The Motley Fool Interviews The Trade Desk Founder and CEO Jeff Green

Meet Jeff Green -- the founder, CEO, and chairman of The Trade Desk (NASDAQ: TTD), a company that embraces the long-term goals and vision that Foolish investors are sure to appreciate.

In this interview, Tom Gardner, Andy Cross, and Aaron Bush speak to Jeff about what his company does, its culture, and the massive international opportunity The Trade Desk will be pursuing in the coming decades.

A full transcript follows the video.

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Tom Gardner: Yeah, I'll just start by saying Jeff, thank you so much for joining us. We've got a couple of Fools here ready to ask some questions of you. But I think maybe just to kick it off, just in your words, The Trade Desk's purpose, and sort of the primary way you think about the long-term strategy of the business?

Jeff Green: You bet. So our purpose is to actually fund media. And the way that you fund media is by making advertising better, and creating a better monetization engine for all of media. And for us, that specifically means that we service the advertisers in the agency. So we're a buy-side platform, as they call it, which is a set of tools that helps agencies and advertisers buy all-digital media, so whether that's Spotify or Hulu, or The New York Times, or Motley Fool, to essentially buy the ads on those sites using data and to make certain that you get the right ads in front of the right customers. So that's what we're after, and that's what we do.

Aaron Bush: Awesome. And this is Aaron Bush here. I'm an analyst here at the Fool. I think it would be fun to talk about people and culture a little bit. So I'm just curious, for your typical employee, what's it like to work at The Trade Desk? And from a leadership perspective, at this phase of your growth and hiring, how do you approach culture building?

Green: Yeah, so the most important steps that we made in building a culture were when we got started, at the very beginning. And you know, we said back then that we were going to have, as we still talk about today, a zero-hassle policy. Where it wasn't enough to be good. And a lot of us came from Microsoft, and there were times where our culture there could be a little bit toxic, and it was partly because there was an attitude of, "Hey, if we just get smart people in a room, they can solve problems, and differences will eventually work themselves out." But if you're not careful, you can create a fairly political environment with that approach.

And so we said people have to be smart. Those are table stakes, and they have to have an attitude of contribution, but they also have to come with a spirit of collaboration. And so we've been just very selective about the team that we've brought on, and at times, we've even limited our growth, because we wanted to make certain that we hired the right people.

And as you fast forward to today, we have over 20 offices around the world. And even though we have just under 700 employees, they're pretty divided up in all of those different groups, and so all of them feel like they have the resources of a $2 billion-plus market cap company, but they have the agility of a start-up. And we ship code every single week, those that are writing code, which is our biggest team, is our team of engineers. They know that unlike in other places that they've been, that when they write code, and ship it every week, that it's going to make money for the company, and they know that they're making millions of dollars for the company and that they matter. And I think sometimes the worst thing that you could have for your culture is a group of people who aren't sure if they matter, or if they're actually contributing.

And so, with a very big mission to fund media, and to change the way that advertising is bought and sold, as well as an environment where everybody knows that they matter, I think we've developed at least the most amazing culture of any company I've ever been a part of.

Gardner: Over what time period do you evaluate the bigger decisions that you and your team are making, and that people are making at the company? What's the time frame for accountability? Obviously there's so many different decisions being made, so, I mean the larger strategic choices you're making, and do you think that that will change, or has changed already in any way, given that you're now public versus private. Are you having to have different conversations about the time frame of the decisions you are making because of that shift?

Green: Yeah. So, not at all. So the first thing I want to emphasize is that, you know, even in the way that we structured our company as it relates to dual class stock, we structured everything in our IPO to make it so we could focus on the long term. And we had a meeting with our employees the day that we flipped our S-1 public and said, "We will not change the way we run our business, and we've always run for the long term."

In the very first presentation I ever made about The Trade Desk to venture capitalists, to raise money for our seed round, there was a slide where I said I believe we're building the business for the next 100 years. So there are parts of our strategy that we think will be around for 100 years, and we want to optimize for that. And we talked a lot about the fact that advertising is a $700 billion industry and will soon be a $1 trillion industry in less than 10 years. And so we're optimizing for the long term.

But of course you can't measure every decision in 100 years! There are a lot of things that can pay dividends today. So we just try to break them down by when they can have the impact, and when they can be measured. So there are parts of our campaigns, and our efforts and strategy, that can be measured today, and there are parts that can be measured years from now. I tend to spend a lot of my time thinking about the long term and making sure we're heading in the right direction. You know, my COO, I try to keep 80% of his time focused on the next 12 months or less. So that it's all about execution. And those guardrails make it so that his team has measurement and evaluation to make certain that they're measured according to those timelines, so they're all within that 12-month window.

