The Trade Desk's Bumpy Ride Down

0:08Welcome to The Big Story, a roundtable featuring members of the AdExchanger editorial team. Every week we bring you an in-depth discussion of key developments in digital marketing and media.

0:23Today's episode is sponsored by Basis, the leading intelligent operating system for autonomous advertising. Its enterprise AI solution transforms campaign briefs into strategies and media plans that integrate directly into omnichannel activation. You can learn more at basis.com.

0:45What is going on with the Trade Desk? The company's stock is down 90 % from its high seven quarters ago. And during this time, its executive team has been a revolving door. In fact, pretty much the entire C-suite has turned over in the past year. The company's CEO has initiated LinkedIn Flaymores to defend itself. Its product decisions have at time incensed the industry or left it scratching its head. And at the end of August, the trade desk laid off 15 % of its workforce after a disappointing quarter. Our senior editor, James Herscher, wrote a story last week, why Wall Street turned against the trade desk.

1:24He's on today to discuss this piece, and we brought in a guest who understands the world of Wall Street. Richard Kramer of Arite Research operates as an independent analyst outside of Wall Street. Richard is a longtime bearer on the trade desk, predating its stock decline, and he's here to share his point of view about the three things Wall Street missed, why Wall Street feels the way it does now, and how he's looking at the ad tech market overall these days. I'm Sarah Sluice, our editorial director. So we're going to dive in. But first, fall is upon us, and so is Programmatic.io New York City.

2:03This conference is the established place to talk about disruption. And this year, we've got speakers from OpenAI, WPP, Dentsu, S4 Capital, OMD. And as always, our listeners can use the code POD10 to shape an extra 10 % off your ticket price. It's in just under two weeks, so lock in your plans for September 28th and 29th. And James and I will be there ready to ready to chat. So, James, I'm going to have you set up this conversation. What just happened with the trade desk? Well, I don't know if I don't know if anything you could say just happened. This has definitely been doing for for some time.

2:44Yeah, I think the the sort of the ball rolling downhill here, I think, started in February last year, which was when they reported a poor Q4 2024. And it was their first missed guidance as a public company. And it was just sort of like a harbinger of bad things to come. And there was a very precipitous drop. Like if you see, if you Google like trade desk stock and look at a five-year graph, it's like you can see that day is clear as clear as day it's right there in the middle of the graph um and yeah i think their stock dropped by more than half and so since then they've really been struggling to play catch up they have had a series of executive departures as you noted the whole like c-suite has turned over um and they have had a bunch of new hires their most recent call Jeff Green, you know, listed them out some big names that I think they were lured there.

3:54I don't know what those compensation packages are, but they were pretty significant for sure. And then most recently, this past quarter that they that they announced it, they brought down their guidance. So I think disappointed again, not really even just on like their revenue, which, you know, they did disappoint on. but the fact that they gave this actual downward guidance, not just sort of like growth down, but going down. So, so yeah, tough, tough times. And they have attributed it to all things. I remember in that February last year, when Jeff Green said literally like an individual, he did, he said like, we're not going to name anybody and sort of like put the spotlight on them.

4:39But like, there was an actual like human mess up that caused us a sort of a miss on CTV or you know they've they've talked about co-kai as a problem um they've they sort of were like forced at first they didn't mention Amazon like investors wanted to see like what's up with Amazon like we're here that Amazon is taking your customers like undercutting you in market um and I think at first he Jeff Green kind of tried to like frame it as like we barely compete with Amazon um if you think of like Amazon you know not Amazon is like a behemoth but like oh the DSP as like this like tiny thing within Amazon.

5:16That's what we compete with. And I think he tried to just sort of assuage these fears. And it was like, no, that this is not what we see. So yeah, Trade Desk definitely dealing with just the cash, like their earnings numbers not showing up after years of such steady and solid growth, as well as these narrative of headwinds that have just been brutal for them. And I'm going to add one more thing too, to kind of TS up. I would say that it's angered agencies, it's angered publishers, publishers a lot over the decisions around OpenPath and how it's bidding into publisher inventory. It got into a bit of a rift with pre-bid.

6:03So that's happened. And then just the agency stuff it just kind of keeps on coming you had publicist telling clients that trade desk failed an audit which you know has apparently since been publicist has been the trade desk big backer forever sort of you know i think that's one of the like the things that doesn't sort of come up maybe but like when publicist put that note out and it's like oh my god like publicist like the trade desk has been like publicist is like almost like baby forever like Like early on, it was sort of Publicis and Omnicom, which is another one. And they've shifted everything to Amazon.

