growing areas of our business, a trend we expect to accelerate through 2025. Retail data on our platform is transforming how many CPG advertisers approach measurement and attribution. Innovations in Co-Kai are helping advertisers identify and target new potential customers with much greater precision. Data elements per impression continue to increase, resulting in significantly better performance, helping to unlock budgets and win new business. Our premium content partnerships activated through supply path innovations, such as Open Path and the sellers and publishers 500 plus marketplace are helping advertisers value and select ad impressions with more objectivity than ever. Innovations like UID2, which has reached critical mass, are helping advertisers pioneer better approaches to address ability in a changing identity environment. And our investments in new measurement capabilities from the TV quality index to our growing network of retail data partners are helping advertisers prove the efficacy of their campaigns in new objective ways. Let me conclude by underlining that taken together these initiatives, along with many others, position the trade desk very well for market leading growth in the years ahead. I believe it is worth noting again, we continue to significantly gain market share. I believe our level of relative outperformance, 27% revenue growth in the third quarter is indicative of the value we are delivering to our clients as they deal with an uncertain consumer environment. We continue to find JVPs with brands and their agencies at a very strong pace with billions of dollars transacted through these partnerships each year now. I believe we will look back on 2024 as an inflection point in terms of how advertisers value the premium open internet driven by CTV and digital audio as a compelling alternative to wall of gardens. And I expect advertisers will emerge in 2025 more empowered than ever to drive data-driven precision. As a result, we will continue to gain share. And with that, I'll hand it over to Laura to cover our financials.

Thank you, Jeff, and good afternoon. As our third quarter results demonstrate, the trade desk is executing at a high level, outpacing peers and capturing increased market share. We achieved robust accelerating year over year revenue growth while delivering outstanding profitability and cashflow. Key investment initiatives, including performance advancements in our Co-Kai platform, expansion in CTV, retail media, and supply chain innovations like our Open Path technology are not only strengthening our foundation, but position us for durable growth in 2025 and beyond. Turning to our results, revenue in Q3 was 628 million, representing growth of 27% year over year, accelerating from the prior quarter and year over year. We continue to win more share of our clients' advertising budgets as they increasingly prioritize platforms like the trade desk that deliver high value results, especially in premium video and CTV. This trend is a familiar dynamic in our industry that we've witnessed many times over the years. When CMOs face pressure to achieve more with less, they turn to platforms like ours for flexibility, precision, and measurable results. During the third quarter, CTV led our growth from a scaled channel perspective once again. We saw strong momentum in retail media as we continued to win incremental shopper marketing budgets. International spend growth outpaced North America, once again with notably strong performance in CTV. With the strong top line performance in Q3, we generated approximately 257 million in adjusted EBITDA for about 41% of revenue and free cashflow of 222 million. From a scaled channel perspective, CTV by a wide margin led our growth again during the third quarter. In Q3, video, which includes CTV, represented a high 40% share of our business and continues to grow as a percentage of our mix. Mobile represented a mid 30% share of spend during the quarter. Display continued to represent a low double digit percent share of our business and audio represented around 5%. Geographically, North America represented about 88% of our business in Q3 and international represented about 12%. We are pleased that our ad spend outside North America grew at a faster rate year over year than inside North America, as has been the case for the last seven quarters in a row. CTV continued to drive our growth across both in the Asia Pacific. We see significant opportunities to capture more share in these regions in the quarters and years ahead. In terms of verticals that represent at least 1% of our spend, growth was broad based again this quarter. We saw strong performance in the majority of our verticals, particularly in medical health, which includes advertising related to healthcare and pharmaceuticals, as well as home and garden and pets. Political spending was also strong in Q3 as expected. Family and relationships and healthy living verticals were both below average. Overall, we saw healthy trends across categories and we continue to believe there's opportunity for us to gain share in all of the verticals we serve. Turning now to expenses. Excluding stock-based compensation, operating expenses in Q3 were 391 million, up 24% year over year. During the third quarter, we continued to invest in our team, our platform and our infrastructure to support sustained growth. Income tax expense was 33 million for the third quarter, driven primarily by our pre-tax profitability and non-deductible stock-based compensation. Adjusted net income was 207 million or 41 cents per fully diluted share. Net cash provided by operating activities was 273 million for Q3 and free cash flow was 222 million. DSOs exiting the quarter were 89 days, down two days from a year ago. DPOs were 74 days, down one day from a year ago. In Q3, via our share repurchase program, we repurchased 54 million of Class A common stock. We will continue to approach the repurchase program opportunistically, depending on market conditions and capital priorities. We exited the third quarter with a strong cash and liquidity position. Cash, cash equivalents and short-term investments ended the quarter at 1.7 billion. We have no debt on the balance sheet. Turning to our outlook for the fourth quarter. We continue to see strong spend in our key areas such as CTV, retail media and political. We estimate Q4 revenue to be at least 756 million, which would represent growth of about 25% on a year over year basis. We estimate adjusted EBITDA to be approximately 363 million in Q4. In closing, we are extremely pleased with our strong performance in the third quarter and we are cautiously optimistic for Q4. We continue to gain momentum across our biggest priorities, delivering profitable growth and significant share gains. As we look ahead to the remainder of Q4 in 2025, we believe we have never been in a better position than we are today. With large growth drivers, including the ongoing secular shift to CTV, upgrading measurement with retail data, expansion outside North America, a strong identity framework, strengthening of the supply chain and the ability to drive leverage in our model, we remain optimistic for many years to come. That concludes our prepared remarks. And with that operator, let's open up the call for questions.

