Chit Chat Stocks - The Trade Desk (Ticker: TTD) with Kris from Potential Multibaggers

Episode Date: June 22, 2023

The Trade Desk Inc. (TTD) is a digital advertising platform that empowers advertisers with self-service tools to reach and engage target audiences across multiple channels and devices in a data-driven landscape. Listen as Brett and Ryan ask questions about the company, its business model, and valuation. Enjoy the show! ***************************** Want updates on future shows and projects? Follow us on Twitter: https://twitter.com/chitchatmoney  Subscribe to our Substack to receive free show notes and charts that go along with every episode: https://chitchatmoney.substack.com/ Interested to see more of Kris's work? Check out their Twitter here: https://twitter.com/FromValue?s=20 Contact us: [e-mail] Timestamps The Trade Desk | (1:58) Growth | (10:59) Connected TV | (35:09) Disclosure: Chit Chat Money hosts and guests are not financial advisors, and nothing they say on this show is formal advice or a recommendation. Brett Schafer and Ryan Henderson are general partners and portfolio managers at Arch Capital. Arch Capital and its partners may hold securities discussed on this show. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Chit Chat Money. This is our Thursday deep dive episode where we interview an analyst to discuss a single stock or industry. And today we have on the show, Chris from Potential Multibaggers. That is his service on Seeking Alpha, where they seek to find, as it sounds, potential multibaggers. And one of those multibaggers for him has been the Trade Desk, which we talk about today. They are sort of the disruptor or the innovator within the digital ad landscape. And they have a very charismatic CEO in Jeff Green. And it's been an outperformer over the last five years, really since it's become public. So this is a fun interview to get into. And if you want to learn more about the business, stick around because

here's our interview with Chris. Welcome to Chit Chat Money. On this show, hosts Ryan Henderson and Brett Schaefer interview industry experts, and riff on the world of investing. As a quick reminder, Chit Chat Money is a CCM Media Group podcast. Ryan and Brett are also general partners at Arch Capital, and Arch Capital may have positions in the securities discussed in this podcast. Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not formal advice or a recommendation.

Now, please enjoy this episode. All right. Today, we are welcomed by Chris. He has been on the show a number of times, but it has been a while. You may know him as FromValue on Twitter. We were talking about this before the show, the CEO, founder, lead author, whatever you want to call it, of Potential Multibaggers. It's a service on Seeking Alpha that we will link to in the show notes. But today, we're going to be talking about the Trade Desk, which I think is a company a lot of people in the investing community are maybe familiar with, but maybe not so much if you're, I don't know,

new to investing. So can you give some history around the business? How did they come to be one of the leading digital advertising companies? And I guess, what's the genesis story here for the trade desk yeah well first ryan brad i'm very happy that i'm back with you guys it's always fun to talk to you um so let's let's go to the trade desk um you know the trade desk is two people actually so um jeff green and dave pitts um well of course there are thousands of employees right now but it starts with jeff green so jeff green after he finished university he joined Microsoft and he worked at

Amazon if you still remember that messenger service and he worked at Microsoft after university in Salt Lake City for two years and then he founded a company

called Ad ECM and that was actually one of the first or maybe even the very first programmatic advertising company. But there have been several updates, of course, since then, a lot of updates. And then four years later, he saw that company or Microsoft bought his company at ECN. So he was back at Microsoft at, you know, in the marketing department or advertising.

And there he met Dave Pickles. And, you know, he stayed there for two years. And, you know, he was frustrated with how Microsoft treated his, you know, former company because they did almost everything wrong, according to Jeff Green. And so he started, together with Dave Pickles, who's still the CIO today, he founded the Trade Desk. And so actually, the idea that Jeff Green had was that he also knew trading and investing. And the idea that he had was, why not make buying ads much easier, just like you have a broker? which is in between the buyers and the sellers.

