Behind The New Deal Between The Trade Desk and Amazon

Amazon supports an open internet, allowing third-party tech companies to sell ad space on Amazon Fire TV.

Aug. 6, 2019

Last month, Amazon (NASDAQ: AMZN) announced that it was partnering with both The Trade Desk (NASDAQ: TTD) and Dataxu to sell ad inventory on third-party TV providers content through the Amazon Fire TV device.

The Trade Desk is an online advertising marketplace. Operating in a similar fashion to the stock market, it gives advertisers an accurate price and description of who they will be reaching with their ads. Dataxu, meanwhile, is a private software company that analyzes data to help marketing professionals improve advertising.

What does this mean for Trade Desk?

This new deal gives Trade Desk the ability to sell more connected TV advertisements through their marketplace. Founding CEO of Trade Desk, Jeff Green, described this partnership as the company’s “most important initiative in [connected TV] to date.”

Connected TV, or CTV, is television accessed online through devices such as the Amazon Fire TV or Roku. As of 2017, there were 168.1 million CTV users and this number is expected to reach 194.4 million by 2021.

A study carried out by Extreme Reach earlier this year revealed that CTV has overtaken mobile devices in the number of impressions, growing 194% in 2018. In the same period, the average time spent watching these video ads grew 35%. Simply put, this advertising space has become incredibly valuable.

Due to more brands shifting their advertising spending to programmatic advertising through Trade Desk’s platform, in Q1 2019, Trade Desk raised their 2019 expected revenue 1.3% to $645 million. In this quarter revenue grew 41% to $121 million.

Trade Desk stock rose over 9% following the announcement.

What this means for Amazon?

Although advertising space can now be purchased through these third-parties, Amazon will still be selling ad inventory through Amazon Publisher Service. Green addressed this, saying that this deal shows that Amazon is supportive of an open internet. Amazon’s open approach is important in an era of antitrust amongst big tech companies.

Unlike ads sold through Trade Desk, companies such as Google (NASDAQ: GOOG) or Facebook (NASDAQ: FB) do not give advertisers much insight into their reach and therefore advertisers may not be getting the best value for their money.

With this deal, we may see more advertisers look to Amazon as a place to showcase their ads as they can see exactly what kind of engagement they will get and the price they have to pay for it.

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MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in Amazon and The Trade Desk. Read our full disclosure policy here.