Greetings. Welcome to the Trade Desk Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] 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 second 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 is available on our website in the Investor Relations section at thetradedesk.com. Please note that aside from historical information, today's discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risks and uncertainties and reflect our views and assumptions as of the date such statements are made. Actual results may vary significantly and we expressly disclaim any obligations to update the forward-looking statements made today. If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. For a detailed discussion of risks, please refer to the risk factors mentioned in our press release and our most recent SEC filings. In addition to our GAAP financial results, we present supplemental non-GAAP financial data. A reconciliation of the GAAP to non-GAAP measures is available in our earnings press release. We believe that presenting these non-GAAP measures alongside our GAAP results offers a more comprehensive view 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 to everyone for joining the call. As you've seen from the press release, we delivered very strong growth once again in the second quarter. Revenue was up 26% to $585 million. Our growth rate significantly outpaced the rest of the digital marketing industry, just as it has every quarter for the last few years. I'm convinced that our success has been forged on the back of consistent, strong 20% plus revenue growth year-after-year for the past several years. By comparison, our ad funded peers have gone through periods of much lower-growth and even stagnation in some cases. That means we are consistently gaining market share quarter-after-quarter and year-after-year. And I firmly believe that's because we continue to bring the best innovation and best value to the market. And perhaps more important, I believe that we will continue to outpace the market in the years to come led by areas such as Connected TV, which are only getting stronger. In fact, one of the most bullish things happening in advertising today are evident in our performance. Through the first half of this year, CTV growth has accelerated versus the first half of last year. Before I get into the core of my remarks, let me make a macro observation about the marketing and advertising industry. I've recently been meeting with many CMOs from the world's leading brands around the world, including at the recent Cannes Lions Festival in France. Through all of these meetings, one thing has become very clear to me. These leaders are dealing with a lot of uncertainty. They are looking for answers and they are looking for partners who can help them. The pandemic was the nucleus of a great deal of change for them. The pandemic has been followed by several years of economic uncertainty, whether it's inflation or dramatic changes in fiscal and monetary policies around the world or supply shortages or unpredictable consumer demand. One top CMO talks about the difficulty of what he described as, the illusion of growth, where it appears that companies are doing well, stock prices are up, but the average consumer feels more constrained than ever in terms of purchasing power. That has significant implications on how companies market products from pricing to packaging to advertising. And perhaps more than anything else, it's putting a premium on the efficacy of marketing. More than ever, CMOs have to prove that what they are doing is working. And increasingly, that means revising traditional dependencies on cheap reach and all the legacy mechanisms and beliefs that support cheap reach. It means embracing the power of programmatic data-driven advertising. We are convinced that the only scaled response to all the changes CMOs and agencies are facing is to embrace data-driven buying. To get a healthy and competitive global economy, all roads require scaled programmatic advertising and that bodes well for the long-term prospects of this company, the Trade Desk. As a result of these trends, our relationships with the world's leading brands and their agencies are only getting stronger. It's one of the key reasons we continue to significantly outperform the market and why I believe we'll continue to gain share in the years ahead. I'd like to spend the bulk of my time unpacking this a little. Because I think for most leading CMOs, there is a growing bifurcation in the market. It's being driven by efficacy of new channels such as CTV, by the emergence of new conversion data such as retail data by a growing focus on premium inventory and by rapid advances in the innovation of our industry. Let me start with this point around efficacy. I often talk about how we compete against walled gardens. And to give them due credit, it's very easy for companies to work with big tech walled gardens. They offer easy on-ramps to massive scale in terms of ad impressions with the promise of easy mass reach. And of course, for the most part, they also control the scorecard. So it's very easy for walled gardens to take credit for things like last touch attribution or last click attribution. While in the process, disintermediating a brand and their customer and giving little or no credit to the rest of the marketing funnel. For many marketers dealing with macro uncertainty over the last few years, this cheap reach solution has been attractive. But more and more CMOs, especially those at the world's leading brands have become concerned with the flaws in this strategy for a number of reasons. A few of those. First, much of the mass scale is predicated on cheap, owned and operated content, which is often just user generated videos or social content that is essentially free to produce and ultimately mostly lower quality and higher risk for large advertisers The big tech owners of this content have an inherent incentive to direct demand toward it because the margins on it are so significant. But it's often not where the marketers target customers spend most of their time nor where they're the most leaned in. Second, after several years of uncertainty, the business flaws of cheap reach are more apparent than ever. If a CMO has been going to the CEO or CFO and saying, look, I was able to drive down costs, and the scorecard says it's working. But then a couple of years later down the road, business results are not consistent with those marketing metrics. And as a result, there's a disconnect. This is arguably one of the main reasons that CMOs have the shortest tenure on the C-suite, marketing performance data predicated on cheap reach that doesn't match up with the business outcomes over time. And last leading CMOs at large brands have been leaning into alternatives to this cheap reach that offer much greater efficacy, and by extension, a much closer correlation to business performance. At the center of this is the revolution in TV advertising, driven by the mass shift to streaming TV where advertisers get to target based on authenticated logged-in users. And building on that is the emergence and availability of new kinds of marketing conversion data such as retail data, where advertisers can understand the impact of campaign spend on actual customer outcomes much more clearly. Take HP. They recently came to us to test the efficacy of CTV advertising using UID2. Buying on Disney+ and Hulu on our platform, they were able to drive a 23% reduction in cost per unique household reach, with much greater precision and frequency management. As HP's North America Head of Programmatic, Caitlin Nardi said, using the Trade Desk UID2 solution with our first-party data helped us increase our unique audience reach, boost our cost efficacy and improve how we measure conversions and sales. That's a really great affirmation of the case for the efficacy of CTV, in part because of the embrace of UID2 by most of the major streaming companies. But layer in new data elements such as retail conversion data, and the story gets even stronger. Rossmann is one of the largest retailers in Germany. It's something like CVS in the United States. They worked with us to drive demand for one of their diaper ranges. Using CTV, they were able to drive 170% incremental reach improvement. In addition to that, they were able to understand with precision that every 1,000 impressions served resulted in 20 actual sales. That's a very impressive return on ad spend. They were also able to see the impact of using their own first-party data. When they use that data as their targeting seed, every dollar was between three to four times more likely to drive a sale. When you compare these kinds of efficacy results to the murkiness of cheap reach, it's easy to understand why CMOs are increasingly looking to unlock the power of programmatic on the open premium internet. Let me touch on this point too, the open premium internet. Since we last spoke, we put out a report, the Sellers and Publishers Report. The report kicked off more discussion in our industry than anything we'd ever put out there and I encourage you to download it if you haven't already. The level of industry discussion actually surprised me, in part because I think the report highlighted many of the trends we've been talking about for some time, in particular, where value is shifting on the internet. One of the trends that, that report showcases is the massive shift over the last four years in terms of where consumers are spending their digital time. It used to be that consumers spend about 60% of their time within walled gardens and 40% on the open internet. That trend has