In times of economic crisis, advertising tends to take a hit. Consumer spending falls, which lowers the potential return on advertising activity, and businesses tighten up their budgets as a result. Thus, for companies like The Trade Desk (NASDAQ: TTD) that derive their revenue from ads, the lockdown that has ensued to halt the spread of the coronavirus was looking like a bad omen.
In reporting its numbers for the first quarter of 2020, The Trade Desk did in fact reveal that its cloud-based ad platform took a hit in March. But business is already rebounding, especially in connected TV, as new internet-based streaming platforms come online. Digital ad flexibility is a double-edged sword in times of crisis, but it's an enduring long-term advantage.
First, the start of 2020 must be acknowledged. In spite of mounting fears, The Trade Desk's revenue growth exceeded guidance provided at the onset of the year (which called for at least 30.5% growth). Adjusted profit margin measured by EBITDA (earnings before interest, tax, depreciation, and amortization) was 24% -- lower than the 30% margin predicted for full-year 2020, but still strong year-over-year expansion.