Key Points
An audit from Publicis revealed that The Trade Desk had violated the terms of their agreement.
As a result, Publicis, the world’s largest ad agency, said it would no longer recommend The Trade Desk.
The Trade Desk was already struggling badly before the news came out.
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Shares of The Trade Desk (NASDAQ: TTD) tumbled this afternoon, giving up early gains in the session after Publicis Groupe, the world’s largest advertising group, said it would no longer recommend its clients use The Trade Desk as a demand-side platform (DSP) for digital media buying.
Not surprisingly, the news sent The Trade Desk stock plummeting, and it finished down 7.4%, or 12% lower than its peak, as the stock had gained 5.8% before the news came out.
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The Trade Desk faces another setback
After a recently completed audit, Publicis said it found that The Trade Desk had violated the master services agreement between the two companies in multiple ways, according to a report from Ad Age. Publicis found that The Trade Desk had “improperly applied their DSP fee to other fees.”
The news comes after fellow ad agencies Dentsu and WPP said they were leaving The Trade Desk’s OpenPath supply optimization product.
Given Publicis’s influence in the industry, the news seems likely to have a material impact on The Trade Desk’s results and growth. It also calls into question the company’s business practices and its treatment of other clients.
Publicis had addressed the findings with The Trade Desk management, but the two sides could not come to a resolution.
The Trade Desk has not responded to the news, but it wouldn’t be surprising if the company addresses the report, as this could damage its reputation. It’s especially problematic coming at a time when the company is already in crisis mode, as the stock has plunged and growth is rapidly slowing.
Where The Trade Desk goes from here
Shares of The Trade Desk are down more than 80% from their peak a little more than a year ago as growth has slowed significantly, and the company has missed its own guidance. The Trade Desk, which is the leading independent demand-side platform (DSP) in adtech, appears to be losing market share to Amazon, which has put significant resources into its DSP, and owns one of the largest advertising platforms in the world.
The Trade Desk investors were encouraged by recent insider buying from CEO Jeff Green, but there seem to be fundamental issues with the business, and it’s unclear if the company can fix them. Despite the discount in the share price, the business may need a serious overhaul before the stock can be considered a buy.
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Jeremy Bowman has positions in Amazon and The Trade Desk. The Motley Fool has positions in and recommends Amazon and The Trade Desk. The Motley Fool has a disclosure policy.