completely reversed since the pandemic. Why? Well, in large part, it's because of the mass consumer shift to emerging premium open internet channels such as CTV and digital audio. In the US, over the last decade or so, consumers have doubled the time they spend in these two channels alone to around five hours per day, significantly more than they spend on social media. Companies like Spotify, Netflix, Disney, Warner Bros, Discovery and others have fundamentally changed the way that consumers behave. I would also add that the time that consumers spend in these channels is much more leaned in and engaged than the time spent on channels such as social media. You're much more leaned in when watching the latest hit show or the Olympics or listening to your favorite podcast than you are watching endless short videos of teenagers pulling wheelies on the West Side Highway. To come back to my earlier point, while walled gardens have always done a good job of providing easy access to ad impressions at scale with their own reporting system, today, advertisers have an alternative. For large brands, the premium open internet now rivals walled gardens in terms of scale, thanks to advances in key channels like CTV and audio. But that's where the similarities end. On the open internet, advertisers get to showcase their brands against premium content where their targeted audience is highly engaged and they get to measure campaign performance with much greater rigor based on high levels of authentication and actual consumer conversion data. So while walled gardens still account for the bulk of global advertising spend, we're starting to see many cases where the open internet is commanding the first dollar. CMOs of the world's leading brands also recognize that certain channels, especially digital audio, represent tremendous value, considering the amount of consumer engagement in those channels. On average, in the US, consumers spend around three hours per day listening to music, podcasts and other types of digital audio. And yet digital audio commands a small fraction, by comparison of advertising demand. But that's beginning to change, especially as companies like Spotify make investments to enable more programmatic and automated buying as they highlighted in their most recent earnings call. I would be remiss not to touch on the ever-evolving identity landscape in the context of all of this. What I hope you've noticed in many of our recent reports, including recent earnings reports is that UID2 has been embraced across the digital advertising ecosystem, but perhaps most aggressively by channels that never relied on cookies to begin with, particularly in CTV. UID2 has never been a direct cookie replacement. UID2 has always been about building an identity framework that is much better than cookies could ever aspire to be. It's addressing much bigger issues and is expected to have more ubiquity than cookies ever did or do, an identity framework that works across all digital advertising channels, not just display, and distributes control among many advertisers, publishers and consumers, not just a couple of walled gardens that own browsers. UID2 improves consumer privacy controls while preserving the value exchange of relevant advertising for free content, the essential value exchange of the internet. As most of you probably know, recently, Google announced a change in their long-promoted plans. They reversed their plans and suggested they're no longer getting rid of third-party cookies. I have long predicted that Google would never deprecate cookies. I've never believed it would make much strategic sense for them to do so, and we're seeing that play out now. It's really hard to claim leadership on privacy while also consolidating control over identity, especially when that control is so important to preserving your ad demand in channels such as YouTube all derived from search. I don't know where Google goes from here. We've gone from cookie deprecation to flock to privacy sandbox and back to no cookie deprecation. If you're a company in the ad business that's dependent on Google, and there are many of them, this must be maddening. Understandably so. Google offers are not very compelling and often repeated argument to both the advertising industry and the regulators, both regulators addressing privacy and competition. They argued that privacy sandbox complexity and deprecation of internet functionality was good for everyone. But for The Trade Desk, it doesn't really matter. Our plans haven't changed. We, along with many others, have created the new identity fabric of the open internet, one that is so much more fit for purpose than cookies could ever be. UID2 has already reached a critical mass of adoption, which has made it an essential identity signal, and UID2 continues to gain strong adoption across publishers, data partners and advertisers. For example, FOX is scaling UID2 and OpenPath deployment across their entire digital portfolio, having started with Tubi three years ago. And in recent weeks, we've seen Roku and DIRECTV adopt UID2. These are significant steps forward. Similarly, in Europe, EUID is gaining momentum, with adoption from publishers such as Le Figaro in France, and Reach in the UK, a publisher who boast more than 130 UK newspapers, including The Mirror and The Express. All of this brings me to my third point, the value of innovation in our business. In order to help advertisers think about efficacy in new ways and to help them take advantage of the premium open internet where consumers are most leaned in. After years of development, we launched our most ambitious platform to date, Kokai. Kokai allows our clients to deploy data about their most loyal customers and then use that data as a seed to grow and harvest the next generation of loyal customers. Kokai helps them target those new audiences across the many thousands of destinations that comprise the best of the open internet, and it leverages AI to help them make sense of the roughly 15 million ad opportunities we see every second and the hundreds of variables associated with each one of them. And all of this happens in the context of what any given client's unique business growth goals are. I've been incredibly encouraged by the early results from Kokai. For those campaigns that have moved from Solimar to Kokai in aggregate, incremental reach is up more than 70%. Cost per acquisition has improved by about 27% as data elements per impression have gone up by about 30%. In addition, performance metrics have improved by about 25%, helping to unlock performance budgets on our platform for years to come. So our clients are getting more precise, more cost efficient and then they're able to reinvest for even more reach and drive a much better return on ad spend. Given everything I said about what CMOs today are trying to accomplish and the pressures that they are under, I firmly believe that we have met the moment with Kokai. We are still in the very early days of programmatic advertising. We are just getting started in terms of how data-driven precision will help advertisers optimize every dollar of their ad spend. At end state, all of the rapidly approaching $1 trillion advertising TAM will be digital or at least transacted digitally and the vast bulk of it will be transacted programmatically. And we are thrilled and thankful to be partnering with the world's most forward-thinking marketers as we bring that value to life. We believe we've aligned our interest with theirs, creating a very bright future for both of us. Let me bring my remarks to a close by summarizing what all of this means for us and why I believe The Trade Desk is positioned so well to capture more than our fair share of that $1 trillion TAM. We're in the midst of a period of tremendous change in our industry, change that's the result of macro market pressures as well as rapid innovation such as Kokai. A powerful open internet advertising ecosystem is coming of age, one that provides a compelling alternative to the cheap reach dynamics of walled gardens. That ecosystem includes the world's leading streaming TV and digital audio companies, almost all of whom are partnering with us in new ways. From Disney to Netflix to Roku to FOX to NBC with the Olympics, these companies are trusting The Trade Desk to bring them the most valuable advertising demand. The world's leading retailers and commerce data companies are partnering with us to help advertisers close the loop on campaign spend to consumer purchase. Partners across the ecosystem are working with us to build the new identity fabric of the open internet and we're pioneering new innovations that help advertisers take advantage of their data, target new audiences with efficacy, leverage AI as a copilot and embrace the very best of the open internet. In doing so, we are offering premium value to our clients. And as a result, we are solidifying our position as the default DSP of the open internet. As I've said many times before on these calls, our profitable business model gives us incredible flexibility to make investments and continue to drive growth and to always think about driving innovation and value for the long-term, not just this year or next. Working with our clients and with their needs in mind, we are not afraid to make the big calls. And you see that every day in how we develop our partner ecosystem, how we innovate and how we help clients harness the value of the open internet. I could not be more excited and confident about the powerful alternative we provide to the marketplace today. With that, I'll hand it over to Laura, who will take you through more of the financial details.