You don't even have to know the buyer. You don't even have to know the seller if you're the platform. And that's actually what the Trade Desk has become. The Trade Desk is the platform where you can buy and sell ads. Well, actually, the Trade Desk is on the demand side. So that means that it's teaming with people who buy ads. not who sell but of course there's supply as well from the uh you know from content makers but that's not directly uh we can talk about the details later but um so it's actually a platform

and the trade desk takes a percentage of uh the worth of the campaign let's call it that and um that percentage is actually quite high if you compare that to brokers. So it's 20% to 25%, which is quite a bit. And, well, not always, of course. There are always deals, et cetera, et cetera, but it's quite high. And the reason that it's so high is because the trade adds a lot of value, actually for its um you know uh ad age agencies and other customers so if you're unilever you can go to the trade desk and say you know we want to campaign and you can actually um you know just

like uh buying a stock you can say i want to spend this much and i want those channels and um what the trade desk will do is like a good broker is try to find most bang for your buck so um and that's why the trade desk is completely on the DSP so demand side platform so they only team with um with the you know the the advertisers so and that that's that's uh already very to know. We'll probably get into that a bit later. Yeah. And you kind of answered the next question we have here, but I want to go through a little bit more. You talked about how the overview of the digital advertising process works, but for someone, I think this part for any first time investor in this space, it gets a bit confusing. So I kind of want to hit on maybe some of the

details again let's say you mentioned i'm uh unilever you make an ad you go to say or then at the end result it gets put in front of a person this could be a display ad it could be a video ad it could be an audio ad actually if you're listening to this show the trade desk could be supplying some ads for you right in the middle of it uh but audio is audio is growing quite fast It's a smaller market for them, but it's actually grown quite fast. Yeah. We will talk about maybe these growth avenues, CTV especially later, but how does that process work?

Do they just have a dashboard within their team and are they able to just seamlessly do this? And is that what it means by programmatic? You're kind of just, okay, I don't have to talk with anyone at the trade desk. They'll do it all for me. They'll put it on Roku, Spotify, all the different places. Any details there that investors need to know about? yeah well actually it's a it's a very complicated process you know um which is amazing actually

because it goes very fast it's we're talking milliseconds here and so you have um an ad slot right so uh you know um you uh brian for example is watching i don't know disney plus um do they already have ads right yeah um so there's an ad slot there now um disney has an ssp because it's it's has its own ssp so that's supply side platform so the supply side platform if it's a smaller uh website for example they will they will use an ssp for example like pubmatic so So Pubmatic will put that ad slot, you know, and people can actually bid, make a bid, right? So they can say, oh, I'm willing to give, you know, five cents for this. Oh, I'm willing to bid six cents for my ad.

And that's actually where that is on the Trade Desk's platform. So it's actually a bidding platform, but the trade desk will always try to make the price as low as possible for its customers because they team with the advertiser who wants as much bang for their buck as possible, of course. So that's actually how it goes. And this goes in milliseconds. So, and of course, this is done programmatically because, you know, it's not that someone, that a person is really bidding there in that millisecond. Oh, five cents, six, seven cents. No, that goes programmatically because an advertiser has said beforehand, you know, I want to give this profile.

um i i'm i'm i want to spend that much on that profile so maybe if uh right if your mother watches uh disney plus normally she will get another um ad unless she's looking under your profile so so that's that's actually how it goes so and that in that sense it's programmatic that it's not as if a person intervenes in that process because we're talking about it goes faster and faster, but we talk about, let's say, 200 milliseconds or so or even depending on where you are, et cetera, et cetera. But it's very fast.

So that's a bit more or less how that works. When WestJet first took flight in 1996, The vibes were a bit different. People thought denim on denim was peak fashion. Inline skates were everywhere. And two out of three women rocked the Rachel. While those things stayed in the 90s, one thing that hasn't is that fuzzy feeling you get

when WestJet welcomes you on board. Here's to WestJetting since 96. Travel back in time with us and actually travel with us at westjet.com slash 30 years. That makes sense. Now, I guess over the last, I think, couple of years, there's been they seem to have outpaced the industry overall so what's kind of allowing them to do that why are they i guess growing so quickly relative to the rest of the

advertising industry yeah um that's uh that's a a very big question because it has multiple answers but i think it started uh you know first and for all the trade desk is is the one that you know clearly sides with agencies and big brands, et cetera, et cetera. So that's already in the, you know, that makes them different. If you look at the walled gardens, as they call it, so Meta or Facebook and Google, I'm talking about Google because Google is the ad, you know, part of the department of ad alphabet here.

So, if they are both DSP and SSP, so they make content, well, not themselves, but we do, and then they also are DSP. So, actually, that's a bit, you know, schizophrenic, because at one side, as a content creator, they want to maximize their profits. On the other hand, as a DSP, they have to say, oh, we have this and this ad, and you can have it for as little as possible. So they have to find some sort of compromise there. And that goes for a lot of players in the industry. So they have both the supply side and the demand side, and those don't really mix well. Now, the Trade Desk has always started with, you know, we're clearly on the DSP side, so the man side, so the advertisers. Now, and one of the crucial things they did, and I think that was 2016, 2017.

