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

Thank you, operator. Hello, and good afternoon to everyone. Welcome to The Trade Desk First Quarter 2024 Earnings Conference Call. On the call today are Founder and CEO, Jeff Green; and Chief Financial Officer, Laura Schenkein. A copy of our earnings press release can be found on our website at thetradedesk.com in the Investor Relations section. Before we begin, I would like to remind you that except for historical information, some of the discussion and our responses in Q&A may contain forward-looking statements, which are dependent upon certain risks and uncertainties. These forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. Actual results may vary significantly, and we assume no obligations to update any of our forward-looking statements. Should any of our beliefs or assumptions prove to be incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. I encourage you to refer to the risk factors referenced in our press release and included in our most recent SEC filings. In addition to reporting our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures can be found in our earnings press release. We believe that providing non-GAAP measures, combined with our GAAP results, provides a more meaningful representation of the company's operational performance. With that, I will now turn the call over to Founder and CEO, Jeff Green. Jeff?

Thanks, Chris, and thank you all for joining us today. As you have seen from the press release, we are off to a very promising start once again this year. For the first quarter, revenue grew 28% compared with last year, marking strong revenue growth acceleration on both a sequential and a year-over-year basis, outpacing the industry for a quarter or two is a great accomplishment, but I'm so proud of our team for now having outpaced the digital advertising industry for a couple of years straight. I believe our revenue growth acceleration in the first quarter speaks to the innovation and value that we are delivering to our clients with Kokai. It also reflects growing awareness among the world's leading advertisers of the value and power of the best of the open Internet. To put a finer point on this, more than 90% of the Ad Age Top 200, the largest 200 advertisers in the world have run advertising campaigns on our platform over the last 12 months. Even with this considerable size, CTV continues to be our fastest-growing channel. Over the past few months, industry giants like Disney, NBCU, Walmart, Amazon, and now Roku and LG Electronics have all made deeper pivots into CTV. Many of them in partnership with us, bringing more opportunity for advertisers. UID2 has become ubiquitous across the premium parts of the open Internet, and along with greater first-party data deployment and advances in emerging data markets, especially retail data, we are building the new identity and authentication fabric of the Internet. In doing so, the open Internet is getting replumbed and revalued, especially in contrast to the value offered by walled gardens. And the innovations in our Kokai platform will help our clients take advantage of this revaluation and fully leverage data-driven buying to fuel their own business growth. As a result, I've never been more optimistic about the future of the open Internet and our ability to gain more than our fair share of the nearly $1 trillion advertising TAM. Let me dig into this a little deeper. I'd like to frame my remarks with just a little context on how our industry has advanced over the years, at least in part because of some of the significant and disruptive events today. I think this framing is important because I believe we may be in the midst of another period of major disruption right now. And perhaps most important, I believe our ability to anticipate and innovate in these moments positions us very well moving forward. I've often said that the programmatic industry as we know it today came to life as a result of the global financial crisis just over 15 years ago. At that time, there was tremendous pressure on all businesses to do more with less and to find new ways to differentiate, automate and grow more efficiently. With those pressures, the precision and value of programmatic became more immediately apparent to major brand advertisers, and this proved to be a fertile environment for our business and so many others. Similarly, the rapid rise of CTV as the driving force of programmatic would not have happened so quickly were it not for the COVID pandemic. With stay-at-home directives around the world, consumers shifted en masse for the convenience of streaming, and the media world hasn't been the same since. TV has always been the central element of major brand advertising campaigns, so the shift from linear to CTV was always going to be disruptive. What's perhaps more important is how quickly the TV industry has evolved as a result. CTV is now a driving force in how we think about things like authentication, identity, the use of retail data, relevance, and attribution in advertising. And while it may not be as apparent as a global financial crisis or a global pandemic, I believe we're now in the middle of another great disruption in our industry. This disruption is very different because it is driven from major tectonic shifts within our own industry instead of from macroeconomic and pandemic forces. Today's shift is largely driven from the conflict Apple and Google are having with governments and the domino effects that are coming from new draconian policies and tactics emerging from wounded big tech. For the last couple of years now, we've delivered consistent, durable revenue growth over 20%, significantly outpacing the broader market, including the major walled gardens. And it's because the contrast between the best of the open Internet, what you might call the premium Internet, and the content and characteristics of walled gardens has never been more apparent. The details of the Texas Attorney General suit against Google and the approaching trial of the Department of Justice versus Google have shined a light on a few things inside of Google but have created a lot of clarity on things outside of Google as well. There is a wider understanding of a few immediate themes facing advertising. First, there is a broader understanding of the role that walled gardens are playing as major purveyors of low-grade inventory. Second, there is a much wider understanding of how poor ad-to-content ratios within walled gardens create brand suitability risks regarding user-generated content. The industry has growing awareness that consumers