Operator: Greetings. Welcome to The Trade Desk Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Chris Toth. You may begin.

Chris Toth: Thank you, operator. Hello and good afternoon to everyone. Welcome to The Trade Desk third quarter 2024 earnings conference call. On the call today are Co-Founder and CEO, Jeff Green; and Chief Financial Officer, Laura Schenkein. A copy of our earnings press release is available on our website in the Investor Relations section at thetradedesk.com. Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risks and uncertainties and reflect our views and assumptions as of the date such statements are made. Actual results may vary significantly, and we expressly disclaim any obligations to update the forward-looking statements made today. If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. For a detailed discussion of risks, please refer to the risk factors mentioned in our press release and our most recent SEC filings. In addition to our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures is available in our earnings press release. We believe that presenting these non-GAAP measures, alongside our GAAP results, offers a more comprehensive view of the company's operational performance. With that, I will now turn the call over to Co-Founder and CEO, Jeff Green. Jeff?

Jeff Green: Thanks, Chris, and thank you all for joining us today. As you've seen from our press release, we again posted very strong growth in the third quarter. Our revenue grew 27% compared with Q3 last year, marking strong revenue growth acceleration on both a sequential and a year-over-year basis. Quarter after quarter, we continue to gain market share, outpacing the industry and our peers, both large and small. Even though it is now a considerable part of our business, CTV continues to be our fastest-growing channel and it shows no sign of slowing down. Partners like Disney, NBCU, Walmart, Roku, LG, Netflix and many others are deepening their relationships with us around the growing CTV opportunity. I could not be more excited about our position in CTV and the size of the growth opportunity for us in the years ahead. With our leadership in CTV as well as other areas such as retail media, identity, measurement and data, we are winning more business with both new and existing customers. We are signing more multiyear joint business plans with leading agencies and brands. In fact, over 40% of our business this year will fall under JBPs, representing spend projections in future years well into the billions of dollars. I have great optimism that The Trade Desk will continue to outperform the market and gain significant share. Exiting this year, we are set up exceptionally well for 2025 and beyond as we continue to execute in areas such as CTV, retail media and in markets outside of the United States. I want to start the core of my remarks by explaining why I believe our industry is changing at an unprecedented rate. I believe there is more opportunity for The Trade Desk than ever before. But in order to understand the significance of our opportunity, we have to contextualize the macro changes and their effects on media, ad tech and the biggest forces in digital advertising. Let's go through 10 significant landscape changes and why these are creating what we see as sustainable secular tailwinds for The Trade Desk. So long as we navigate changing conditions and position ourselves and our clients to benefit from the changes. The first significant landscape vector that is creating a tailwind for The Trade Desk is the macro environment itself that those of you listening or reading this, know all too well. The Fed has been fighting inflation by raising rates. One simple way to frame this relevance to our world is that inflation is measured primarily using price increases implemented by our clients on products we advertise for around the world. The change in fiscal and monetary policies around the world mean the consumer has been forced to reconsider the cost benefit of every product they buy. Advertising plays a bigger role in establishing which brands and which products win market share and which lose market share. The second significant macro vector is related, and that's that CMOs have more pressure than ever to produce real growth and prove it with data. While there has been a lot of macro focus on the reduction in inflation rates, historic highs for stock market indices and growing indications of a soft landing, that's not necessarily translating to consumer confidence, which is why CMOs are becoming much more closely aligned with their CFOs. CFOs want more evidence than ever that marketing is working. And for CFOs that doesn't just mean traditional marketing KPIs. It means growing the top line business. All of our AI and data science injection into Kokai, our latest product release, is encouraging CMOs and CFOs to lean more and more on TTT to deliver real, measured growth. The third macro tailwind that is setting up The Trade Desk for continued outsized gains is the move to AI. Every company needs an AI strategy. Our AI product, Koa, is a great copilot for traders. But this is only the beginning. There are endless possibilities for us as we have one of the best data assets on the Internet. The learnings that come from buying the global open Internet outside of walled gardens. To win in this new frontier, we're looking across our entire suite of products, algorithms and features and asking how they all can be advanced by AI. We have teams focused on incubation, and we've developed team structures to create checks and balances among our distributed development teams. This way, we know the effect of complex AI product and measure the output and inputs of each of them. We expect to talk about these efforts and their results over the coming quarters and years. We are positioned to benefit from our objectivity, our focus, our scale and the loyalty of our buyers. We are already seeing the results of Kokai performance today, but we're just getting started. The fourth sector that is changing the entire landscape of digital advertising and ad tech are the changes happening at Google. Google has an incredibly dominant moneymaking business in search and another in YouTube and also have an incredible opportunity in cloud and AI, most notably in Gemini. Because of the AI race in big tech and these opportunities, Google could continue to downgrade their network business to focus on those prospects. After all, they operate at a disadvantage in the large buyers of the buy side of the open Internet to The Trade Desk because Google lacks subjectivity. If these pressures weren't enough on Google, they also have a pending antitrust trial that has created massive ripples throughout the global ad tech ecosystem. The outcome of the trial itself is less important than the change in behavior that will likely come at Google, no matter what. Whenever the outcome of the trial, I do believe that Google will become more cautious, if not less involved in the part of their business where they compete with us. First off, they are and will remain under tremendous scrutiny in this market, whether it's from U.S. regulators or their many equivalents around the world. By contrast, the convoluted role they play, laid out very clearly by the U.S. Department of Justice, in their network business is likely to play more fairly one way or another. I point this out because it presents tremendous opportunity for our business and for the broader ad tech ecosystem. I have never been more excited about the value of the premium content