Thank you, Jeff, and good afternoon, everyone. We delivered a strong second quarter with revenue of $585 million, representing 26% year-over-year growth. During the quarter, we benefited from a relatively stable digital advertising environment supported by both agencies and brands. We continue to gain market share as more advertisers sought greater efficiency and measurable results, particularly in CTV and Retail Media. Our business model, with its wide range of large advertisers and vertical markets, also contributed to our success. Additionally, our growing access to premium inventory, including major events like the Olympics for the first time through NBCU as well as gaining access to platforms like Roku and Netflix also help ensure long-term durability and success, something we take great pride in. With the strong top line performance in Q2, we generated approximately $242 million in adjusted EBITDA or about 41% of revenue. When we outperform on the top line, we often see that outperformance throughout our financial statements as was the case again in Q2. I'm proud of our focused efforts to consistently generate meaningful positive EBITDA and free cash flow while continuing to invest in the critical areas of the business that will drive our future growth. From a scale channel perspective, CTV, by a wide margin, led our growth again during the quarter. In Q2, video, which includes CTV, represented a high 40s percentage share of our business and continues to grow as a percentage of our mix. Mobile represented a mid-30s percentage share of spend during the quarter. Display continued to represent a low double-digit percent share of our business and audio represented around 5%. Geographically, North America represented about 88% of our business in Q2 and international represented about 12%. We're pleased that international growth outpaced North America for the sixth quarter in a row. Across both EMEA and Asia Pacific, CTV continued to drive our growth. While still small relative to the share of CTV spend produced in North America, we see significant opportunities to capture share in these verticals. In terms of the verticals that represent at least 1% of our spend, growth was broad-based again this quarter. We saw strong performance in the majority of our verticals, particularly in home and garden, food and drink and shopping. Family relationships and healthy living verticals were both below average. Overall, we continue to see healthy trends across our verticals and we continue to believe there is opportunity for us to gain share in the verticals we serve. Turning now to expenses. Excluding stock-based compensation, operating expenses in Q2 were $363 million, up 19% year-over-year. While there are ample opportunities to achieve more leverage within our operating expenses, our primary objective remains on growing spend on our platform and gaining more share of the global advertising market. During the second quarter, we continued to invest in our team, our platform and our infrastructure to support sustained growth. Thanks to our careful management of operating expenses in recent years, we are well positioned to innovate our platform, invest in cutting-edge technologies like AI, expand our teams and further distance ourselves from competitors. Income tax expense was $27 million for the second quarter, driven primarily by our pretax profitability and nondeductible stock-based compensation. Adjusted net income was $197 million or $0.39 per fully diluted share. Net cash provided by operating activities was $81 million for Q2 and free cash flow was $57 million. DSOs exiting the quarter were 90 days, down about two days from a year ago. DPOs were 75 days, down about one day from a year ago. We exited the second quarter with a strong cash and liquidity position. Cash, cash equivalents and short-term investments ended the quarter at $1.5 billion. We have no debt on the balance sheet. In Q2, we did not repurchase any shares of our Class A common stock. We will continue to approach the repurchase program opportunistically depending on market conditions and capital priorities. Now turning to our outlook for the third quarter. We continue to see strong spend in key areas, including CTV and Retail Media. We estimate Q3 revenue to be at least $618 million, which would represent growth of 25% on a year-over-year basis. We estimate adjusted EBITDA to be approximately $248 million in Q3. In closing, we are extremely pleased with our strong performance in the second quarter and throughout the first half of the year. The opportunity ahead of us has never been more promising. We are positioned within a large and expanding market, supported by a business model that consistently delivers robust top line growth, significant profitability and strong cash flow. With key growth drivers such as CTV, Retail Media, International expansion, a strong identity strategy and a major product upgrade with Kokai, we remain confident and optimistic about our future as we navigate the second half of this year and look forward to 2025 and beyond. That concludes our prepared remarks. And with that, operator, let's open up the call for questions.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question comes from Shyam Patil with SIG. Shyam, please proceed.

