DSP - Richie Capital Group - The Trade Desk: A Rich Measurement Marketplace

• Majority of positions in our portfolios were down 10% or more - one notable exception was The Trade Desk which declined 40.0%.
• As we entered 2022, I reduced our TTD position to one of the smallest in the portfolio due to valuation concerns.
• TTD management reaffirmed Q2 guidance and reiterated that they expect to continue growth in excess of their market’s projected growth rate.

The following segment was excerpted from this fund letter .

The Trade Desk ( TTD )

We had numerous detractors during the quarter as the market left few places to hide. The majority of the positions in our portfolios were down 10% or more, and so I won’t discuss them all. One notable exception was The Trade Desk ( TTD ) which declined 40.0%.

At the end of 2021, TTD had grown to one of the largest positions in our portfolio. However, as we entered 2022, I reduced our position to one of the smallest in the portfolio due to valuation concerns. But we have many reasons to remain invested in this wonderful company. The Trade Desk is the leading Demand Side Platform ((DSP)) for digital programmatic advertising. Their customers are the advertisers and agencies seeking to manage complex marketing campaigns which TTD enables through real-time auctions, AI, and analytical tools placing client's ads in the best context at the lowest price.

Advertisers love programmatic ads because they know exactly who they are reaching and can maximize the effectiveness of their marketing budget. Publishers love programmatic advertising because they can sell the exact spaces they need to fill. Over the past two years, the advertising space has shifted:

• With the advent of streaming platforms (Netflix, Hulu, etc.), and the changes that both Apple ( AAPL ) and Google ( GOOG , GOOGL ) have implemented to their ad tracking models, advertisers have scrambled to find ways to effectively reach their target customers.
• And as ad spending continues to shift away from social medial platforms (Facebook/Meta, Snap, etc.), marketers are seeking more effective and targeted channels outside of walled gardens.

TTD is well positioned for this shift.

In partnership with the advertising community, TTD has built a unique and effective solution to counteract these changes in the form of UID 2.0. The market has discounted the entire ad tech sector due to concerns that advertisers will significantly reduce their advertising budget during a recession.

We believe that a recession is pending, if not already here. But even if we do have a deeper recession, advertisers will reduce their marketing budgets but not eliminate them. Marketing will still be critical to pursue consumer spend. Marketing teams will want to partner with the platform providing the best solution. That is TTD and their Solimar platform which provides marketers with a rich measurement marketplace. The ad tech sector will be a “winner take most” race and TTD will continue to thrive despite challenges amongst their peer group.

As Netflix ( NFLX ) begins their journey towards offering an ad supported subscription tier, they have no choice but to include The Trade Desk in their decision process because they have the best solutions.

At their annual meeting in May, TTD management reaffirmed Q2 guidance and CEO Jeff Green reiterated that they expect to continue growth in excess of their market’s projected growth rate (8% to 16%) while maintaining a 90%+ retention rate for their existing customers.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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