Now, when the Trade Desk had its IPO, that was in 2016, I think. You know, Jeff Green gave a talk. He's a very gifted speaker, by the way. you haven't listened to him you really should if if you if he has a series for example how is it called in in normal terms or in speaking terms of i don't i don't remember exactly but he just explains those often very difficult concepts of attack and um programmatic advertising in you know clips on youtube or in four or five minutes very clear very um very um good to see if you want to know something about the industry now let's go back what they did uh back then is they said

you know if we are not going to ipo uh who else will what he mean what he meant was that um programmatic advertising had an awful name it was seen as the dirtiest industry you know there was um and and um but the trade ask wanted to up you know the standards and how did they do that and i think that was still 2016 could have been 2017 they worked together with a cybersecurity company to eradicate all fake ads now that was huge for the industry what i mean is this now if you're a supply side uh platform um and um you know you you could you know it's in your uh it's in your advantage to say that you had a thousand impressions while you while you maybe only had 500 right so that's how you know and and they could do that technologically with

fake ads. And at that time, it probably was about 50% or 40% or high numbers and depended a bit on the medium you were using. But a huge percentage was fake. So that was very important. The trade desk could throw out all the fake ads. What does that mean for advertisers? Of course, they have to pay less for the same, you know, views. Or, you know, they had less views, but then they had to pay less as well. So that was already very important. And that, you know, gave a lot of companies a lot of confidence in the trade desk. You know, these guys really stand up for advertisers.

So I think that is very important. Another important thing is, you know, as I said, Dave Pickles is still the CIO and, you know, he's the guy on the background. And Jeff Green is the technological guy as well, but he's the visionary guy. You know, I always have to think of Steve Jobs, someone who's technically very, very good, but also, you know, sees where things evolve. So, you know, Steve Jobs has once referred to, you know, being smart as you see all the people with stupid little maps. And being smart means that you're on the top of the building, you can just see the road, right? And that's actually what Jeff Green does. I mean, I have followed him so for so long um so i um i added potential um the trade has two potential multi-baggers in in

2019 um at 19 and a half split adjusted and um even before that i think it was 2017 or 2080 and he always does something not many ceos want to do and that is predicting and he has he has made so many predictions and they were all correct um very specific ones that you could control right um they said oh no google is going to have to um um wait to abolish cookies uh it's not possible in the first years and you know google had said we'll do it next year oh yeah and then google came out oh we'll have to wait for two more years for example but back to dave pickles. He is very important as well, because the trade desk is technically superior to everyone else. So they have much more

things they can measure. So they give insights on, you know, the returns of the ads much more than anyone else. They have already used AI, for example, it's now a buzzword. But they have used that for, I think, at least five years, probably earlier. And then I mean AI all over the platform, not just, ooh, we have a very special coordinator here for AI. No, no, no, no. So technologically, they are also superior. And then, as I said, it would be a long answer. And then a third thing I would want to point out is data. So it's always fancy to say, oh, we have the best data, but the trade desk has the best data by far.

And why is that? Well, there are, again, there are multiple answers to this. UID2 is a part of that. But, you know, they also have partnerships with big retailers, for example. So with Walmart, with Home Depot, and many, many, many others. And they have their data as well. Um, so those, you know, I mean, which, which data are, are better if you, you know, are, uh, liking, uh, uh, a Facebook, um, clip of a dog who stands on his front feet, uh, or a paws. I mean

wow great data right no if Walmart can show you know

like this is how it goes so the trade desk targets a certain area for example for a specific brand

let's say Heinz Ketchup right so they target Boston and then they can measure

in Walmart later, how much has that campaign yielded? How much more ketchup has been sold because of the campaign? This is what advertisers have been wanting forever. They want to measure how their campaigns work. Up to a few years ago, it was always, oh but brand awareness is important etc etc and you cannot measure that you know the traders can they can clearly measure and they can give them then they can give their customers the numbers and those are often you know high um one of the last earnings calls jeff jeff green mentioned a customer who had a return on investment of 5.4 if i remember correctly it was more than five

So every ad dollar had five, more than five in return. So if you can show that to your customers, I mean, you're going to stick with that one, right? Yeah, that makes sense. And you brought up a couple of good points, which is, so first of all, on that marketing side, there used to be that expression of, I think it was a CEO or someone said, 50% of our marketing spend is worth it. We just don't know which 50%. But I think the trade desk is hopefully trying to eliminate that problem. The other thing I wanted to say is you mentioned the purchase price, initial purchase price of, what was it, $18 or something like that.

