Amazon is wreaking havoc on the ad market, and The Trade Desk may be its latest victim
The Trade Desk, which helps companies target people across the web with ads, beat expectations in its earnings — but that wasn't enough to quell Wall Street's concerns. In commentary, analysts also cited the departure of the adtech company's CFO, but largely focused on the Amazon factor in explaining the stock drop.
The Trade Desk CEO Jeff Green responded to analysts' questions, saying his company would continue to serve an important role because it's a neutral seller of advertising, unlike Amazon, which also sells its own ads on Prime Video. He also argued The Trade Desk only competes with a small part of Amazon and suggested Amazon might one day allow companies like his own to sell ads on Prime Video.
"Amazon is not a competitor, and Google really isn't much of a competitor anymore either," Green said on the company's earnings call. "We're trying to buy the open internet, leveraging technology that values media objectively. We don't have any media. And we don't grade our own homework."
Analysts were skeptical of Green's optimistic stance, pointing to an increasingly competitive connected TV ad landscape. Amazon, Netflix, and Disney+ have all entered the market in recent years. Amazon's ad business, in particular, is on pace to grow fast with an upcoming deal to let advertisers buy ads on Roku devices through Amazon, and the NBA adding to Amazon's live sports programming on Prime Video.
Meanwhile, The Trade Desk is limited in its growth potential because it depends on its ability to access the ad inventory of other players like Netflix.
LightShed analysts had the harshest words, writing that "Green is either in a serious state of denial, or he is living in an alternate reality."
"The Amazon shadow over this stock is now front and center ... and harder to deny," MoffettNathanson's Michael Nathanson said, cutting his rating to sell from neutral.
Others were more sanguine. Evercore maintained an outperform rating, citing The Trade Desk's growing partnerships to sell Netflix, Roku, and Spotify advertising, and its expansion in retail media and international markets.
Amazon has become an ad titan
The bull case for Amazon's ad business has been gaining steam since the company barrelled into the TV ad market a year ago by making ads the default on Prime Video.
Gripes about the ad rates notwithstanding, advertisers like Amazon's massive scale, ability to target people based on their shopping preferences, and growing live sports offering on Prime Video.
Ad industry insiders recently told Business Insider that Amazon's entrance into TV advertising had made it harder for all but the top TV players, like Disney and Comcast's NBCUniversal, to compete.
A Morgan Stanley report in July said Amazon's Prime Video was on pace to dominate the advertising market on US-based smart TVs, knocking YouTube off its perch as the market leader in 2027. Later that month, Amazon reported its second-quarter earnings, showing its overall ads business growing 22% to $15.7 billion. That beat analyst expectations.
Amazon has also been striking deals with rival streamers like HBO Max and Apple TV+ to make itself the default destination for TV watching.
All this could be OK for rivals if the pie were ever-increasing. But the bigger worry is that CTV advertising won't be the growth engine it once was — leading media companies to fight for pieces of a smaller pie.
Nathanson pointed to slowing growth in recent quarters and intensifying competition from Amazon and Google.
He said he saw "a broader deceleration" in the US CTV ad market that should concern Trade Desk bulls.
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