spend most of their quality time with premium content on the open Internet versus the walled gardens. Advertisers are making better use of their first-party data and retail data as they explore contemporary cross-channel alternatives to cookies. Lastly, in advertising and marketing, like in many other sectors, there is a broad industry frenzy around AI and what it means for our industry. Taken together, I don't know that I've ever seen the industry in such a state of transition. In some corners of our industry, I also sense some panic and confusion about what to do next. But for us, this gives context to our recent outperformance as well as our conviction for why I'm so confident about the opportunity in front of us in 2024 and the years ahead. One insight that reinforces the shift that is happening is founded where I'm spending my time. Over the last 6 months or so, I've been spending more and more of my time with CEOs, CMOs, and heads of media companies, helping them make sense of the issues that I just outlined. The bottom line across all these discussions is there is consensus that the value is shifting to the open Internet. But perhaps I should be more specific. It's shifting to the best of the open Internet, what we might call the premium Internet. It won't all happen overnight, but it is starting. In 2022, it marked the first year in a decade that the majority of digital ad spending took place outside of Meta and Google. With the proliferation of CTV and Retail Media, that trend accelerated last year, and I believe the trend will only continue moving forward. The role of CTV and digital audio in all of this should not be understated. For many people, movie, TV, and audio consumption are very important parts of their daily lives. It's premium quality content that captivates consumers who spend significant amounts of time engaging with it. No one watches Mandalorian or Curb Your Enthusiasm or March Madness casually. No one listens to their favorite podcasts passively. I find that in every aspect of my life, I can't talk to anyone about premium CTV content or the best of music without people sharing a passion for some form of those mediums. We are all highly invested in it. That's very different from how consumers engage with or talk about social media content, which is often short-form user-generated content, such as cat videos or 14-year-olds filming themselves falling off of bicycles. However, people spend much more time with premium content such as streaming TV and digital audio than they do with user-generated content. Our research shows consumers spend about 60% of their online time on the open Internet. The ad-to-content ratios are much better, and therefore, the experience is much better. But walled gardens still command the bulk of digital advertising spend because those tech giants have made it super easy to reach consumers at map scale, and the performance results are equally simplified. Hey, look, your ads did great. We told you so, so it must be true. But that's changing. Advertisers now have scaled alternatives on the open Internet. One of the major innovations in Kokai is the sellers and publishers 500+. This is a curated marketplace that represents the best of the open Internet, the premium Internet, where consumers spend the majority of their time online. It includes live sports events such as March Madness, where we saw a 200% increase in spend compared to a year ago. It features the latest movies and hot TV shows, music and podcasts on platforms like Spotify, and trusted journalism. Now our advertisers can access that premium marketplace at scale easily and with confidence. In doing so, they don't have to give up control of their valuable first-party data; they get to measure effectively, and they can be sure that their ads are showing up against high-quality content that's consistent with their brand. Advertisers now have a scaled way to control their own future. Of course, our ability to buy the best of the open Internet is based on close working relationships with the world's leading publishers. Across the board, publishers are working with us to make advertiser access to their inventory as attractive as possible, which means making it as transparent and objective as possible. You only have to look at the list of expanded partnerships that we've signed over the last few weeks. We are integrating directly with the Disney Real-time Ad Exchange, which includes Hulu and Disney+ via our OpenPath technology. For the first time ever, NBCU will make the Olympics available programmatically to advertisers and is doing so with The Trade Desk. LG Electronics has adopted UID2; VIZIO and Cox Media Group are connecting with us via OpenPath. TF1 and M6, two of the largest broadcasters in France, have integrated UID to make their content available programmatically. A week ago, Roku announced that it is expanding its demand strategy to include The Trade Desk for its premium content. Just to go one click deeper on Roku. I think it makes a ton of sense for Roku to embrace the open Internet with their premium content. Early on CTV inventory was scarce; it made sense for many of the premium CTV streamers to sell most of the inventory themselves. With the proliferation of CTV content over the last couple of years, those same companies now need to find ways to maximize advertiser demand and that means opening up to a broader range of demand sources such as The Trade Desk and embracing solutions such as UID2, which help advertisers find their target audience as accurately as possible. We are excited to be Roku's partner in this, and we believe this move is a win-win-win for Roku, for advertisers, and for The Trade Desk. As a reminder, last year on June 6, we started shipping Kokai. This platform launch is different for us because June 6 last year marked just the beginning, and we've been shipping new features ever since. We are quickly approaching some of the biggest UX and product rollouts of Kokai, which nearly all of our customers will begin to use and see benefits from over the next few quarters, including a game-changing AI-fueled forecasting tool. Another major innovation that we're bringing to market with Kokai is a completely new approach to audience-based buying. We're able to do this because of the broad availability of new identifiers such as UID2, along with easier access for first-party data. This means advertisers can now take what they know about their most loyal customers and find new customers who look just like the loyal ones and find them anywhere across the open Internet. Advertisers no longer have to use content as