at scale on the open Internet combined with new approaches to performance efficacy, especially in contrast to the murkiness of cheap reach dynamics within walled gardens such as Google. The fifth macro vector creating incremental secular tailwinds are changes in the market dynamics of CTV. It's hard not to be bullish about CTV when it's both our largest channel and our fastest growing. Advertisers can see more clearly the contrast of our offering and the role we play with brands and agencies, with walled gardens than ever before. This year, we've really started showcasing the strength of sellers and publishers available on our platform and on the open Internet. We've even published a list of 100 of the best destinations on the open Internet. When you contrast the quality of the open Internet with the perils of UGC, it's easy to see that the best of movies, the best of TV, the best of sports, the best of journalism and the best of music and podcasts represents something more valuable to society and to advertisers and short videos and user-generated content surrounded by comment sections that are often not good for brands. At The Trade Desk, we've also been talking a lot about the premium open Internet because that is where consumers are increasingly spending most of their time. Companies like Netflix, Roku, NBC, Spotify, Disney and Fox, along with many others, have redefined the consumers' Internet experience over the last few years. They all recognize the power of advertising to fund the amazing content experiences that their consumers have now come to expect, and they are all investing in the capabilities to capitalize on advertiser demand. This point is worth reiterating because of some of the macro inventory dynamics in digital advertising. You may recall three or four years ago, I would talk on these calls about inventory scarcity, especially in CTV in the fourth quarter, which was enjoying a significant surge because of people spending more time streaming at home during the global pandemic. As advertisers chased those viewer eyeballs to new streaming platforms, advertising inventory was scarce and with demand rising, CPMs went up. But CTV inventory isn't scarce in the same way anymore. Because over the last couple of years, every major media company has launched a streaming service, and all of them have embraced advertising as a key way to fund their content and grow. As inventory scales and scarcity decreases, advertisers have a lot more choice. They also have a harder job, which is assigning value to a lot more inventory. Now it's about the quality of the inventory as well as the quality of the signal. You may remember at our last Investor Day, that we showed a graph of what our clients were willing to pay for CTV ad impressions on the open market. In many cases, we've been significantly higher than the price that the media companies were negotiating in direct deals. The content arms race is more intense and more expensive than ever and media companies need to monetize their content as effectively as possible. Two weeks ago, Variety reported that the top six media companies will increase content spending this year by 9% to a record $126 billion, all of which needs to be funded. Without the benefit of scarcity, media companies now need to provide advertisers with more insight. What am I buying? Who am I reaching? Tools like UID2 and OpenPath, are helping provide that signal. And it's no surprise that platforms like Fox, who are among the first to embrace these tools are benefiting the most. One major news publisher who has deployed OpenPath, so that they can gain a clear understanding of what our clients are willing to pay, saw their fill rate increase by 7x, leading to a revenue increase of more than 25%. The sixth positive secular force helping The Trade Desk is pressure to make the supply chain better. Advertisers and publishers are two endpoints of the supply chain pressure on the edges, meaning the endpoints, means pressure on the whole supply chain. How is, this good for us is perhaps counterintuitive? There are many players in ad tech that are focused on extracting the highest margin possible. In contrast, we have been focused on adding more value than we cost or charge. We do this because it is the right thing to do, but also because it engenders loyalty from our clients and because it is the very essence of economically sustainable. At this moment, the advertising ecosystem is in the process of refining its supply chain to become definitively more efficient than walled gardens with more objective and independent measurement to prove its efficacy. Companies focused on extraction will likely lose share, while companies focus on adding value will likely gain market share. There are many in our industry, who share, the ethos to add value and we're aiming to partner with nearly all of them. However, there are many that don't. Some who take a more short-term approach and are just looking for arbitrage opportunities or places where they can create the quick illusion of value at the expense of agencies, advertisers or sellers and publishers. I do believe, like most markets that that ad tech will go through a long arc will bend toward market efficiency and transparency. It's just a question of how quickly we get there. And in this moment, we have an opportunity to accelerate that progress. There will be more focus than ever on who is adding value and at what cost to advertisers and sellers and publishers. Continuing the potential prioritization changes happening at Google. In a world where Google is more cautious on the open Internet, a brighter light will shine on the value that everyone provides in the ad tech supply chain. I have long said that everyone in our industry should provide more value to the market than they extract. That's a principle we've always followed. Advertisers are under more pressure than ever to do more with less. Sellers and publishers, which is, of course, our term for content owners and the companies who own that content are fighting harder than ever to take home as much of the CPM as possible and simultaneously increase their fill rates. And they want the advertising ecosystem to be as efficient and transparent as possible. That's why most are so eager to partner with us on initiatives like UID2 and OpenPath. So they can provide advertisers with as much signal and transparency as possible. And so advertisers can value their ad impressions as accurately as possible in the context of reaching their target audiences. The seventh macro vector, that I want to talk about today are the trends happening in audio. I want to highlight that many have wrongly defined the advertising TAM of audio to some sort of comparison to legacy radio. Because the biggest players in audio are global and because digital provides potential for far fewer and more relevant ads, I'm convinced if the biggest players move correctly, they can capture one of the biggest opportunities in advertising and media today, which is the delta between time spent in audio channel and the amount of ad budgets heading to that channel. Digital audio is at the early stages of its evolution. The channel is in a similar position to where CTV was a few years ago. Consumers in the U.S. spend an average of three hours per day consuming digital audio, up significantly over the last five years, and advertisers are eager to capitalize on this emerging advertising channel. At the moment, advertisers are looking for clear trusted signals to inform what they buy. Trust but verify, has become a mantra around the