U of Digital Newsletter - 9/5/24 (free)

August 28th-September 4th

Below is a roundup of last week’s notable industry news, with summaries and our opinions. Google is going to antitrust court next week and the buzz (and evidence) is building. But for our top story, let’s discuss a little big rumor about The Trade Desk’s CTV ambitions…

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Top Story 👁️ 

Scoop: The Trade Desk is building its own smart TV OS
Source: Lowpass Newsletter (we’ve never heard of it either)
August 29th, 2024

Summary: Independent demand-side platform (DSP) The Trade Desk is reportedly developing a smart TV operating system that would compete with the likes of Roku, Google, Amazon, LG, and Samsung. The Trade Desk is said to be pitching the TV OS to device makers that don't want to use their competitors’ TV operating systems—and is offering more generous revenue-sharing splits and flexibility in designing the interface. So far, one hardware maker has apparently signed on, which may lead to The Trade Desk's TV OS appearing on a device for the first time as early as 2025.

The OS is based on the Android AOSP, which could make it easier to build the system and install apps. However, TV makers may run into issues with Google. Amazon's Fire TV OS is also based on the Android AOSP, and Google didn't let Amazon work with some device makers for years, though the two have since patched things up.

The Trade Desk reportedly started secretly working on the OS during the pandemic. Connected TV is a major growth driver for the company, and it is said that the DSP was concerned that it would get locked out of the smart TV ad market by platforms that handle sales of CTV ads appearing on their platforms. Owning the OS also creates access to more CTV inventory and data that can be reserved for The Trade Desk’s advertising customers. 

Opinion: No legitimate news outlet has confirmed this story yet. So it’s just speculation at this point. But it’s fun speculation, so let’s get into it!

On one hand, this makes no sense at all. First off, the CTV hardware and software business is an uber competitive, consumer-facing business and The Trade Desk is getting a late start: 

They have no consumer-facing appeal, so adoption would have to come entirely through distribution deals with TV manufacturers (note: major manufacturers like Samsung and LG already have their own OSs, and smaller manufacturers like Hisense and TCL already have deals in place with other OSs, so the pool of prospects is limited). Secondly, what happened to “we’re the agnostic DSP” and “we’re the antithesis to the walled gardens like Google who own inventory and data and preference it through their ad tech?” We’ve been saying for years that this Trade Desk narrative is hypocritical, given their evolution into becoming a data reseller, an ID purveyor, etc. But owning their own CTV OS would truly be the nail in the coffin for TTD’s “agnostic DSP” claim. And would put them on the same path that is leading Google into antitrust court next week. 

On the other hand, this makes tons of sense! CTV is the primary driver of growth in digital advertising, and for The Trade Desk, having their software installed in smart TVs would give them proprietary access to CTV inventory (from the apps that they feature on their platform) and data (demographic data, viewership data, ACR data, etc). 

But the question still remains: how will The Trade Desk “get there”? CTV devices and OSs have traditionally come at this market from the “let’s get a critical mass of consumers and then monetize through ads” angle. So they built a consumer-facing product first and then tried to stand up an ad business. But the consumer-facing TV OS today has become a commodity. They all look and feel the same. It’s the “easy part”. Which means the only meaningful differentiation for these businesses is now a) how much scale they currently have and b) their ability to monetize their scale through ads. While TTD doesn’t have a), they can do b) better than anyone right out of the gate. TTD is coming at this market from the “let’s get a critical mass of advertising demand and then launch a TV OS” angle.

So once their OS is live, TTD will be able to offer more advertising $$$ upside to manufacturers and publishers, undercut other OSs, and shortcut their way to scale.

Of course, they could just take the ultimate shortcut to scale:

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That’s It For This Week 👋

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