Additionally, we make certain that on the business side, anybody that touches clients, between 25% and 50% of their cost comes essentially as a percentage of revenue or gross spend, so that they can participate in what's happening today. And it makes it so that they all operate like portfolio managers that are going where the opportunity is. So with those incentives, and with the right culture and vision that they all believe in, it makes it easy to sort of surface the metrics we should be measuring to make sure we're doing the right thing.

Bush: Great. And I mean, just reading through your calls lately, you guys are doing a fantastic job expanding internationally it seems, and it seems like that's a very core piece of your long-term strategy. When it comes to international expansion, what excites you the most about that, and what maybe have been some of the larger challenges that you've had to overcome?

Green: I am so excited about just the reality of advertising, which is, of that $700 billion pie, two-thirds of it, roughly, is outside of the United States. And nearly all of the growth in the world, if you're just looking at a GDP basis, is happening in Asia. And so, I am super excited about Asia. I am so excited by the growth that we've seen in Japan and Korea and Singapore and Hong Kong. And now we're just getting started in China, which if it's not already, will soon be the largest media market in the world. We're super excited about those opportunities.

But you know, we just put up almost 100% growth year over year in London, which was the second office we opened, so that's been around for us for almost six years. So to have growth rates like that, just incredible. We had well over 100% growth from Germany. And earlier in the year we opened Spain and France, and those together were both growing by over 500%, so just super excited at what all of those represent, which you know, our business today is right around 85%, 86% of our business comes from the U.S. And given that two-thirds of the pie is outside of the U.S., just all of that international footprint just represents upside. And so I think it's the most untapped potential, just because of less competition, a little bit earlier stage, and us having a track record of just really growing.

Bush: Now speak . . .

Green: Now you asked, like what are the big obstacles? The single biggest obstacle, it's just execution, across really, every time zone in the world. There are times that we need to have calls between our Australia office, our Singapore office, our U.S. office in L.A., our U.S. office in New York, and then one or two of our teams in Europe, for instance for one of the big multinational brands. And coordinating that -- it's just hard. And because we represent so many global agencies and so many global brands, the coordination can take work. And then us, just making certain that we have the same standards and employees, and in a way, like maintaining corporate culture across very different cultures around the world, takes a lot of work. It's different than just having an office in Denver, or whatever.

Andy Cross: Jeff, this is Andy. I'm curious on what, you say you opened an office in Spain, or you opened a business in Germany. Just talk to us very high level on kind of what that entails. Is it new engineering staff, new support staff, sales staff?

Green: You bet. So one of the things that's really great about our business, and you can tell from our financials, is that we have just a tremendous amount of operating leverage. And because in spend, we're getting literally millions of dollars per employee, when we hire new employees, we want them to be super creative, but we also to create a culture in each of these offices that has a sense of autonomy. Like one of the biggest mistakes that I think American-based businesses make is they put people in international markets, and they make them effectively second-class citizens by saying, "Oh, send us money if you can, but we'll be doing the heavy lifting over here." We say all the time to our team, that we are not an American company -- we are a global company that happens to be based in the United States.

And that means that in every individual office, we're not just going to put a few salespeople, which is highly common for American companies to do in their "satellite offices". We look at them as the core of the business. To some extent, given the growth that will come from international markets for us, they are the future of our business. So we try to put engineers in every office. We try to put salespeople in every office. We try to put account managers and trading specialists so that they can train the client. Really, every function is there. The only thing that isn't, is we centralize everything in finance, in either the U.S. or London today. But even that is becoming slightly more distributed as we continue to grow. But we try to put every function in every office, which means when we open an office, we're racing to get to a dozen people as quickly as possible.

Gardner: I'd love to hear your take on privacy as it relates to your business, and maybe with a little bit more specificity on your view on the Intelligent Tracking Prevention from Apple, and the risks that poses to you and the workarounds that have been created. So broader umbrella is privacy, and then within that, the impact of Apple's Intelligent Tracking Prevention.

Green: Sure. So you know, we have worked really hard to lead the way in respecting consumers' privacy. So in the broadest of strokes, I think every internet consumer understands to some extent, although perhaps not the full extent, that as we share data, which sometimes is our email address or things that we're interested in, or our photos or whatever, on Facebook or whatever, that as you exchange some amount of data or insight, in exchange for that you get all these free services that are effectively the internet. And that data, and then receiving and viewing ads, is what powers the internet. And the data is what makes the ads more relevant and creates a better ad experience for everybody.

But in order to make that as healthy as possible, we of course have to make certain that we respect consumers' privacy. And make sure that we never do anything that loses trust with the consumer. So what we specifically do, is just make certain that we're focused on anonymized data, so it's not tied to an individual. We don't keep track of anybody's email addresses, or anybody's name, or anything like that. And that the insights that we use don't have anything to do with really sensitive areas like aspects of their personal health or things like that.

