Trade Desk Doubles The Revenue, CTV Drives Earnings
The digital advertising firm Trade Desk reported revenues of $280 million for Q2, representing a growth rate of 101% Y-O-Y. The growth rate is driven by strong growth in Connected TV (CTV). Its revenues were a major piece of the gain. In an earnings call on Monday, Jeff Green, founder, and CEO of The Trade Desk said:
“We have nearly 10,000 CTV advertisers on our platform, up over 50% compared to last year.”
He further added that through the first half of 2021, brands spending more than $1 million in CTV on their platform have already doubled year-over-year. CTV is the fastest-growing channel and growing as a percentage of overall revenue. It is completely driven by customers in the form of content subscriptions. Its supply hit the roof during the pandemic. Green said,
“One thing we constantly say to advertisers is that whatever you thought you knew about the scale and reach in CTV six months ago has changed dramatically.”
The advertisers growing demand in the Connected TV space especially for premium ad inventory led to the company’s strong revenues. The shift in the behavior of the advertisers is disrupting the traditional TV buying ads- where brands commit in advance to spend on TV ad inventory even before the commercial releases. There is a paradigm shift of advertisers transitioning to digital TV which offers flexibility and data for ad targeting. The ad tech company is acting as a clearinghouse for CTV platforms to funnel ad inventory to digital buyers and is in direct competition with YouTube, Hulu, Roku, and more. Trade Desk is grabbing ad dollars from brands like Mondeléz and Ford. Green also mentioned a food giant brand that shifted a quarter budget of linear TV to CTV.
“We are seeing many brands shift TV budgets to the data-driven precision of CTV.”
On the other hand, Trade Desk is positioning itself as an alternative to the walled gardens and launched the new ad-buying interface Solimar recently. The Trade Desk is trying to develop an open programmatic approach that lets the advertisers access audience ID and export data to their own database. At the same time, walled gardens don’t allow to extract data and restrict data sharing across platforms.
Many broadcast companies are early adopters of the Unified ID 2.0 (UID2) standard, a replacement for third-party cookies. In recent weeks, as reported by Adweek, Interpublic Group joined the list to support UID2 along with Omnicom Media Group and Publicis Groupe. Green is bullish on consumers’ readiness to exchange data for more information from brands.
On the call, Trade Desk emphasized two key drivers that determine future growth – the rise of CTV and its data policies. It is just beginning to witness advertisers moving as much as one-quarter of media budgets to CTV to minimize waste.
Trade Desk expects third-quarter revenues of at least $282 million.
Publishers Look For New Income Alternatives As Adtech Revenue Declines
The adtech industry has already been in an unstable situation for the past two years loaded with debt. It has been a challenging situation for major tech providers as well. Many of the companies were start-ups, fully leveraged, or hoping to come out with an IPO soon.
The COVID-19 pandemic only worsened the situation, for now, companies are to stay above water. Publishers fear that the two-year revenue gains will be over.
With the overconsumption of video content, premium ad placements have also declined. The publishers are also concerned about encountering payment uncertainty from ad exchanges and third-party revenue sources.
Co-CEO Rotem Shaul of Primis which is owned and backed by the Interpublic Group and Universal McCann.shares with Digiday the concerns from publishers and said,
The publishers we work with are prioritizing safety.
Therefore, publishers are rapidly finding new and stable ad formats and ad programs across platforms to continue with additional revenue streams ad reduce dependence on one ad format. The new ad format includes native, display, video advertising content, and scrolling videos that give way to new opportunities. Publishers are also using this quarantine time to improve and update the programmatic systems -page loading speeds, update ad tech stacks, and refresh the sales team on the latest developments.
CEO Roetm Shaul added with an increase in consumption, publishers should do everything they can and should partner with companies that will continue post-crisis too. They should look for new ways to diversify their ad tech portfolio.
All this would have been a little easier to experiment with vendors before the tightening of the economy as they had the luxury of freedom and money to test and determine the best solutions. Currently, the focus is on the cash flow with low pay or no pay, putting pressure on the managers to deliver revenue.
In this down economy, this will lead to a vicious cycle. Publishers will be hesitant to give a chance to small vendors for fear of being unpaid or will be enforced to replace ad tech. With these concerns, publishers will leave small companies and they will lose more money and business which will lead to bankruptcies or shutdown. This will create more worry over working with small vendors and publishers moving to bigger vendors.
Present scenario of publishers
According to Digi Day, Shaul said, “Publishers are frantically moving their businesses to safe havens like Google, Verizon, and other big companies.” Companies may not offer the best deals but have no uncertainty over the payments.
However, there are vendors like Freewheel (owned by Comcast), SpotX (owned by RTL), or Primis that can offer similar levels of stability. They are equipped to offer attractive deals and keep the revenue stream intact.
Again, Shaul said to DigiDay that at Primis, all publishers want to hear is about security and safety in these uncertain times. He added,
Even we feel the concerns from publishers. Fortunately, they do categorize us as a big company, as we are a part of IPG, and once they see the letters IPG and know that they will back us up, they relax.
This unpredictable time will teach new learnings. To drive fresh revenue streams, new ad programs are set up. For ad tech and publishers, these new practices for stability and innovation will be carried forward. The revenue-strapped publishers and vendors will stabilize, then sustain, and once again grow and prosper. It’s all these important learnings that will lay a new foundation for their relationships and campaigns in the future and make stronger business for both sides- vendors and publishers.
Snap’s Q1 2020 Report: Users and Revenue Increases, Ad Spend Declines
Snap Inc. the parent company of the popular social media platform Snapchat reported in its Q1 2020 earnings – strong gains in both users and revenues but a dip in advertiser spend despite the growing concerns about the coronavirus pandemic.