We're looking at it today after a long kind of drawdown from COVID and kind of a difficult period for tech stocks in general, and it's at $75. So it's a little bit of the testament to the buy right and sit tight approach. But I wanted to talk also kind of about maybe the mechanics of how the trade desk works attracting customers. So I guess I'm curious, do you think of this as sort of a sales organization? Like, are they going out and trying to get advertisers onto the platform? or is it kind of advertisers come to them

and they're like, well, we know that you have a better measurement or we can track our ROI better. How do you think? Well, it's a bit of both. But the trade desk is not, if you want to advertise chit-chat money, you're not going to the trade desk

because they only have customers. you have to spend a certain amount per year to be able to be a customer. And that's quite big. I mean, it also depends on which country you're in, but in the U S it's, I think it's 30 million a year or so in ad spending. I don't think Chit Chat money has 30 million a year to spend on that. You'd be correct. Yeah. Well, in the near future, in the near future. All right. That's, that's the spirit.

um so um but for example in canada i think it's just one million um or that could have been mexico as well i'm not sure but you know they have they have uh different prices so but it doesn't mean that if you want your ads um through the trade that's that's still possible you can go to an ads agency and if they together have more than 30 billion millions or 30 billion that would have been too much um even for chit chat money in a few years uh so um so then it's you can still use the trade desk as well so that's actually how it goes of course um every advertiser of you know above that level will be approached by the trade desk as well so it's a bit both but they also say that they see a lot of uh you know brands and ad agencies just come to them because

they know that they have you know better um better data better insights right that makes sense all right move it along here what is uid 2.0 yes it's very important it's actually um jeff jeff green always called calls it the currency uh the ad currency so it starts from uh maybe i would just have to explain first what uid stands for um um is it uniform i think it's uniform uh identification um so um or is it universal i i think it's uniform but whatever it's something like that you know um and um it's actually a standard that uh the traders themselves have developed and uh you know Now, Google still wants to abolish third-party cookies. And, you know, they are in the process.

Now, third-party cookies, a lot of people saw that as a very big negative for the trade desk if third-party cookies would be abolished. Well, that's not really the case because the trade desk was years ahead with UID and then UID 2.0. and you know they developed the standard and then moved it open source to you know some organization so it's not theirs anymore they have given it away to everyone and what it actually means is that it's it's it's a bit like a cookie but it's completely it's completely privacy you know it respects all the rules when it comes to privacy it gives much more insights it can be used on all platforms um and so it's actually you know jeff jeff green always says that it's the currency of the net in the internet why because you know uh we're used to free things

right if if we um if we go to a site and you know uh most of the sites unless they have some sort of specialized um you know inside or you know like potential multi-baggers for example so but but the rest is is free right um this podcast is free to listen to um so what that means is that you know nothing is free um there has to be an exchange and the exchange is that uh is the data so um for example netflix has already said that the the value of their uh ad uh supported um viewers is already higher right now than a paying member or a paid subscriber and that's why Jeff Green calls this

the currency of the internet now, what this means is for example, on the last earnings call, he gave a great example I think, and I will more or less summarize it here there is the biggest Indonesian

retailer, you know the local Walmart let's call it and they say, you know, we want to we want to reach more people and what the trade desk does then is you know that company has a loyalty program so they have two million people uh in that loyalty program now what they do is they um insert um that the those data points onto the trade desks platform now what the software will do is compare what things are in common between the loyal customers. I don't know,

maybe they are a certain age or what have you. They will compare all those things and see, oh, okay, those most loyal customers have these criteria. Okay, we can now link those data with what we have from everyone else. So, everyone in Indonesia in this case with the same characteristics because people have opted in for UID, too. And what it means is that, you know, you go to a site, you know, you have to log in, you're either tracked, or you give your email address. And that's for everything then. So and so those things are combined. So the data, you know, which people in Indonesia have the same criteria as the loyal customers that we see.

Then those are targeted. Now, the cost of acquisition from that local Walmart, I don't remember the name, Indonesian Walmart, went down by 66% because those ads were so much more targeted than what they did before. So what do you think? Will that retailer go to the trade desk for the next campaign? Of course they will. And that's the value that the trade desk brings.