6:41Like they're practically an Amazon shop. They're sort of captured there. Like they won the Amazon account. But yeah, like this holdco business for the trade desk, very rough. So because you got Publicis with the failed audit. Omnicom, which has Amazon as a client, shifting spend to Amazon DSP. Dentsu and WPP exiting OpenPath. It's like pretty much every single agency. WPP is like an owned Google shop, like in the way that Omnicom is an Amazon. Like they're like WP, those, these, these court documents came out earlier this year, a sort of an aggrieved former employee. And what showed up was like, oh my God, Google is insanely like a large, like a meaningful double digit percent of all the ad spend is coming from Google as an advertiser and is also going to Google as the seller.

7:37Like, oh, man, WPP like that is just like their Google. So it is that it's tough dealing with the whole it goes right now. So and so, Richard, why we brought you in here, because I feel like there's definitely a connection here between some of these product decisions, what's going on with the agencies and publishers. Some of it's reactive, I feel, to the stock price and trying to kind of maybe placate investors or get ahead of it. So it's very much a symbiotic system and reactive, you know, even though I would say ad exchange are special. You know, most of the people here are more in the product sales partnerships realm.

8:12So now you're going to be our translator here and tell us a little bit about what went on and kind of maybe take us through this very tumultuous period at the Trade Desk through the Wall Street perspective, analyst perspective. Sure.

8:29Richard Kramer: And thanks for having me on. I think, you know, we go back to Trade Desk IPO. It was coming out of a period where we had a lot of failed ad tech IPOs of the 2014-2015 vintage. And it was all of a sudden the exception that proved the rule. Right. You had this terrific company that was knocking out incredible growth and reached a$60 billion market cap. Now, you know, James, your article was about Wall Street turning on the trade desk. But I think you need to put that in the context of when the trade desk had that first precipitous fall of 30 plus percent back in February 2025, 80 % of the analysts covering the trade desk had it rated as a buy.

9:15Richard Kramer: And I call them sycophants and stenographers. They're the ones who say, congratulations on a great quarter, Jeff. Tell us, how should we think about and fill in the blank? They were cheerleaders. And I think one of the most important things is that that cohort of analysts, some of which came last year to Programmatic.io and told us trade desk was the best stock pick you should have. And obviously, it's now down substantially from the last programmatic I.O. They confused reoccurring campaign spend with recurring revenue. And the trade has kind of encouraged that to suggest that they were somehow a SaaS business and they had all this visibility in their future business, right?

9:59And they wanted to be the predictable company that would grow 20 % every quarter. But it turns out that's not the way it worked. Something else that I think Wall Street was negligent in looking at is with all the stuff that you mentioned, with the bid shading and CoCai and OpenPath and UID 2.0, why was this company reporting a flat take rate? You'd think a software company that adds all of these extra features would show you consistently better margins. They would charge more for it. And obviously, OpenPath, the Trade Desk CEO said, we're not competing with SSPs. Well, if you listen to Magnite or Palmatic or others, they certainly didn't feel that way.

10:44And I'd say one third thing that I think was missed in all of this, and I think it's a good jumping off point to discuss, is the Trade Desk was getting most of its margins, its highest margin business in OpenWeb, display. And we're shifting to CTV. And as you already referenced, CTV, as we know, has become incredibly concentrated. James, you cited some stuff in your article about that. And you had an Amazon out there saying, let's do 1 % to 5 % for programmatic guaranteed or private marketplace deals. So you had a structural shift to lower margins in the market that caught Wall Street and the trade desk out.

11:24So I think those three things are just the tip of the iceberg of what happened in the souring of Wall Street on the trade desk. And then it's really hard to get back that hundreds of person years of institutional knowledge when you lose that entire senior management team. That's a kind of a mic drop list of devastating pieces. I want to drill into the take rate piece of that. I know from years covering Rubicon, now Magnite, the take rate ended up just being this whole flashpoint for a lot of the clients because they could see that the publicly reported take rate was different than what they were being charged.

