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Austin’s August Update: Why Long-Term Leadership Matters

August 17, 2020

Exceptional leadership is a trait that many of the best performing companies and stocks have in common. We can’t think about Amazon without Bezos, Netflix without Hastings, or Tesla without Musk. However, great management doesn’t get it’s own line on a company’s balance sheet and stock screeners can’t quantify it as a data point.

For long-term investors, that means that finding the best-led companies can be an important factor in finding stocks that outperform the market. Data shows that founder-led companies outperform the rest because they are more innovative, adapt their business models better, and maintain more loyal employees.

So how do we find great founder-leaders? To answer that question, I’ll dissect The Trade Desk (NASDAQ: TTD) Co-Founder and CEO Jeff Green’s management traits to provide a blueprint.

Great business leaders are ambitious: Green and Co-Founder David Pickles founded The Trade Desk in 2009 and entered into the multi-hundred billion dollar global advertising business. Green had previous experience trading stocks professionally and founded The Trade Desk to create a “new trading floor” of internet advertising to facilitate price discovery and empower advertisers to understand the impact of their marketing campaigns. The Trade Desk’s advertising platform had its first $1 million month of spend in 2012 and has grown platform spend to more than $1 billion a quarter in 2019. Green believes The Trade Desk has a lot of growth ahead with more than $725 billion in total global advertising spend up for grabs.

Great business leaders are innovative: The Trade Desk recorded $308 million in revenue in 2017, up from $45 million in 2014. But Green didn’t allow The Trade Desk to get complacent. The company launched its “Next Wave” advertising platform that provided an entirely re-imagined user-experience, advertising planning tools, and AI enhanced reporting in 2018. This innovative approach has helped the company to more than double revenue again in two years to $661 million in 2019.

Great business leaders listen: Perhaps one of Green’s strongest traits is his ability to observe and listen. In 2018, when more than 85% of The Trade Desk’s revenue was in North America, Green relocated his family to China so he could listen and learn the Chinese way of life. Green wanted to understand the advertising and cultural landscapes to determine how to adapt their business to expand into China. Because of this approach, The Trade Desk has essentially created the programmatic advertising market in China and has a multiple-year head start on their competition. The company has partnered with Baidu, iQIYI, Tencent, and Youku, giving it access to some of China’s largest advertisers.

As of August 21, 2020, The Trade Desk has a nearly $22 billion market capitalization and the stock has returned more than 1,400% since 2016. The company began with the ambitious vision to make advertising more transparent, management has continued to adapt and innovate to outmaneuver competitors like Google and Facebook. Under Green’s leadership, the company has swiftly navigated consumer data privacy laws, and is set up for significant international growth.

There are many factors that have contributed to The Trade Desk’s success, but investors stand to benefit greatly by finding companies with leaders like Jeff Green who are ambitious, innovative, and able to listen to all stakeholders.

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