And that's the value of UID2.0 as well. And there was a mistake initially. A lot of people thought that the traders had to go to every publisher to implement UID2. But that was not true because they went to AWS, they went to Google, and they said, you know, can we introduce it here? Okay, no problem. So it became a standard quite fast, actually. and um and that's how they have you know they have the the direct data from many people because the data of those uh of that indonesian retailer is now on the trade desks platform just like the data

of walmart for example of home depot of all those others and it's actually quite quite simple right now. On the last earnings call, Jeff Green said, big content makers cannot say we don't want to work with the trade desk because there will simply not be enough demand for ads. That was a bold in a statement but i think it's actually true if you if you and and he could have referred there to the net to netflix for example because netflix worked or made a partnership with um with microsoft and what you saw is then and there were articles that they didn't get the ad slots filled i mean maybe maybe have seen those articles as well so it's it it was okay it was quite a success but you know they didn't get all the ad slots filled so i think that could have been uh

everybody thought that netflix would work with the trade desk they they they went to microsoft and you know you see prop i have heard that um netflix is already starting to work with the traders now i'm not sure if that's true that could be speculation but um i mean that that's uh that's the reality that's the power of the trade desk and that's the power of uid too which has become uh in a very fast time um the new standard actually for for um you know data tracking it's completely anonymized it's um completely uh privacy uh friendly um so uh yeah that's uh that's uid too and it's important role and it's adopted now across the industry i think we've already touched on it a little bit but is there anything else that the trade desk offers to

advertisers that the walled gardens can't yes a lot um no of course the the quality of the data as i already mentioned um so um but but also um multi-channel so um many many many companies you know want um a total campaign on all channels right and um and jeff green said that um you know Now, let's first go to multi-channel and channel. So if you advertise on Google, you can advertise on Google or on YouTube. If you advertise with Meta, you can advertise on Facebook, Instagram, and more and more bits, WhatsApp maybe, and that will be it. If you go through the Trade Desk, you can also have ads on Google Meta, but you can also have them on CTV.

You can also have them on a website. You can have them on a podcast. You can have them even. So, the trade desk is now in full transition, making everything that was not digital, digital. That's also very interesting. So, you can also bid for, for example, oh, my customer, my target customer is, you know, rich and works in finance. Okay. In Manhattan, near Wall Street, there are digital ad displays, right?

So they can change because they have screens more than the traditional fixed displays. And you can target those people between 8 and 9 in the morning when they go to work, for example. So even those things are made digital. You can say, oh, I want my Heinz ketchup. I want it on display in Walmart with 10% off or buy two, one extra. And I want it on display. And I want the premium display place. Well, you can bid for that on the trade desk.

So the trade desk is also transforming those traditional offline ways of making ads. also making them programmatic. So, yeah, I think that's a very interesting evolution right now. Yeah, no, totally makes sense. I want to talk about a specific vertical, and that is CTV. It seems to be the one they're the most excited about. But correct me if I'm wrong. What opportunity do they have left in CTV?

And I want to hear your thoughts on the competition with YouTube for TV ads, Because that is, at least in the United States, the most popular streaming service, if you combine both YouTube TV and YouTube, it's probably about 10% of viewership. But again, just curious in general, that opportunity and the competition with YouTube. Well, the competition with YouTube is actually that there is no competition. Why is that? Because, you know, the trade ask also will advertise on YouTube without a problem. um so yeah sure that there will be a part of um youtube ad or there will be brands which go

directly to youtube and or to google and say you know we want to advertise on youtube no problem um and but most especially bigger brands will want a multi-channel uh campaign and they will also want YouTube, but through the traders because they can coordinate everything. And, you know, you don't want multiple platforms and do everything yourself. And that's actually the value that the traders, they're still, you know, still companies doing that for sure.

Also because, you know, people are involved and they want, you know, they want to make sure that their job doesn't become superfluous, right? that that's that's always how one of the the reasons why innovation is slowed down because people want to you know understandably keep that job but so yeah there's still a lot ground to cover there in that sense that companies still have to you know adapt to that a little bit because it's relatively new. Now, as for CTV, there's a direct and indirect component.

So the direct component is simple, right? So if you look at ads on traditional TV broadcast, you see that there are still too many ads compared to where the eyes are, where people watch their content because more than half now is watched streaming. And that imbalance will go away. So much more ads will go to CTV.