open Internet. Just a few weeks ago, media reported on our major expanded partnership with Spotify. They will be deploying both UID2 and OpenPath, so that advertisers can find as much addressability and insight as possible for Spotify's high-value ad impressions. I don't think there's a company in the media universe that's been more successful than Spotify at building a subscription model. In the audio world, Spotify gives us access to almost all of the world's music for a low monthly subscription. In many ways, Spotify has been at the forefront of this mass consumer shift to digital audio. I think they are in the process of becoming well positioned to get incremental users due to a good ad experience and to get incremental ad budgets for the exact same reason. You only have to listen to their most recent earnings report to understand how seriously they are taking the ad-supported side of their business and building out their programmatic capabilities over the next several years. We are very excited to partner with them in this work and to help our advertiser clients make the most of this fast-growing channel, where listeners are highly engaged and leaned in. Our partnership with Spotify is one of the inventory partnerships that I'm most optimistic about. The eighth macro vector aiding in our outsized growth is the massive opportunity around retail media. To summarize this at a high level, Amazon has showcased to retailers around the world the benefit of using retail purchase data to make retail businesses work better. If advertisers advertise products people like and want and frequently buy at their stores like Walmart or Target or Albertsons or Dollar General or many, many others, those retailers, of course, will sell more product, so do the company is making and selling the products. The significance of this vector and the role it's played in our success the past few years, deserves a much larger space of time, which I expect to do in the coming quarters. The ninth macro tailwind is the changes happening in live sports. Of course, sports is some of the most premium and most expensive content and media. Because it is often scarce and often highly sought out by brands, and it changes very quickly, it really is built for programmatic advertising. The best moments in sports are surprises and unpredictable. That's what makes them so exciting. However, it's also what makes them hard to plan around and to price properly. I expect over the coming years to see programmatic spot markets and sports become best friends. We are enjoying our strongest year-to-date with live sports as the football season has kicked off here in the United States, we are looking at, on average, 1.5 billion ad impressions per weekend. We have dozens of major brands buying football through our platform for the first time and many others increasing spend in the triple-digit range. One example is a major quick-serve restaurant chain here in the United States. This client had been advertising on traditional linear television, but with its customer base, mostly aged over 45 and restaurant visits among that demographic decreasing, they wanted to expand their customer base to reach younger adults and young families using CTV. Working with their agency, Happy Cog and their partner, Clever, this restaurant chain worked with us to target their audience with a specific focus on live football opportunities on CTV, followed up with online video and display, all in an omnichannel approach. Our platform enables the restaurant to target their audiences with precision and use new measurement tools to understand the impact of those ads on brand intent. As a result, this client saw a 15% increase in brand awareness among their target audience and a 9% increase in mobile transactions where CTV was the first ad served. This is a great example of how programmatic on our platform is driving high-value business results. The tenth macro trend helping us grow is this net effect of all of these changes at once. I've said publicly a few times that the biggest thing Google has going for it in its defense against the Department of Justice is complexity. It's hard to make sense of this industry and all of the forces changing it so rapidly. Our clients need help. They are navigating unprecedented change and unprecedented pressure. Fortunately, our buy-side focus and our objectivity aligns our interest with clients and positions us to stand with agencies and brands shoulder to shoulder as we face supply chain changes that ultimately benefit the open Internet and the market, but will require adjustments across the ecosystem. We're here to help and have proven ourselves to be one of the leaders of the open Internet. All of these 10 macro forces when joined with our amazing team, our global footprint, our buy-side focus and our amazing product, including the recent platform overhaul found in Kokai, are showing the early signs of the future promise of our innovations, our objectivity, our AI and our company. Clients are seeing performance upgrades around the world, many of whom are embracing new approaches to objective data-driven measurement The Trade Desk offers. So as we exit 2024 and look forward to 2025, The Trade Desk is better positioned than we have ever been. 2024 has been a banner year for CTV, and we have further cemented our position as the first choice platform to help leading brands as they continue to shift their budgets from linear TV and UGC into CTV. Retail Media has rapidly become one of the fastest-growing areas of our business, a trend we expect to accelerate through 2025. Retail data on our platform is transforming how many CPG advertisers approach measurement and attribution. Innovations in Kokai are helping advertisers identify and target new potential customers with much greater precision. Data elements per impression continued to increase, resulting in significantly better performance helping unlock budgets and win new business. Our premium content partnerships activated through supply path innovations such as OpenPath and the Sellers and Publishers 500+ marketplace, are helping advertisers value and select ad impressions with more objectivity than ever. Innovations like UID2, which has reached critical mass, are helping advertisers pioneer better approaches to addressability in a changing identity environment. And our investments in new measurement capabilities from the TV Quality Index to our growing network of retail data partners are helping advertisers prove the efficacy of their campaigns in new objective ways. Let me conclude by underlining that taken together, these initiatives along with many others, position The Trade Desk very well for market-leading growth in the years ahead. I believe it is worth noting again, we continue to significantly gain market share. I believe our level of relative outperformance, 27% revenue growth in the third quarter is indicative of the value we are delivering to our clients as they deal with an uncertain consumer environment. We continue to sign JBPs with brands and their agencies at a very strong pace with billions of dollars transacted through these partnerships each year now. I believe we will look back on 2024 as an inflection point in terms of how advertisers value the premium open Internet, driven by CTV and digital audio as a compelling alternative to walled gardens. And I expect advertisers will emerge in 2025, more empowered than ever to drive data-driven precision. As a result, we will continue to gain share. And with that, I'll hand it over to Laura to cover our financials.