So by doing that, and just focusing on things like, you know, their travel interests or the categories of advertising that would be relevant to them, instead of doing anything that's creepy or wrong, we're instead just helping create a better internet and a more relevant experience.

What Apple has recently done, is they of course have created this Intelligent Tracking where they make cookies less persistent for the internet advertising companies. There's some debate as to how rigorous they'll allow other cookies or other tracking to come into play. I personally don't believe it will be a significant issue, and the reason why is because the way that we set cookies and target online, meaning making the ads more relevant, is dependent to some extent on these cookies. And when they get eliminated, it makes the internet experience less robust, makes it not as good. And it can make it so individual websites won't work well, if they're too aggressive in what they block. And if they're not aggressive, then it doesn't have much impact.

Because if they're very aggressive, it will make the internet experience worse, and in my view, that will accelerate the adoption of things like Chrome and alternatives to Apple web-browsing products, which don't have much market share today anymore. If they're aggressive, it will be bad for Apple. If they're not aggressive, it doesn't have much impact. They implemented it over a month ago and so far, it's had almost no impact to us, which I think is strong data to suggest that what we predicted all along would be the case, which is that it wouldn't have much impact on our business or our ability to continue to target in a consumer-friendly way.

Bush: Speaking of the data, you mentioned on your recent conference call that you're serving 9 million ad requests per second, and that you've only scratched the surface of using that data. Are you making an investment in machine learning to better leverage that data and make that available to your clients and advertisers?

Green: Absolutely. So there is absolutely more that we can do in machine learning. I mean, I think, you know, AI and machine learning are the buzzwords of 2017. But you know, they are the future of the way that machines can learn from very large datasets. So it is the perfect case for us to deploy machine learning as we're looking at most of the ad requests on the internet in that 9 million-plus every second.

So, it's absolutely the case that we've just scratched the surface. There's so much work to do. But as we mine that massive data asset, to learn more so that we can create a better internet for consumers, we should use every tool we can, which includes machine learning, and we have to make it available to our agencies and advertisers in order for them to be as competitive as possible.

Bush: So you guys, it seems are setting a new standard for ad transparency, but do you ever face any issues with bad actors among your client base? Just people trying to rig the system, or game the system, I should say, in any way? And in either case, how would you work to tackle misaligned behavior?

Green: Yeah. So it's not a huge percentage of the internet. There is a small percentage of the internet which is, we can call them bad actors. People that are basically falsifying content. And so, our clients are the agencies and advertisers, and because in order to participate in the ad ecosystem you basically have to pay money to show ads, most fraudsters are not the ones paying, and therefore, we're not concerned about our clients being the bad actors.

Where we spend a lot of time is on the publisher side, where there are companies out there that will either pretend to be quality sites, like some hacker in Ukraine may put up a website that he's trying to trick us into thinking it's actually CNN, and trick us into actually buying it, and even trick us into paying for the ads that we thought were on CNN. And then when he gets paid from that, he's obviously piggybacking on, essentially lying to us in terms of what that was and then has tricked us and the ad exchange who sold it to us.

So we're very focused on deploying as many tools as possible to make certain that we don't ever fall victim to those sorts of players. And the way that we do that is we partner with cybersecurity firms like White Ops, where we announced a big partnership with them a few months ago. And our mission, our joint mission, is to eradicate that sort of fraud. And it's not significant today, but we truly believe that we can get them to move on to someplace else. Not that we can get rid of fraud or evil on the internet -- we can't. But in terms of ad fraud, because these ad exchanges are built on transparency and because there is so much data and work that we can do to make it hard for them, we think we can get them to crawl over to some other corner of the internet and leave the ad portion to us.

So things like that, things like fake news, to make certain that we don't ever run on fake news. You know, earlier this year we declared war on fake news by saying we were going to defund it, by making certain that we don't run on that. And so we've deployed a bunch of efforts to make certain that we don't run on that. Those are the sorts of things that we're doing to steer clear of bad actors.

Gardner: You mentioned on the most recent call how you are always evaluating how to grow responsibly and deliberately, like what pace to go for, how aggressively to reinvest. So take this from the position of an outsider, ignorance from the balcony as I look at your business, which is a position I love to take frequently. If you have 95%-plus client retention, and are generating the EBITDA and the cashflow that you are, and have the balance sheet that you do at this early stage in your public market journey, why not be more aggressive in signing up new clients?

Why not push that side for, you know, we're super, super long-term investors at The Motley Fool. In the recommendations that I've made in The Trade Desk, there's no question that I will hold for at least five years in my methodology and our methodology at The Motley Fool is often like 10, 15, 20 years. So what the bottom line numbers look like in the one, two, or three years are much less significant to us than the size of the opportunity that you've captured over the next five, 10, 15 years. So when I see 95% retention rates, I'm like, hey, should you all be more aggressive in gathering new clients?