Hey, guys. Congrats on another great quarter. Jeff, could you maybe provide your high-level thoughts on the current digital ad environment right now? And kind of going back to what you mentioned kind of at the start of the call, what's allowing Trade Desk to continue to so meaningfully outperform everyone else and gain share? Thank you.

Thanks, Shyam. Really appreciate the question. So first let me just talk about our company before I talk about the macro environment. I don't know that I have ever been more proud of our team across the board, not just in our go-to-market teams, but of course, our engineering team and throughout the entire company. I don't know that we've ever been firing on all cylinders in the way that we are right now. And that has absolutely been essential in this environment, because we've never had more change, especially in CTV in a three to four month period than we've had. All good things coming at us, just lots of opportunity, but responding to it all and adjusting to it all is something that I think our team has done really, really well. One thing that I do want to highlight at a macro level that I think makes us different than other players in the space is that we are not a destination and we are not sell-side. So often we get compared to other companies that are dependent on ads, but they are destinations, whether they are an app or whether they're a mobile company or whether they're a website. People are trying to go to those destinations and then they have added inventory that they have to sell in those moments. We are not a destination or a B2B company that represents buyers. So there is a big difference right now between the sell-side and the buy-side. And we're seeing some changes on the sell-side in almost every category, but we are not on the sell-side. We are on the buy-side. And as a result of that, I believe that The Trade Desk is in a stronger position than we have ever been before. CMOs are facing a greater degree of uncertainty than they have generally, but it's really important, I think, to note that we see a relatively stable digital advertising environment, especially when we're comparing that to the macro. Nonetheless, CMOs are being asked from CFOs to deliver growth. CFOs are saying we have to have real growth now and that puts more pressure on the CMOs than ever. And of course they're in an environment with inflation and some consumer weakness and some higher interest rates and a bunch of other macro themes that investors know all too well. But those pressures are actually creating a better macro environment for us. All of those things, including some of the pressures on the sell-side, create a buyer's market. And the pressures on CMOs create data-driven, rational buying, and they're looking to us to help them put their data to work and make more informed decisions. They're being asked to do more with less. They're being asked by their CFO to prove that the ROI is better. It's no wonder they're coming to us asking for joint business plans and say how can we build long into the future, especially when there seems to be no other company in the world more focused on the open internet and helping to monetize that for all the great premium content owners on the open internet, but of course, representing the buyer to help them figure out what is best for them. Of course, we're not immune to the macro changes that we've seen over the last few years, but we are convinced that with our model, our approach and the fact that we're focused on the buy-side, that we will continue to gain share in any environment. It is a buyer's market. We believe it always have been and always will be, in digital advertising, and so as a result, we're in a better position than we've ever been before. Thanks, Shyam.