Certainly, and thank you. At this time, we will be conducting a question and answer session. If you wish to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you wish to remove your line from queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment while we poll for questions. And once again, please press star one at this time if you wish to ask a question. The first question today is coming from Sham Patil from Susquehanna. Sham, your line is live. Please go ahead.

Hey guys. Great job on the strong growth and the results. I just had one bigger picture question. Jeff, can you talk a little bit more about what you're seeing in terms of the near term macro for three queue and four queue? And then for next year, how you view the macro and setup for trade desk? Thank you.

Thank you, Beth. Thanks, Sham, for the question and for the fine words. So first, I just wanna point out that the most significant macro vectors that I can talk about are the things that we itemize in the prepared remarks. So we've taken more time this time to talk about the macro vectors that are affecting us, especially into next year in the prepared remarks this time. So I just encourage everybody to spend a little bit more time with them because we spent a little bit more time preparing them. As it relates to the here and now though, I'm incredibly proud of our performance in the third quarter and we are currently firing on all cylinders, whether that's what's happening in CTV, it being both our largest channel and our fastest growing, which those two things don't usually go hand in hand, or the amazing efforts in Co-CHI. It started the year as an engineering effort and it's since turned into both an engineering effort as well as our sales and client services teams getting that adopted. The adoption has been phenomenal. The product is the best that we've ever shipped. So a lot going for us in that. UID too has become the primary currency of identity in the open internet. And then of course, we have so much going for us in retail media and supply path optimization. I really do believe we're in a stronger position than we have ever been. As it relates to the macro market sort of in the here and now, I do wanna just highlight that CMOs are dealing with a lot of uncertainty and a lot of scrutiny. The uncertainty they've seen a lot of over the last few years, but the scrutiny, I don't know that it's been more than they have right now. And as a result, brands are under pressure to grow and that is good for us. So even though it's a little bit tense for the market, it's good for us because they're turning to us saying, how can we help? And I do wanna also highlight that there is a difference between the stock market being at an all time high and consumers feeling as confident as they've ever been. And that is not where many consumers are, especially sort of on the left side of the bell curve. So if you make less than the median household income, then you're more affected by price. And if you're selling products to those people, then it is probably affecting your business more than others. And so as a result, some brands are in a phenomenal position and some are in a more difficult position in this current market as they face inflation and consumer weakness, changes in interest rates and all the implications as to how products need to be marketed. As a result, they need to be more agile, more focused on efficacy, more focused on efficiency than ever before. And so what we do, which is give them more data and honestly give them control of their own future. It means that they are leaning in more than they ever have before. They're looking for solutions to help them. But when you couple that with why programmatic advertising is the leading source of growth in advertising, which is that, of course, we've been outperforming the market. Of course, it's a place where you can put data to work on a case by case basis and optimize for personalization. Of course, when you're using data driven advertising and marketing, that is the very best place to inject AI in distributed models in the way that we have. And then of course, when we take our joint business plans and all the other efforts that we have, we're in a really phenomenal position. One other thing I just wanna highlight is that political in both Q3 and Q4 was as expected. It's been very strong. And, but we are mindful that some brands are not as interested as advertising in a polarized political environment. And so those dynamics have made things a little bit different in this Q4 than in other Q4s. One other thing that also gives me a tremendous amount of optimism for the future is that some of our most significant partnerships, whether that's Netflix or Disney or Roku or Fox or Spotify are all in what I would call the crawl phase of our partnership. We've done some amazing things with some of those. Others, we've only talked about doing amazing things and we've done just sort of testing the pipes. But I think the very best is yet to come in all of those partnerships. And so in the short term, they're making small contributions but I think the very best is yet to come in all of that. And I'm sure we'll talk about Open Path and some other things later, but that gives you a sense of what we're facing in the short term.