And Jeff Green has always said that if there would be a recession, that this process would even speed up. And, you know, again, he's right. He has said that years ago. Because why is that? Because, you know, because when there is a recession, companies, you know, reduce their ad budgets, but, you know, they still want the same effects, right? So, and that's why, you know, programmatic advertisements are much more efficient than the traditional broadcast. So, now, the second and indirect consequence is also very important. What Jeff Green says is that companies, you know, have always seen TV as some sort of brand awareness campaigns, right? with ctv that has changed a little bit but but many still see them as brand awareness campaigns and then they go further because you know that's the top of the phone but they want

that sale right so that they start with ctv and then they go to other you know they will target you on a website they will target you uh in walmart where you make the purchase of that ketchup again um so and and that's that's why ctv is such a huge opportunity because it drives everything else as well so it it's the first domino that drops and the rest follows so that's why you know the rest of of the trade desk also outperforms um you know all the other big plays in the industry because ctv drives the other divisions of or the other possibilities for for advertisers as well and just to clarify for all the listeners we're not sponsored by heinz ketchup or anything like that so no am i we uh we did get some questions on

twitter um and i think we touched on some of them kind of in our own questions but one was from luke hallard who has been a guest on the show before he asked about the end game for open path and then um this one i really liked as well kind of the potential to disintermediate the supply side platforms or the ssps and kind of become that two-sided marketplace what do you think about that and then uh the the thoughts on the end game for open path yeah so open path um to be clear is actually a big publisher so we're talking about huge publishers who can directly put their content for sale on the trade desk that's more or less open path and yes it has been a theme for uh since it started more than a year ago so oh the trade desk is trying to um disrupt ssp as well

Well, on every conference call, Jeff Green, in very strong words, says that's no way the plan. And I believe him there. I think that the reason is, again, because if the trade desk would do that, they would have the same problem as Google, as Meta, as other walled gardens like Roku was until recently because they have opened up for other platforms as well, both on the SSP and DSPs, right? But I don't see them doing that at all. So they don't control the supply there.

They just offer it. And that's a big difference. It's not that they want to maximize the returns of the big publishers that use OpenPath. They will remain firmly on the side of DSP. So I'm really, you know, it has been talked about for over a year. And to me, it's a non-discussion. I can never see it happen. Of course, it's my more or less informed opinion.

You can see into the future. I think if the traders would want to do it, they certainly could. But I think they don't want to do it. And I think that's the right thing to not do that, to not want to be both DSP and SSP because then you get into trouble because you have to act against your own interests on the other side. Yep, makes sense. Conflict of interest. Now, let's hit the stock with one question. What are your thoughts on the valuation?

I know the market cap, it's always been a premium valued stock, but it's one that has put up some impressive growth. So I'm curious how, as someone who is interested in growth stocks, interested in having a decade-long view with you know potential multi-baggers how you look at the trade desk currently um as you say it's expensive and it has always been expensive it was it was also expensive when i bought it at 19 and a half um you know four years ago um so i i always have to think of of um an article that morgan house wrote years ago um it it was you know what could i have paid uh as a pe um to have market-like returns in this talk

um so you you go back um and he he went back i think the article was written in 2013 and he went back to i think 1995 don't ask me why but that that was it um and um you know Bank of America traded at 6.1 times earnings in 1995. But it actually had to trade at three times earnings to have market-like returns. Coca-Cola traded at, I think it was, 88 times earnings. No, no, it didn't trade that. It traded at 24 or something, but it could have traded at 88 times earnings, and you would still have had market-like returns. I'm not sure if it was Coca-Cola, but I think it was. It could have been another company as well. And that's actually how I think about valuations over the long term.

If you look at the Boston Consulting Group had a very interesting stat once that showed, if you look at shorter term, and that's one year, three year, the most important element is the multiple for stock returns. If you look at longer periods and you look at 10 years, then what the company does is most important. And what I mean with what the company does and the numbers of Boston Consulting Group show that revenue growth and cash flows were most important over a longer period. So, if you look at the Trade Desk, they have been profitable in every quarter but one, the pandemic quarter in 2020, since 2013. So, I think that's important as well. This is not a money-losing company. This is a profitable company. And yes, if you look at adjusted numbers versus GAAP, you will see a difference.