Green: Yeah, so there was a number that I heard from Dun & Bradstreet like 10 years ago that really stuck with me as we were creating our business model. And I tend to think of things from a very macro perspective, and I think of the macroeconomic vectors as the things that, just we can't change, and that we need to just take those into account to build a business. And so one of them about advertising, that we made a big bet on and that many people did the opposite, many of our competitors did the opposite, was to bet on ad agencies. And we just believed that there was gravity around those that couldn't be changed.

And we also bet on that Dun & Bradstreet fact that I was about to mention, was that, I think the number was, it's nine times more expensive to go get a new client than in it is to retain the one you have. And that's just general across all industries. I think in our industry, it's even more expensive, especially when you consider that there are only seven major global holding companies, and that they power, it depends on whose numbers you trust, but let's call it a third to half of all advertising dollars. So it's just too expensive to lose them. And then of course there's individual agencies inside of all of them, and those change. But when you take the esoteric nature that is programmatic advertising, and digital is also esoteric, although not quite as much, the amount of time to ramp up, the amount of time that it takes to get somebody smart to use our platform, it just takes so much time that if we were churning customers, we would lose a bunch of the operating leverage that we've built into this business.

So I continue to say, let's invest as aggressively as we can. And, you know, from a big picture, when you see that last year we roughly had 450 employees at the start of Q3, and we have 650 this year, that's a huge investment. And a huge amount of those go internationally. You take the fact that we've basically spent a third of our engineering resources on products in 2017 that won't pay dividends until 2018. 2017 has been the biggest investment year that we've ever had. And we're going as aggressively as we possibly can while still looking for opportunities to do more.

So at the end of last quarter, I felt like I was essentially apologizing to investors for producing too much EBITDA, which is effectively dollars that I didn't reinvest into the business. So we were excited to do our first acquisition in this last quarter, spend just a little bit more of the EBITDA, but I still would like to invest more aggressively. But we can't do it at the risk of our culture and for short-term gain, without the long term. So the fact that you guys think about things with such a long-term horizon, is exactly the same way that we do, which is at times why we've made choices not to invest in something that could be shortsighted.

Cross: Jeff, speaking of that, looking at the long term, one of your large client bases are ad agencies, more than half your business. Talk a little bit about, they seem to be going through a little bit of an existential crisis here, or at least certainly there's a lot of potential disruption going on in the ad agency model. I mean, the Cannes Festival from last year seemed to be pretty dour. So just talk about, if you are an ad agency looking at the next five years, what does their business look like, and how do they have to evolve to benefit from the trends that The Trade Desk is playing with?

Green: Yeah, so let me start by just dispelling a myth. So a lot of people are saying, "Hey, everything is being brought in house, and brands are doing everything on their own." You know, I spoke to all of the marketing team at one of the largest telcos in the U.S. just a couple months ago, and before a presentation, their head of programmatic said, "Can you just reinforce to the team that we still need all of our agencies? Because a lot of them think, 'Oh, programmatic, it'll make it so machines do everything. And then we don't need to interact with our agencies anymore, it'll reduce the number of touchpoints.'" That's not what has happened inside of digital. As it's gotten more complex, the need for human judgment, and especially to interpret data, has gone up, despite all the investments in machine learning and big data and all those exciting new frontiers.

So with few exceptions, the biggest brands in the world are still using agencies and plan to continue using agencies. However, the agency model where they used to bill by the hour, and you know, you rewind really even just a decade, media buying was just order taking and order placing. You called up The New York Times and said, "How much?" And they'd reference their rate card, and they gave you a price. And you said OK or not. In an era where every ad can be priced separately and there's all this data used to figure out what something's worth, and there's a different level of utility to every single buyer. But when you add that many variables, as well as, in digital it's not that hard to create more supply, versus what it was like 20 or 30 years ago. That means that the media buying departments of agencies have had to transform, and they have to get a different type of person to make a data-driven buy, versus to place an order. And it also means they have to figure out how to price it to their clients.

And so I would say it's not just the agencies that are going through an existential crisis, it's also the brands themselves who are interacting with those agencies. And as I say to them all the time, make sure that you pay your agency enough so that they can actually do well. And so one of the mistakes that brands will sometimes make is they'll beat up their agency to get a rate that is as close to zero as possible, but then be upset if the service isn't good. "I want it for free and I want it to be good." You know, we would never think of employing people that way. "Oh I want you to work for as little as possible. So what's the least amount I have to pay you for you to still show up every day?" That is not the way to get the most out of people.

