There’s some very profitable news hiding behind the record 39.1 million Americans who quit their jobs last year during the COVID lockdowns and layoffs.
This trend, known as the Great Migration, has led to a significant boom in new businesses. A record 5.4 million new business applications were filed last year, according to the U.S. Census Bureau.
After all, it’s never been easier to start and run an online business from your home.
But drumming up new clients, on the other hand, isn’t so easy. And as millions of folks started taking out online ads to help grow their small businesses, we saw the growth of another sector ramp up…
Digital ads.
PricewaterhouseCoopers (PwC) and the Interactive Advertising Bureau (IAB) found that U.S. digital ad revenue jumped 35% last year, the last period for full data, to a stunning $189 billion.
Small businesses face extra hurdles when it comes to digital advertising
With that in mind, I’m going to reveal a digital ad king helping these small businesses get their ads in front of customers – and doing it so well that it’s now on pace to double earnings in 2.5 years…
This Firm Solves a Big Advertising Problem for Small Businesses
To put these numbers in perspective, starting a business in a recession is always risky. Consumers are spending less, and businesses are wary about signing new deals.
But some of today’s most respected names in business got their start in a downturn.
Airbnb Inc. (ABNB) opened its doors in 2008. Microsoft Corp. (MSFT) was founded in 1975, towards the end of the “stagflation” recession. Revlon Inc. (REV) got going in 1932, in the middle of the Great Depression.
Of course, getting a new business up and running today is much easier. The cloud can take care of most of your accounting, tax, HR, and other needs. Wi-Fi and mobile phones mean you can have access to the whole world from wherever you set up shop.
You can even install chatbots on your website to let your customers interact with you without having to hire a full-time staff.
One thing that hasn’t changed is the need for marketing to find customers. Unfortunately, for most small businesses, print and mainstream broadcast ads are too costly and reach too broad an audience.
Digital ads are a different story, though. You can do it by the click or with short ads you post on social media.
As I mentioned, this area of marketing is surging. Last year’s 35% jump was much higher than the 12% growth of the year before.
And according to that same report from PwC and IAB, a whopping 78.6% of last year’s digital ad spending happened on the 10 largest platforms and publishers.
No surprise on who’s on that list – Alphabet Inc. (GOOG), Meta Platforms Inc. (FB), Amazon.com Inc. (AMZN), and the like.
Still, 10 separate platforms to advertise on is way too many for a small business to easily handle alone, especially as each one works slightly differently, has a slightly different audience with slightly different interests, and so on.
That’s precisely the problem that Trade Desk Inc. (TTD) solves. The firm offers a cloud-centric platform that allows companies to buy, track, and optimize ads in one place for placement across more than 70 networks and exchanges.
In short, the firm allows clients to advertise to anyone, anywhere, from one central location.
And I really mean anywhere. Trade Desk sells ad spots on major sites like MSN.com and Yahoo!, as well as on mobile phone screens, audio podcasts, and even smart TVs.
As an added bonus, Trade Desk’s platform allows for real-time pricing of ad spots, which creates more transparency to help smaller businesses with their marketing costs. All this can be fully automated to let businesses focus on what they know best.
Trade Desk’s Explosive Growth Story
As part of this real-time ad marketplace, Trade Desk receives 10 million queries per second for a total of 800 billion queries per day. This requires a response time of fewer than 15 milliseconds – faster than you can blink your eyes.
With digital ad revenue jumping by 35%, it’s no surprise that Trade Desk is handling huge amounts of ads. We’re talking roughly 790 billion ad impressions and roughly 819 million devices per day across the globe.
Trade Desk’s story is one of explosive growth. In 2011, an average day saw just 8 cents of ad spending on the firm’s then-new platform.
Just a decade later, in 2021, Trade Desk’s revenues had ballooned to a whopping $1 billion a year.
The firm has also grown into an ad marketplace for all kinds of businesses, with industries as different as automotive, personal finance, food and drink, shopping, and many more, accounting for roughly equal shares of ad spending.
This diversification is a huge boost to Trade Desk’s ability to continue growing. The firm is also global, with almost 2,000 employees across more than 20 offices worldwide, including in the rapidly growing East and South Asian markets.
Earnings weakened a bit last year from the average of 58% a year for per-share profits, but a lot of that had to do with sharply higher costs of stock-based compensation. The timing was just bad. And Trade Desk stock has, like many other tech stocks, sold off as of late.
But with digital ad spending exploding and even non-digital media moving towards managing ad inventory digitally, Trade Desk’s platform is a long-term winner.
Cheers and good investing,
— Michael A. Robinson
Source: Strategic Tech Investor