a proxy for audience. Instead of simply advertising against the NBA playoffs to reach pizza lovers, advertisers can find pizza lovers wherever they are across all digital channels. In Asia, Unilever and their agency, PHD, leveraged our retail partnership in Kokai with Foodpanda to increase sales of their Knorr food sauces. Unilever was able to onboard its own first-party data on our platform, then do look-alike modeling for Foodpanda's retail conversion and loyalty data to target new customers more precisely on the open Internet. This new audience-based approach resulted in a 229% improvement in customers adding Knorr products to their shopping basket and an 81% improvement in customer conversion. Just like Unilever, more and more advertisers are prioritizing ad opportunities where they can be sure they are reaching their target audience. And increasingly, that means activating their first-party data effectively and leveraging ad impressions where UID2 is present. This is the new identity fabric of the Internet taking shape, and it's revaluing the Internet and the process. Recently, Target Australia and their agency OMD worked with us to upload their first-party customer data into our platform, then targeted new customers using UID2. Their conversion rate improved 66% compared to using traditional identifiers, and their cost per action decreased 36%. There are huge benefits to publishers who offer transparency and authenticated audience data to advertisers. Unwind Media is one of the world's leading gaming platforms. They recently reported that they saw a 47% improvement in the value of ad impressions when deterministic identifiers such as UID2 are present, and a 107% improvement when users are authenticated with Single Sign-Ons such as Open Path. Let me also spend a moment on AI, not because we're trying to get on the bandwagon. We've been deploying AI in our platform since we launched Koa in 2016. Given the frenzy around AI, I think it's important to talk about how it is actually helping advance the work of programmatic advertising. Too much discussion on AI today focuses on the abstract instead of practical details about implementation. We are starting to get better at explaining how our AI investments will actually help people do their jobs better. To that end, we've known since before our company existed that the complexity of assessing millions of ad opportunities every second, along with hundreds of variables for each impression is beyond the scope of any individual human. We have always thought about AI as a copilot for our hands-on traders. With Kokai, we are bringing the power of AI to a broader range of key decision points than ever, whether it's in relevant scoring, forecasting, budget optimization, frequency management, or upgraded measurement. AI is also incorporated into a series of new indices that score relevance, which advertisers can use to better understand the relevance of different ad impressions in reaching their target audience. For example, UScellular worked with their agency, Harmelin Media, to leverage our TV quality index to better reach new customers. Their conversion rates improved 71%. They reached 66% more households by optimizing frequency management, and their cost per acquisition decreased 24%. I think it's important to understand how we're putting AI to work in Kokai because this kind of tech dislocation will bring new innovators. We see that now where major tech players are inviting scrutiny because they're behind the innovation curve on AI while more agile players, and I would include The Trade Desk in that group, are figuring out how to apply it to help humans make better, more data-driven decisions. We are also developing AI branded with Koa to make data-driven refinements on its own within the confines of human-defined guardrails. Let me close by trying to bring all of this together and help you understand why I believe this positions The Trade Desk so well going forward. I can't explain that any better than Jamie Power, the SVP of addressable sales at Disney, who spoke at our recent FORWARD '24 event in New York City. Disney is one of the pioneers of CTV technology, and Jamie talked about how UID2 is helping Disney offer advertiser match rates that are 3 to 4 times higher than when UID2 is not present, and higher CPMs are clearly following those higher match rates. That's a pretty astonishing statement about where the Internet is heading. Disney deals with an authenticated audience, and they're leveraging UID2 so advertisers can find the right customers with much more precision in TV than ever before against what many would consider some of the most premium content on the open Internet. With the growing ubiquity of UID2, with new approaches to authentication, with better deployment of first-party data, with easier access to the premium Internet, and with major advances in AI, the ability for advertisers to reach the right audience at the right time and place and convert those customers has never been greater. And all of that is happening on our platform. And all of that happens with the advertiser in control of their data, understanding more precisely where their dollars are going, how they should optimize, and how those ads are performing in service of their KPIs. None of what I just ran through is really possible in a walled garden. I might not go as far as to say we're seeing the early days of the fall of Rome, but the current macro and tech forces are creating an important moment of reckoning for everyone in our industry, and advertisers are shifting more dollars to us as a result. Advertisers want a competitive market with price discovery because they want to own their own future. It is easier than ever for advertisers to understand who is delivering value at all points of the digital advertising supply chain. They will increasingly gravitate to those who are helping them make the most of every advertising dollar with transparency and objectivity. Of course, this is all made possible by our profitable business model that generates significant cash flow, which in turn allows us to invest in the major platform upgrades that characterize Kokai. So while I believe 2024 will be remembered as a year of great tech-driven disruption in our industry, I also believe it is a year that The Trade Desk will continue to differentiate itself from its competitors and continue to outpace the market. As the industry races towards a $1 trillion TAM, we are incredibly well positioned to take more than our fair share. With that, I will hand it over to Laura, who will take you through more of the financial details.