12:07And then it kind of became this leverage for the competitors. And I don't think they report take rate anymore. Eventually, they realized they should just remove that. I know Trade Desk just reports. Once a year, they report, they give you the data you could use. I mean, is Wall Street, you said the Wall Street would expect the take rate to be the same or decline, but like all of these different products, right, would have different take rates. So like, what are they kind of incentivized to keep it a certain way, regardless of what the business might demand or clients like just maybe tell us a little bit about what they would be told to optimize for and then how that might put them in tension with what what they might need to do for clients or other people.

12:48So I think you all in your reporting have referred to many companies as black boxes, right? And I think it was in 2021 that Trade Desk removed the disclosure of the gross spend

13:02Richard Kramer: on which you could then look at what they reported as sales and calculate the Trade Desk take rate every quarter. Then they used to give day sales outstanding and collectibles on the call. And that allowed investors to back out what they thought the take rate might be. Right? But they removed that. They stopped talking about that as well. My point about the take rate was that with all of these new products, let us say, for example, OpenPath, if they would have a DSP platform fee and charge a further fee for using data from a live ramp or an ID5 or some other data provider, and then you think we're going to capture some of the SSP fee, that should be additive to the take rate.

13:56The take rate should be going up. But instead, what people were calculating over a long period of time was that the take rate was impossibly flat, around 20 % for years, even though all these new products and all these new features were being added that should be additive to the take rate. And that to me is the sign of a black box that you can't really unpick where the margin is being made. And then when the margin is no longer being made or the gross spend comes down, they still have the same fixed cost base. And again, that's what prompted the company, no doubt, to lay off 15 % of its workforce.

14:38They needed to reduce that fixed cost base because the current guidance for the business implies that it will be shrinking year on year for this coming quarter and likely as well for the fourth quarter this year. Is there a connection between kind of this impossibly flat take rate and, you know, a major holdco saying it failed an audit? Like, are those related in any way? Possibly, but we'll never know. That's between one of the last four CFOs that have been at the trade desk in the last year or so, or 18 months. Um, you know, I think the, the impossibly flat take rate and the metronomic growth of the top line was something that at a certain point when they reached$12 billion of gross spend, the increments to keep that going were so high.

15:36So to grow 20 % on your 12 billion, you need to find another$4 or$5 billion of gross spend. I think the hold code thing comes in at a time when every agency, this is going to shock no one, but they're all under pressure. They're looking at gross spend and where it goes. And whether you have Brian Lesser at WPP, or you have the guys at Publicis, or you have Omnicom and IPG coming together, they're all thinking, well, we can claw back some of those DSP fees if we do that buying ourselves, or we're approached by an SSP that says we will provide a direct pipe into high quality inventory, or we have large volume buying with all these CTV guys, why do we need a DSP to do decisioning?

16:25And we always said with the trade desk, which had hinted many times that it would get some Netflix deal, But if I know there's an ad break coming up in five minutes on a Netflix show for my ad-supported tier, I don't need a lot of decisioning in real time to figure out which of the ad age 100 or 200 ads they're going to show. They're not going to have some random crypto ads on Netflix. They're going to want to have high-quality advertisers. So a lot of that decisioning role for high quality CTV and high quality advertisers just doesn't apply in the same way as it did in the open web where you had millions of advertisers and millions of placements.

17:08I think that the trade desk take rate too. Part of it is that it is so steady over time while their mix of different types of inventory that has different flavors of margin and CPM and the kind of data sales that they have have changed a lot, like the margins that they make on their data marketplace and different products. And so like a lot of advertisers probably are correct. Like my, that's the tape. The trade does take grade on my spend is not 20 % or something like that. And like, maybe they're right, but the trade desk, the trade desk, I think goes to great lengths to make sure that like in an overall way, it's take grade is the same.

17:53And it does all these things that it can. Like, I think it plays around with like retail data, some data itself is a percent of sale. Like there's the new like audience packet, like data is that it's audience unlimited. I think it's called where it's forced these sort of like very much like wholesale prices from data sellers. Like we don't really know, like the trade desk is doing all these things to increase its take rate because it's losing take rate elsewhere. um and yeah like in my mind it is it's shocking that they haven't given that they haven't seeded a little more ground on take rate to to like get to sort of get back that like amazon being like oh like we're you know we're giving that back to you like you're you know we're cutting our fee or something like that um they really clearly like they feel strongly about like this is our this is the right commission that the trade desk should have.

