Trade Desk shares pop after securing Netflix ad-tech deal

After just one year, Netflix's (NFLX) ad-tier subscription service has over 40 million users. The Trade Desk shares (TTD) have popped on the news that Netflix will launch its own ad-tech platform.

Citi Analyst Ygal Arounian joins Market Domination to comment on what Trade Desk's automation software has to gain on this opportunity.

"Netflix is 20% of viewership. and that ad platform is expected to grow. So what that means, bottom line for the trade desk, and on our estimates, we think that the billings, the dollars that are running through The Trade Desk in 2025, that's an incremental $500 million, or about 3 to 4% of growth that's just in 2025," Arounian says.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.

Video transcript

It was a busy week in the media sector.

The industry's top names unveiling their upfront presentations to advertisers, but it wasn't the shows making the big headlines.

It was the focus on advertising technology, Netflix announcing its own ad tech platform and will make its ads available to programmatic buyers including the trade desk shares of TT D jumping on the news this week from on what this means for the company and its business.

We're joined now by city analyst, Yal Arroy and Yal, it is good to see you.

So what this basically means, Yal, as I understand is that the trade desk is gonna help facilitate um automated ad purchases for Netflix kind of walk us through you guys.

Just what bottom line this means for the company, you know, what kind of financial impact do you think it's gonna have?

Yeah, sure.

So look, this is a really important set of inventory for the trade desk and it was just a kind of level set trade desk is a demand size platform that essentially connects advertisers with uh with, with, with various uh digital platforms.

Uh That's a across the web collectively that could be online video and, and display ads.

But the, the fastest growing and biggest part of their business is, is a connected TV.

Uh as connected TV has become bigger, it's continue to take share from linear television and that's, that's uh really early stages and, and, and growing the, the trade desk is the largest independent demand side platform uh do playing this role within the ad tech ecosystem.

Netflix is still really early in terms of its, of its ad offering.

It's about five or 6% of total uh C TV ad dollars.

Um but opening up to the trade desk here is, is gonna be really important because Netflix is uh 20% of viewership and that ad put platform is is expected to.

So what that means bottom line for the trade desk and our on our estimates, we think that the billings, the dollars that are running through the trade desk uh in, in, in 2025 it's an incremental $500 million or about 3 to 4% of uh of growth that's just in 2025.

And then as Netflix gets bigger, um and C TV, uh A dollars and advertising continues to grow and 26 and beyond, it should continue to be a larger impact Igal.

Um Netflix didn't, it's Julie here.

It's good to see you.

Um Netflix didn't just open it to trades, it opened it to a couple of competitors as well.

But do you think trade desk is really best poised here to take the biggest share.

And do you think and what are we seeing, I guess from the other streaming platforms also?

Yeah.

Hey, hey Julie.

So um it, it, it opened it up to a couple of other competitors.

So when Netflix first came out with its ads here, it was partnering with Microsoft.

Um over time, the the decision was to bring some of the the capabilities in house and then, and then expand the relationship with multiple partners, really with the ultimate goal of, of letting more ad demand coming uh come into the platform.

Um The the trades and the role that it plays as the, the really the largest independent uh demand side platform.

They have a ton of relationships with, with large advertisers.

Um And, and they should, they'll likely play a really important role in, in bringing in this demand.

They also partnered with, with Google and, and their demand side platform.

Google is really more oriented towards um its own platforms and um and, and youtube in particular, but the trade desk, one of the biggest differentiators for them is that um they are, they are agnostic, essentially, they don't own their own inventory.

That's one of the things that advertisers like a lot um Trade desk is plugged into um a at this point really all, all the leading uh C TV platforms for youtube and, and Amazon who are really control their stack on top to bottom on their own.

Don't have those outside partners.

You got, you know, you look at trade desk nice run.

Right.

It hit a, it actually hit a 52 week high just this week.

It's of about 30% this year, up around 40% over the past 12 months.

But, you know, you look at valuation, you go as an analyst is valuation still supportive here.

Yeah.

So valuation tends to be the biggest push back on the stock.

It's, but it, it's been the biggest push back on the stock really on that 40% run up um as well.

Um It, it's definitely not a cheap stock and there's a, there's a real premium to that.

It's trading at about 40 times next year's Eva do.

Um So, you know, certainly a a significant premium.

Um but, but we think that's justified.

You would you look at the growth rates, trade has been growing mid 20%.

Uh We think that there's upside to the numbers this year.

When you look at um the Netflix contribution next year, we think there's upside now to numbers next year.

C TV is about 40% of, of the trade desks, billings and, and it's been growing and there's C TV is in very early stages.

Still you think about viewership.

It's moved away from linear where about 5050 50% of, of viewership is on uh is on streaming.

50% is on linear, that's gonna continue to go to, to, to move.

But when you look at uh TV, ad dollars, it's about 25 30% that's on C TV versus linear television.

So the ad dollars haven't caught up yet.

Uh The, the streaming platforms are pushing more and more subscribers to the ad tiers because it's more profitable.

So we're in early stages of maturity here, trade desk is, is a really dominant uh platform in in the the role that it plays within the ecosystem.

So we see real good long term growth for the trade desk that play a really important role.

And those are the reasons why you can justify uh that kind of valuation.