Laura Schenkein: Thank you, Jeff, and good afternoon. As our third quarter results demonstrate, The Trade Desk is executing at a high level, outpacing peers and capturing increased market share. We achieved robust accelerating year-over-year revenue growth while delivering outstanding profitability and cash flow. Key investment initiatives, including performance advancements in our Kokai platform, expansion in CTV, retail media and supply chain innovations like our OpenPath technology, are not only strengthening our foundation, but position us for durable growth in 2025 and beyond. Turning to our results. Revenue in Q3 was $628 million, representing growth of 27% year-over-year, accelerating from the prior quarter and year-over-year. We continue to win more share of our clients' advertising budgets as they increasingly prioritize platforms like The Trade Desk that deliver high-value results, especially in premium video and CTV. This trend is a familiar dynamic in our industry that we witnessed many times over the years. When CMOs faced pressure to achieve more with less, they turn to platforms like ours for flexibility, precision and measurable results. During the third quarter, CTV led our growth from a scale channel perspective once again. We saw strong momentum in retail media as we continue to win incremental shopper marketing budgets. International spend growth outpaced North America once again with notably strong performance in CTV. With the strong top line performance in Q3, we generated approximately $257 million in adjusted EBITDA or about 41% of revenue and free cash flow $222 million. From a scale channel perspective, CTV by a wide margin, led our growth again during the third quarter. In Q3, video, which includes CTV, represented a high 40s percentage share of our business and continues to grow as a percentage of our mix. Mobile represented a mid-30 percentage share of spend during the quarter. Display continued to represent a low double-digit percent share of our business and audio represents around 5%. Geographically, North America represented about 88% of our business in Q3 and international represented about 12%. We are pleased that our ad spend outside North America grew at a faster rate year-over-year than inside North America, as has been the case for the last seven quarters in a row. CTV continued to drive our growth across both EMEA and Asia Pacific. We see significant opportunities to capture more share in these regions in the quarters and years ahead. In terms of verticals that represent at least 1% of our spend, growth was broad-based again this quarter. We saw strong performance in the majority of our verticals, particularly in medical health, which includes advertising related to health care and pharmaceuticals as well as home and garden and pets. Political spending was also strong in Q3 as expected. Family relationships healthy living verticals were both below average. Overall, we saw healthy trends across categories, and we continue to believe there is opportunity for us to gain share in all of the verticals we serve. Turning now to expenses. Excluding stock-based compensation, operating expenses in Q3 were $391 million, up 24% year-over-year. During the third quarter, we continued to invest in our teams, our platform and our infrastructure support sustained growth. Income tax expense was $33 million for the third quarter driven primarily by our pre-tax profitability and nondeductible stock-based compensation. Adjusted net income was $207 million or $0.41 per fully diluted share. Net cash provided by operating activities was $273 million for Q3 and free cash flow was $222 million. DSOs exiting the quarter were 89 days, down two days from a year ago. DTOs were 74 days, down one day from a year ago. In Q3, via our share repurchase program, we repurchased $54 million of Class A common stock. We will continue to approach the repurchase program opportunistically depending on market conditions and capital priorities. We exited the third quarter with a strong cash and liquidity position. Cash, cash equivalents and short-term investments ended the quarter at $1.7 billion. We have no debt on the balance sheet. Turning to our outlook for the fourth quarter. We continue to see strong spend in our key areas such as CTV, retail media and political. We estimate Q4 revenue to be at least $756 million, which would represent growth of about 25% on a year-over-year basis. We estimate adjusted EBITDA to be approximately $363 million in Q4. In closing, we are extremely pleased with our strong performance in the third quarter, and we are cautiously optimistic for Q4. We continue to gain momentum across our biggest priorities, delivering profitable growth and significant share gains. As we look ahead to the remainder of Q4 and 2025, we believe we have never been in a better position than we are today. With large growth drivers, including the ongoing secular shift to CTV, upgrading measurement with retail data expansion outside North America, a strong identity framework, strengthening of the supply chain and the ability to drive leverage in our model, we remain optimistic for many years to come. That concludes our prepared remarks. And with that, operator, let's open up the call for questions.