Thanks, Jeff.

Thank you. Your next question is coming from Vasili Kharastiav from Cannonball Research. Vasili, your line is live. Please go ahead.

Hi, Jeff. I have a question about Google. As they remain under pressure from regulators, what are you seeing in the market in terms of how is it easier, is it harder for you to get to win spend from brands? And then with Google network business continuing its negative or negative growth, does the trade desk really have any preference in what happens in this DOJ trial? Thank you.

You bet, thank you. Appreciate the question. So first, a little bit of context. As you know, the Department of Justice already concluded one of its trials against Google on that of search and the Department of Justice won. And I would argue that the case that the Department of Justice has against Google on the ad tech side is even more compelling. It is more compelling, but it's also more complicated, which makes it a little bit harder to predict. But I think the case is incredibly compelling for the government. But regardless of what happens, I believe we will win. And I do wanna underline the things that I said in the prepared remarks. Google is a phenomenal company. I think they have a tremendous amount of opportunity ahead of it as it relates to search and cloud and AI and Gemini. But it is clear that they have been deprioritizing network and it has not performed the way that the rest of their business has. If I were in Sundar's shoes, I would deprioritize it too because of the opportunities that they have on those other fronts, as well as just the nature of their business, which is pretty dependent on them making very fine margins on media that has a cost of goods sold that is incredibly low. And the premium content of the internet does not have a low cost of goods sold and therefore makes it hard to move the needle on a P&L as big as Google's. So I anticipate that they will deprioritize it. But even if they don't, what I think is inevitable is that Google has to play more fair. What has clearly come out in the trial is that they have not always played fair. And that might be the understatement of the call. But we have managed to win in an unfair market. I believe they will be forced, whether that's from government or just by their own choosing because this risk reward is not worth it. So by their own choosing, I think they would make the market more fair and therefore make it easier for us to do well. So that's why I maintain that regardless of what happens in the trial itself, I believe that we'll do well and that we'll continue to win. I think there are scenarios where the landscape looks very different depending on what happens to Google and regulation, especially on the supply side, which is at the core of the government's case, which underlines the fact that I don't think anybody is disputing as it relates to the trial itself but the trade desk will continue to do well. So I think we're in a great position. I'm very excited to see the outcome and I think we win no matter what.

Thanks for the question.

Thank you. Thank you. Your next question is coming from Jessica Erlich from Bank of America. Jessica, your line is live. Please go ahead.

Thank you. Hi, Jeff. We've seen the trade desk deploy many initiatives over the years focusing on the supply chain from the gold standard for SSPs to UID2, to S&P 500 plus, and now OpenPath. Can you wrap this all together and speak about how the work you've done on the supply chain with OpenPath and what this initiative can mean to the value of the trade desk with its partners over the next several years? And I guess like secondarily, when do you scale? Because as you said, you're in the crawl phase with many of the users of OpenPath. I mean, just starting like Disney and Fox, et cetera. And some that you've mentioned like Netflix, not even on the platform yet.

