Dive Brief:

• The Trade Desk saw revenue rise 22% year over year to $741 million in Q4, per an earnings statement. Despite the double-digit gains, the report marked the first time the ad-tech firm missed internal revenue expectations in eight years as a publicly traded company.
• A number of headwinds contributed to the road bump, including what Founder and CEO Jeff Green described to investors as “a series of small execution missteps.” The demand-side platform (DSP) in December underwent a reorganization to address some of those pain points.   
• Executives also admitted that the rollout of Kokai, an offering powered by artificial intelligence (AI) billed as The Trade Desk’s “largest and most important platform overhaul ever,” has been slower than anticipated. The Trade Desk wants to transition all of its clients to Kokai this year.  

Dive Insight:

At a glance, The Trade Desk’s Q4 revenue haul wasn’t too shabby, up 22% YoY to $741 million. That figure still fell sharply short of internal estimates of “at least” $756 million for the end-of-year period that typically sees a spike in advertiser activity due to the holidays. The miss sent The Trade Desk’s stock price tumbling ahead of the long holiday weekend.

CEO Green said that the underwhelming performance was the result of a number of small hiccups, including “people mistakes” the executive was unwilling to discuss publicly. The DSP recently underwent the largest reorganization in its history to more clearly define roles and enable greater agility both for internal functions and client-facing relationships. 

A prior lack of alignment potentially affected plans to scale up important products like Kokai, The Trade Desk’s major bet on AI. The firm is now pushing to transition its entire client roster from Solimar, a legacy platform, to Kokai by the end of 2025. A majority of clients are already on Kokai, which launched two years ago.

Green at once admitted that The Trade Desk has “rolled out [Kokai] slower than we anticipated” and also said that the “slower Kokai rollout was deliberate.”

“A quicker rollout would result in more short-term spend, and we don’t always build what the customers want,” Green said on the investor call. “Instead, we are trying to understand what the customer needs.”

Kokai’s troubles are emblematic of broader growing pains for AI in marketing, where breathless hype has not always matched the reality of what is often a timely and resource-intensive implementation process for a technology that has a lot of kinks to iron out. 

The Trade Desk, which promotes itself as an independent alternative to tech heavyweights, also believes that some of its rivals could retreat from the open web, creating fresh growth opportunities in the near term. For example, Google’s network revenue derived from open-web advertising has shrunk over time while the search giant has increasingly prioritized generative AI and cloud computing — not to mention its contention with mounting antitrust threats. 

“[I’m] confident that one way or another, Google is going to exit the open internet,” Green said on the analyst call.

One of The Trade Desk’s other bids at shaking up the walled garden ecosystem is Ventura, a smart TV operating system announced in November that is content-agnostic, aiming to capitalize on a market dominated by players like Roku and Amazon Fire TV. The Trade Desk’s video segment, which includes connected TV (CTV), represented a share of business in the high 40s percentage-wise in Q4, Green said. CTV is both The Trade Desk’s largest and fastest-growing channel.

Bigger cracks into areas like CTV and audio advertising will be supported by The Trade Desk’s recent acquisition of metadata startup Sincera. The deal, which is subject to customary closing conditions, is expected to be finalized in Q1.