Operator: [Operator Instructions] The first question today is coming from Shyam Patil from Susquehanna. Shyam, your line is live. Please go ahead.

Shyam Patil: Hi, guys. Great job on the strong growth and the results. I just had one bigger-picture question. Jeff, can you talk a little bit more about kind of what you're seeing in terms of the near-term macro for 3Q and 4Q? And then for next year, how you view the macro and set up for Trade Desk? Thank you

JeffGreen: You bet. Thanks, Shyam, for the question. And for the kind words. So first, I just want to point out that the most significant macro vectors that I can talk about are the things that we itemized in the prepared remarks. So we've taken more time this time to talk about the macro vectors that are affecting us, especially into next year in the prepared remarks this time. So I just encourage everybody to spend a little bit more time with them because we spent a little bit more time preparing them. As it relates to the here and now, though, I'm incredibly proud of our performance in the third quarter, and we are currently firing on all cylinders, whether that's what's happening in CTV, it being both our largest channel and our fastest growing, which -- those two things don't usually go hand in hand or the amazing efforts in Kokai. It started the year as an engineering effort and has since turned into both an engineering effort as well as our sales and client services teams getting that adopted. The adoption has been phenomenal. The product is the best that we've ever shipped. So a lot going for us in that. UID2 has become the primary currency of identity in the open Internet. And then, of course, we have so much going for us in retail media and supply path optimization. I really do believe we're in a stronger position than we have ever been. As it relates to the macro market sort of in the here and now, I do want to just highlight that CMOs are dealing with a lot of uncertainty and a lot of scrutiny. And the uncertainty they've seen a lot of over the last few years, but the scrutiny, I don't know that it's been more than they have right now. And as a result, brands are under pressure to grow, and that is good for us. So even though it's a little bit tense for the market, it's good for us because they're turning to us saying, how can we help? And I do want to also highlight that there is a difference between the stock market being at an all-time high and consumers feeling as confident as they've ever been. And that is not where many consumers are especially sort of on the left side of the bell curve. So if you make less than the median household income, then you're more affected by price. And if you're selling products to those people, then it is probably affecting your business more than others. And so as a result, some brands are in a phenomenal position and some are in a more difficult position in this current market as they face inflation and consumer weakness, changes in interest rates and all the implications as to how products need to be marketed. As a result, they need to be more agile, more focused on efficacy, more focus on efficiencies than ever before. And so what we do, which is give them more data and honestly give them control of their own future. It means that they are leaning in more than they ever have before. They're looking for solutions to help them. But when you couple that with why programmatic advertising is the leading source of growth in advertising, which is that, of course, we've been outperforming the market. Of course, it's a place where you can put data to work on a case-by-case basis and optimize for personalization. Of course, when you're using data-driven advertising and marketing, that is the very best place to inject AI in distributed models in the way that we have. And then, of course, when we take our joint business plans and all the other efforts that we have, we're in a really phenomenal position. One other thing I just want to highlight is that political in both Q3 and Q4 was as expected. It's been very strong. And -- but we are mindful that some brands are not as interested as advertising in a polarized political environment. And so those dynamics have made things a little bit different in this Q4 than in other Q4s. One other thing that also gives me a tremendous amount of optimism for the future is that some of our most significant partnerships, whether that's Netflix or Disney or Roku or Fox or Spotify are all in what I would call the crawl phase of our partnership. We've done some amazing themes with some of those. Others, we've always talked about doing amazing things and we've done just sort of testing the pipes. But I think the very best is yet to come in all of those partnerships. And so in the short term, they're making small contributions, but I think the very best is yet to come and all of that, and I'm sure we'll talk about OpenPath and some other things later. But that gives you a sense of what we're facing in the short term.

Shyam Patil: Thank you.

Operator: Thank you. Your next question is coming from Vasily Karasyov from Cannonball Research. Vasily, your line is live. Please go ahead.

Vasily Karasyov: Hi Jeff, I have a question about Google. As they remain under pressure from regulators, what are you seeing in the market in terms of how -- is it easier? Is it harder for you to get -- to win spend from brands? And then with Google Network business continuing its negative or – negative growth, does The Trade Desk really have any preference on what happens in this DOJ trial? Thank you.

JeffGreen: You bet. Thank you. I appreciate the question. So first, a little bit of context. As you know, the Department of Justice already concluded one of its trials against Google on that of search. And the Department of Justice won. And I would argue that the case the Department of Justice has against Google on the ad tech side is even more compelling. It is more compelling, but it's also more complicated, which makes it a little bit harder to predict, but I think the case is incredibly compelling for the government. But regardless of what happens, I believe we will win. And I do want to underline the things that I said in the prepared remarks, Google is a phenomenal company. I think they have a tremendous amount of opportunity ahead of it as it relates to search and cloud and AI and Gemini. But it is clear that they have been deprioritizing network, and it has not performed the way that the rest of their business has. If I were in Sundar shoes, I would deprioritize it too, because of the opportunities that they have on those other fronts as well as just the nature of their business, which is pretty dependent on them making very high margins on media that has a cost of goods sold that is incredibly low. And the premium content of the Internet does not have a low cost of goods sold and therefore, makes it hard to move the needle on a P&L as big as Google's. So I anticipate that they will deprioritize it. But even if they don't, what I think is inevitable is that Google has to play more fair. What has clearly come out in the trial is that they have not always played fair, and that might be the understatement of call. But we have managed to win in an unfair market. I believe they will be forced, whether that's from government or just by their own choosing because this risk-reward is not worth it. So by their own choosing, I think they would make the market more fair and therefore, make it easier for us to do well. So that's why I maintain that regardless of what happens in the trial itself, I believe that we'll do well and that we'll continue to win. I think there are scenarios where the landscape looks very different depending on what happens to Google and regulation, especially on the supply side, which is at the core of the government's case, which underlines the fact that I don't think anybody is disputing as it relates to the trial itself, but The Trade Desk will continue to do well. So I think we're in a great position. I'm very excited to see the outcome, and I think we win no matter what. Thanks for the question.

Vasily Karasyov: Thank you.

Operator: Thank you. Your next question is coming from Jessica Reif Ehrlich from Bank of America. Jessica, your line is live. Please go ahead.

Jessica Reif Ehrlich: Thank you. Hi, Jeff, we've seen The Trade Desk deploy many initiatives over the years focusing on the supply chain from the gold standard for SSPs to UID2 to S&P 500+ and now OpenPath. Can you wrap this all together and speak about how the work you've done on the supply chain with OpenPath, and what this initiative means -- can mean to the value of The Trade Desk with its partners over the next several years? And I guess like secondarily, when do you scale? Because as you said, during the crawl phase with many of the users of OpenPath, I mean just starting like Disney and Fox, et cetera, and some that you've mentioned like Netflix, not even on the platform yet.

