1. The Trade Desk (TTD) -- Disney & Microsoft
a) Disney
The Trade Desk signed a new deal with Disney to deepen its clients' abilities to programmatically target within the iconic content library. Disney’s vast data ecosystem will now be infused into “Unified ID 2.0” (UID2) which will free advertisers to merge their unique 1st party data with The Trade Desk's data scale Disney’s value-added insights. Together, the two will now allow advertisers to leverage all available data through The Trade Desk’s platform which augments targeting efficacy and precision.
Not only does this allow The Trade Desk to gain a more intimate and valuable partnership with arguably the most relevant content company on planet earth, but it gives them another foothold into the world of live sports. While linear TV cord cutting in favor of streaming is in full swing, live sports is perhaps the final domino to fall in the value equation. The vast majority of the most-watched shows in the United States are live sporting events. Now, with The Trade Desk securing the Disney partnership (which includes ESPN+ and all of its rights), the company continues to find itself in an ideal spot to be the primary demand-side beneficiary in the streaming revolution. Disney wants 50% of all its ad impressions placed programmatically in the near future and will use The Trade Desk to make that happen.
b) Microsoft
Netflix announced a new partnership with Microsoft to help power their advertising platform. Just like potential relationships with NBC and Roku will not prevent The Trade Desk from profiting off of Netflix's pivot, Microsoft won’t either. To create the most competitive bidding environment, Netflix will need to collect the maximum number of bids. The Trade Desk represents virtually all of the companies placing these bids as it instructs them on pricing, timing etc.
The partnership utilizes Microsoft’s "Xandr" ad-platform for Netflix’s planned ad-supported infrastructure. Per the Current (The Trade Desk’s Blog), this was a natural choice considering that other options like Google have inherent conflicts of interest. Xandr will help marry more data sources with Netflix’s built-in scale to allow for more effective programmatic targeting. Importantly, this does not mean The Trade Desk is getting shut out of Netflix’s ad-tier. It is something that The Trade Desk is openly excited about as the Microsoft agreement is a clear sign that Netflix is embracing the open internet approach to advertising. With Xandr being among the first adopters of UID2, this is not something to be feared by TTD shareholders. Xandr will funnel demand through its programmatic ecosystem and The Trade Desk is a prominent piece of that.
2. CrowdStrike Holdings (CRWD) -- Case Studies
a) Tuesday Morning
Tuesday Morning -- a national discount retailer -- transitioned its legacy tech stack to CrowdStrike’s Falcon platform in recent months. The company’s IT Director -- Tom Sipes -- praised the platform for seamlessly locating and nixing potential vulnerabilities with no developer or operational down time. Here were the other highlights:
- Eased the burden on its small security team via enhanced automation.
- Reduced costs by well over $1 million with no staff cuts.
- “Increased visibility and streamlined operations.”
“In terms of improved productivity and adding business value, the difference with CrowdStrike is night and day.” — Tuesday Morning IT Director Tom Sipes
b) InfoCepts
InfoCepts is a global data analytics firm that needed to re-vamp its security stack. It chose to do so with CrowdStrike and these were the highlights:
- No worsening of device performance post Falcon implementation (unlike with substitutes).
- Limited false positives.
- Reduced incident response time from hours to minutes.
“The pre-purchase pilot was so good, we feel in love with it. It showed us that CrowdStrike was the right partner… CrowdStrike is bulletproof and our users love it…. CrowdStrike improved our security by 100%.” — InfoCepts CIO Rajendra Jodhpurkar
3. Match Group (MTCH) -- The League, Google & Garbo
a) The League
Match Group’s new CEO, Bernard Kim, has made his first M&A splash at the dating and social discovery company. Match is buying an exclusive dating app called The League for terms not yet disclosed. The League’s exclusive niche uses an admission-based model requiring user applications and a thorough vetting process. It seeks out highly-motivated users and matches individuals based on career-goals and ambitions. There is a free tier, but also a subscription where users can double their match frequency. It has around 250,000 users today.
Match Group has made M&A a central part of its success for years and years. Apps like Hinge and Plenty of Fish -- both inorganically acquired -- have become integral pieces of its operations. And with its strong balance sheet and cash flows, there’s no reason not to remain acquisitive for the right price. This is why I was so encouraged that Bernard Kim was brought on to replace Shar. His track-record of explosive growth and successful M&A integration at Zynga makes him a perfect candidate to conduct a thoughtful M&A path here. This is step 1.
b) Google
Google responded to Match Group’s Google Play lawsuit calling it a “cynical attempt” to use Google’s scale while side-stepping fees. Despite this, the other recently announced settlement between the two allowing Match to plug in to 3rd party payment systems (and thus to sidestep the app store fees) remains in place. But clearly this relationship is far from amicable.
c) Garbo
Match Group is expanding its successful background check program to more of its apps. Through its Garbo partnership, where Match is also an investor, the company allows users to seamlessly search a user’s public records; now that will be doable through Match.com and Stir. Subscribers to these two apps will get 4 of these searches per month with free users getting 2. The feature is also available on Tinder for a few dollars per search. As in-person meeting comes back with full force, this is how Match plans to keep its users feeling safe and secure while also collecting more revenue.
4. Duolingo (DUOL) -- Accolade & Analyst Notes
a) Accolade
AdAge named Duolingo as one of its hottest and most successful brands in creative, social marketing. This is encouraging, but not all that surprising considering Duolingo’s impressive Twitter and TikTok engagement that I frequently discuss.
Social media is a key driver of Duolingo’s word-of-mouth growth engine, accounting for 90%+ of its new users. Happy customers are frequently nudged to share their experiences with friends, and this fuels user growth via the personal endorsements. Friends posting their experiences with a product is inherently more valuable marketing than a 3rd party, “take-my-word-for-it” approach. Perhaps this is why we’ve seen the company drastically cut marketing expense as a percentage of revenue while still outperforming on top line growth.
Economically efficient expansion like this is only possible with beautiful, compelling products; that has been the central Duolingo focus since day 1. It’s more interested in spending that next dollar on R&D to create a better product vs. on advertising. If the company has its way, users will be so delighted with the product that they’ll organically spread the word for free. That’s the goal. It uses its leading scale to effect data-driven split testing to craft the best product vs. guessing at it.
b) 2 Analyst Notes
KeyBanc downgraded Duolingo during the week on valuation concerns. At 126X 2023 EBITDA, this is a fair and valid worry -- but I would remind everyone that Duolingo has shattered estimates in each quarter since its public debut. Still, expensive is an accurate classification as it has held up remarkably well over the last several months. That’s why I trimmed the position last month and would be glad to add that piece back at lower multiples. Conversely, Raymond James channel checks suggest more upside to 2022 Duolingo forecasts via robust traffic.
5. Olo (OLO) -- Case Study
One of Olo’s modules is called Olo Network. This allows menu items to be displayed across a large roster of 3rd party partners and marketplaces and includes “Order with Google through Olo.” It does this while allowing brands to stay in full control of their customer experience and data -- which is an exception to the rule in this industry.