Thank you, Jeff, and good afternoon, everyone. The Trade Desk delivered another strong quarter as revenue was $491 million, a 28% increase year-over-year. Our growth is further evidence of the durable value that The Trade Desk brings to our clients, and we continue to outperform the industry as a result. All of our progress in areas such as CTV, Retail Media, Kokai and UID2 helped deliver another quarter of consistently strong growth and profitability to start 2024. In addition to strong top line performance, I'm proud of the $162 million of adjusted EBITDA we generated during the quarter, representing a margin of 33%. Our strong growth in Q1 was broad-based in terms of geography and channel. Strength in CTV continued as the channel led our growth from a scale channel perspective once again. We also continue to see strong momentum in Retail Media as we continue to win shopper marketing budgets and as more of our existing clients utilize third-party retail data for targeting and measurement. UID2 is being deployed by major advertisers and publishers at a larger scale than ever. We continue to see the benefits from strengthening our relationships with major brands and their agencies. From a scale channel perspective in Q1, video, which includes CTV, represented a mid-40% share of our business and continues to grow as a percent of our mix. Mobile represented a mid-30% share spend during the quarter. Display represented a low double-digit percent share of our business, and audio represented around 5%. Geographically, North America represented about 88% of spend, and international represented about 12% of spend for the first quarter. We saw strong consistent year-over-year growth across all of our regions in Q1 with international growth outpacing North America for the fifth quarter in a row. We continue to execute our growth playbook internationally, led by CTV and Retail Media. We remain optimistic that our business outside North America continues to be a strong contributor to our overall growth this year and for years to come. In terms of verticals, every category greater than 1% of spend grew double digits in Q1. It's exciting to deliver such consistent growth across the business, and we're proud to see the value of the open Internet for premium Internet resonating with clients from many industries. Turning now to expenses. Q1 operating expenses, excluding stock-based compensation, were $352 million, up 20% year-over-year. We continue to make investments in our team and platform, particularly in areas like sales and marketing and platform operations as we position the organization for long-term growth. Income tax expense was $14 million in the first quarter, driven primarily by our profitability and nondeductible stock-based compensation. Adjusted net income for the quarter was $131 million, or $0.26 per fully diluted share. Net cash provided by operating activities was $185 million, and free cash flow was $176 million in Q1. DSOs exiting Q1 were 86 days, down 2 days from a year ago. DPOs were 70 days, down 2 days from a year ago. We exited Q1 with a strong cash and liquidity position. Cash, cash equivalents and short-term investments ended the quarter at $1.4 billion. We have no debt on the balance sheet. Finally, in Q1, we repurchased 1.5 million shares of Class A common stock for an aggregate amount of $125 million. The company will continue to approach the repurchase program opportunistically depending on market conditions and capital priorities. Now turning to our outlook for the second quarter. We continue to see strong spending in our key areas such as CTV and Retail Media. We estimate Q2 revenue to be at least $575 million, which would represent growth of approximately 24% on a year-over-year basis. We estimate adjusted EBITDA to be approximately $223 million in Q2. In closing, we are encouraged about the momentum of our business. We're executing on large long-term growth drivers, including CTV, international expansion, Retail Media, our recent platform upgrade in Kokai, UID2, and the upcoming U.S. election cycle. We continue to generate strong free cash flow for our headcount efficiency and maintain a balance sheet that positions us to continue investing and achieving durable growth. We remain optimistic about the prospects for our business in the remainder of 2024 and beyond. That concludes our prepared remarks. And with that, operator, let's open up the call for questions.

