The Trade Desk's Robust Q3 Earnings Reflect the Accelerating Momentum of UID2
Shares drop 30% despite Trade Desk's robust Q3 earnings as UID2 gains momentum Advertiser caution due to resolved strikes contributes to lower Q4 guidance
Article Brief:
The Trade Desk's earnings statement revealed a noteworthy 25% surge in revenue, amounting to $493 million in Q3. Notably, the company's total revenue for the first three quarters of the year reached an impressive $1.34 billion, reflecting a substantial 23% year-over-year growth.
The Trade Desk has received notable support for its Unified ID 2.0 (UID2), a substitute for third-party cookies. Several publishers, including Warner Bros. Discovery, NBCUniversal, and Walmart Connect, have already implemented this solution in their platforms.
While the company's profits remained strong, its shares experienced a decline of approximately 30% following the announcement that Q4 revenues would fall short of analyst predictions. The executives attributed this lower guidance to advertiser apprehension caused by strikes within the automotive and entertainment sectors.
Article Insight:
The Q3 earnings of The Trade Desk indicate that the demand-side platform has experienced growth due to an increase in digital spending by advertisers. According to Jeff Green, the co-founder and CEO of the company, this success demonstrates the value that premium brands place on attributes such as precision, agility, and transparency when it comes to their campaigns.
"Our strongest position yet allows us to seize a larger portion of the $1 trillion advertising market as we enter our busiest period and plan for 2024," Green stated in an earnings release. "With the shift towards connected TV, the expanding opportunities in shopper marketing, our leadership in identity, and our groundbreaking product launch of Kokai, we are better equipped than ever to assist advertisers in utilizing data to drive growth and differentiate their brands."
The Trade Desk aims to offer a viable solution for a post-cookie world with UID2. The earnings release emphasized the solution's adoption by an increasing number of CTV and streaming services, resulting in enhanced ad targeting and greater spending efficiency. Furthermore, the integration of UID2 across Walmart Connect's retail media network is being tested, presenting a new avenue of opportunity for the programmatic company.
However, The Trade Desk's Q4 revenue guidance is approximately $580 million, which is $30 million less than what analysts had estimated. As a result, the company's stock plummeted by around 30% in after-hours trading. During the earnings call, Green attributed the lower guidance to spending reductions caused by strikes in the entertainment, media, and automotive sectors.
"We have noticed a decline in brand expenditure in sectors like automotive and consumer electronics, particularly in areas related to cell phones and media and entertainment," Green explained during the call. "Certain industries, such as the U.S. auto industry, have recently been impacted by strikes."
The United Auto Workers union initiated strikes in September against General Motors, Ford Motor Company, and Stellantis, while the SAG/AFTRA unions had been on strike against major Hollywood studios since the summer. However, all of these strikes have now been resolved.