Why is that? Jeff Green has had a huge compensation, which, you know, still has influence there. But, you know, there's no delusion because the trade desk also buys back shares. So, but, you know, there has been quite a bit of anger, actually, from some people that thought this is outrageous. you cannot do this so much well i have to say because i think it's in total it's two billion but there are very strict limits and it is over time and i think that um you know it the stock has to trade above a certain level for at least 30 days etc etc etc and then he can get the next bonus and um you know there's there's a full program there and

And if he can bring or he can reach all the goals in total, it's not $2 billion, maybe, but $1.8 or something. It's huge. It's huge. Now, if he does that, from here, I think if I remember well, the highest price was $375. dollars i'm quite okay from here if my stock goes from 75 to 375 he could he can have a bit so especially because the dilution you know actually the trade desk buys more buys back more than it you know the dilution so i'm i'm recently i have to say that was not the last year um so uh i'm not even even you know if you look at uh at everything the dilution and and

they would not buy back even then the dilution would be you know like four or five percent or something like that so i'm you know i'm it's never great to see that but i'm i'm still okay because it's, you know, he's aligned with shareholders. And, you know, that doesn't make it great, but it makes it better. It makes that bitter pill a bit sweeter. Yeah, no, makes sense. Let's get our wrap-up question,

our favorite one that we ask on every episode, and that is the pre-mortem. What are you looking at for why an investment in the trade desk could perform poorly or why you would end up selling your shares or something like that in the future? um i think in this space innovation is extremely important and you see that um the traders as i said um uh technologically they're superior to everyone else in in you know of course uh

platforms like google and the wolf gardens have you know great technological capabilities as well of course but i mean uh from the open internet that's what jeff green always calls it the open internet you know because you can go everywhere you can go to facebook but you can go to youtube but you can also go to uh walmart the displays etc etc you can go to any site you can advertise this you can advertise with chit chat and money um through the through the trade desk um so i think you know it's um it's um important that the trade desk keeps innovating and you know they have just released an ai um update um i have not been able to to it was only um released uh uh tuesday so two days ago when we were taping this um so and um uh you know they um i have not been able to

look at it but just a short summary but it looks it looked impressive again they totally uh changed their platform uh it was two years ago in just six months i think 70 75 had already switched to the new platform because they they wanted to you know customers to switch over two years and usually customers are conservative. They switched in six months, three out of four had already switched. So those constant innovations are very, very important. I also see Jeff Green as very important for the company.

He's the visionary. He sees where the company has to evolve. As I said, he has made so many predictions that all proved to be correct. not a single and i'm talking about dozens that you can't control not just you know um very vague but very you know controllable um and um you know if if he would leave i probably would trim my uh my position a bit as well because it's a it's a big position um so yeah i think i think that and you know there are always if you look at risks um you know you probably know the the

quadrants you have the known knowns you have the unknown knowns you have the uh unknown knowns and the unknown unknowns and i think the last quarter the unknown unknowns is the the most important one very often um it's something completely else than you expect so you can take a look at the risks sure uh but very often is something completely different happens and and you know that's that's just investing and that's just life right there's always uncertainty and that's always uncertainty And John Lennon put it like this, life is what happens while you're busy making other plans. So I think that's correct. And I think that goes for life, that goes for investing.

And I think, yeah, there are risks that we are not aware of. And thinking that you know everything is just arrogant. Well, that is going to do it. That's all the questions we have. Chris, for anyone who wants to follow along with you, we have a lot of probably new listeners who maybe haven't heard you before. What are the best places or best resources

to keep up with you? Well, if you want my quick takes, then you can follow me on Twitter at FromValue. You can also read my public articles on Seeking Alpha. So there are five a month free if you're a Seeking Alpha subscriber. which I would highly recommend the value you get

is huge you can read all my free articles or public articles and then I have my service Potential Multibaggers there's a two week free trial there as well I mean a two week free trial sometimes people are afraid

that they're locked in one way or the other I've counted it it's just three clicks and you're out so it's not that that I don't want to lock in people. It's, you know, you have to be happy. And if you're not, I mean, you can read everything. If you say, I like it, you stay.

If you don't, well, you leave. No problem there. So try it out. Awesome. Well, that is going to do it. We want to remind our listeners that Brett and I are not financial advisors. So anything we say or discuss here on Chit Chat Money is not formal advice or recommendation. We are, however, general partners at Arch Capital.

clients may have positions in the securities discussed in this podcast. Thank you all for listening. Thank you, Chris, again for joining us and we'll see you all next time.