Thanks Jeff.

Okay. The next question comes from Youssef Squali with Truist. Please proceed.

Great. Thank you very much. Yeah, thanks for all the color on CTV. I'd like to double-click on that, if you don't mind. Can you talk a little bit about the competitive environment within CTV with the rise, particularly with the rise of Amazon Prime Video's ad business and the impacts you're seeing on competitors, both in terms of CPMs or pricing and in terms of ad budget shifts? Thank you.

You bet. Thanks so much for the question. So I just want to underline what I said in answer to the last question, which is that we are not a destination, which, of course, is a sell-side function of where you're a content owner and trying to monetize that content. We're instead partnering with all of those and trying to figure out what to buy on behalf of the biggest brands in the world. And by representing the buyers in a buyer's market, we think we're in a stronger position than we've ever been before. As it relates to the competitive nature of the ad environment, I mentioned also in the last question that I don't know that we've had a three or four month period where we've seen more change. I think it's worth highlighting a couple of those. So Netflix announced in that time frame that they will expand their buying capabilities to include The Trade Desk as one of its main programmatic partners going forward. FOX announced an expanded partnership, which I intently work with them personally on this to expand to UID2, of course, and OpenPath across all of FOX brands and the AdRise technology platform. E.W. Scripps is one of the first CTV content owners to adopt OpenPass, which is a new single sign-on that we are launching or just launched. Roku is adopting UID2, of course, allowing advertisers to implement more precise targeting and put their data to work as they're buying media on the Roku platform. And of course, in EMEA, CTV is leading the EUID adoption, with major players like TF1 and M6 in France, for instance. So those that's all just in the last three or four months. But of course that sets a contrast to what you're seeing at Amazon, which I would just say is another rollout of a walled garden. And the reason I say that's in contrast is because all those companies I just mentioned, I would argue that the decisions that they made are to join the open internet, and to recognize that the walled garden playbook doesn't really work in CTV. And the reason why the walled garden playbook doesn't work in CTV is because nobody has enough share to be draconian or even to target well, even to be effective, because of the fact that TV is fragmented. There is no one single player that has anything close to what Facebook does in social or what Google has in search. So as a result, if you house a bunch of inventory there and then don't enable people to bring data to work from other places, it will not perform as well. And so it is true that more inventory has been coming online in CTV, but what sometimes I think is lost, especially in discussions about CPMs is that there is a greater desire for marketers to find their exact audiences than they've ever been or than there has ever been. And they're look they have to look across all these different pools of inventory in order to find the small pieces in each of them that give them the efficacy that they need to be effective and to put their dollars to work as effectively as possible. That's only possible when you're looking across the entire open internet. And when you consider the fact that perhaps our greatest strategic asset is that we are objective that we don't own media. And so as a result, we can help the biggest brands in the world objectively figure out whether they should buy Hulu or Netflix or Spotify or Yahoo. And that objectivity is in greater compromise, I would argue, at Amazon than anywhere. And that's in large part because not only does Amazon have its own owned and operated inventory as it relates to CTV inventory. It also operates as the second largest search engine in the English-speaking world and then it also competes in building products with almost every major advertiser in the world. So that conflict of interest, I think, makes it very difficult. But a biddable marketplace with price discovery, with competition and data is where everybody is heading and I believe that there's no one better positioned to capture the value of that than us. Thanks for the question.

Thanks, Youssef. Next question, John.

The next question comes from Justin Patterson with KeyBanc. Please proceed.

Great. Thank you very much. Good afternoon. And Jeff thanks for that LinkedIn post on chocolate chip cookies the other day. That was great. I guess now that the dust is settling on cookie deprecation in the privacy sandbox, how does your strategy and investment level really change around UID2 going forward? Thank you.

Thanks so much, Justin, and next time we speak, I'll show you more photos but I appreciate the shout out then and appreciate the question today. First, I don't know that there's a lot more to say about cookies than what I've already said, only because as was pointed out to me by somebody I was interviewing recently and respect a lot. He said one of the things that I love talking to you is it doesn't matter what clips I take from the past. They're always consistent. You said the same thing four years ago that you're saying today. I said in 2020, it was not a good idea for Google to get rid of cookies for that. And I stand by that today. And so because that message has been consistent, there's not a lot new to say. But just to reiterate some of the highlights, cookies were never the best technology to provide personalization. And in a privacy-centric environment, they need to be upgraded. It is not a surprise that privacy sandbox is dead that when you complicate the open internet and deprecate it at the same time and then ask the internet to make huge investments in it, even if you pay them $5 million each, it apparently doesn't work, and that is something that we predicted as they were rolling it out and offered that criticism in private and in public. But I want to be super clear, because occasionally, this point gets lost despite the fact that we've made it again and again. We did not build UID2 as a replacement for cookies. It is way bigger than that. We actually wanted to build an identity framework that can live on irrespective of what Google or Apple or anybody else does. And if there's anything that we've learned from the changes in the last four or five years, it's that Google, in particular, but also Apple, can't be trusted on these issues. And that anybody whose strategy is simply to depend on them and hope for the best, they ought to rethink or at least consider getting a backup plan. And so we built UID2 with the purpose of making something that could live irrespective of the decisions made at Google or Apple. and as a result, it's quickly becoming ubiquitous. Now when I say it's becoming ubiquitous, I especially mean in CTV and in audio, in places where people are logged on. Where there are log-ins, UID2 have been extremely valuable and it is quickly becoming ubiquitous. Where there are not log-ins, which includes, in most browsers, namely Safari as well as Chrome, there's still a lot of work to do in creating authentication, consent and personalization that makes the advertising effective enough to replace the CPMs the way that Google wanted to in deprecating cookies. I believe that's part of the reason why they have created some delay, but that also is a bit of a double edged sword because it could give publishers a sense that they can slow down and take their time, which is not a good idea. Given the efficacy of things like UID2, in order for them to compete, they need to adopt a more sophisticated technology, which puts some pressure on them to continue to change. So hopefully, this doesn't slow them down in that regard. But the bottom line for this, for us, is how does our strategy change is the result of cookie deprecation? Not at all. Thank you so much for the question.