No Coronavirus Negative Impact on Earnings-Yet
The stock was up nearly 20 percent after the company reported a 44 percent (Y-o-Y) increase in its first-quarter revenue to $462 million. That was a far better performance than expected. The ad spend growth grew 58% in January and February, and fell to roughly 25% in March (when the pandemic grew rapidly), the gains from the first two months helping to end the quarter positively.
CFO Derek Andersen said during Snap’s earnings call,
“The economic environment has become challenging for many of our advertising partners.”
The company didn’t provide guidance for Q2 citing uncertainty related to the worldwide economic crisis but in an unusual step, provided revenue growth figures for the first week of April. The advertiser mix on Snapchat contributed to the Q1 performance and continues to help in Q2. Snapchat has a few small business advertisers unlike Facebook and Instagram, however many large advertisers are ready to commit on a regular basis.
Snapchat CEO Evan Spiegel said in a statement,
“We are grateful for the opportunity to serve our community and partners during this difficult time.” He added, “Snapchat is helping people stay close to their friends and family while they are separated physically, and I am proud of our team for overcoming the many challenges of working from home during this time while we continue to grow our business and support those who are impacted by COVID-19.”
Strong User Growth and increase in Engagement
Snapchat’s daily active user (DAV) base reached 229 million in the first quarter across all regions and on Android and iOS.This represents a 20 percent increase from last year.
Image Credit: Snapchat Earnings Slides
There is some concern over the divergence of Snapchat’s users’ growth. Snapchat added 2 million more users in North America- the most lucrative market but the majority of the growth was from the ‘Rest of the World’ category. Snapchat has witnessed significant growth in the Indian market since it revamped its Android app, a key contributor to the ‘Rest of the World’ category.
However, the key area of opportunity that Snap would prefer to boost growth in the US as it will get more 3.5x more revenue per user.
Image Credit: Snapchat Sides
Besides, the time spent on Snapchat has increased due to coronavirus. CEO Evan Spiegel reported that the average time spent in the last week of March vs. the last week of January was up more than 20%. On the other hand, markets like the U.K, France saw more than a 30% increase.
Mobile app tracker App Annie’s findings point out 54% growth in average time spent per user on Snapchat in South Korea from March1-14,2020, compared with Q4 2019. Italy marked a 36% increase and Japan was up 23%.
Image Credit: eMarketer
Additionally, this pandemic increased communication with friends and family on Snapchat, up more than 30% in the last week of march compared to the last week of January whereas in some other geographies there was an increase of more than 50%.
Games, TV, Chat, Calling are other highlighting points of group engagement.
Snapchatters watching Snap’s premium content hub ‘ Discover’ grew 35% Y-o-Y in Q1 2020 which represents the total time spent watching shows more than doubling this quarter. The company also mentioned hiring Hulu senior vice president of advertising sales Peter Naylor.
Chief business officer Jeremi Gorman said,
“As TV budgets migrate to digital, they move to places that carry the same advantages of linear, and we’ve been investing in those things for years. Peter is just the most recent investment in the strategy.”
Snap has also launched App Stories -brings its popular stories feature to the app. It also launched five new Snap games globally. With the use of videoconferencing and live streaming to connect with friends and family, Snap has seen more than 30 times increase in the daily download of Snap camera, a desktop app that allows people to add lenses to whichever video service they use. Besides, it added more than 120 partner app integration with its Snap Kit, and the numbers of Snapchatters using on a monthly basis is up 75% from the Q4 of 2019.
Direct-Response advertising budgets make up half of the revenues.
Snap continues to double down on direct response advertisers especially in games, home entertainment, CPG, and eCommerce. Direct response advertising now accounts for more than half of Snap’s revenue.
Speigel noted,
“In the short-term, we’re shifting sales resources and pulling forward some investments in direct response to better serve the advertisers who are trying to reach our audience during this time. For example, we can help movie studios pivot to digital releases by supporting them with a suite of products designed to track titles over a dynamic and flexible release window. We’ve also seen many large brands doing a lot of important things to help their community and the broader world, and we’re helping these brands communicate their efforts to our audience in a thoughtful and approachable way that inspires others to make a positive impact.”
Snapchat recently worked with Universal on the promotion of the animated film ‘Trolls World Tour’ released digitally incorporating Trolls AR masks into Snap Camera add-on a feature that gained significant momentum as more people work from home.
Snap has worked immensely hard over the past few years to build out measurement capabilities and ad products to interest the direct advertisers resulting in nearly double total ad revenues in two years.
So what has Snap done to get this?
Snap introduced conversion-optimized bidding- which allows advertisers to optimize toward their sales or app install gaols, conversion-tracking advertising pixels, and improved ad-targeting capabilities. This has attracted performance advertisers who already buy those types from other platforms.
Snap has focused on offering unique ad products like augmented reality platforms and easy self serve ad platform.
Chief business officer Jeremi Gorman said,
“Advertisers are looking for a way to make a dollar go further. “We have efficient pricing, and we’re a great place to come to get ROAS for the audience they’re looking for.”
There is also something for Snap’s brand advertisers. The company has doubled the amount of money committed via upfronts in 2020 vs. 2019. Snap is using its creative services to help brands distribute their PSAs related to COVID-19, like the filter from Adidas encouraging people across the United Kingdom and Germany to stay at home that was viewed more than 14 million times.
Snap has a lot of potential and capacity to reach a young audience. Although things look gloomy for the remaining year of 2020, Snap appears more stable and an attractive platform for advertisers and partners. If Snap manages to expand its market appeal geographically, it will be well-positioned beyond COVID-19.