18:48Yeah. And I think one of the things you're pointing to also back to our discussion about the agency hold codes, they're all buying their own identity spines. So they're not going to buy that same ID from the trade desk, which then gets marked up in their own data marketplace. So if the trade desk was reselling a lot of live ramp IDs in campaigns, well, that spend is now going to be captured by publicists once that deal closes. So the value of the trade desk is a bit less in CTV environments, a bit less as agencies buy identity spines. If anything, they're incentivized to make take rates go up, whereas the industry's expectation is that take rates will only go down.

19:31And then I want to talk about Amazon next. But first, we're going to take a very quick break, and then we'll talk about how Amazon Factors into all of this. Stay with us.

19:48I'm Sarah Sluice, Editorial Director of Ad Exchanger, and I'm here with Mark McEachran, VP of Product at Basis, which is supporting our podcast this month. Hello, Mark. Hello, how are you doing? I'm good, especially because we're going to talk about three-letter acronyms, which I think is one of ad tech's favorite things, things, although this goes beyond just ad tech. So help explain this to our listeners. What is an MCP server and how are advertisers using it? I do love a good TLA. MCP stands for model context protocol. Anthropic built it, open source it in late 2024, and then handed it to the Linux Foundation.

20:31It's plumbing that connects the systems to agents. It lets an AI model reach into a piece of software, see what's available, and pull the right lever instead of hand developing of the spoke integration for every tool that the model touches. And over the past year, Google, Meta, Amazon, and others have rolled out their own ad platform and MCP servers, as had DSPs and SSPs. A buyer can now say, pull my campaign report or build this audience in plain language and have that request land correctly inside whichever platform is listening without building a custom connector for every combination. And eventually those instruction sets, they begin to look like standard adapters.

21:19Okay. So MCPs are taking off like wildfire, I would say, and with good reason because they're very useful. So tell us a little bit more about what advertisers are able to control when platforms have an MCP server. So control depends on who built the server. An agent can pull reporting, diagnose a stealth campaign, or explain a CPC spike. But in most cases, a human still has to make the change. Some folks like Meta have enabled agents to create audience, set budget, and launch a campaign all by itself. But where it's furthest along, advertisers can do all that. You can let the agent read performance data, build and activate audiences, adjust the budget, launch campaigns, and even generate creative variations all through natural language.

22:07Letting one agent shift budget across platforms on its own is where the industry says it's heading, but that's not the standard practice yet. The industry direction is obvious, though. Fewer read-only endpoints, more agents with their hands actually on the wheel. and at that point governance and guardrails become the real conversation not the pipes themselves so you're talking about a lot of new ways that people can connect and companies can connect to each other so does that mean we're going to be solving for media fragmentation marketers run dozens of platforms to get to all that media dsps walled gardens with the clean rooms, measurements, they're all bolted together with their own quirks and logins.

22:52Each of them historically needed their own bespoke API integration, its own authorization, and some team member who knew how it all fit together. MCP doesn't unify the stack, but it has the potential to unify the interface to the stack. One agent could sit on top of all of them. As an example at Basis, we have Compass, our proprietary strategy and planning agent. It has direct integrations with buying platforms, including our own DSP. Advertisers use it to upload briefs along with their research, performance history, which is then synthesized into a proposed media mix, audience personas, and creative strategy.

23:34Initiating an omni-channel planning conversation through one interface. Okay, so if I'm thinking about MCP servers as a shorthand, it might help unify my interfaces if I'm a buyer, but the platforms themselves remain fragmented. Indeed. There's a lot of room for innovation under the hood. MCP is the unifying layer that is the command and control on top of it. Well, thank you, Mark, for helping explain MCP servers. I know I understand them a bit better after these few minutes. And thanks to Basis for supporting our podcast. Thank you.

24:11And we are back and we're here to talk about Amazon. James, you frequently remind us in your stories that, you know, Jeff Green has long denied that Amazon is even a competitor to its business. But meanwhile, it's emerged as, you know, this very fast growing popular DSP, tons of capabilities. these. And I'm wondering, Richard, it's definitely come up on the calls, right? People have been asking about Amazon. Do you see them as competitors, perhaps differently from the leadership of the trade desk? What's your read on how Amazon factors into trade desks decline?

24:52Richard Kramer: Well, I wouldn't say that Amazon's DSP, the off-platform DSP at Amazon, is necessarily the sole factor responsible for the trade desk's revenue decoy. But it's absolutely a force in CTV, not least because where do you go to buy Amazon Prime? Now, I'm not suggesting that Amazon's DSP has found a magic way to buy YouTube that no one else has found. And Jeff Green has always bemoaned the fact that he can't get direct access to YouTube. But you could see the way in which Amazon, having built the all-star team of ad tech in 2020 or 2021, patiently built out its stack, having a huge data lake of conversion data at their fingertips, then went out and secured deals with Disney, with Netflix, with all those majors, and Roku.

25:51Richard Kramer: They secured deals with all of those major sources of CTV inventory. And I think that has been directly competitive with the trade. Now, being asked on your earnings call, are you competing with this company? And just completely denying it doesn't give the impression to investors that the CEO is necessarily being straight with them. Sometimes it's better to acknowledge a competitor and say, we think we can do better or we have, as he often would say with Google, we're completely independent. We're here to support the open web where Google might not be. It might've been better off at the beginning to acknowledge Amazon as a competitor, but point out your differences with them as opposed to flat out deny that you're ever in a bake off with them.

26:43Richard Kramer: And I think there's a few others. James, you mentioned Pontiac and Viant and others. I think Yahoo has become a material DSP competitor to the trade desk. Again, they don't outwardly acknowledge, but everybody in the industry seems to be talking about them. Yeah, I would agree that Yahoo is really on the upswing. Yahoo's done an interesting one too, because they've secured all these open web, Like they've cut deals with Microsoft and LG, I think it was. And it's specifically to be like the exclusive reseller NBC lately of open web display, like the most boring bucket, like that stuff that nobody that everyone says, like, we don't want anymore.

27:28And I do think that they're kind of going around and everyone just thinks this is like garbage. And they're just like, oh, like, hey, like we do actually know that there's there's plenty of like juice left here. Or, yeah, I feel like they're not so loud about it, or maybe they're just not public anymore or something.

27:46Richard Kramer: And again, to link it back to this revolving C-suite, if you're someone senior at one of those companies, the publishers you just mentioned, and you're used to dealing with someone senior at that C-level at the trade desk, and they turn over and get replaced maybe some months later with somebody else, that's a great insertion point for a competitor to come in. say, well, we can provide a similar or better service at a lower cost. Why don't we talk about doing a deal? So since we talked about Amazon, you briefly mentioned Google. So let's just turn over to the other big tech competitor with a DSP.

28:28We heard the outcome of the ad tech trial. It is a monopoly, but they won't have to spin off their ad tech business, which I think, you know, maybe a minority of people were hoping would happen, if not a larger group of people that were rooting for it to happen. So how does that affect the trade desk with this, you know, ruling in place?

28:50Richard Kramer: So the last time you very kindly had me on Ad Exchanger to speak, I was talking about this idea of getting the publishers to buy Google's network business as a collective and run it at the lowest possible cost. But obviously, it didn't go in that direction. And I think the structural remedies, as everyone recognized, would have caused a long delay because Google would have fought them and they would have taken a lot of litigation to realize and disrupted the market quite a bit. I'm not suggesting that the behavioral remedies are going to reset the market somehow in some panacea, but I do think that this removes a, I wouldn't even call it a sort of Damocles.

29:31Richard Kramer: It's kind of a more like a nail clipper that Google was facing, you know, given that the network businesses is about eight, seven, 8 % of sales and, and certainly less than 1 % of its profits, you know, that they might have to clip off a little bit of it. I do feel like, especially with like this Amazon sort of, you know, coming under scrutiny for their so dsp auction practices like i've seen this you know it's like oh wow like here's our you know here's ad exchanger stuff popping up in the ftc but you know just like i think like a few years ago i i would have been like oh like this you know google's in hot water and this is a huge opportunity a big window's been blown open for all for the trade desk and all these and really like nothing came of it like i don't think any like no one gained any ground no one really like no none of the big guys like lost a footing or something like nothing it just kind of like played out and like nothing came of it and it feels like that's how it's gonna be like even if like even if amazon gets some like big very uncomfortable spotlight on its dsp and everyone's like oh like antitrust concerns like it just kind of feels like it's who's gonna better So the FTC case isn't really about Amazon's DSP.