And so as we see brands and agencies trying to figure out what the right model is, there is definitely an understanding between the both of them that they need each other. And so it is definitely a time of transition, but it's a time of transition which is, I think, the most exciting in the history of advertising, which is we finally get to make data-driven choices, and everybody's better off for it. But the opportunity is coming so fast, and the need to change, from all of them, is so great that it's hard. It's hard for all of them.

Gardner: Could you explain to a layperson that might listen to or read this interview, the relationship between your work and the walled gardens of Google, Facebook? Could you explain the dynamics of that to somebody who understands advertising but doesn't quite understand the strategic dynamics of those forces?

Green: So Google, and for the purposes of programmatic advertising, just because search behaves a little bit differently, let's just talk about YouTube, and then Facebook. Because YouTube and are the biggest walled gardens.

And so what both Google as a company has done well, as well as Facebook has done really well, is they've gone to advertisers, especially medium and small advertisers and said, "Let me make it easy for you to buy ads on Facebook," to use an example. And they created on-ramps that make it so that you can type in titles and descriptions, easily upload images, and if you don't have images, they'll provide them. And you can start spending money in two or three minutes.

And what Facebook focuses on, same as Google, is monetizing And Facebook had contemplated for a long time, they even tested for a while, the idea of letting demand come from other players. But they decided that instead of doing that, they were going to make it so that the only person that you could really buy Facebook from was them. And with a few exceptions, and when those exceptions exist, they don't really give them any data to make relative decisions. They don't make it easy for you to compare one site to another.

And because Facebook and YouTube don't make it easy to compare one site to another, we look at that and say, "If I can't grade the performance of Facebook against the performance of Spotify or The New York Times or Hulu, or Sony's Crackle, or Yahoo, or AOL, then I can't really know the value of Facebook." And since the only way that Facebook really allows media buyers to buy them is when you buy directly from Facebook, as well as you let Facebook do the measurement as to whether it was good or successful, we've chosen not to buy in the limited ways they've made available, and that becomes earmarked in the advertising community as a walled garden, a place where you can only buy it through them. And we isolate all of our buying to the rest of the very big internet. And because I don't believe that that is the way to optimally monetize a website, meaning generally speaking, open markets win, and when a market is open you generate the most amount of demand, and when you get the most amount of demand is when you monetize optimally.

I think long term, there are no walled gardens. The reason why Google and Facebook kind of operate walled gardens today, is because when they say, "Hey you have to buy it through us," they're big enough today that people will say, "Okay I'll do that." And because they've done such a good job of making the on-ramps really easy, it is a good place for people to start and that is often where people start advertising. But as the rest of the internet becomes more easily accessible, as it becomes aggregated through platforms like ours, we think walled gardens go away. And eventually all advertising gets accessed and bought on a relative basis instead of in silos. Because silos are one of the least effective ways to advertise.

Gardner: To what extent do you think the walls come down, because the competitive pressures and the market, you're able aggregate a new force out there? And to what extent do you think it will be the result of regulation?

Green: I don't know the role that regulation will play in making the walled gardens stop. I think it's just, the principles of economics that make it so that's the case. It's just better to have more demand.

But then also, because the rest of the internet operates with a higher level of transparency, for the ads that any advertiser buys on most other sites, they have way more detail on what they're buying and what they're selling, how it performed, and how it performed on a relative basis.

So I think as we get bigger, and as the rest of programmatic gets more organized, and it does take a lot of work to coordinate the measurement of millions of websites instead of just one, so the one advantage that walled gardens have is that because they control essentially that small ecosystem, I say small, I mean Facebook is like 20% of the ads on the internet so it is big enough to move the needle, and it's all within their control, so they can make choices that they can control the outcome. But as the rest of it gets more coordinated and gets more efficient, then sort of grading things on a relative basis, and enabling real price discovery, which I would argue those walled gardens don't enable for buyers, because they don't give enough data for them to actually know what they're buying and selling, by enabling real price discovery on the rest of the internet, that economically puts pressure on them to do the same thing.

Andy: Jeff, this is Andy. How high do you think your mobile business will eventually cross over?

Green: It's really hard to put a ceiling on that. I mean, you know we were really excited in this last quarter to report that our mobile business, when you add all the forms of mobile up, represented over 40% of our business. That means that it's bigger than our display business, which, if you rewind six or seven years, display was almost 100% of our business. That's where really programmatic advertising was tested and grew up. So to go from that to now mobile being the lion's share of the business, you know when you look at that $700 billion pie that we think again is marching toward $1 trillion as it's growing roughly double the pace of GDP, we're just going to keep growing alongside of it.