Thanks, Justin. Next question, John.

Yes. The next question comes from Vasily Karasyov with Cannonball Research. Please proceed.

Thank you. Good afternoon. Jeff, you spoke about what is going on in the Connected TV market and short-term concerns because of Prime Video entering the space here. I wanted to ask you to talk about what will happen in the next two or three years in the midterm with all the premium inventory sources like Disney, Roku and Netflix and possibly others becoming more available on your platform. How does this impact your revenue growth trajectory in the midterm? Thank you.

Thanks so much for the question. So I truly believe that The Trade Desk is in a stronger position than it's ever been and I think we might be in the very best position of any player in the market to benefit from the changes in streaming and the move to connect television. I mentioned to the team all the time. I'm way more concerned about the tidal wave of opportunity being too big and that's not being equipped to handle all of the opportunity that comes to us than I am that the wave doesn't exist or it's too small. But if you step back for a second, I believe there's a macro changing of the guard that is happening. It used to be that the first dollar that went to digital went to Google and to Facebook, and that's partly because they built such easy on-ramps, partly because they had so much to scale. They did a lot of things right. But that's changing for a bunch of reasons and not least of which is that most of their content outside of search is not premium. It is user-generated content. And the only reason why I believe that not so many dollars is both because of the easy on-ramp, but especially because it had so much scale and there's nowhere else to go. Now there is. Now there's premium content and the premium content is becoming more and more available. So when the largest brands in the world get to choose between a variety of different premium content owners and then compare that with user-generated content, with measurement that is somewhat suspect to them, it just becomes easier and easier for them to put the first dollar in the open internet, led by CTV and audio, which I would argue those two are the most premium content on the internet altogether. It's no wonder that as they put the first dollar there, that it creates this incredible opportunity for us. Now for a long time, CPMs were very high for these content owners because there was scarcity of supply, especially early on in the pandemic. But as a result of all of them seeing the benefits of ad funded models or at least hybrids where you can have a subscription and also ads and let the consumer pay however they want, they're seeing that they can get incremental subscribers by offering them ads in part because many of them have subscription fatigue and had so many different options to choose from. But we've seen a little bit more of a surge of inventory than we've seen in the past. And so as a result, that requires some restabilizing or rebalancing of CPMs and what gets bought and what doesn't. You ask what's going to happen over the next couple of years. I believe they're all going to get the balance right. They're not going to get too many ads in the commercial breaks and also not too few and consumers are going to be able to pay however they want. And they're going to have access to more subscriptions than they have today. And that will, in large part, be brought to you by ads that will be more effective than they've ever been in television history. And so when you put all of that together, I really believe that we're on the early path to the most effective television ecosystem ever, where you have premium content that is getting funded at rates that we've seen in recent years, but not just on speculation, it's actually being funded and paid for because of these dialed-in hybrid ways that I believe will be better than it's ever been before in part because the content is better than it's ever been before, but also and maybe especially because the advertising itself will be more effective because we can put data to work in a way that never could have happened in linear television. So as we see some of the legacy media companies struggle a little bit, I believe their only way out is programmatic advertising is data-driven advertising that will get them higher CPMs and it will make all of our clients compete to be on their platform, and it will get them incremental subscribers. But I think over the next two or three years, we will see the most effective advertising maybe ever emerge out of the digital advertising space.

Thank you.

Thanks, Vasily.

Okay. The next question comes from Mark Mahaney with Evercore. Please proceed.

Okay. Hey, Jeff, I just want to follow up on the question I asked you last quarter, except events have changed. And that had to do with maybe the increasing dislocation in the market related to Google and all the regulatory scrutiny. And since that time, we've obviously had a DOJ decision. We'll probably have another one in the next three to six months and probably be negative two. Google Network is now kind of negative on negative like their revenue base is declining on a base that was declining. And I just wonder if that's what you're seeing in the market and CMOs are really coming to you and looking for more aggressively for an alternative than they were in the past, particularly in light of the regulatory and legal changes that Google is almost certainly going to have to face.