30:52It's more about the on-platform stuff. And I would argue it could be worse in that now Google is basically done with its antitrust trials and free to be more aggressive with its DSP in the marketplace. Yeah. So if you were a competitor of the trade desk like Google and you had to worry about what you were saying in private chats and emails, and you felt that literally everything you'd be doing when you walked into the office every day would be under a process of discovery by the feds, you would be pretty cautious. But now that that's all over, and we're going to get some remedies, and they'll be done and dusted, and they mostly affect the SSP side.

31:35Now, if you're the DSP side, you might say, well, this is my time to step up the aggressiveness in the marketplace. And by the way, they still have, by virtue of search and by virtue of all the other distribution products they have of billions of users, access to enormous quantities of inventory and a tremendous data set. So you could see a world in which in 12 months time, Google is a much more formidable competitor than it has been in the last three or four years under the microscope. i do think the trade desk too may have almost like missed an opportunity to to acquire something like first party wise like even you know part of like yahoo's sell is that they have you know like they have it's an old sort of almost like a punch line of like an email inbox operator aol and yahoo it's like oh like what about hotmail or something and you know there's not a lot of people using like yahoo search or something but like it they do have this data archive and they do have this like first party they own sites they own data they have a large they have a large o and o business of of yahoo finance and fantasy sports and all they read all your shopping roku or something they could have bought pintrit like they could have they sort of missed when they were big and they was like oh like there was a time when you were 60 something billion and roku was like eight billion or something.

33:06It was like, you could have digested something and you could have had like some great asset. Yeah, we had we had done M &A cases for Tradesk and Roku in the past. One other one that I thought, if you go back long enough and James, you and Sarah, you you've been following this industry is, you know, as long as I have or even longer. Remember when Jeff Green said retail media would be a half a trillion dollar opportunity. And then he proudly announced the Walmart business. We haven't talked about Walmart yet, which obviously NCTV has just bought Vibe. And they obviously have Vizio. So they're heading in their own direction.

33:42But one business that the trade desk could have bought had been Cruteo, because they would have brought them a retail

33:51Richard Kramer: media SSP and DSP combination and would have added quite substantial engineering talent to the trade Desk, which has always been more of a sales and marketing led organization. So, you know, if the Trade Desk was really serious about that retail media opportunity and wanting to be number two to Amazon, they ought to when they had their 60 billion dollar market cap bought in Croteo when it was just at the infancy of its retail media growth. Oh, man. Oh, that's interesting. I always thought like Trade Desk's a live ramp was always my sort of end of the year prediction or something like that. It kind of like felt it wouldn't it would have been keeping it within like the third party world.

34:32But like, oh, like, why not just go own all the set of mucking around with like UID2 or something? Why not just own LiveRamp? But yeah, clearly that's not where it's going. Well, I want one common thread between LiveRamp and the Trade Desk. If you look at their accounts as carefully as we do, is they're both 85, 90 percent U.S. businesses.

34:53Richard Kramer: You know, they have very little international. Now, the trade desk happens to be growing much faster internationally than it is in the U.S. right now. And LiveRamp had a very poor performance for many years in international and finally started picking up a little bit in the last quarter or two. But they're both principally U.S. businesses. I'm not sure how the buyers of using the DSP would have felt about having the ID solution in-house that they were obliged to use and not being able to bring their own first-party data, for example, to campaigns. So I want to talk about Trade Desk and how that relates to the health of the open web overall.

35:32I think, you know, over the years, Programmatic's been really successful in moving to new channels. I've been reflecting on this as we go into our conference and our opening speech, like that when we started like writing an ad exchanger, like it didn't even like I didn't even have an iPhone or no, I don't know. Like iPhones were still being launched, I think, as ad exchanger was. I had I joined a number of years.

35:56Richard Kramer: Realize they're on iPhone 18 now. Oh, my gosh. My first iPhone was an iPhone 4. I was a late adopter. So, you know, it's brought in audio, digital out of home, CTV, but now we're in an environment where there's going to be open AI and agentic advertising. And we see publishers who are really the core of Trade Desk market really struggling right now because they have so much inventory on those banners and boxes that are declining. So, you know, is this part of the bear case for the open web overall, or is this more of a trade desk execution issue? You know, I think one of the talks we gave at a programmatic I.O.

