Operator: The next question comes from Justin Patterson with KeyBanc.
Justin Patterson: Jeff, I just wanted to build off of your last statement there. Given the caution that you’re seeing from advertisers right now, what gives you that confidence heading the next year around growth and market share gains in the year ahead? And just a quick follow-up to that point. Last year at the Analyst Day, you were talking about just investing to make sure you’re not missing this CTV and retail media wave. So I know you don’t guide to expenses or EBITDA for the year ahead but could you give some commentary on just how you’re thinking about the right level of investments in an environment like this one?
Jeffrey Green: You bet. I’ll take the first part of the question and Laura, if you’ll just speak to the investment side of that question. So let me just say a few words on 2024. First, obviously, the macro environment plays a role in our business and things like higher cost of capital and increased money supply have downstream effects on most businesses. Some of those effects are opportunities which we’re seeing mostly across our client base but we’re seeing some of those effects as pressures on their businesses. But regardless of the macro environment’s effects on individual companies, we continue to see the tidal wave of opportunity over the next 2 years. And I’ve never been more bullish and that is because of just the slew of things in front of us that are — what we see as some of the biggest opportunities we’ve ever seen and probably ever will.
CTV is moving to streaming more and more and they’re also moving to biddable both as a total and as a percentage at a faster rate than it ever has before. Content has more competition than ever and it needs ads as a part of their strategies more than it ever has as we mentioned in the prepared remarks. We’re convinced that there are incremental subscribers and the incremental revenue are largely going to come from ads. Retail media is something we didn’t spend as much time as I would have liked in the prepared remarks, is one of the fastest-growing areas of our business and it’s providing advertisers with completely new ways of thinking about measurement and attribution. It closes the loop and helps them see the impact of their advertising in a way that has never been possible before.
But in addition, they’re also finding customers that benefit both advertisers and retailers because they’re selling more of their products in the retailers that they’re partnering with to get the data. In 2024, I also believe audio will follow suit. They’re going to take out the CTV playbook and they’re going to see some of the benefits that I think are really important for that category to grow. So I think there’s another secular tailwind available in 2024. Decision programmatic is poised to have its best year ever in 2024. And I believe this is partly due to the macro pressures. We’re investing heavily in our platform so that we make the value as obvious and as powerful as possible. I think the open Internet will start to get the first dollar even more in 2024 than it has in the past and the places where we’re injecting AI into the platform have seen amazing results so far.
So of course, I’m optimistic about what that will relate to in 2024, especially because everything that we’ve done so far in AI has been small and yet also really impactful. So if we just continue down that track, I think we’re going to see some amazing fruit come from that. Incidentally, I’m here in Chicago today. Yesterday, I met with hundreds of our clients, hundreds of traders, hands-on keyboard people. The day before that, I met with a group about the same size in New York. We have never been more aligned with traders than we are today. I think they’re excited about the control and upgrades that Kokai represent for them which I believe they’ll all hit the ground running in Q1 with those enhancements. We’ve put better decisioning right next to data.
We put those 2 right next to each other in a much better and usable way than we ever have before. We’ve made first-party data activation better than it’s ever been before. And that’s strategically more important at this moment than it’s ever been. The obvious benefits of UID2 and EUID are becoming more and more apparent to everybody in the advertising community. Traders know that their jobs are not going to be taken away by AI. But instead, they have to compete with each other. So their job could be taken away from a trader who knows how to use AI really well until all of them are looking at ways to use the tools that are fueled by AI that were provided, where AI is essentially doing 1 or 2 things. It’s either doing the math for them, if you will, of course, with very advanced learning models or, in other cases, it’s actually their co-pilot.
So we could not be more excited. I’m more bullish on even things like EUID and Europe. I think many markets outside the U.S. recovered more slowly post pandemic but we’re seeing advertisers now in the EU start to really lean into the innovations that we’re bringing to the market in all dimensions such as EUID. In times of macro uncertainty or for verticals that are dealing with uncertainty, we will gain share aggressively and we’re seeing exactly that. In times of more stability, we accelerate our spend. But I couldn’t be more confident in that model and the growth potential that, that means for both the near term and the long term. Laura, for the part on expenses?
Laura Schenkein: Yes. So I’m going to repeat something I’ve said before which is that we have a great luxury. We’re high growth, we’re profitable. We’ve got cash flow. And in 2023, we’re growing well into the double digits above 20%. So all of that allows us to save the course to continue investing in areas such as CTV, AI or platform measurement and to still deliver that strong profitability and cash flow. So as we and you start to think about 2024 for The Trade Desk, there are a few things I keep in mind. First, we’ve been deliberate in our investments in hiring. So we’re going to grow headcount this year but only at about 15% to 17%. And importantly, we expect a similar trajectory next year which should allow us to grow headcount slower than revenue growth.
That leads to a very nice setup for 2024. I’d also add that our investments include Kokai, AI, the forward market and we don’t see any material increases as others have with investments in areas like that. We’re also focusing heavily on productivity with our engineering teams, our go-to-market teams, everyone at sales, account management and trading. And I’d close with, I’ve been here about 10 years now and I couldn’t be more confident in our model, our growth, our ability to drive profitability and cash flow in both the near and the long term. Thank you for the questions.
Operator: The next question comes from Shweta Khajuria with Evercore ISI.
Shweta Khajuria: I have two, please. So first is on retail media. Jeff, when we think about the opportunity that Trade Desk has in retail media, if we think about, call it, 2 to 3 years from today, what would you be satisfied with in terms of how big retail media revenue is as a percentage of overall business, call it, 10%, 20%-plus? How should we think about that? And then second is on connected TV, clearly a growth driver as well. Where do you think industry growth is expected for next year and more specifically for Trade Desk to grow faster than overall industry? How should we think about what is really driving that inflection of shifting inventory to biddable marketplaces? Do we expect that next year and is that the key driver that will allow you to gain share?
Jeffrey Green: You bet. So rather than giving specifics on growth rates that I expect 2 to 3 years from now, we don’t guide in that way, I’ll talk about the macro vectors that are influencing that. So what I’ll be happy to see over the next 2 or 3 years is to see us, first of all, continue to grow in the way that we have with companies like Walmart and Albertsons and Walgreens and Dollar General. We’ve had just an amazing year in all of those partnerships and so many others. I don’t mean to leave off the dozens of others that have been amazing partners to us this year. And once again, this is a case where economic pressures have helped them to be bold and daring and do things that they haven’t done before that have really paid off for them and us and our clients.