Jeff Green: Thank you so much. Appreciate the question. A lot to unpack there. So let me first just give a little bit of history so that you and I bring everyone along in this question. So I love that you know about it because we weren't very public about the gold standard back in 2017, but we certainly talked to SSPs and at exchanges about it. I would essentially summarize that effort as us saying to the sell side, here's the sort of signal that we would like to see, and we are just going to tell you in advance. When we see this signal, we're more likely to bid up because these are the things that give us indication of value. We haven't always done that in the past. But we did start doing that in 2017. As you know, UID2 was an effort to make identity ubiquitous across the Internet. When we first announced it, a number of companies suggested that we would never be successful because they thought we'd have to get 2 billion consumers to sign up for us to have any sort of footprint. And we explained then that our play was not to go sign up 2 billion consumers or to go direct but instead to partner with the infrastructure of the Internet, and we've done that across the board. Then as you point out, in the last two years, we've launched two initiatives. One is the Sellers and Publishers 500+ as well as the OpenPath. Sellers and Publishers 500+ is meant to make it easier for people who are currently buying private marketplaces, which often have really slowed or small trickles of inventory and they don't necessarily realize how much they've limited their decisioning power by only considering a small amount of inventory. So by selecting some of the most prominent and safe parts of the open Internet to buy across all of it. They expand their ability to find value. Because many times, the reason people enter into private marketplaces is simply to be safe. And so we've given them a very safe large ecosystem for them to buy into. And it's something that we'll just continue to promote and make accessible and provide transparency into what, of course, they're buying. But OpenPath, it might be aside from UID2, the most significant venture of all of them. And all OpenPath is, is our willingness to go one step further from gold standard and share with the sell side exactly what we're willing to pay on any given impression opportunity. And the reason why we do that is because there are many publishers who are saying, I don't have any idea what you're willing to pay because of all of the companies that exist between us and it's a way for them to hold them accountable to earn their keep. Some have wrongly assumed that this is us trying to cut them out. It is not. It is us trying to empower the publishers to make certain that they earn their keep. And the reason for that is that we are competing with walled gardens. We're competing with the most successful companies in the history of advertising, companies like Facebook and companies like Google. Those walled gardens have one advantage, which is that they control the supply chain end to end. And therefore, they're not at the risk of players in the middle of the supply chain, extracting too much and then decreasing the value proposition of those that participate in the entire open Internet rather than just in a particular walled garden. And too often, an advertiser pays $1 and less than $0.50 ends up in the pocket of the publisher. So OpenPath is a bit of -- to mix metaphors or to at least use two of them, it's a bit of a light on hill as well as a canary in the coal mine. Buyers get better visibility in the overall supply chain and the reason why I say light on the hill is because we don't necessarily need OpenPath to be on every impression. In fact, we have no expectation that it will. But we will have it run often enough, especially with the largest players on open Internet to know how to grade all the other supply chains, all the other ways that we could potentially buy so that we hold it accountable to be as efficient as possible. The way I view this is it is a race between walled gardens and the open Internet to create the most efficient supply chain. Walled gardens have the advantage on one level, which is that they control at all. But they operate at a disadvantage because they only operate with UGC and they only operate with content that has a very low cost of goods sold and don't have the appeal of all the best parts of the open Internet, which I think we described well in the prepared remarks. The advantage that we have is not only do we have the premium side of the open Internet. But we also have the forces of capitalism of competition, of all things that make markets great that we can partner with so many different companies and through a collection of efforts outperform on any single one company. I don't think you can count on any one company to be a source of all innovation. And we've got a business model that I don't think goes out of style, the way that many destinations do. And so in order for us to be a company that services the entire open Internet. I believe it's essential for us to have a product like OpenPath. So it's a really critical part of our present and future and really appreciate the question, Jessica. So we had a platform to talk about it more.

Jessica Reif Ehrlich: Thank you.

Operator: Thank you. Your next question is coming from Shweta Khajuria from Wolfe Research. Shweta your line is live. Please go ahead.

Shweta Khajuria: Thank you for taking my question. Jeff, I have one on CTV growth. So it's your largest and fastest, you have a lot of catalysts that enable healthy sustainable growth in CTV. So when we think about the drivers over the, call it, next two to three years, how would you rank order the impact of secular tailwinds to third-party partnerships that you may expand to your forward product, international expansion, rising levels of ad tech or AI that will be used in measuring or anything else? Like can you please help us on back key drivers that will allow you to sustain growth at a healthy clip in the near to midterm? And then the follow-up is how do you see Amazon evolve as a DSP over the same timeframe?

JeffGreen: Thanks for the question. You did a pretty good job of laying out all the other key secular drivers for us, the tailwinds that are helping. The first and foremost, over the last few years has been at times anxiety about will there be walled gardens in CTV, , not because we ever thought that was a viable path because I believe that is not a viable path because it's too fragmented. But instead, what all of the major players have come to understand is that when you have a premium product, the very best way to get the most out of it is to auction that off. And of course, to describe it in great detail. When you're not selling an average product, you have to describe it better in order to get the premium that you deserve. And that's true, whether you're selling cars or art or ads. And I would also add that conflict of interest is an even more inferior playbook in CTV than it is in any other channel or any other corner of media. So as a result, I would argue that Amazon operates at a much bigger disadvantage in CTV than in any other channel. So we've argued against Google's lack of objectivity in every other part of the open Internet and they've been less of a competitor in CTV. Amazon has been more of a competitor in CTV, but I think Google was a more formidable competitor in the other parts of the open Internet than Amazon is in CTV and that is simply because of that conflict of interest. They are going to be pushing ads on premium content that they own, meanwhile, neglecting premium content that others own, while we have no dog in the hunt, and we're just trying to help people objectively decide, do I buy the ad on Netflix or do I buy the ad on Hulu or Tubi or somewhere else. So as a result, you take all the partnerships that we put together, and I think those are a significant driver for our growth in the future. A couple of years ago, I would have said that we were leading the CTV market in Australia and in the United States. That's expanded to other markets like the U.K. and to Germany but there are still way more opportunities around the world. As I mentioned last quarter, I was in India over the summer and just the opportunities there in every channel, but especially in CTV and audio are just spectacular. And so the opportunities that exist for us around the world couldn't be better. We've also established UID2, it's not only the currency of the open Internet, but it is especially the currency of connected television. In a way, that's the way it became the currency of open Internet is because of CTV. So what I think is the most significant thing to watch over the next couple of years, is that so many content owners have put ads on their content now that what was once a shortage is no longer the discussion. It's no longer a discussion about scarcity or about shortages of inventory. And so as a result, they are trying to distinguish themselves from each other. This is what has been the case in streaming wars, but now that's also true of the ad experience in the streaming wars. And so they will be describing their inventory better than they have historically. We will have more choice than we have historically. I think that the premium content will do better. I think the content that has identity attached to it will also do better. I think that position CTV to do really well, but there will be a lot of work done over the next couple of years for them to layer identity as well as other metadata to give buyers the very best chance to value it properly and to pay the premium that they need in order to continue to fund their massively expensive content machines. So hopefully, that helps. I really appreciate the question.

