Chaos in the advertising industry during the COVID-19 pandemic and a push for diversity across companies has paid off for some companies such as Centro and The Trade Desk, catching the tailwind of year-end budgets with creative thinking and restructuring their business models.  

Centro spent five years improving the company, spending more than $100 million to rebuild its software. It bought a DSP and then launched a new platform about three years ago.

“It was a difficult five years,” said Shawn Riegsecker, CEO and founder of Centro. “Q1 of this year, everything’s running clean and then COVID hits. We needed to reset and rethink everything. I had to rip $21 million from the cost based on the new budget.” 

The company projected growth of about 20%, which would have set revenue between $160 million and $175 million, but reset the budget to come in at about $133 million — about an 8% decline from 2019. Budget cuts, yes, but layoffs were not in the plan.

“We ended up doing a companywide progressive income tax reduction for all employees, where the people at the top took the biggest cuts and those at the bottom took smaller hits,” he said.

Riegsecker told employees that if the company resumed profitability he would bring salaries back up. The second quarter took the company down even further in terms of revenue, but in Q3 the company bounded back in much better shape than anticipated.

Two weeks ago the company reinstated salaries and Riegsecker announced the company would provide back-pay since April 1, 2020.

“If you would have told me that in March or April I would consider year-end bonuses based on how well we’re doing, I would have been shocked,” he said.

Centro should grow more than 40% this quarter, and 10% for the year. Riegsecker attributes the growth to the company’s platform that developers rebuilt and its ability to drive performance during COVID-19.

Brands are renewing contracts at higher rates, adding up to about 100% growth in contract value, he said.

When The Trade Desk announced third-quarter earnings results ending September 30, 2020 on Thursday, it reported a surprise. Last quarter it forecast it would post earnings of $0.38 per share, but this quarter it posted earnings of $0.92. During the past four quarters, the company has surpassed consensus EPS estimates four times.

A significant amount of new business from competition and political spend steadily ramped throughout the quarter,” wrote Raymond James Analyst Aaron Kessler in a research note. “Connected TV (CTV) increased over 100% y/y (vs. 40% in 2Q), Mobile Video increased 70% y/y (vs. 15% in 2Q), and Audio increased ~70% y/y (vs. 20% in 2Q).”

Categories such as Health and Fitness, Technology and Computing, Food and Drink and Home and Garden all performed well.

Automotive showed consistent improvement, while travel remained negative, although it improved during the quarter. Shopping was also strong, with growth well into the double digits. Political was also strong, and will represent about a mid-single-digit share of revenues in 2020. 

Brands need to generate performance. “We recently surveyed more than 200 top advertisers — around 85% of them said they are under new pressure from CFOs to justify marketing spend and to measure against business goals,” Jeff Green, The Trade Desk CEO, said during the company’s earnings call. “Fifty percent are now having their typical measurement techniques questioned. As a result, almost all of them intend to adopt data-driven measurement strategies.”

National brand campaigns have become complicated because they need to adjust to highly local campaigns that are specific to the circumstances in a particular region or state, he said. There is an increasing need to reach a specific audience with focused messages.

Advertisers are following consumers to streaming devices. The Trade Desk’s connected TV (CTV) spend grew more than 100% year-over-year in the third quarter. eMarketer estimates 77.6 million U.S. households will have cable TV packages this year, down about 7.5% year-over-year.

Green said the company has won tens of millions of dollars of ad spend from UGC platforms and is taking business from linear TV, especially in the last quarter, and he expects the trends to continue.

Performance is helping to shift a good chunk of these brands’ linear budget to CTV.