The first question comes from Justin Patterson with KeyBanc.

Great. Jeff, at the last Investor Day, you spoke about Connected TV forming a tidal wave. We're now starting to see Disney, Roku, and even NBC with the Olympics leaning more on programmatic, suggesting that CTV won't be just a walled garden world here. It will actually be more open. So where do you think you are right now in just that tipping point from linear TV spend flowing into connected TV? And how are you thinking about the right investment level to seize that opportunity?

Thanks, Justin. I appreciate the question. So first, I think it's just important to take a step back and just look at where we've come from. It's been a few years. It wasn't that long ago that people were saying, oh, cable has got a long life. It's not going to be that long, and then the pandemic accelerated everything. Then we started talking about a new currency like UID2 and there was a fair amount of, well, are you sure you can get adoption on that? It seems like CTV has a lot of defenses or ways that it's going to be reluctant to adopt something new. When you look at it now, and every streaming service has an AVOD offering, except for Apple. We've been saying for almost 10 years that Netflix would be showing ads and of course, they are today. In the last months, we've talked about how Disney+, the Olympics are coming to NBC, but they're also coming to programmatic for the first time, and they're doing that via The Trade Desk. And then, of course, our Roku partnership, and I think even during the height of the pandemic, people would not have predicted that we would be in the place that we are. Those 3 big announcements, our Disney+ announcement being to integrate directly with them have all come in roughly the last month. And then, of course, UID2 is the primary currency of connected television. And so with that backdrop, I think we're in a phenomenal position. Once again, the consumer is leading in the sense that as they move away from traditional television, cable and linear television, they're moving into streaming and connected TV and all of those are filled with ad options. The content owners and the streaming wars are more dependent on programmatic than ever. As we're seeing things like profitability and Hulu and Disney excel in large part because of them leaning into programmatic, and we're super proud of our partnership there across the board. As I said last quarter, I believe there will be an increase in inventory this year. I think we've heard that theme from most of the content owners throughout the year. And the scale of identity is going to continue to go up, and that's in part because of that inventory going up. All of that tips the scales even more towards the buyer's market. There is going to be more supply, and it makes it so that buyers can be more selective in what they buy. That makes it more important for everything to be layered with UID2, but also makes it more important for them to be very deliberate about what they're buying. Most of the streamers have to rely on programmatic so that they don't add to the ad load and, therefore, shrink or slow their growth. So I think that puts us in a tremendous place to thrive, and we're seeing more and more pressure on anybody who tries to create a walled garden-like strategy in CTV. I think you're going to see more and more of the open Internet led by connected television. I think this year, so far, even just the headlines from this year have been underlining that point.

The next question comes from Shyam Patil with SIG.

Congrats on another really strong quarter and outlook. I had a 2-part question. Jeff, I guess, following up on the first question, how do you think about the impact of Amazon's ad-supported Prime video offering from a competitive perspective? And then for the second part, this is related. Disney called out in their earnings call that there's a lot more supply in the market as a result of the competitors entering the ad-supported tier. And I think everyone's assuming that that's Amazon. And there are just some concerns out there that a massive influx of CTV inventory at lower CPMs could depress the CTV market overall without necessarily driving more demand. So I'm just curious about your thoughts on how all of this affects you guys and the industry.

Sure. Can you please remind me of the first part of your question? I understand the second part. What was the first part again?

Yes. Yes, I know it's a long one. Yes, the first part was just how you're thinking about the impact of Amazon's ad-supported Prime video offering from a competitive perspective.

Yes. Currently, we do not purchase Amazon Prime video, as it is only available through Amazon itself. As you noted, they are increasing their supply but are solely selling it themselves, which impacts their objectivity. The challenge with objectivity arises when it is hard to approach buyers and convince them to invest when you also own a lot of the inventory. This leads to difficulties in representing others' inventory. Their objectivity issue mirrors that of companies like Google, but Amazon complicates things further by selling products that compete with many consumer packaged goods advertisers. This discrepancy creates challenges when there is an oversupply and an objectivity issue, putting pressure on them. Over time, I believe Amazon will likely create more separation between their business units. An inferior ad experience due to ownership of the DSP does not benefit either Amazon or its users. I hope they will make their inventory available to all. I would like access to their inventory and for them to adopt UID2, as I believe they are operating in a limited market. They will face challenges because UID2 has become a valuable currency in the connected TV space, where advertisers want to utilize their data strategically. Given the objectivity issue I mentioned, achieving high CPMs will be difficult without a more impartial ecosystem. I would like to see them evolve similarly to Roku, embracing the open Internet and allowing advertisers to use their data to achieve higher CPMs. This, in turn, could lead to a lighter ad load and an improved ad experience, benefiting Prime video customers. However, significant changes need to take place first. Until then, I don't find them particularly competitive; other players have stronger offerings for premium advertisers, which is crucial in television. I believe the premium supply is not as abundant as it could be if Amazon embraces this approach, and it may take some time before we see those changes.

The next question comes from Brian Fitzgerald with Wells Fargo.

Jeff, it looks like third-party cookies won't be going away now for at least until 2025. What are your thoughts on the cookie deprecation delay once again? And how, if at all, does it impact the industry? And then, maybe secondarily, could the continued delays have any impacts, positive or negative, on UID2.0 adoption?