So as a percentage, if you look at, like, how much time is spent on mobile relative to other devices, it seems like a bit of a war between your phone and your TV in terms of where people are spending all their time. And of course you have to put audio mostly on your phone, and which channel you call audio also affects how you divide that up. But we think as a percentage, television and mobile will be competing with each other for as far as we can see in the future, as being the largest channel. And we just need to make certain that we continue to keep pace with the shape of the sort of global, more mature pie as things are growing. And then we get to get as much of that business as possible.

But we're excited that, and maybe the most bullish things that we can share about the channel mix, is really just that, you know, we're getting more than our share of connected TV; we're getting more than our share of digital audio; we're getting more than our share of mobile in every category, and perhaps the most exciting of which is mobile video. Because we believe that those are the channels that represent the future, and that's where consumers are heading, and we think in that 100-year plan, at the end, those are the channels where the most effective advertising is done. The fact that we're getting more than our share in all of those, by so much more than we are the rest of our business, I think is one of the most bullish indicators of our entire business.

Cross: Just a quick follow up to that: Talk a little bit about programmatic television seems to be just, not different entirely, but really a different flavor of the other channels. Just talk a little bit about the excitement but also the challenges of programmatic television.

Green: You bet. So just to touch on the excitement, there's not a channel that I talk about, and especially when I talk about investors or partners, or everybody when we start to talk about TV, they take off that investor hat or they take off that agency hat, or even their brand hat, and they immediately become consumers. Right? We all are looking at TV from the perspective of consumers. It's something that we all, for the most part, really care about. And because TV content is at the top of its game, we all really care about its future.

But what Netflix and Amazon have done is they've shown the world what it's like to have content on demand. And even though roughly 70% of Americans still subscribe to cable, that number is declining fast, and in advertising, you know, a huge amount of people that do that day-to-day are millennials. You ask them to raise their hands in terms of how many of you have ever subscribed to cable, you would think that that 70% was much, much lower. And it's just because cord-cutting, and cord-shaving, and cord-nevering just continues to grow. Because people want on-demand.

But as on-demand continues to grow, particularly since roughly 70% of Americans still pay for cable and roughly 70% of Americans pay for Netflix, it's essentially them double-paying. In the sense that it's costing more. And the content is costing more.

And so the TV ecosystem today, we think of as a little bit of a ticking time bomb. Which is, especially in traditional TV where the users are going away, the number of people watching is declining, but the cost of providing the service has been going up. And the price of the ads has been going up, even though fewer people are watching. And so that's making it so that it's less effective on a per-dollar basis than it's been, and yet the cost of content is going up. And so that's what we think is creating the ticking time bomb.

And the only way for that to resolve itself is with programmatic advertising. So we're super excited about the fact that dollars are moving into programmatic advertising, and the way that that's working is in the new apps that you're getting on your Roku or your Apple TV or your Samsung TV, the ones after Amazon and Netflix, like a Hulu or a Sony Crackle or a TBS, all of those have some amount of ads, or at least an ad option. And because we can target them in a way that television ads never could, as well as the fact that there's a degree of scarcity right now, because there isn't that much inventory, it's making those ads go for a premium, which is actually making it so that more content owners are trying to make their content available in apps like that.

So it's just such an exciting time in television. It's really hard to be bearish on any of it. The one place where it creates some transition is that most of advertising in the traditional world is sold at an upfront. So one week a year is when they really buy and sell most of the ads. And that's not really the best way to create the most amount of demand for things. Especially when targeting is at play. So transitioning from that old way of distribution as well as selling everything on an upfront basis, to a world where more data can be deployed, and decisions can be made all year long instead of just one week a year, that transition is probably the hardest part of the transition. But consumers are dragging the industry there whether we're ready or not, just because they want things on demand. So it's a great forcing function for change.

Cross: Thank you.

Bush: How does consolidation in ad tech affect your business? And I know you picked up Adbrain -- how is that acquisition starting off?

Green: Yeah, so the consolidation is a really exciting thing. And sometimes when we see that some businesses are going away, we tend to look on that as outsiders as, "Oh no, businesses are struggling. That's a sign that something at a macro level is wrong." And I think that's the wrong way to look at it in this era.

And instead, we live in a time when technology is changing things really, really quickly. And in our space in particular, there's a bunch of businesses that were really trying to take advantage of that transition. So they were charging too much, or they were adding less value than they were charging. So in other words, if you create 20% efficiency and you charge 40% for that, that business is not sustainable.

And so there have been a bunch of businesses in ad tech in particular that were just not sustainable businesses, and those businesses are going away. And that's not a tragedy -- that's an earmark of efficiency. That's an earmark that agencies and advertisers and publishers have gotten smarter, and they've put their monetization, or their ad business, in the hands of companies that are more aligned with their interests. And that's super healthy.

