How The Trade Desk Breaks Down Walled Gardens
Walled gardens are increasingly common on the internet nowadays. From social media services to online newspapers, many content managers charge subscription fees for the privilege of viewing their productions.
Consumers often find the practice frustrating, but that's just the way the internet now works. After all, walled gardens are a proven method for monetizing exclusive content, and these publishers might not be in business for long without them.
But the times, they are a-changin'.
Content creators are exploring alternative ways to make money. There are microtransactions, freemium services, video creators selling merch on the side, and crowdfunding systems, just to name a few options. And The Trade Desk (NASDAQ: TTD) is more than happy to help advertisers set up effective marketing campaigns in this evolving landscape.
The Trade Desk offers unique value
Last summer, The Trade Desk launched a digital advertising platform called Kokai. Driven by artificial intelligence (AI) and the company's treasure trove of user data, this platform unifies many different types of data in a single channel, helping ad buyers target their messages while respecting user privacy.
Kokai lets advertisers work around the inconveniences of walled gardens. It is an open ecosystem where content publishers (also known as providers of ad space) and ad buyers (also known as potential revenue streams) can connect their proprietary data to a shared data pool. The built-in Koa assistant generates campaign recommendations based on deep learning analysis of Kokai's data.
This system would be less effective in the hands of any other ad-tech company. A recent remote chat I had with Laura Schenkein, The Trade Desk's CFO, underscored the value of The Trade Desk's unbiased approach to the ad market. Schenkein said:
Objectivity has been central to the conversation with our clients, and it's especially relevant when we're talking about the walled gardens. We don't and never have owned any media. So we objectively help our clients choose which ads are best for them to buy. And I think that's why we've become one of the central partners to some of the biggest brands in the world.
Schenkein noted the challenges advertisers face in walled gardens where campaigns can underperform due to issues with content quality or biased spending practices. The biggest ad spenders inside walled gardens tend to own the content, too. She highlighted The Trade Desk's commitment to providing clients with unbiased, data-informed insights and measurement tools to enhance their advertising strategies.
"From what I've observed over the years, we've emerged as the default alternative because we can add that value," she said.
CEO Jeff Green weighs in
This conversation isn't new. The Trade Desk never liked the concept of walled gardens. Five years ago, CEO Jeff Green suggested that walled gardens are destined to become extinct someday.
"I personally believe that long term, there are no walled gardens, because of the fact that you want to welcome as much demand as you can," Green said in the earnings call for Q4 2018. More recently, Green noted that regulators don't like walled gardens, either, and consumers are best served by an open internet.
"Premium content is outside of the walled gardens and all the questionable user-generated content is inside of the walled gardens, from cat videos to political rants to hate speech to cyberbullying, walled gardens simply use self-reported numbers in an increasingly opaque black box," he said in last month's Q4 2023 earnings call.
Open standards for the win
That brings me back to Ms. Schenkein. Near the end of our chat, she summarized the wall-busting benefits of an open internet with eye-opening clarity:
The entire ecosystem needs an alternative to help them maximize monetization. At the end of the day, there's a really robust open internet, where journalism continues to thrive as Google continues to deprecate user-tracking cookies. And as consumers, when we're watching TV or on the internet, ads will be more relevant and there's fewer of them. The parties creating all the expensive content can charge higher ad rates. So we're sitting at the center of this industry transition. And we want to make sure that for all parties, it's win-win.
That's why The Trade Desk can grow annual sales at 20% or more during a sector-wide downturn, while many rivals and competitors stalled out during the inflation crisis in recent years. This company provides a uniquely valuable service, with a strong commitment to open standards.
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Anders Bylund has positions in The Trade Desk. The Motley Fool has positions in and recommends The Trade Desk. The Motley Fool has a disclosure policy.
How The Trade Desk Breaks Down Walled Gardens was originally published by The Motley Fool
