Why Would The Trade Desk Want in on the TV Operating System Wars?
Trying to break down the plan, and the pitfalls
A quick note:
Next week, I’ll be interviewing YouTube’s Brian Albert in New York at an event hosted by my friends at PreciseTV, and I’ll also be delivering a brief keynote. Please check it out - you can register here.
A few weeks ago, Lowpass reported that The Trade Desk is working on a connected TV operating system. The company initially denied this report, but soon more specifci details arose (Sonos may be a partner on a device), which made this one seem pretty real.
Since them, I’ve been thinking about this concept, and mulling over several questions about how this may or may not shake up the TV ad market:
Why exactly does TTD want to do this?
Isn’t this going to be extremely difficult?
With ad tech monopolies in the air, could this kind of launch raise uncomfortable question for TTD and others in this sector?
I turned to CTV ad tech expert and consultant Julian Savitch-Lee for some help. Here are some of our conclusions and theories:
Getting market share won’t be easy
While the smart TV market isn’t mobile - where basically two operating systems rule, it’s isn’t exactly wide open. You have a lot of manufacturers, including several big names (Samsung, LG, Vizio) that very much want to own their customer relationships, app stores, and ad businesses.
So when it comes to rolling out a new operating system, gaining distribution, scale, and a full list of top media partners, “it’s supremely difficult,” said Savich-Lee. “Just getting apps to sign off on distribution is so challenging.”
After all, think about how long Google has been at it - it’s not as though Google TV software dominates the market. No one does.
It’s worth noting that in this case, TTD is not a consumer brand, for better or worse. So ‘powered by TTD’ is not exactly a sexy selling point on its own, which might be why a partner like Sonos could help. That’s also complicated. Is Sonos going to make TVs or a set top box, as Lowpass reported? Even Amazon hasn’t gained much traction with its own TVs. And do people want set top boxes anymore?
Savich-Lee theorized that TTD may cut a deal with an existing manufacturer or two to try and gain instant market share, like Google TV did with TCL a few years ago. However, it’s also worth noting, that that hasn’t exactly lead Google to any sort of big market share.
Does TTD want to build its own tech, or build on existing software?
Savich-Lee reminded me something I forgot - Amazon Fire TV was actually built upon Android’s software. Amazon, for all its assumed tech brilliance, only recently began swapping out Google’s software on TV for its own. Savich-Lee predicted TTD might take a similar path, which would presumably be quicker or less expensive. Except for the face that- well - TTD and Google kind of hate each other.
So does TTD have the chops, and the investment resources, to go all in on making its own TV OS from scratch? “There is too much fragmentation already,” said Savich-Lee. “They could find themselves in a world of pain.”
It’s about that valuation
During its most recently earnings announcement, TTD revealed that revenue jumped 26% to $586 million, which is by most accounts, excellent. However, while TTD has leaned hard into CTV, it was born in a display/programmatic world. A world that relied heavily on the open web, which appears to be in serious trouble. Meanwhile TTD has a $54 billion market cap, which puts it in the neighborhood of Capital One, Travelers and BWM.
As Richard Kramer, analyst at Arete Research, framed it in a recent report, TTD is carrying a “super-premium valuation – nearly 50x [2025 operating cash flow].”
There’s a lot to live up to there. “We see 2025 as a key crunch point for TTD,” wrote Arete. “given our outlook that growth slows, signal loss could accelerate with a Chrome tracking user prompt, and CTV inventory gets scrutinized or shifts to direct sales – while TTD relies on re-occurring campaign spend despite being valued as if it has recurring software license fees.”
With a TV play, “The stock market’s understanding the story,” said Savich-Lee. “‘oh, they’re monetizing like Roku.’”
Data, analytics, ad inventory (=more TV$$)
Here’s where Savich-Lee thinks a TTD TV OS has a lot of logic. Suddenly, TTD would have a lot more knowledge about what people are watching on TVs, and what ads they are watching - which could be leveraged to its ad buying platform smarter. One note of caution - Savich-Lee noted that just because you own a TV OS, doesn’t mean you instantly have automated content recognition data. “You need a partner.”
That said, if a player like TTD gained serious share in TV, “This could change measurement,” he said. Over time, do you still need a Nielsen or comScore when your DSP also knows lots about viewership, campaign performance, etc?
Also, remember, one thing that Amazon, Roku, Samsung and others love about being CTV OS players is they get their hands on CTV ad inventory (You want your app on my OS? I’ll sell 10% of your ad space). There’s real money in TV advertising, in case you haven’t heard.
One wild card - would TTD launch it’s own FAST service? That’s another way to gin up ad inventory quickly. Yet that also puts TTD into a very new, potentially awkward role - that of a programmer.
Is there a retail media play?
Savich-Lee brought up an interesting idea - “What if -they go to an electronics brands -we’ll do a million devices, and do a split, then flip it - make them a customer of a DSP?
In other words, could there be a deal where TTD launches a TV with say Best Buy, and they inks a deal to power Best Buy’s Retail Media network? It’s hardly crazy.
Could TTD buy Roku?
I have long wondered if Google should just buy Roku, and grab hold of a much bigger share of the TV market overnight. Now, there’s no way the US government would let that happen. Could TTD get away with such a deal? It would be a much easier way to get a running start in the OS wars that way. The two companies are already partners. Then again, you’d be stuck combining two ad tech companies’ tech - which is always messy.
But wait - isn’t this a bit monopolistic, to build a ‘tech stack’?
Given the ad tech news of late (see Trial of the Century, Google), I can’t help but wonder, are the players in CTV trying to do exactly the same thing in TV, and no one is paying attention? After all, correct me if I’m wrong, but Amazon sells TV ads, serves them, and has it’s own DSP, which you have to use if you want to buy certain stuff. Roku owns its own DSP, sells ads, and makes you use its ad tech (you don’t have to use Roku’s DSP). Walmart just bought Vizio, which could result in lots of leverage being exerted.
The big difference here of course, is that none of these players are dominant - for now.
Still, could the Trade Desk building its own TV ad stack ironically be viewed as kind of Googley?
“Do they want to create a target on their back?” asked Savich-Lee.
It might be too late. Or maybe nobody in DC is even watching.
I had Deutsch New York’s EVP of integrated media Karen Benson on my podcast this week. A couple of themes really stood out to me:
On retail media and the growing in focusing on ROI:
“I definitely think there’s been an over-rotation to performance. optimizing yourself into this box. What does that do to you as a brand?
“You start to see these businesses that are overly reliant on Amazon or Meta….they’re almost stuck in this rut or circle, and can’t build their business.”
On trying to plan and blend the use of TV, social video and creators:
“You don’t want to over-silo, but you do need to have an expertise…negotiating with influencers and creators is very different than negotiating with a star for a Super Bowl spot.”
Check out the full episode here: