In just one year, Netflix's (NFLX) ad-tier subscription service has grown to over 40 million users. Trade Desk stock (TTD) soared on news that Netflix is launching its own ad tech platform.
Citi analyst Yigal Arounian joins Market Domination to comment on what trade desk automation software can gain from this opportunity.
“Netflix accounts for 20% of viewership and its ad platform is expected to continue to grow. So what this means is that Trade Desk's revenue and billings, according to our estimates, will continue to grow. The amount, the dollars that are flowing to the trade desk, in 2025 equates to an increase of $500 million, which is about 3-4% of the 2025 growth rate,” Arouunian said.
For more expert insights and the latest market trends, click here to watch this full episode of Market Domination.
This post was written by luke carberry morgan.
video transcript
It's been a busy week in the media department.
Top companies in the industry released presentations to advertisers, but it wasn't the show that made the headlines.
It focuses on ad technology, with Netflix announcing its own ad tech platform and programmatic buyers including TT D's Trade Desk stock jumping on the news this week on what this means for the company and its business. announced that it plans to provide its own advertising.
Joined by Urban Analyst Yal Aloy and Yal. nice to meet you.
So what this basically means is, yall, from what I understand, Trade Desk helps power Netflix's automated ad buying.
What do you think this means for the company and what are the financial implications?
Yes, certainly.
This was a very important inventory set for Trade Desk, and it was just like a level set. Trade Desk is basically a demand size platform that connects advertisers with different digital platforms.
Oh, and that's an umbrella term for the entire web, including online video and display advertising.
But the fastest growing and largest part of their business is connected TV.
As connected TV grows, it continues to take share from linear TV. It's really in its early stages and growing. Trade Desk is the largest independent demand-side platform. It plays this role within advertising. technology ecosystem.
Netflix is still in its early stages when it comes to advertising.
This is approximately 5-6% of C TV's total advertising spend.
Um, but being open to the trade desk is going to be very important here. Because Netflix accounts for his 20% of viewership and its advertising platform is expected to do so.
So what does that ultimately mean for the Trade Desk, and our estimates are that the billings, the dollars flowing to the Trade Desk, will increase by, uh, $500 million in 2025, or about We think it will be 3-4%. In 2025, we expect real growth.
And as Netflix gets bigger and C TV, A$ and advertising continue to grow, it should continue to have a big impact on Igal in 2026 and beyond.
Well, Netflix didn't, here's Julie.
nice to meet you.
Well, not only did Netflix open it up for trade, but they also opened it up to some of their competitors.
But do you think The Trade Desk is really best poised to capture the lion's share here?
And I think from other streaming platforms as well, so what are we thinking?
Yeah.
Hey, hi Julie.
So, that, it opened it up to some other competitors.
So when Netflix first advertised here, they partnered with Microsoft.
Over time, the decision was to bring some of the functionality in-house and then expand our relationships with multiple partners. The ultimate goal was to be able to capture more advertising demand onto the platform.
Um, trading and the role that it actually plays as the largest independent demand-side platform.
They have many relationships with major advertisers.
And they will likely play a very important role in capturing this demand.
We also partnered with Google and its demand-side platform.
Google really cares about their platform, and YouTube in particular, but one of the biggest differentiators for Trade Desk is that they're agnostic and essentially own their own platform. That's what I haven't done. stock.
This is one thing that advertisers really like. Trade Desk is currently connected to all major C TV platforms, including YouTube and Amazon, and has unique control of the stack from top to bottom. .
Don't have external partners.
Check out Trade Desk's amazing run.
right.
It actually hit a 52-week high this week alone.
This year it has increased by about 30% and in the past 12 months it has increased by about 40%.
But, you know, if you look at valuation, as an analyst, I think valuation is still supported here.
Yeah.
As a result, valuations tend to push stock prices back to the maximum.
That being said, it was also the biggest pushback for the stock in its 40% rise.
Well, it's not a cheap stock by any means, there's a real premium to it.
EVA stock is trading at about 40x next year.
Well, it's definitely quite a premium.
Um, but we think it's justified.
If you look at the growth rate, trade is growing at a mid-20% rate.
Well, we think there's room for upside in this year's numbers.
Looking at Netflix's contribution next year, we think there is room for upside in next year's numbers.
Although C TV accounts for approximately 40% of trade desk and billing operations and continues to grow, C TV is in a very early stage.
Still, you're thinking about audience ratings.
We've moved away from linear, where about 5050 of our viewership is streaming.
50% is in a straight line and will continue to move.
But if you look at TV advertising spend, the ratio between C TV and terrestrial TV is about 25-30%.
In other words, advertising costs have not yet caught up.
Well, streaming platforms are increasingly pushing subscribers into their advertising tiers because they are more profitable.
So we're in the early stages of maturity, and Trade Desk is a very dominant platform in terms of the role it plays within the ecosystem.
Therefore, we believe that Trade Desk, which plays a very important role, has very good long-term growth.
And these are the reasons why such an assessment can be justified.