Thank you so much. Appreciate the question. There's a lot to unpack there. So let me first just give a little bit of history so that you and I bring everyone along in this question. I love that you know about it because we weren't very public about the gold standard back in 2017, but we certainly talked to SSPs and ad exchanges about it. I would essentially summarize that effort as us saying to the sell side, here's the sort of signal that we would like to see. And we are just gonna tell you in advance. When we see that signal, we're more likely to bid up because these are the things that give us indication of value. We haven't always done that in the past, but we did start doing that in 2017. As you know, UID2 was an effort to make identity ubiquitous across the internet. When we first announced it, a number of companies suggested that we would never be successful because they thought we'd have to get 2 billion consumers to sign up for us to have any sort of footprint. And we explained then that our play was not to go sign up 2 billion consumers or to go direct, but instead to partner with the infrastructure of the internet. And we've done that across the board. Then as you point out, in the last two years, we've launched two initiatives. One is the Sellers and Publishers 500 Plus as well as the Open Path. Sellers and Publishers 500 Plus is meant to make it easier for people who are currently buying private marketplaces, which often have really slow or small trickles of inventory and they don't necessarily realize how much they've limited their decisioning power by only considering a small amount of inventory. So by selecting some of the most prominent and safe parts of the open internet to buy across all of it, they expand their ability to find value. Because many times the reason people enter into private marketplaces is simply to be safe. And so we've given them a very safe, large ecosystem for them to buy into. And it's something that we'll just continue to promote and make accessible and provide transparency into what, of course, they're buying. But Open Path, it might be, aside from UID2, the most significant venture of all of them. And all Open Path is is our willingness to go one step further from gold standard and share with the sell side exactly what we're willing to pay on any given impression opportunity. And the reason why we do that is because there are many publishers who are saying, I don't have any idea what you're willing to pay because of all of the companies that exist between us. And it's a way for them to hold them accountable, to earn their keep. Some have wrongly assumed that this is us trying to cut them out. It is not. It is us trying to empower the publishers to make certain that they earn their keep. And the reason for that is that we are competing with walled gardens. We're competing with the most successful companies in the history of advertising, companies like Facebook and companies like Google. Those walled gardens have one advantage, which is that they control the supply chain end to end. And therefore they're not at the risk of players in the middle of the supply chain, extracting too much and then decreasing the value proposition of those that participate in the entire open internet, rather than just in a particular walled garden. And too often an advertiser pays a dollar and less than 50 cents ends up in the pocket of the publisher. So open path is a bit of to mix metaphors or to at least use two of them. It's a bit of a light on a hill as well as a canary in the coal mine. Buyers get better visibility in the overall supply chain. And the reason why I say light on the hill is because we don't necessarily need open path to be on every impression. In fact, we have no expectation that it will, but we will have it run often enough, especially with the largest players on the open internet to know how to grade all the other supply chains, all the other ways that we could potentially buy so that we hold it accountable to be as efficient as possible. The way I view this is it is a race between walled gardens and the open internet to create the most efficient supply chain. Walled gardens have the advantage on one level, which is that they control it all. But they operated at disadvantage because they only operate with UGC and they only operate with content that has a very low cost of goods sold and don't have the appeal of all the best parts of the open internet, which I think we described well in the prepared remarks. The advantage that we have is not only do we have the premium side of the open internet, but we also have the forces of capitalism, of competition, of all the things that make markets great that we can partner with so many different companies and through a collection of efforts, outperform on any single one company. I don't think you can count on any one company to be the source of all innovation. And we've got a business model that I don't think goes out of style the way that many destinations do. And so in order for us to be a company that services the entire open internet, I believe it's essential for us to have a product like Open Path. So it's a really critical part of our present and future. And really appreciate the question, Jessica. So we had a platform to talk about it more. Thank you.

Thank you. Your next question is coming from Sweta Kajuria from Wolf Research. Sweta, your line is live. Please go ahead.

Thank you for taking my question. Jeff, I have one on CTV growth. So it's your largest and fastest and you have a lot of catalysts that enable healthy, sustainable growth in CTV. So when we think about the drivers over the call it next two to five years, how would you rank order the impact of secular tailwinds to third party partnerships that you may expand your forward product, international expansion, rising levels of Aztec or AI that will be used in measuring or anything else? Can you please help us unpack key drivers that'll allow you to sustain growth at a healthy clip in the near to midterm? And then the follow-up is, how do you see Amazon evolve as a DSP over the same timeframe? Thanks a lot.