Great. And so first, I'm glad to get this question on cookie deprecation not because I haven't heard it before but in an effort to hopefully put it to bed for at least a little while until the next headline hits. I've been blown away by how much in trade press there has been discussion about cookies. Maybe it's because I felt like it was a very important topic to talk about two or three years ago, but I just feel like we already had all these conversations. I was on record during the pandemic of saying, I think it is a strategic mistake for Google to deprecate cookies. I don't think the risk/reward is worth it for them. I would not be surprised to see them delay this again and again as they continue to buy more time. I think that's exactly what we saw because we weren't surprised by this. We predicted this. We have just been sort of quick to move on. I do want to give Google a little bit of credit, though. I mean Apple took away cookies and said nothing, gave no announcement, offered no alternatives. Google said, 'We're going to take away cookies', they gave some head start. Now they've moved the data a bunch both forward and backward, which to me didn't make any sense. But they did at least try to propose something else, which was a privacy sandbox. The unfortunate thing was what they proposed was half-baked and not a great solution. The industry has just been criticizing, us included, for the better part of the year because those criticisms, I think, were pretty unanimous even from industry bodies like the IAB that I've never expected to take such a strong position on privacy sandbox. I think it forced Google's hand to delay cookie deprecation. We were not surprised by it. The net effect of that is that it gives the open Internet a bit more runway to adopt UID2 and come up with authentication and identity strategies so that they can drive an environment outside of cookies. I think this is very good for some of those that move slow. Some of the legacy media companies, especially those in journalism, I mean, journalism is being hit from so many sides, especially with big tech sort of pulling away from them, which makes it harder and harder for them to monetize and they had a whole pile of problems before their CPMs went down. So I do think that this delay makes it so that things will function a little bit longer. But I don't think it actually slows down UID2 adoption. We haven't seen any of that. The reason why I don't think it slows it down is because the world knows they're serious. The world knows that it's not going to last forever. They are looking for a way to get out of this. The average publisher is saying exactly what we were saying 4 or 5 years ago, that while we think it's a strategic mistake for Google to get rid of cookies, we also think it's a strategic mistake for all the rest of us to do nothing. Everyone else, I think, has bought into that strategic fact that everyone has to be moving, operating, and adjusting. So I do think that prevents any sort of dips or drop-offs where some 20% of slow adopters get meaningfully hurt. It helps give them a bit more runway. But I don't think it decelerates the adoption of UID2 in any way in part because UID2 adoption has been led by CTV, and CTV providers are competing with each other. That is a way that they differentiate from one another is by making it easy for the biggest brands in the world to put their own data to work as they buy media. All of them need that at streamer X, Y, and Z irrespective of what happens at the New York Times or the LA Times or anywhere else like that. So hopefully that answers the question on cookie deprecation. I'm excited to be moving on from this.

The next question comes from Vasily Karasyov with Cannonball Research.

Jeff, I would like to ask you to talk about the deeper partnership with Roku that was announced last week. We heard some commentary from Roku. And from your perspective, what would you highlight for us that is significant for the Street to know? And in addition, as this progresses, I think the timeline is a couple of quarters out. Can this lead to increased volume of CTV advertising for The Trade Desk? And if so, how would that work?

Thanks. So it's early days in the specifics of our partnership, but we're very excited about the long-standing relationship that we've had with Roku and seeing it finally materialize into something meaningful. I do believe this is something meaningful. The Roku Channel has grown tremendously over the last couple of years. So as they become more and more into content, and that includes having more ads, we're excited to have access to those in large part because we view Roku as a key premium publisher in the connected television space. A couple of things that I think are incremental about the partnership. We anticipate their adoption of UID2, so we think that will be important. Our relationship has strengthened during the most recent discussions, and we believe that we will play the role of their most strategic demand partner. I think for the first time ever, advertisers can get access to Roku's ACR data directly in The Trade Desk platform. Perhaps as significantly as any of those things, I think us getting access to biddable inventory is a very big deal. Too much of CTV is still sold on a programmatic guarantee basis or a fixed-rate basis, which is becoming increasingly undesirable. As more inventory comes online, buyers want the option to pick and choose. That is why they will pay a premium, and that requires a strong persistent sense of identity or identity currency. That also means making the inventory biddable. The strength of the partnership and the relationship is the best that it's ever been with Roku. I'm really excited about the change that this represents for them. We're excited at the partnership and excited for what it means for the future.

The next question comes from James Heaney with Jefferies.

Can you just talk more about the expanded OpenPath partnership with Disney's streaming properties? I'm curious how this impacts just the amount of CTV inventory that you're now able to access compared to what you had before?

You bet. So let me just take a step back to explain what OpenPath is. Over the years, the supply path in digital advertising has gotten more and more convoluted. Sometimes it's because of the tactics used in companies like Google, where the DoubleClick Ad Exchange was once a pure theme and then they introduced things like Open Bidding, which has complicated the supply chain. In an effort to make the supply chain more efficient, we created an offering called OpenPath. This essentially connects the largest publishers in the world, often in connected television, but in any channel where they want to plug in directly with us. I want to be super clear, we are not in the yield management business. That is a function for publishers and their technological representatives. We are representing the buyers, but we're willing to give them visibility into our demand directly so that an intermediary can't make it more convoluted, more opaque, and in some cases, charge more than they're adding in value. So we've connected OpenPath, this pure pipe of visibility into our demand directly into Disney's DRAX so that they have UID tied directly to them, and we have better visibility into how the auction works. We expect 100% visibility eventually at Disney. We're moving in that direction. They said on stage at FORWARD '24, by the way, that 50% of the business is automated and addressable. By 2027, they expect that to be 75%. So we're on the path toward that 100%, but that is all made possible by us plugging in directly and having a clear sense of where UID is present and where it is not, how we can make things more addressable, and how we make the connection between us. In other words, how do we make the supply path as clean, clear, transparent, and efficient as possible? By us plugging in directly with Disney, I think we're setting yet another model for optimizing integrations done in connected television. So very excited to be doing that with one of the biggest players in the space. Thanks for the question.