36:37Richard Kramer: many years ago, we sort of talked about expecting that the market would bifurcate between one high quality, neat and tidy Singapore on one side and a sort of a tumble down shanty town, you know, falling down the hill in Lima, Peru or something that you see sort of images of on the other side. all of that open web where fraud rates are high, where inventory is hard to, quality inventory is hard to secure. And I think what's going to happen to the open web is you're going to see that bifurcation finally happen, where quality publishers are going to be more sensitive about where they place their inventory.

37:19Richard Kramer: The SSPs are courting them heavily and making more direct links to the agencies, which are going to want to buy quality inventory. And then you have that other part of the market, which is programmatic in name, but obviously is hiding quite a lot of sins. And, you know, there's plenty of folks in the industry who try to point that out all the time. Oftentimes they just get shouted down or ignored. But so I think, you know, if we talk about open web, we have, I think you need to distinguish between the quality publishers and inventory and that super long tail. and that long tail has always seen anything from egregious to obscene take rates and always seen a lot of crazy companies that seem to have incredible amounts of inventory that none of which particularly performs but it sure is cheap when you throw it into the mix in your CPMs although I do think it is it is the big platforms that are the biggest buyers of like the junkiest crap out there um like the yeah the trade desks and the the third party vendors sort of bear the brunt of it because you know they'll give you the log files and you go back and say like what unless you put my ad here whereas you know but like performance max and amazon and microsoft and meta like they're buying up a lot of that crap and i think that this is also part of like the case that jeff green has to make um is that like oh you know there is sort of a misunderstanding and we are probably saddled with all this crap but like that's google that's amazon like you know come use us and you won't find that in your mix or something like that like i think that this is part of the case that they have to make, but probably people have just shrugged off desktop display banners.

39:16I think people are just like, nope.

39:18Richard Kramer: I used to always say open is a four-letter word. I'd amend that to say anytime you see a management or a company talking about being committed to transparency, that's literally the last thing they want. I call a lot of programmatic obfuscatory arbitrage. Right. You're hiding the fact that you're making an outsized margin between what you're you're bonding and selling. Which is which is arbitrage and in the financial markets arbitrage schemes almost always get sort of squeezed down to very low amounts. And as we look ahead to the trade desk, what signals would we all see that would show that they're either pulling themselves out of this mess and turning things around or continue to be stuck?

40:11I mean, what the financial markets focus on is revenue and profit growth, right?

40:20Richard Kramer: And the trade desk was the king of the hill when it was knocking out consistent 20 % plus revenue growth and showing sort of flat or steadily increasing margins. Now, when you see companies go into, and I don't think trade desk is in what we call the desk spiral, but they're in that sort of challenged position where revenues are going down. They have to reduce the costs. Will they reduce the cost as fast as revenues decline? Because obviously the headcount is only one part of the revenue cost that they bear. They have platform operations and QPS costs and sales and marketing and so forth. It's not all headcount.

41:01Richard Kramer: But so what the investor community will look to is when they inflect back upwards or at least reach a trough of stabilization where they understand what the revenue is. And I think it will take some time for a new management team to repair relationships, which obviously were, if they weren't broken, they were at least strained. Mm-hmm. So they're kind of still in this cost-cutting era, which may or may not end with those 15 % layoffs. Well, look, I don't think those 15 % of people that lost their jobs at the trade desk were doing nothing. And any organization that has a headcount cut, and one should not assume that it just snaps back immediately, in the same way as when you You replace a management team.

41:55Richard Kramer: Someone new coming into a role takes three to six months to figure out, well, where were the bodies buried? What do I need to know here? How did that decision get made? Where's the documentation for that piece of code? And then they start going. They can make a plan. So I think that's all human nature. I think one of the great mistakes that financial markets make is to think that you can just snap your fingers and, and Hey, you've cut 20 % of your costs and everything will be fine. But, um, yeah, I, I, I, I don't think there's, uh, these are not quick fixes any more than it was, it was a quarter or two that, that built this tremendous machine that the tray desk had going in 2024.

42:40I, I like that nuance on, on layoffs. And I would agree that's often how it's positioned like, Oh, we lay these people off and now we're just off to the races instead instead of it being actually something that will, you know, for three to six months, slow you down. I like that as a, you know, an employee myself.

42:58Richard Kramer: And there's one other, I mean, look, you've seen with big tech companies, they have crazy science projects. So if Mark Zuckerberg tomorrow decided to lay off everybody who's doing VR and meta, no big deal. Right. Because they, it's something that's off to the side. They were funding, maybe it's going to work, maybe it's not. But it's gone. That's OK. But when you're laying off out of the core organization, again, you have this volume of work and those 15 percent of people weren't doing nothing. So their work has to be backfilled and then taken forward by at the top. What is a new team? I feel like they, you know, well, the trade desk needs to needs to convince investors.