Thanks for the question. You did a pretty good job of laying out all the key secular drivers for us, the tailwinds that are helping. The first and foremost, over the last few years, there's been at times anxiety about will there be walled gardens in CTV? Not because we ever thought that was a viable path because I believe that is not a viable path because it's too fragmented. But instead, what all of the major players have come to understand is that when you have a premium product, the very best way to get the most out of it is to auction that off. And of course, to describe it in great detail. When you're not selling an average product, you have to describe it better in order to get the premium that you deserve. And that's true whether you're selling cars or art or apps. And I would also add that conflict of interest is an even more inferior playbook in CTV than it is in any other channel or any other corner of media. So as a result, I would argue that Amazon operates at a much bigger disadvantage in CTV than in any other channel. So we've argued against Google's lack of objectivity in every other part of the open internet and they've been less of a competitor in CTV. Amazon's been more of a competitor in CTV but I think Google was a more formidable competitor in the other parts of the open internet than Amazon is in CTV. And that is simply because of that conflict of interest. They are going to be pushing ads on premium content that they own, meanwhile neglecting premium content that others own. While we have no dog in the hunt and we're just trying to help people objectively decide, do I buy the ad on Netflix or do I buy the ad on Hulu or Tubi or somewhere else? So as a result, you take all the partnerships that we put together and I think those are a significant driver for our growth in the future. A couple of years ago, I would have said that we were leading the CTV markets in Australia and in the United States. That's expanded to other markets like the UK and to Germany but there are still way more opportunities around the world. As I mentioned last quarter, I was in India over the summer and just the opportunities there in every channel but especially in CTV and audio are just spectacular. And so the opportunities that exist for us around the world couldn't be better. We've also established UIV-2 is not only the currency of the open internet but it is especially the currency of connected television. In a way, that's the way it became the currency of the open internet is because of CTV. So what I think is the most significant thing to watch over the next couple of years is that so many content owners have put ads on their content now and that what was once a shortage is no longer the discussion. It's no longer a discussion about scarcity or about shortages of inventory. And so as a result, they are trying to distinguish themselves from each other. This is what has been the case. In streaming wars, but now that's also true of the ad experience in the streaming wars. And so they will be describing their inventory better than they have historically. We will have more choice than we have historically. I think that the premium content will do better. I think that content that has identity attached to it will also do better. I think that position CTV could do really well but there will be a lot of work done over the next couple of years for them to layer identity as well as other metadata to give buyers the very best chance to value it properly and to pay the premium that they need in order to continue to fund their massively expensive content machines. So hopefully that helps. I really appreciate the question.

Thanks, Jeff, that is helpful.

Thank you. Your next question is coming from Laura Martin from Needham. Laura, your line is live. Please go ahead.

Okay, great. So Jeff, I'm just gonna ask you one and it's the hardest question I get. And that is that Tradesk is growing two to three times faster than other SSPs and DSPs, even those that are public. Is there a tipping point at which you eat too much of your competitors, you take too much share and there isn't an open internet for you to compete with or trade with and therefore your growth gets limited by the fact that you must have trading partners on the other side and on the same side of the open internet. Thank you.

Laura, thanks for the question. I like this one a lot. I didn't see this one coming. So big picture. I believe that the advertising ecosystem around the world is about a trillion dollar industry today, especially when you include retail media. I think it's about that today. Lots of different numbers out there that aren't that too far away from that, but it just depends on whether you include retail in that or not. If you look at what we're doing, 13, 14 billion a year at this point, we're just over 1% of that trillion. I look at it as we have 99% of the pie left and there's so much opportunity for us to do more. As I'm looking at that pie and say, how do we not get distracted by all the different ways that we could go and all the different things that we could build and parts of the pie we could pursue? How do we stay focused? I look at the biggest piece of the pie and say, okay, there's the US, there's a CTV, and of course, up and coming channels like audio, but those represent, I think, the most premium opportunities for us to go pursue. I would point back to the comments in the prepared remarks about, we think that every company in ad tech needs to add more value than they charge or extract. Some of the companies in the ecosystem don't think that way. They think about charging rent or extraction and there's often a mindset that is, ride the wave while it lasts, instead of how do I build something that really lasts, that I'm adding more value over time, creating more consumer surplus where your consumer or your client gets more value over time and therefore making it more and more sustainable and making your customers more and more loyal. I think there's a lot of pressure on the companies in the middle, including some of those that you referenced and that they have to be focused on adding more value than they extract. I think if we do the right thing for advertisers and then give visibility to publishers, that will create a more effective supply chain and that is the biggest impede or roadblock for our growth is an inefficient supply chain. So we need to make certain that the supply chain is as efficient as possible and that means partnering with all of those companies that are adding more value than they extract and continuing to obsess about the supply chain. But I don't have any worry that we can cannibalize the market, we're 1% of it. So I think there's just so much opportunity for us ahead.