Shweta Khajuria: Thanks Jeff. That is helpful.

Operator: Thank you. Your next question is coming from Laura Martin from Needham. Laura, your line is live. Please go ahead.

Laura Martin: Okay. Great. So Jeff, I'm just going to ask you one and it's the hardest question I guess. And that is that Trade Desk is growing two to three times faster than other SSPs and DSPs, even those that are public. Is there a tipping point would you eat too much of your competitors, you take too much share. And there isn't an open Internet for you to compete with or trade with and therefore, your growth gets limited by the fact that you must have trading partners on the other side and on the same side of the open Internet? Thank you.

JeffGreen: Laura thanks for the question. I like this one a lot. I didn't see this one coming. So big picture, I believe that the advertising ecosystem around the world is about a $1 trillion industry today, especially when you include retail media. I think it's about that today. Lots of different numbers out there that aren't that too far away from that, but it just depends on whether you include retail in that or not. If you look at what we're doing, $13 billion, $14 billion a year at this point, we're just over 1% of that $1 trillion. I look at it as we have 99% of the pie left and there's so much opportunity for us to do more. As I'm looking at that pie and say, how do we not get distracted by all the different ways that we could go and all the different things that we could build and parts of the pie we could pursue, how do we stay focused, I look at the biggest piece of the pie and say, okay, there's the U.S., there's CTV and of course, up and coming channels like audio, but those represent, I think, the most premium opportunities for us to go pursue. I would point back to the comments in the prepared remarks about, we think that every company in ad tech needs to add more value than they charge or extract. Some of the companies in ecosystem don't think that way. They think about charging rents or extraction. And there's often a mindset that is ride the wave while it lasts instead of how do I build something that really lasts, that I'm adding more value over time, creating more consumer surplus where your consumer or your client gets more value over time and therefore, making it more, more and sustainable and making your customers more and more loyal. I think there's a lot of pressure on the companies in the middle, including some of those that you referenced, and that they have to be focused on adding more value than they extract. I think if we do the right thing for advertisers and then give visibility to publishers that will create a more effective supply chain and that is the biggest impeder or roadblock for our growth is an inefficient supply chain. So we need to make certain the supply chain is as efficient as possible. And that means partnering with all of those companies that are adding more value than they extract and continuing to obsess about the supply chain, but I don't have any worry that we can cannibalize the market. We're 1% of it. So I think there's just so much opportunity for us ahead.

Laura Martin: Thank you. Thanks, Jeff.

Operator: Your next question is coming from Justin Patterson from KeyBanc. Justin, your line is live. Please go ahead.

Justin Patterson: All right. Thank you. Jeff, I wanted to touch on the audio opportunities some more. Obviously, we also had Spotify ad exchange announcement. When you kind of step back and you compare where we were at with audio versus CTV, what are some of the key things that need to change in the industry for this to become a much larger percentage of the business? I think audio is still roughly 5% of your spend today? Thank you.

JeffGreen: Yes. Thanks, Justin, for the question. I think audio is in a slightly different position than CTV, in the sense that when it was a more legacy business, meaning before the Internet changed everything. The distribution models were more around local and the way radio sold ads was just different than the way TV sold ads. And there is less a sense of national. And of course, in CTV now, there's more of a sense of even global. And of course, in audio, there's a very global sense inside of businesses like Pandora and Spotify. So because things are being redefined, I think people have wrongly defined the TAM as being something quite small where when you look at time spent and you look at the amount of engagement with audio content, it is really off the charts and represents a tremendous amount of consumers' time. So that's why I mentioned in the prepared remarks, if companies like Pandora and Spotify and so many others execute well. I think there's just tremendous upside for them. And of course, I watch carefully when I see in their earnings that 10% to 13% of the revenue comes from ads but most of their most of their subscribers or most of their users are asking for ads. And so I think that represents a tremendous opportunity for them. I'm a big believer in Daniel and Alex, and I believe they're on the on the path to get there. But there's a lot of work ahead. There's a lot of development that has to happen. This is going to be a multiyear process but I'm extremely optimistic about what that means for the future and think that it can represent a greater percentage of our business than it does today. And I think that audio can be a bigger percentage of the overall pie than it's arguably ever been before. I don't know that, that will necessarily take or cut into CTV and premium video at all. But I do believe from some of the other channels, it will and should. So I'm pretty optimistic about the future of spot of Spotify and audio, but we all have a lot of work to do.

Justin Patterson: Thank you.

Operator: Thank you. Your next question is coming from Dan Salmon from New Street Research. Dan, your line is live. Please go ahead.

