Trade Desk Struggles To Scale CTV Inventory: Analyst Warns Of Roadblocks Amid OpenPath Expansion

Benchmark analyst Mark Zgutowicz reiterates Trade Desk Inc TTD with a Sell and a $38 price target.

• While the analyst agrees with suspected strategic and economic motivations behind the February 2022 launch of OpenPath, TTD's in-house SSP solution, his recent discussions with streaming publishers suggest formidable roadblocks to it scaling CTV inventory ahead. The roadblocks include CTV ad server conflict, CTV inventory autonomy, and increased agency friction. 
• While TTD and OpenPath access display inventory directly from publishers that use open-source header-bidder software Prebid, access to CTV inventory requires a more cumbersome partnership and plug-in to an ad server. 
• The top 3 CTV and long-form ad servers are Comcast Corp CMCSA FreeWheel, Magnite, Inc MGNI SpringServe, and Integral Ad Science Holding Corp IAS Publica.
• Also, Alphabet Inc GOOG GOOGL Google's DV360 is the top display (not CTV) ad server. 
• Importantly, all three ad servers have SSP operations (2 extensively). So as OpenPath attempts to bypass and compete directly with SSPs, it's competing with the essential tech partner in CTV ad delivery. 
• Today publishers give TTD's self-service DSP platform direct access to their inventory, albeit managed by an outside SSP. 
• For a publisher to move its CTV inventory from an agnostic SSP to OpenPath, it must be comfortable giving TTD a much bigger open view of its inventory, which TTD can theoretically manage independently. It also affords TTD access to more user data via the bid stream. 
• TTD remains heavily reliant on large agency (trading desk) volumes while simultaneously walking a thin line with them as they compete for large advertiser and publisher direct deals. 
• OpenPath's (intended) aggregation of large publisher inventory will naturally elevate this competition, risking agency partner fallout to other DSPs and new strategic data partner alliances.

Price Action: TTD shares traded lower by 0.5% at $61.79 on the last check Wednesday.

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