Thank you, thanks Jeff.

Thank you, your next question is coming from Justin Patterson from KeyBank. Justin, your line is live, please go ahead.

All

right, thank you. Jeff,

I wanted to touch on the audio opportunities some more. Obviously we also had Spotify ad exchange announcements, but you can step back and you compare where we were at with audio versus CTV. What are some of the key things that need to change in the industry for this to become a much larger percentage of the business? I think audio is still roughly 5% of your spend today. Thank you.

Yeah, thanks Justin for the question. I think audio is in a slightly different position than CTV in the sense that when it was a more legacy business, meaning before the internet changed everything, the distribution models were more around local and the way radio sold ads was just different than the way TV sold ads. And there's less a sense of national. And of course in CTV now, there's more of a sense of even global. And of course in audio, there's a very global sense inside of businesses like Pandora and Spotify. So because things are being redefined, I think people have wrongly defined the TAM as being something quite small, where when you look at time spent and you look at the amount of engagement with audio content, it is really off the charts and represents a tremendous amount of consumers' time. So that's why I mentioned in the prepared remarks, if companies like Pandora and Spotify and so many others execute well, I think there's just tremendous upside for them and of course I watched carefully when I see in their earnings that 10 to 13% of their revenue comes from ads, but most of their subscribers or most of their users are asking for ads. And so I think that represents a tremendous opportunity for them. I'm a big believer in Daniel and Alex, and I believe they're on the path to get there, but there's a lot of work ahead, there's a lot of development that has to happen. This is gonna be a multi-year process, but I'm extremely optimistic about what that means for the future and think that it can represent a greater percentage of our business than it does today. And I think that audio can be a bigger percentage of the overall pie than it's arguably ever been before. I don't know that that will necessarily take or cut in to CCTV and premium video at all, but I do believe from some of the other channels, it will and should. So I'm pretty optimistic about the future of Spotify and audio, but we all have a lot of work to do.

Thank

you.

Thank you. Your next question is coming from Dan Salmon from New Street Research. Dan, your line is live, please go ahead.

Okay, great, thanks. Good afternoon, everyone. Laura, you highlighted that political was strong as expected. Any more you can do to quantify its expected impact for 2024 revenues implied by your guidance? I think it was a mid single digit impact in the last presidential cycle. And Jeff, you called out how some advertisers will step out of the market or get crowded out by higher pricing in some ad markets. Do you think those dollars that left can offset political, partially offset it? Just trying to think about the impact of that on our 2025 models. And maybe just one quick follow up to slip in, if you could just give us your updated views on capex for the remainder of the year and how you're thinking about it into 2025. Thank you.

Dan, thanks for the questions and absolutely happy to answer. We went into the last political cycle, the last big one back in 2020, saying that political spend was in the mid single digits. And we believe for this year of 2024, it'll be in the low single digits of the percent of our overall spend. When we think about how we consider political in Q4 and then go into thinking about how we're modeling going into 2025, it's a really nuanced but important question this year. Typically what we see is that Q1 is on average a 22 to 23% sequential decline from Q4. And in political years, it's critical to exclude that political contribution in Q4, which we believe again will be a low to mid single digit percent for that quarter as we go into modeling Q1 of 2025. On the second part of your question, which includes capital expenditures for 2024 and 2025, we've said and been consistent that we expect CapEx to increase in 2024 and 2025, but in both cases, it should be around 5% of revenue. And that hasn't changed. We invest primarily in two areas. The first thing our infrastructure, which includes data centers. And the second being our offices around the world, which is we have employees who are coming into work every week. So again, just wanna reiterate there that we don't expect any significant changes to CapEx this year or next year relative to the last few years.

And Dan, as it relates to the part of the question that was directed to me, the 2024 that was taken out, meaning those advertisers that spend a little bit less in 2024 Q4 because they don't wanna be next to the political, will that be back in 2025? Of course. In fact, in many cases in Q4, it didn't go anywhere. It just got postponed or got moved to other channels. So it doesn't necessarily go anywhere. It just reallocates its form. But in 2025, we think the cycle is a bit more typical and rates are more predictable. And then it's also a little bit easier to predict the shape of the curve throughout the quarter simply because you don't have a big change on November 5th.

Great, thank you both.

Thank you.

No problem. Our next

question is coming from Jason Helstein from Oppenheimer. Jason, your line is live. Please go ahead.

Thanks for taking the question. So Jeff, you highlighted, or I guess in the press release, the Yahoo, the Roku integration in the quarter. And I guess I wanna ask, how does this play into your broader CTV strategy around UID and buying unduplicated reach and frequency? And it's fair to assume you'll have similar integrations with TOP, whatever it is, three or four CTV platforms. Thank you.

You bet. Thanks so much for the question. I'm so proud of what we've done with Roku this year. We've had a long standing relationship with them, but it's really a born fruit in this year. And it really represents a significant change for them as it relates to adopting things like UID2 and some of the principles of the open internet. But of course, the Roku channel has grown tremendously for them and they have become not only a partner for us as a distributor of others content, but also a premium publisher themselves. I'm so excited by what they've done with UID2. And because of some of the assets they have with ACR and whatnot, I expect our partnership to continue to grow in the coming years. So I'm very optimistic about our partnership with Roku. I expect that to continue to expand and very much appreciate the question.

Thank you. Thank you.

Our final question today will come from Matthew Swanson from RBC Capital Markets. Matthew, your line is live. Please go ahead.

Yeah, thank you so much for taking my question. If I could maybe marry up a couple of the vectors you talked about, Jeff, specifically the idea that CMOs are under more pressure and then also some of the capabilities and the traction you're seeing from Co-CHI. I guess, what type of work does it take to help CMOs and the users understand the metrics coming out of Co-CHI, but also to kind of gain trust around them? I know that's been a challenge in the past some other walled garden platforms so people trust in the attribution data.

Yeah, so I really appreciate the question because I think this is one of the more nuanced ways that we have just so much opportunity in front of us. And honestly, we were contemplating adding other macro vectors that are helping us. And one of them is the state of measurement, which would have been a number 11. But the state of measurement is that walled gardens have essentially been grading their own homework for many, many years. And one of the things that they've done really well is convince people to use their own metrics and kept things quite simple. But at times that's been really difficult for some of the biggest brands in the world because they'll be told by a walled garden, we helped you sell 101 toothbrushes when the company actually only sold 100 toothbrushes total. So when you have that phenomenon, you start to doubt the credibility of those metrics. We have a very different dilemma or challenge, which is that we've been sharing so much data with them and given them so many options about the way to attribute success and attribute sales, that we've overwhelmed them with complexity and with numbers. And there's so many different ways for us to answer those questions. But because we're committed to doing that with integrity and with objectivity, we'd rather have a conversation with them about how do you want to measure success? There's a whole bunch of different ways to do it. Let us help you put together the one that makes sense for you. So as CMOs and CFOs get closer together, and their offices in some cases moved closer together, as they get closer together, a lot of our discussions, in fact, some of our biggest wins in last quarter and this one have come from us understanding what the CFO is looking for from the CMO so that we can go back and put together the metrics that prove we're creating incremental sales or growth. So it's largely about figuring out what they are looking for and us getting better at not making everything bespoke and reinventing the wheel, but at the same time, not oversimplifying it, assuming that we have all the answers and just grade our own homework with a single metric. So I'm very optimistic about what that means for the future because I do think there's a very important principle that we have been saying since the day we went public, which is objectivity matters a lot today, but it will matter more tomorrow and it'll matter more the day after that. And as time marches on, we think that that continues to be one of our greatest strategic advantages over the biggest names in tech.

Thank you. This does

conclude today's Q&A session and conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.