Dan Salmon: Okay, good. Thanks. Good afternoon, everyone. Laura, you highlighted that political was strong as expected. Any more you can do to quantify its expected impact for 2024 revenues implied by your guidance? I think it was a mid-single-digit impact in the last presidential cycle. And Jeff, you called out how some advertisers will step out of the market or get crowded out by higher pricing in some ad markets. Do you think those dollars that left can offset political -- partially offset it? Just trying to think about the impact of that on our 2025 model. And maybe just one quick follow-up to slip in. If you could just give us your updated views on CapEx for the remainder of the year and how you're thinking about it into 2025? Thank you.

Laura Schenkein: Thanks for the questions and absolutely happy to answer. We went into the last political cycle, the last big one back in 2020 saying that political spend was in the mid-single digits, and we believe for this year of 2024, it will be in the low single digits as a percent of our overall spend. When we think about how we consider political in Q4 and then go into thinking about how we're modeling going into 2025, it's a really nuanced, but important question this year. Typically, what we see is that Q1 is, on average, a 22%, 23% sequential decline from Q4. And in political years, it's critical to exclude that political contribution in Q4 which we believe, again, will be a low to mid-single-digit percent for that quarter as we go into modeling Q1 of 2025. On the second part of your question, which includes capital expenditures for 2024 and 2025. We've said been consistent that we expect CapEx to increase in 2024 and 2025. But in both cases, it should be around 5% of revenue and that hasn't changed. We invest primarily in two areas. The first thing, our infrastructure, which includes data centers and the second being our offices around the world as we have employees who are coming into work every week. So again, I just want to reiterate there that we don't expect any significant changes in CapEx this year or next year relative to the last few years.

JeffGreen: And Dan, as it relates to the part of the question, that was directed to me, the 2024 that was taken out, meaning those advertisers that spend a little bit less in 2024 or Q4 because they don't want to be to be next political, will that back in 2025? Of course. In fact, in many cases, in Q4, it didn't go anywhere. It just got postponed or moved to other channels. So it doesn't necessarily go anywhere just reallocates its form. But in 2025, we think the cycle is a bit more typical and rates are more predictable, then it's also a little bit easier to predict the shape of the curve throughout the quarter simply because you don't have a big change on November 5.

Dan Salmon: Great. Thank you both.

Operator: Thank you. Next question is coming from Jason Helfstein from Oppenheimer. Jason, your line is live. Please go ahead.

Jason Helfstein: Thanks for taking the question. So Jeff, you highlighted or I guess, in the press release, Yahoo -- the Roku integration in the quarter. And I guess I want to ask, how does this play into your broader CTV strategy around UID and buying unduplicated reach and frequency. And it's fair to assume you'll have similar integrations with top, whatever it is, three or four CTV platforms? Thank you.

JeffGreen: You bet. Thanks so much for the question. I'm so proud of what we've done with Roku this year. We've had a long-standing relationship with them, but it's really borne fruit in this year. And it really represents a significant change for them as it relates to adopting things like UID2 and some of the principles of the open Internet. But of course, the Roku channel has grown tremendously for them, and they have become not only a partner for us as a distributor of others' content, but also a premium publisher themselves. I'm so excited by what they've done with UID2 and because of some of the assets they have with ACR and whatnot, I expect our partnership to continue to grow in the coming years. So I'm very optimistic about our partnership with Roku. I expect that to continue to expand and very much appreciate the question.

Jason Helfstein: Thank you.

Operator: Thank you. Our final question today will come from Matthew Swanson from RBC Capital Markets. Matthew, your line is live. Please go ahead.

Matthew Swanson: Yes. Thank you so much for taking my question. If I can maybe marry up a couple of the vectors you talked about, Jeff, specifically the idea that CMOs are under more pressure. And then also some of the capabilities and the traction you're seeing from Kokai. I guess, what type of work does it take to help CMOs and the users understand the metrics coming out of Kokai but also to kind of gain trust around them? I know that's been a challenge in some other walled garden platforms, so people trusting the attribution data.

JeffGreen: Yes. So it's -- I really appreciate the question because I think this is one of the more nuanced ways that we have just so much opportunity in front of us. And honestly, we were contemplating adding other macro vectors that are helping us and one of them is the state of measurement, which would have been number 11. But the state of measurement is that walled gardens have essentially been grading their own homework for many, many years. And one of the things that they've done really well is convinced people to use their own metrics and kept things quite simple. But at times, that's been really difficult for some of the biggest brands in the world because they'll be told by a walled garden, we help you sell 101 toothbrushes, when the company actually only sold 100 toothbrushes total. So when you have that phenomenon, you start to doubt the credibility of those metrics. We have a very different dilemma or challenge, which is that we've been sharing so much data with them and given them so many options about the way to attribute success and attribute sales we've overwhelmed them with complexity and with numbers and there are so many different ways for us to answer those questions. But because we're committed to doing that with integrity and with objectivity, we'd rather have a conversation with them about how do you want to measure success. There's a whole bunch of different ways to do it. Let us help you put together the one that makes sense for you. So as CMOs and CFOs get closer together and their offices, in some cases, moved closer together. As they get closer together, there -- a lot of our discussions, in fact, some of our biggest wins in last quarter and this one have come from us understanding what the CFO is looking for from the CMO so that we can go back and put together the metrics that prove we're creating incremental sales or growth. So it's largely about figuring out what they are looking for and us getting better at not making everything bespoke and reinventing the wheel. But at the same time, not oversimplifying it, assuming that we have all the answers and just create our own homework with a single metric. So I'm very optimistic about what that means for the future because I do think there is a very important principle that we have been saying since the day we went public, which is objectivity matters a lot today, but it will matter more tomorrow and it will matter more the day after that. And as time marches on, we think that, that continues to be one of our greatest strategic advantages over the biggest names in tech.

Operator: Thank you. This does conclude today's Q&A session and conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.