So overall I'm really excited by the consolidation. I think in some cases, we've caused the consolidation, and we're excited at the opportunities that that creates. You know, one of them for us this year was Adbrain, the acquisition you asked about. You know, there were not that many companies that had raised money as cross-device data providers. Adbrain was one of them that had great tech, but it was really early in terms of, just barely on the other side of pre-revenue. We represented the majority of that. And it became pretty obvious that they were worth more to us than they were as a stand-alone company. And so as they made the choice to sell the company, we were in a strong position to acquire the company and make more of it than it ever could have been as a stand-alone company.

So we're super optimistic, because we knew their business well because we'd partnered with them almost three years ago, qs well as the fact that we were the majority of the revenue. It's really easy for us to model its profitability for us in 2018. And you know, the team's already contributing -- it's an amazing strategic asset for us. So there's a lot of M&A that doesn't work, or sometimes only works on paper. This is one that was a slam dunk in every category: financially accretive, EBITDA accretive, strategically critical. It was good for us across the board.

Bush: I'd like to bring it back to Asia for a moment. I'm just curious, in your view, how does the competitive landscape and the customer landscape differ in countries like China and Japan? And why do you think you have an edge there against what maybe a native Chinese ad tech company, could they replicate some of what you're doing, or do you have something special?

Green: Yeah, so the landscape in every one of these countries is different than the United States, and I do think that American companies will often make the mistake of thinking that one size fits all, or that the leverage that they have in the U.S. can translate there. And I think that's especially true in B2C companies. So you know, unlike a Facebook trying to go into China, or an Uber trying to go into China, where you're essentially trying to get Chinese consumers to fall in love with a Silicon Valley brand.

And I think something that people don't often understand is, neither Chinese businesses nor the Chinese government want to see companies take money out of China when there's a totally viable alternative inside of China. And so the thing that is really different about our business is that, you'll recall, we're the ones writing checks to the big publishers. So we go to the Chinese market with sort of step one being to create great relationships with companies like Baidu and Alibaba and Tencent. And to create relationships with the big media companies.

And you know, we talk about the U.S. being competitive, without a doubt the Chinese media market is as competitive if not more competitive. In fact, I would argue it's more competitive. And it's also the only scaled media market in the world that is more fragmented than the United States.

So when we go in with a pitch that is essentially, we're not trying to take money out of China -- in fact, the opposite. We're trying to bring advertising spend from big multinational brands, like KFC, or Mercedes, or Pepsi, or Coke, to take these big brands and help them spend money on these big publishers in China. It's much, much easier to partner then, because we're bringing money to China instead of the other way around. And we're not trying to win consumers' hearts and minds to our brand. We're instead just trying to help these other big multinational brands service that market more effectively.

And one of the things to just be really macro, because I know, as you mentioned, your investors think very long term, between here and 2030, basically, we're going to take 12% of the world's middle class, and I'm doing these numbers from heart, but in our investor day presentations these are all there, and there's estimates that say instead of 12% of the population in China being middle class a few years ago, it will by 2030 be, I think it was almost 80%, which is just the most amazing growth of middle class arguably in the history of capitalism.

And what we're doing in that process is, when people are choosing a refrigerator brand, or a car brand for the very first time in their lives as they join the middle class, we're able to influence that for the biggest multinational brands in the world. And fuel the rise of the middle class. And so we think, as the economic engine for media, we're playing a role in helping that middle class grow. And so we think we're a significant contributor in China instead of one of those companies that often fails to do well in China, because they go in trying to extract resources instead of bringing them.

Gardner: In the interest of respecting your time, Jeff, we're each going to ask one last question. You can give as brief an answer as you want to, to it. We're happy to sit here for longer, because we get so much from this, but we're at the one-hour mark, so we'll just each ask a question. Feel free to be as brief as you'd like to.

Green: Okay, great.

Bush: Awesome. So in the last call you mentioned that the percentage of revenue coming from data will increase. I'm curious just from a 10 years from now, 20 years from now perspective, how big of a deal is selling data, separate from the marketplace business, to The Trade Desk?

Green: It's really hard to put a percentage on it. It's even harder to put a specific number on it. But rather than talk about it from a financial perspective, let me just talk about it from what I call a "data element" perspective.

So today, it's not uncommon for a single impression to use less than one fact to determine what ad to show. And, this is where I talk about, the infrastructure just has to get better as an industry, where we make it easier for advertisers and agencies to use data. So instead of using one fact, "Oh this person visited this travel website 48 days ago," and now they're showing you an ad for the trip you already went on. All of us have experienced that as a consumer. An ad that was almost relevant or was relevant weeks ago. So the only way to fix that is to use more data and more insights and make it available faster. And so instead of going from, we'll round up to one, using one fact on every ad that's shown, I think in the next five-ish years, we need to move to using, closer to 100 facts in every ad that we show.

