Shares of The Trade Desk declined 5.1% after concerns about future headwinds. The company has faced pressure from large digital advertising giants that offer programmatic buying services at little or no cost while also monetizing ad inventory. Ad agency clients have also criticized fees. The Trade Desk positions itself as “neutral” by not operating its own ad-selling platforms, aiming to avoid conflicts of interest. A sell-side analyst initiated coverage with a Sell rating and a lower price target, citing improving AI tools from big tech that could further compress The Trade Desk’s take rates, estimated around 20% today.
"Shares of programmatic advertising software company The Trade Desk fell on Thursday, declining 5.1% on the day. The Trade Desk has had a very difficult time over the past few years, as several Magnificent Seven digital advertising giants have threatened its market share. At the same time, its ad agency clients have expressed displeasure at what they deem excessive fees."
"The Trade Desk has positioned itself as a "neutral" programmatic advertising company by not operating its own ad-selling platform, such as a search engine, social media platform, or e-commerce marketplace, thereby avoiding the conflicts of interest it says are inherent in using the tools from the digital ad giants. However, over the past few years, the big digital advertising tech giants have begun offering programmatic buying services for little to no cost, since they also make money by selling the ads themselves."
"Today, sell-side analyst Bianca Dallal at Rothschild & Co Redburn initiated coverage of The Trade Desk with a "Sell" rating and a $11 price target, which would be over 50% below yesterday's closing price. Dallal believes that continued AI improvements to media-buying tools offered by the big tech giants for little or no cost will further pressure The Trade Desk's "take rates," it charges advertisers, which Dallal estimates stand at roughly 20% today."
"Competing with near-zero take rates is difficult to begin with, especially if one is starting at 20%. While The Trade Desk can likely make a case that its "neutral" platform offers customers better value by not directing ads to its own sear"
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