The next question comes from Jason Helfstein with Oppenheimer.

I want to ask a question about social video. It seems that it's been gaining share and as linear dollars are just kind of leaving linear, like it's definitely competing with CTV for a share of those dollars. Just any thoughts about how you think about that, how you can kind of utilize that channel for your customers? And then it also seems to be perhaps pushing CTV to embrace more data to try to be competitive with that. So maybe comment on that, agree, disagree, etc.

Absolutely. The shift from offline advertising to digital is becoming prominent, and we believe that in the future all advertising will be executed digitally, even for those who haven't embraced it yet. We will utilize digital channels even for print ads. The movement toward digital is evident, highlighted by two key trends. One centers on user-generated content, which has an overwhelming amount of supply compared to demand, with an enormous volume of content uploaded every second on platforms like TikTok and YouTube. These platforms excel at making it easy for advertisers to spend money, often measuring their success internally. Using their metrics, advertising reach appears very affordable, especially when compared to premium content. Our focus is on the premium side of the Internet, as that is where the majority of people's attention lies. We indicated in our prepared remarks that the balance of ads to content in user-generated environments is worse now than ever and this trend seems to be worsening despite rising inventory. As a result, more advertisers are seeking the reliability of premium content, preferring ads that assure visibility. As the number of these desirable ads increases, it becomes simpler for advertisers to align themselves with ads that guarantee attention. We anticipate that discussions surrounding the premium segment will increase, as the leading advertisers want to be positioned there. Meanwhile, user-generated content faces growing concerns over negative elements such as hate speech. While some budgets will still flow toward UGC, the growth in advertising will predominantly occur in the premium sector due to its capacity to leverage data insights effectively. You pointed out that one of the benefits of social media video is its streamlined supply chain, as it often operates under a single company that handles both demand and execution, which simplifies processes even if it lacks objectivity. We are also integrating with firms like Disney to enhance the supply chain across the open Internet, which should yield more premium inventory. This situation is beneficial for us, emphasizing the contrast between these two market dynamics. While both sectors will continue to capture advertising spend, we believe the premium side will see the most significant growth.

The next question comes from Laura Martin with Needham.

Jeff, I believe that strong leadership generates significant value, and I truly appreciate your guidance in the open Internet space. To start, my question is regarding CTV full funnel. It seems to me that your collaboration with Walmart on RMN, along with the acquisition of VIZIO and Amazon leveraging its 200 million Prime video subscribers, indicates that the TAM growth in CTV is occurring at the bottom of the funnel. This suggests that connected television is evolving into an omni-funnel channel rather than just focusing on the top of the funnel as was traditionally believed. My question is whether part of your impressive 28% growth, which is leading in the industry, is a result of having a full funnel approach in connected television.

The short answer is yes. It is true that the easiest dollars to move over are top of funnel because historically, the largest advertisers in the world have historically placed their largest spends there. They are moving that budget over, but previously they had put it in linear TV. Those budgets are coming over to CTV. They are taking the same assets and in some cases, the same way of thinking about it. We improved the metrics a bit, and then improved targeting a lot. This is now reflected in the new sort of ported-over TV budgets. However, as you point out, you don't have to spend that way for too long to say, now what do we do next? How can we improve? That's why we're bringing retail data to bear, which shows amazing advantages for those that have historically sold in brick-and-mortar stores and have difficulties getting that data online. They can now partner with some of the biggest retailers in the world who compete with large tech. They're all saying; how can I put data to work so that we can sell more products at a Walgreens, Dollar General, Walmart, Target, or many others? If they can sell products in their stores by making their data available on our platform, then advertisers get a bit more bottom of the funnel, and the retailer can provide proof that their data is actually selling more products in their own stores, allowing them to spin their flywheel faster, just like they think about it in places like Amazon. A win-win between the retailer and the advertiser means they're gaining data-driven insights and efficiencies that they haven't had before, and that is, by nature, a bit more bottom of the funnel. I think we've merely scratched the surface on what's possible there. There's much ahead of us in that space.

Next question comes from Mark Zgutowicz with the Benchmark Company.

Just maybe a follow-up to Jason's question on social walled gardens. If you look at your mix across all of your ad categories, it's been relatively unchanged since December of 2022. This quarter, you indicated mobile dropped from a high 30% to mid-30s, but we haven't seen video move up from the mid-40s since December '22. So I'm just curious what's driving that dynamic. I would have expected to see video mix moving higher as all these CTV initiatives are applied.