Thanks, Mark. I really appreciate the question, and you couldn't be more right that the world changed a lot since the last time we talked about this on this call roughly 90 days ago. So, yes, you're right, 2024 is shaping up to be a very big year on the regulatory side and there's probably almost everyone is hearing this knows the Department of Justice won in their suit or trial against Google as it relates to Google Search. And there, of course, is another upcoming trial that will begin likely in September, where the Department of Justice is suing Google over anticompetitive practice in ad tech. In my opinion, the Department of Justice's case against Google on the ad tech side is even more compelling than it was on the search side. Now the one thing that I think Google had in its favor on this most recent case, although it lost, was that it's more simple. It's simpler than the case in ad tech. The ad tech case is quite complicated. But I think it's interesting to point out that one of the things that was under the most amount of scrutiny was the focus on partnerships that were deemed illegal and the payments that Google made to Apple, for instance, that kept them on the sidelines and limited competition. And that at a moment of inflection as Cantor highlighted is a moment where market needs competition, most of all. And as we head into this trial, I believe that same discussion about partnership and especially as it relates to Jedi Blue and Facebook will come up. I think it will come up around open bidding. And the product that Google deployed called open bidding and some of the important mechanics about those auctions that I think will likely be scrutinized, but also the partnerships. But even though I do think that all of that will once again be on trial, I think, there are a bunch of things that we can predict will happen irrespective of the outcome of that trial. One is what you highlighted early on, which is we have historically competed, and I jokingly say, we competed against the 37th highest priority at Google. Not too long ago, we started competing with the 47th highest priority at Google because it was downgraded. And as you point out, the network business, essentially shrinking on shrinking, represents, I think, a deprioritization. And as they continue to upgrade their focus on Gemini and Cloud and AI and Search and YouTube, I think network and open internet is less important to them than ever. I think the cookie decision underscores that same thing as well. So what I think that does create opportunity for us that we haven't seen before in this form. I think it also makes it very possible for us to continue to service the open internet and to continue to be very focused on what we're doing. So as they downgrade their focus on the open internet, that's, of course, been our only focus since inception. So it does create room for us to do more. It does create some uncertainty, especially on the sell-side, which is where they're being challenged in this trial and how that will shape up. But I think the thing that is absolutely certain is that they will be moving more slowly and more carefully than ever. They are a weaker competitor than they've been for us in years past. And as I've often said, we've been winning in an unfair market. Imagine what we could do if we're competing in a fair market. I think as a result of that, I believe, we'll win no matter what the outcomes of this case are, but it will still be fun to watch. Thanks for the question.

Thanks, Jeff.

Thanks, Mark.

Next question comes from Shweta Khajuria with Wolfe Research. Please proceed.

Thank you for taking my questions. I'll try two, please. First is on Netflix. Jeff, could you please give an update on where you are with their partnership and how should we think about the time line on scaling and perhaps potential contribution as we think about 2025? And then the second one is on your earlier comments, a couple of questions ago on Trade Desk being raised up in consideration by advertisers. So is it fair to assume that the ROIs that they're seeing, the advertisers are seeing now, are very comparable, either even higher than nonsearch social ad dollars that are played and that's why you're gaining share? Thank a ton.

You bet. Thanks for the question. So first about Netflix. I am so excited about this partnership in part because I don't know that there is a partnership where I've had a longer relationship with the C-suite and yet waited so long to have any actual partnership with Netflix. And it's great to see that they've had some early success with ads, and I'm so excited that we now can talk about our formal partnership and the discussions that we've been having for a very long time. First of all, let me just say I'm a big fan of the leadership at Netflix and believe that they are very rational players, and I love that they, in some ways, come with a very objective and open mind as a result of not being a legacy media company of not having ever been in traditional media, but instead, of course, always been essentially a digital player. As it relates to the time lines, we have begun some testing. All we're doing really is putting -- we're putting real money and real campaigns on it, but it's just testing the pipes, nothing that has scaled. I think we'll start seeing that ramp up a little bit this year. But really it's in the next few years that I think we'll see it ramp up and really start to contribute to us and to them, but we'll spend the rest of this year sort of proving it out. And I think next year will be a very important year for the future of both of us and for the future of our partnership. So very excited about that. On the second question, where why is Trade Desk sort of rising in the consideration set for marketers? Part of it is absolutely ROI and return on ad spend and all of those performance metrics and our timing as it relates to shipping Kokai could not have been better as it relates to contributing to those performance metrics. But it's also that premium content like Netflix or Spotify or so many others are coming online and that as we have the opportunity to buy for more quality premium internet destinations, it creates more opportunity for marketers to see returns and to be associated with the most premium content on the internet. And when they have more choices and they can put more data to work because of things like UID2 just the flywheel spins faster. While at the same time, I think they're just a bit more suspicious of the metrics inside of walled gardens. But also the content itself, that user-generated content has been under greater scrutiny, especially as more alternatives pop up. So it's a bit of a double-edged sword. Thanks so much for the question.

Thanks, Jeff.

Next question comes from Tim Nollen with Macquarie. Please proceed.

Thanks very much. Another question on CTV. I hope you don't mind, Jeff, I'm sure you don't. Given the ongoing weakness that we've seen in linear TV, even through this reporting season through Q2, there was a flood of CTV ads on Amazon Prime earlier this year, and now we've seen Netflix and Roku and others open up to more programmatic CTV. I wonder if you could comment, are you seeing more on the appetite for the CTV sellers to really adopt biddable programmatic, not just delivery of programmatic ads, but actually using auction-based bidded decision programmatic tools? And if you have any observations from the upfront markets that I think are more or less done now as toward as to the seller's appetite towards bidded programmatic. Thanks.

