Netflix Partners with Amazon: A Blow to The Trade Desk's Fortunes

Troubles seem to be ongoing for the advertising technology firm The Trade Desk.

In a development announced on Wednesday, Netflix revealed its new collaboration with Amazon. This arrangement allows advertisers to deploy Amazon's demand-side platform (DSP) to secure advertising spots on Netflix starting in the fourth quarter. The DSP system by Amazon is a self-service tool that enables advertisers to strategize and purchase ads across Amazon’s expansive media landscape, including external websites and applications.

The DSP offered by Amazon directly rivals The Trade Desk, a prominent independent player in the advertising tech market. Over recent years, Amazon has quietly invested in its DSP service with a vision to surpass both The Trade Desk and Google, aiming for the industry-leading position as the world’s premier DSP operator.

Amazon has been progressively capturing partnerships with major media outlets that once gave The Trade Desk a competitive advantage in the rapidly expanding connected television sector. Illustrative of this shift, Amazon has recently sealed agreements with other major entities in this space, such as Roku and Disney.

On Wednesday, financial analysts at Morgan Stanley downgraded their recommendation on The Trade Desk's stock, reducing it from 'overweight' to 'equal-weight' and adjusting down their price target for the company's shares from $80 to a more conservative $50.

Impact on The Trade Desk's Market Presence

The Trade Desk's stock price took a significant hit, dropping more than 10% in trading on Wednesday. The shares have seen a decline of over 60% since the beginning of the year.

CEO Jeff Green of The Trade Desk remarked in their August earnings discussion that he does not view Amazon as a direct competitor. However, this perspective seems to have limited impact on swaying industry analysts’ opinions.

Industry experts from Lightshed Partners have issued statements suggesting that The Trade Desk is clearly facing intensified competition, particularly in light of the Netflix-Amazon partnership.

A representative from The Trade Desk expressed that the company has consistently supported an open and competitive market setting. The spokesperson highlighted that The Trade Desk often benefits from being an early collaborator with influential platforms, reflecting its commitment to fostering an open industry ecosystem.