The Trade Desk (NASDAQ:TTD) started off with a focus on advertising through internet-based platforms. It quickly grew to be an independent force to be reckoned with in the world of buying online advertising. Helping clients to buy and manage digital advertising campaigns on websites and social media sites like Facebook (NASDAQ:FB) has propelled TTD stock to massive 993% growth in value since the company went public in September 2016. For the next stage of growth, the company is looking to one of the hottest categories in tech: streaming video.
The twist is, The Trade Desk is counting on consumers to be overwhelmed by the sheer number of paid streaming services. As companies launch free, ad-based options to combat “subscription fatigue,” The Trade Desk will be there to help clients buy advertising slots.
Streaming TV Subscription Fatigue
2019 will go down as the year that the battle for streaming TV dollars truly launched. Netflix (NASDAQ:NFLX) faced a flood of new competing services from some of the world’s biggest media and tech companies. Notably, last fall Apple (NASDAQ:AAPL) launched Apple TV+ and Disney (NYSE:DIS) launched its Disney+ streaming service. The new services have resulted in fragmentation of content. Consumers can no longer see all their favorite shows on Netflix; if they want to watch Marvel movies, they also need a Disney+ subscription. The Office — the most popular show on Netflix — is leaving for Comcast’s (NASDAQ:CMCSA) NBCUniversal Peacock streaming service.
With all of these streaming video services, a new term is growing in popularity: subscription fatigue.
Consumers signed up for Netflix to escape paying big monthly cable bills. But how many streaming video subscriptions are they willing to pay for before frustration sets in?
Ad-Supported Streaming
Media companies are betting that consumers will be willing to sit through an ad or two, if it means they can access a streaming service for free.
Perhaps the biggest (or at least highest profile) salvo in this new free streaming scheme was launched at the start of this week by NBCUniversal. The company announced its new Peacock streaming service, which will become the exclusive home of The Office, as well as other popular NBC shows including Parks and Recreation and Brooklyn Nine-Nine. Besides the expected paid subscription options, Peacock will be available as a free, ad-supported service for Comcast cable’s 20 million customers.
This is where there’s opportunity for The Trade Desk, and corresponding upside potential for TTD stock. It’s what the company refers to as Connected TV (or CTV), and The Trade Desk has a Connected TV service in place, ready to help advertisers buy and manage ads on streaming services. Advertising is already a growing business on Connected TV. Look no further than Roku (NASDAQ:ROKU) for proof. Many of the channels on that platform are free, ad-supported content. That advertising revenue was a primary driver of Roku’s stock growth in 2019.
In December, while retailers were focused on Black Friday sales numbers, The Trade Desk was tracking ad impressions for various platforms. And according to TTD’s numbers, ad impressions for Connected TVs on Black Friday increased 105% compared to 2018.
Last quarter, The Trade Desk reported Connected TV ad revenue grew 145% year-over-year. And the company has signed deals with Roku, Disney, Comcast and Amazon (NASDAQ:AMZN). It’s a market expected to be worth over $10 billion by 2021, and TTD is there to help clients buy and manage advertising with its Connected TV system.
Bottom Line on TTD Stock
Will 2020 be the year that The Trade Desk’s CTV ad business takes off? And if so, will this have a material effect on the company’s bottom line?
The Trade Desk is betting this will happen, and its Connected TV system is in place to take advantage of the growing number of free, ad-based streaming video services. Investment analysts aren’t entirely convinced. Among those polled by CNN Business, TTD stock is a consensus “buy.” However, their median 12-month price target of $292.50 — an upside of just 4.2% over the current $280.39 — suggests they don’t see that CTV ad business exploding this year.
That being said, if free ad-based streaming TV takes off with consumers, it seems like only a matter of time before TTD reaps the benefits.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