So I think the amount of insight needs to go up 100x in the choices that we make. What the economic consequences of that are, I frankly am less interested in, because we need to figure out the economic model to support that level of data-driven decisioning, and start with the assumption that we just have to be data-driven about everything that we do, instead of the other way of like, "How much money could we make if we do this?" Because even if we made none, we would benefit from the media and efficacy of buying that way, which is why we've led the way in data-driven decisioning, because we've always looked at it from a perspective of, let's do the right thing and then we'll figure out what to charge after we've figured out what it's worth. And let's make sure that we always lead consumer surplus.

Bush: So, The Trade Desk obviously has a lot of growth areas and opportunities. What piece of your business is the most exciting to you over the next year, and over five years?

Green: So over the next year I'm most excited about just the international sort of land and expand. And the number of places where, I just see low-hanging fruit all over the world. So I'll say that for the next year. And for the next five years, connected TV. As TV moves from what the chief products officer at Netflix calls "the tyranny of the grid" from the linear television experience that is becoming less and less desirable as all content can be on-demand over the internet, that evolution over the next five years will be one of the most exciting transitions in media ever. Certainly of our lifetimes.

Gardner: Can you explain why you chose the CFO of Netflix to join your board? Why Netflix and why their CFO?

Green: So I think Netflix is one of the most innovative companies in the history of television. Maybe the most disruptive company in television, at least, again, in our lifetimes. And David Wells is incredibly analytical -- he's one of the most strategic people at Netflix. So having his expertise and his foresight, given our bullishness on connected TV, it's really important to have him with us. And it also gives me a chance to constantly annoy him with questions about when are we going to start showing ads on Netflix.

Gardner: Well Jeff, thank you so much . . .

Cross: Wait, wait, Tom can I get my question in?

Gardner: Oh yeah, Andy. Yes.

Cross: Sorry, just very quickly Jeff, clearly very data-driven in your business decisions, you talked at length about that. Are you as data-driven in your people analytics for your culture, and if you can give me specific examples that'd be great.

Green: Yeah. So we are data-driven in everything that we do. I think that we, sometimes we're probably too much so, that we're sort of drowning in insights. And we have to really take the time to understand what they all mean. And so, I look at things like Glassdoor. You know, the ratings on Glassdoor are super validating in our case, but what's more important to me are all the comments that are written. And I look for opportunities like that, whether that's in surveys where we ask, but I really like things like Glassdoor because it's not something where we're asking the questions and people might be just a little bit afraid to tell us where we can do better. You know, we've never asked anybody to fill out a Glassdoor review or rating, and yet a lot of employees and even prospective employees go and give us feedback, and I learn from that all the time.

And I think this about our advertisers as well as our people ops team, which is what we essentially call our HR department, is that using the data that comes from resources like that is a new form of listening. If an advertiser isn't using the data that consumers share online to make better decisions, they're not listening. And if we don't use the data in places like Glassdoor to make better decisions, we're not listening.

And technology's made listening easier. You know, one of the most important parts of communication, arguably the most important, is listening. And the fact that that is easier than ever should make it easier for us to lead and to understand problems and to understand our people. And thank God for that, because when you're serving over 20 cultures around the world in nearly every time zone, we need all the help we can get!

So we've got a really bold, bold and ambitious mission to change all of advertising and continue to power the engine that makes media possible, especially when things like TV are at the top of its game. So to continue to do that, we've got to listen and we've got to make certain that we continue to preserve what think is the best culture in any advertising company ever. But it takes more work as we get bigger to protect it.

Gardner: Jeff, thank you so much. You know we probably have another 40 questions so we'll check back in in six months or a year to follow up on this and see if you have some time again. We're TTD, Trade Desk shareholders, and share owners for the long term and so we're rooting you all on and learning from you. One of my statements about investing, one of the things I love most about investing is, and I really, I turned and said this to a friend of mine that watched one of your presentations that you were waving off earlier, but she and I were really enjoying it, and I turned to her and I said, one of the reasons I love to invest is because when you find a great leader, you essentially have a new professor that you get to learn from, for the foreseeable future given our holding period.

So we look forward to learning from you. We're rooting you all on, and I'm pretty sure we'll be utilizing you as a partner in different ways over the years as well. Thanks a lot.

Green: Thank you so much.

Gardner: Yeah, right on.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Aaron Bush owns shares of Amazon, Apple, Baidu, Facebook, Netflix, Tencent Holdings, and The Trade Desk. Andy Cross owns shares of PepsiCo. Tom Gardner owns shares of Baidu, Facebook, and Netflix. The Motley Fool owns shares of and recommends Amazon, Apple, Baidu, Facebook, Netflix, Tencent Holdings, and The Trade Desk. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends The New York Times. The Motley Fool has a disclosure policy.