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2016 IPO Prospects: The Trade Desk Files to List

Posted on Friday, Sep 2nd 2016

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According to eMarketer, digital ad spending will surpass TV ad spending by 2017. TV ad spending is expected to grow to $72.01 billion in the US by 2017 while the total digital ad spending will grow to $77.37 billion. By 2020, digital ad spending in the US is projected to grow to $105.21 billion.

The Trade Desk’s Offerings

Ventura, California-based The Trade Desk was founded in 2009 by Jeff Green and Dave Pickles as a technology platform for ad buyers. Its self-serve platform allows ad buyers to share customized messages with the targeted population in the context that they choose. Advertisers have the ability to reach an individual potential customer or to send out mass messages for the global audience.

Recent market reports reveal an increased focus on programmatic advertising. Programmatic advertising refers to the use of software and machines to buy digital advertising. According to Magna Global, the global spend on programmatic advertising spot market through real time marketplaces was $14.2 billion in 2015.

The Trade Desk provides organizations with the ability to bid on real-time auctions for ad spaces and it is working with a mission to empower advertisers with the capabilities of programmatic advertising. Its platform grants users with access to highly granular targeting and reporting options, which is integrated with data management technology and first-party data so that customized messages can be delivered. The platform has built-in tools to leverage first-party data as well as third-party data to provide a higher return on advertising dollar spent. It provides access to approximately 3.2 million ad spots on average every second to its clients to bid on across multiple media sources including websites, shows, channels, stations, and streams.

The Trade Desk’s Financials

The Trade Desk’s offerings have helped it grow fast in the past few years. Revenues grew 156% over the year to $113.8 million in 2015. During the same year, The Trade Desk generated a net income of $15.9 million compared with a net income of $5,000 a year ago. For the six-month period ended June this year, The Trade Desk saw revenues grow 83% over the year to $77.6 million. Adjusted EBITDA for the six-month period grew 81% to $20.1 million.

The Trade Desk has raised $252.5 million in both venture and debt financing so far. Its investor list includes Double M Partners, Founder Collective, Hermes Growth Partners, IA Ventures, Joshua Stylman, Kortschak Investments, L.P., Neu Venture Capital, Opus Bank, Revel Partners, SV Angel, Wellington Management, and Wider Wake Networks. It has also taken debt financing from Bridge Bank and Opus Bank. Its last round of venture funding was held in March this year when it raised $60 million at an undisclosed valuation. In May this year, it also raised $125 million in loans.

Earlier this summer, The Trade Desk filed its S1 to list on the NASDAQ under the ticker TTD. The listing is expected to help the company raise $82.5 million. It has been a while since an ad-tech company went public. Competitor Rocket Fuel had listed back in 2013 at a stock price of $29 each. The stock did well initially before collapsing. For the last quarter, Rocket Fuel earned revenues of $116.97 million with a loss per share of $0.38. Its stock has fallen to 10% of its value and is currently trading at $2.99.

Analysts also believe that the ad-tech market may be due for competition from bigger players. While there is a slew of smaller companies like The Trade Desk and Rocket Fuel, of late, other bigger players are also slowly entering the market. A few years ago, IBM had bought digital marketing agencies including Unica, Coremetrics, and Silverpop. More recently, at the start of the year, Oracle bought AddThis, an audience tracking firm for $200 million and a marketing-tech company. Interestingly there is much more focus on marketing technology companies these days than ad-tech companies. Marketing tech companies have been able to deliver a more sustainable business model with their subscription-based model aimed directly at marketers. On the other hand, ad-tech companies have earned revenues based on the volume of advertising transacted by ad agencies on behalf of clients. Ad-tech companies mostly sell to third parties in the ad ecosystem instead of marketers themselves. As a result, ad-tech companies are finding it more and more difficult to raise funds. The Trade Desk’s IPO will be a good litmus test for these companies to test the real appetite of the public market.

Photo Credit: Kevin Simpson/Flickr.com

This segment is a part in the series : 2016 IPO Prospects


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