43:46and I wouldn't exactly call myself bullish, but I do feel like it is sort of a shame that the trade desk has lost its prominence and position. And I think in a lot of ways where it is like, okay, this isn't about getting to revenue or is it the right stock to buy? But a lot of these situations where it's like, okay, there's more friction with hold codes and that's bad for trade desk. agencies are wrong about the stuff that like the trade desk is butting heads with them on and like just my opinion like i you know like the principal media that the trade desk is like no like this is bad like i think the trade desk is right and agencies have like a lot like they are not acting as agents of their clients and like this stuff is wrong and like a lot of the supply side like feuds that they have it's like oh like i'll dig into that and it's like oh man Like these publishers are doing like bad actor stuff.

44:41Like no wonder the trade desk is pissed off. Like they're doing all this stuff to evade bid duplication, like all that, like, and it's like, oh man, like they were just like it. And it was not like, I remember when Google tried to get, like, I think it was authorized buyers. There was just an ad network that they were trying to get slide through in the IAB as kind of having like some special exemption as not being an ad network. And the trade desk put its foot down. They were like at a point where they were big enough to be like, no, like but like google was just gonna get away with that until like the trade desk had some haft and was like insisted no um and yeah like there are these yeah i think like often they are like the one they're not winning but they're right to tell their brands like you shouldn't be trusting amazon like you shouldn't be defaulting to amazon um you know i don't think they're going to convince investors and maybe they're not going to convince marketers like it seems like they're having trouble but i do think in a lot of these things it's like oh man Like they are, they're right in making that point, even though they're not winning on it.

45:42Richard Kramer: And, and, and look, it's, uh, you know, um, the trade desk positioned itself as the white knight of the industry that also put a target on its back. Right. And, and, you know, famous saying in the financial markets is, uh, show me the incentives and I'll show you the outcome. So, uh, you know, you can use that in your programmatic IO opening, right. You know, the incentives for agencies, for marketers, for all the ad tech intermediaries, for the big tech guys, they're all different and they're all pursuing their own incentives. So that white knight status was a great marketing tool for the trade desk on the way up.

46:23Richard Kramer: But again, as I said, it put a target on their back and it put them in conflict with other folks who had different incentives. So I'll sum things up to close. I think kind of from your point of view, Trade Desk was probably a bit overvalued to start because you had all these investors who were kind of cast under a spell, confusing recurring campaign spend with just recurring spend overall SaaS businesses. But once the growth stopped, the spell dissipated. And that's one of the many reasons that it's just been struggling the past seven quarters, mainly also just that it's not growing revenue anymore.

47:04So once it can cut costs and start growing again, it might look up from Wall Street's perspective. But in the meantime, we should expect some time before the new executive team, the new employees can really right the ship and turn things around. And that would be, I think, the best case scenario for them. There could be other stories that unfold. Yeah.

47:27Richard Kramer: And I think, you know, let's just say that, you know, if we go back to when the mid part of the last decade, when we started looking at this space, you know, where's Millennial Media and Yumi and Tremor? I mean, there's so many companies that we thought were going to be world beaters and they're gone. So there is a natural birth-death cycle in this industry of companies that come to prominence, make a big impact on the market, and then fade away. And you mentioned the previous incarnation of Magnite, which was Rubicon, which obviously had a spectacular fall from grace. And so we've seen these birth-death cycles many times over.

48:09And so what's happening to the trade desk isn't unusual in that context. okay the the circle of of life on wall street um i remember listening to millennial media i think it was their last earnings report and they did like oh we'll go to like q a and it was just crickets and it was like oh my god it was yeah i was just that stock went 25 to a dollar 50 so well um happens well that the yeah again the circle of life uh thank you richard this was a very entertaining, illuminating, educational conversation. Appreciate you sharing your knowledge with us.

48:47Richard Kramer: Thanks for having me on.

48:54This episode is sponsored by Basis, the leading intelligent operating system for autonomous advertising. Its enterprise AI solution transforms campaign briefs into strategies and media plans that integrate directly into omni-channel activation. Learn more at basis.com.

49:19I'll see you soon.