You bet. Thanks, Tim, for the question. So there absolutely is a greater desire to lean into biddable for both buyers and sellers. So most of television has been transacted over the last few decades the same way that it was decades before that, which is martini lunches and handshakes and parties at the upfront. But you buy in bulk and it was quite literally broadcast. You buy it out and it gets broadcast to all the people in a specific place watching a specific show. And shows were a proxy for audience. You bought football because they are more likely to drink beer, but you didn't know anything about the user in an anonymized way or able to put any data to work. Biddable is the very best way to put that data to work and it's the very best way to get higher CPMs for the content owners. So while, at first, they're a little reluctant because it's a foreign way of doing business, it's just unfamiliar to those in TV, but the math and the CPMs don't lie. And as a result, you're seeing more and more of them embrace that. And as CPM costs have been high, you're seeing the advertisers say, well, why am I paying two or three times what I used to in broadcast if I'm not getting better results or are not able to bring my data to work. So the tolerance to pay high CPMs, if you don't get something more is lower than it was a year or two or three ago. So as a result, both sides are pushing towards biddable and the results are in and it's showing that it is a more effective way to buy and sell. So I think you're going to see the trends push us more and more toward biddable. It does require a lot of work to get to manage fill rates and to do forecasting and you're going to see companies on both sides, being in buy side and supply side, continue to make big investments, in part so that we can continue to run upfronts, but those upfronts will look more like forward contracts than handshakes and partners. And those forward contracts can be always on. And if they can operate in biddable environments where people just have a greater ability to choose, but they also can make commitments and intentions to spend a very large scale while at the same time, getting the right to choose. So we'll see more and more of that in years to come, but the trend is definitely towards biddable. Thanks for the question, Tim.

Thanks, Jeff.

John, we have time for one more question.

Absolutely. The next question is from Brian Pitz with BMO Capital. Please proceed.

Thank you. Jeff, a lot of discussion around bringing demand to CTV, but any thoughts on timing around bringing more demand to Retail Media and how you see partnerships developing there? And then maybe separately talking about LinkedIn post, you recently said advertisers need an identity strategy and publishers need an identity and authentication strategy. How does Trade Desk best position itself to enable these strategies and transitions essentially for both sides? Thanks.

Yes. Thanks so much. So on the Retail Media side, there is definitely an opportunity for us to continue to drive spend there. And I've mentioned before that I believe the two greatest threats to walled gardens and the bringing down of their walls are number one, CTV for all the reasons we've talked about on this call, and number two, Retail Media. And the Retail Media is important because it changes the measurement game. So a few times in the prepared remarks and in the comments I've mentioned some of the flaws of measurement inside of walled gardens. But if you're actually connecting the ads that you showed to a specific user and then the purchase that they make later, it becomes much more irrefutable to show the connection between the ad shown and the purchase. And Retail just has tremendous promise for that. And not only is that good for advertisers, but that is also good for retailers who are all trying to find their way to compete in this digital world and to compete with the Amazons of the world. So our partnerships with companies like Walgreens and Walmart and Target and so many others are just great examples of the opportunities that exist in Retail Media, and we have merely scratched the surface. And I'm so proud of what we've done with those companies and the others. You're right. I did mention that every advertiser should have an identity strategy and that strategy can't just be cross your fingers and hope that cookies never go away, and for publishers, they need to have an identity strategy and an authentication strategy. And what I mean by that is when it comes to authentication, if you're not in CTV or audio where 100% of your users log-in, and that's not true of all CTV players, but that's true of most of them, then you need to find a way to get them logged in and to address consent, in other words, ask them, if you can provide them with personal content and create a quid pro quo that makes it worth it. Everybody needs to be developing that strategy, especially if you're in browser right now. So they've been given a bit more time, but they need to use that time to act. And even if Google does nothing more, you have to use that time to act simply because things like UID are so effective for CTV and audio and other channels and for those that have log-ins even in the browsing world that it will make it so that we prioritize that media over those that are just dependent on cookies or something else. So naturally, over time, it becomes very important. And this is more important for those in journalism than anywhere, just because they tend to move very slow and not be technological innovators, so it becomes really important that they respond to that. And advertisers, if you're not putting your data to work with an identity strategy, in other words, how can I use my data in a consumer-friendly way and privacy-centric way, how can I put my data to work so that I can do better marketing? If you're not thinking about that and honoring the sort of sacred relationship that you have with your customers, then you're doing it wrong, and you're likely to lose to those that are doing that. So there's a fair amount of pressure on both buy-side and sell-side to sort of get with the times. And all of this change is happening so fast, but all of that has created opportunity for us at an unprecedented pace, and that's part of the reason why we're so bullish. And when you add the deployment of what I think is our best product yet and certainly the product that I am most proud of our team for shipping in my whole career, not just at The Trade Desk. In Kokai, I just think we have such a bright future ahead. So thanks for the question and for the discussion today from all of you.

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