Morningstar

Trade Desk: Opaque Fees Are Straining Relationships with Major Clients

We’ve reduced our fair value estimate of Trade Desk stock.

The Trade Desk logo is displayed on a smartphone screen.
Cheng Xin via Getty
Securities in This Article
The Trade Desk Inc Class A
(TTD)

Key Morningstar Metrics for Trade Desk

  • Fair Value Estimate
    : $29.00
  • Morningstar Rating
    : ★★★★
  • Morningstar Economic Moat Rating
    : None
  • Morningstar Uncertainty Rating
    : Very High

On March 17, Adweek reported that Publicis issued a memo advising clients to avoid working with Trade Desk TTD due to a “failed audit” on fee structures. TTD denies failing an audit and states it is working to accommodate Publicis.

Why it matters: The dispute comes on the heels of other major agencies (WPP, Dentsu) dropping use of TTD’s OpenPath, a supply chain optimization product, due to opaque fees. Agency relationships are crucial to TTD’s growth, yet they appear to be fracturing.

  • In 2025, just two agency holding companies accounted for 30% of roughly $13.4 billion in gross spending on TTD’s platform. With Amazon and Google as viable demand-side platform alternatives (albeit with conflicts of interest), the agencies hold significant bargaining power over TTD, and they are flexing it.
  • In recent years, TTD has had to strike a delicate balance between making its largest customers (agencies) happy and bypassing agencies entirely to work directly with brands. It appears to be failing at the former, posing a near-term risk to incremental flows.

The bottom line: We reduce our fair value estimate to $29 per share from $33 for no-moat Trade Desk to reflect the heightened risk that agencies shift more of their advertising budgets to competing DSPs.

  • Our current base case assumes a 10% exodus of agency budgets, compared with our previous estimates. On a more bearish 25% agency exodus, we would arrive at a fair value of $23 per share. We consider a 10% decline and stable margins reasonable, as we believe brands and agencies will continue to value TDD’s unbiased DSP proposition.
  • On a comparative basis, shares still trade at a higher enterprise value/forward revenue ratio (approximately 3.6 times) than all independent ad tech firms except AppLovin. But we see both differentials as justified, given the more unique value propositions at the DSP level and AppLovin’s stronger data moat.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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