Honestly, I don't spend that much time measuring the mix. Of course, I'm interested in seeing CTV continue to grow and I am interested in the overall growth rate. Because when you're looking at the growth rates against each other, when one is doing really well, it doesn't mean the other is doing badly, even though the slice of the pie goes down. The pie is getting bigger, and we're excited about that growth across the board. So whether it's high 30s to mid-30s in mobile, we're heading in an amazing direction. We spend significant time trying to categorize content, such as video, and sometimes small moves like people watching video on phones or offline versus on CTV impact how we describe growth in CTV versus video. When the content is nearly the same, it's just a device. Creating distinction between premium content and devices can sometimes muddy the waters and the numbers, which is never our intention. We are simply trying to show the value of premium content. We know the trend overall is very good, irrespective of what devices they are used on. Even if you look at it on a device basis, the trends are also very good. So the small changes that you're describing, I honestly don't spend that much time thinking about.

Yes, and Mark, this is Laura. I would just add that video does continue to increase. We just don't break out the exact percentages.

The next question comes from Mark Mahaney with Evercore.

There has been increasing regulatory scrutiny of Google, and while I have been aware of it for a couple of years, it has become more prominent this year. You mentioned some of the information that has been revealed; there are two trials likely to reach decisions by the end of the year. Is this creating a significant shift in ad budgets away from Google towards The Trade Desk? Have you observed any impact now that the issues have come to the forefront?

Thank you for the question. When we receive an additional dollar, it can be challenging to determine its source. Attributing this to people's concerns about Google can be difficult. We know we gain business from Google quite frequently and sometimes attribute that to our superior product, our objectivity, or our efficiency in spending budget. There are various reasons for this, including the current regulatory scrutiny. From my discussions with executives at major companies regarding partnerships or advertising dollars, there is a growing recognition that relying on Google with sensitive data and funds is becoming a risky strategy. Many advertisers are increasingly focused on controlling their own destinies, which seems to matter more than ever. Additionally, the awareness of regulatory issues, such as the Texas Attorney General's complaint, is influencing their spending decisions. I think this awareness makes for better partnerships for us and clarifies the type of partner we want to be. While I believe this is supporting our growth, quantifying it remains difficult.

And then one last question, John.

Our last question comes from Matt Swanson with RBC Capital Markets.

Yes. Great. Jeff, I feel like we've spent a lot of time on the call kind of thinking through CTV publishers and why strategically it makes sense for them to open up more. But I guess, thinking of it from the advertiser side, as CTV continues to scale and just the complexity of buying gets larger, how important is it for them to get back to a single pane of glass? You've used this term currency a bunch in terms of beta consistency and how can that drive more programmatic versus direct as maybe advertisers start to pressure those publishers?

When you say a single pane of glass, can you elaborate? Did you mean just spending on CTV?

Yes. So in CTV, as opposed to the idea of when your budgets are small, direct might seem more feasible? As CTV budgets grow and the complexity grows and the number of suppliers grows, how much more important is it for them to start to create more automated processes?

I see. I love this question. Thank you. It wasn't that long ago that as consumers, we were just using one or two apps on a Roku. Five, six, seven, maybe 10 years ago, I just used Amazon and Netflix. Now there are a lot more options, and nearly all of them have ads. It wasn't that long ago that it was one or two; now almost all have ads. If you're an advertiser, you cannot just go to one company and say, 'I want to buy some ads' and then have an understanding of how frequency caps will be used. You have to think across all of these apps and consider how many times you are showing the same user this ad, regardless of which show, profile, or app they are using to watch it. As the number of options increases and the amount of ad inventory increases, the need to automate and be data-driven and have a persistent sense of anonymized identity is greater than it has ever been before. That is partly because the ad prices haven't decreased. In fact, for the premium stuff, for things advertisers truly want, the prices have increased. This is no longer just because of scarcity; scarcity has actually gone away. The amount of inventory has gone up, but there is scarcity when it relates to having all the metadata you want to make an informed decision. There will always be some scarcity around the exact audience that people want to reach. By making that information more available, that's how you get premium ads. All the streamers have figured this out; this is the way to get premium ads. I think we're seeing them all continue to do the right things. Some of them are at different parts of the adoption or innovation curve, but they're all on the right path. I have huge optimism about the state of CTV. I believe it has enormous implications for the open Internet. I do think it's leading the open Internet as it relates to premium content. I'm also optimistic that digital audio is right behind it. There are many leaders in digital audio that are doing more than what CTV has done; however, they have still a lot of catching up to do. I'm very excited about what that means for journalism as they are starting to view it the right way. But I'm super optimistic about the open Internet led by CTV. I really appreciate your question.

Thanks so much, Matt. You can close out the call now, John. Thank you.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.