There is a saying in business that you want to control the money flow, as it gives you the best leverage to become an essential partner. In the digital world, the currency is premium ad slots (including CTV) and those rivers will be increasingly channeled by The Trade Desk (TTD) on the buy side and Magnite (MGNI) on the sell side. In the all important world of app real estate on your smart phone, Digital Turbine (APPS) is clearly becoming the preferred partner for marketing apps and monetizing mobile devices.
So take a step back for the bird’s eye view: we are heading towards a $1T TAM (total addressable market) for global advertising and a lot of that pie is shifting away from linear TV/Cable over to programmatic. And with the growing concern over safety and transparency, the walled gardens of Facebook and Google (YouTube) are going to lose some of their advertising to the neutral parties on the ad exchange as Trade Desk, Magnite and Digital Turbine don’t own any of the media they buy/sell. Not having a conflict-of-interest is crucial, as more brands and agencies will trust them with their ad spend for both transparency and better performance/ROI. And publishers will trust them with that other very important currency: user data.
As a retail investor today, you have the opportunity to buy into three companies that will largely control the money flow for digital marketing throughout the world… and you’re still well ahead of the curve.
“Stock market goes up or down, and you can’t adjust your portfolio based on the whims of the market, so you have to have a strategy in a position and stay true to that strategy and not pay attention to noise that could surround any particular investment.” –John Paulson
I wonder how last year’s election ad-spend deluge affects current valuation of these stocks. I imagine the demand was far greater then than a typical year, and that in a non-election year the numbers would seem less exciting.
That’s an astute point and no doubt there was an election revenue boost. As the shift over to programmatic is still in early stages there will be lumpy quarters due to unexpected events like COVID and record breaking spend on political campaigns. The best metric is to look at the 3-Year Sales Growth Rate (revenue): TTD 38% and APPS 49% (Magnite is too recently merged to have a three-year average). Those are pretty blistering 3-yr annual averages for revenue (Facebook’s is 27% and Google’s is 17%). Also TTD has a great profit margin of 30.58% (Google’s profit margin is 23.61%). We are looking at future tech giants.