Why The Trade Desk Is Poised for a Big 2020 Despite COVID-19

This coronavirus pandemic is negatively impacting many industries, and digital advertising didn't escape this beating. With many retailers closing their stores and consumers staying at home, the economy has come to a screeching halt. Digital advertising stocks have unsurprisingly been knocked down significantly from highs in mid-February as investors worry about advertising budgets contracting.

But not all digital advertising is created equal, leaving some advertising businesses more susceptible to headwinds from this macroeconomic environment than others. The Trade Desk (NASDAQ: TTD) is one digital ad-buying company arguably better positioned than most to not only withstand shrinking marketer budgets, but to also come out on the other side of this pandemic firing on all cylinders.

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How is this environment impacting The Trade Desk?

In a new YouTube video from The Trade Desk, CEO Jeff Green provided a surprisingly optimistic update on the trends it's seeing from ad spend on its platform, which helps marketers and ad agencies optimize their ad spend across all digital advertising channels. Marketers and ad agencies are changing their strategies during these unprecedented times, Green explained in the video. In a nutshell, marketers need to do more with less -- and they're looking to programmatic advertising platforms like The Trade Desk's to achieve this.

In programmatic advertising, efficiency is the name of the game. Advertisers use software to buy ads automatically, based on specified criteria and data -- all with the aim to maximize reach. Buyers of programmatic ads on The Trade Desk's platform can take the guesswork out of advertising and optimize campaigns with audience insights and real-time recommendations.

Specifically, Green said he's seeing two trends from the ad spend on its platform.

First, the "marketers that have been very good at data-driven advertising in the past are actually leaning on it even more," the CEO explained. "They recognize that this is an opportunity for them to get more efficient." Further, this is really the only option for some marketers, Green asserted. "They have to do more with less."

Second, Green noted that "for those who've been just a little bit behind [in data-driven advertising], they're getting more aggressive now." Previously, many of these marketers were buying ads that weren't comparable or measurable, Green explained. But now they're "doubling down on the media they know is making a difference."

A potential catalyst for 2020

While The Trade Desk could see a near-term hit to its growth rates in ad spend on its platform as ad budgets shrink, the negative impact to its business is unlikely to be substantial. Modern programmatic advertising gives buyers access to ads on all digital channels (desktop, mobile, video, and audio) and across the entire internet, barring "walled gardens" like Facebook and Alphabet's Google. Programmatic ad spend optimized through demand-side platforms like The Trade Desk's, therefore, is a great solution for marketers who need to achieve greater reach on a smaller budget.

Further, it's arguable that the trends Green is seeing from marketers today will have a lasting, positive impact on the tech company -- an impact that could serve as a meaningful catalyst in 2020 if the U.S. economy opens back up soon. Marketers' requirement for more measurement and efficiency during this time could ultimately accelerate the adoption of programmatic advertising, particularly in new and fast-growing programmatic channels like connected TV and audio, where there is an outsize opportunity to tap into fast-growing and highly engaged audiences.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, and The Trade Desk. The Motley Fool has a disclosure policy.

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