The Trade Desk gets downgraded twice after damaging report
Shares of The Trade Desk (TTD) have slid about 13% over the past two days after Ad Age reported that Publicis, one of the world's largest advertising holding companies, has advised its clients to stop working with the adtech giant because of a "failed audit" over fee structures.
The report has led to TTD shares being downgraded twice this week. Its stock is down nearly 40% YTD
According to Ad Age, Publicis had commissioned an independent audit that found "multiple violations" of the master service agreement it has signed with The Trade Desk.
In a post on LinkedIn, The Trade Desk founder and CEO Jeff Green disputed the report, saying "TTD has not 'failed' any audit ever."
The Trade Desk differentiates itself from digital ad giants like Alphabet's Google, (GOOG), Amazon (AMZN) and Meta Platforms (META), which operate so-called "walled gardens" where the platform controls all the content, user data and ad technology. These companies also benefit from inventory ownership, which means they can still make money even if they lose advertisers.
Advertisers gain first-party data targeting through these platforms, but face "black box" reporting and limited transparency.
TTD on the other hand sits strictly on the buy side and exclusively serves the advertisers. Its main value proposition - and why advertisers choose it over walled gardens - is this independence and the fact that it has no conflict of interest by having its own ad inventory.
"Those who succeed will be those who embrace transparency and offer clients competitive, objective value," Green said in his post on LinkedIn. "Thankfully, almost all of our clients, including the world’s largest brands and agencies, share this point of view."
The company has been leaning hard into artificial intelligence through its proprietary media-buying platform Kokai.
Launched in 2023, Kokai uses deep learning algorithms to optimize campaigns across 13 million ad impressions per second, analyzing in real time which placements offer the best bang for the buck.
However, without having any of its own inventory, it means that it relies entirely on the advertising clients it serves. And having a major advertising holding company like Publicis tell its clients not to use its platform could be a devastating blow.
Ad agencies getting more 'confrontational' with TTD
In fact Morningstar analyst Mark Giarelli noted on Wednesday that two agency holding companies accounted for 30% of TTD's estimated $13.4 billion in gross spending on its platform in 2025. He pointed out that Publicis's report comes on the heels of WPP and Dentsu, two other major ad agencies, dropping use of TTD's supply chain optimization product OpenPath over its opaque fees.
"This situation highlights how opaque fee structures are straining relationships between Trade Desk and its major clients, leading to pushback on fees and competitive threats," Giarelli wrote.
According to Morningstar, the total addressable market for digital advertising is roughly $800 billion, and it expects it to grow to $1.5 trillion by 2035. TTD currently holds just under 2% of the market, but has been growing at an "impressive" 12% annual growth rate.
But that growth has been slowing as it faces increased competition from Amazon DSP.
"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," Giarelli wrote. "It appears to be failing at the former, posing a near-term risk to incremental flows."
Stifel analyst Mark Kelley downgraded TTD shares on Tuesday to Hold from Buy. He pointed out that Publicis is the company's largest holding company client, representing more than 10% of gross billings in 2024 and 2025.
He said that "maintaining its relationships with its current client base was an integral component of our '2026 revenue acceleration thesis,' which contemplated a stable client base, paired with healthy growth from political ad spend during this year's midterms."
Kelley added that Stifel still sees TTD as being "the gold standard for digital ad buyers" and expects the company will reach a resolution with Publicis, but "we struggle to find a clear catalyst that will begin to change investor perception to a more positive stance, which means shares are unlikely to work in the near-term."
Rosenblatt analyst Mark Zgutowicz downgraded TTD shares to Neutral from Buy on Wednesday, citing the recent news around Publicis, as well as WPP and Dentsu.
"We see potential that this could be emblematic of a structural change - that pressures on the agency sector, sparking revenue deceleration/declines and consolidation in that sector - could be pushing agencies to take a more confrontational approach with TTD, and move more into TTD's arena, creating revenue risks for TTD, and making it difficult for TTD's multiples to move," Zgutowicz said.