Margin wars reshape programmatic as Amazon undercuts The Trade Desk

The programmatic advertising industry faces a pricing revolution as margin compression reshapes competitive dynamics between major demand-side platforms. According to Adweek, a global auto brand moved approximately $80 million in annual media spend from The Trade Desk to Amazon's platform by the end of Q1, highlighting how fee structures now drive strategic platform decisions.

The financial mathematics behind these migrations reveal stark disparities in platform economics. Amazon's ad sales fees of about 1% are significantly lower than Trade Desk's, which range from 12% to 15%, according to analysis from investment bank Needham & Co. This fee differential creates substantial cost savings for advertisers managing eight-figure annual budgets.

Amazon's margin strategy reflects its integrated business model advantages. Amazon plans to start selling ad inventory from the streaming TV platform Roku and has been expanding its presence in live sports, enabling revenue diversification beyond advertising fees. The company reported ad sales revenue grew 23% year-over-year in the second quarter to reach $15.69 billion, demonstrating scale that supports aggressive pricing.

The Trade Desk's response to margin pressure became evident during its August earnings call. CEO Jeff Green addressed competitive concerns by stating "I think Amazon is more of a potential partner, honestly, than it is a long-term competitor," though this position drew skepticism from Wall Street analysts who questioned the company's competitive positioning.

Industry professionals have engaged in heated debates about margin sustainability and competitive dynamics. Vlad Chubakov, Associate Director of Programmatic at Delve Deeper, articulated the structural challenge facing independent platforms in a LinkedIn post that gained significant attention, including a like from The Trade Desk CEO Jeff Green.

According to the LinkedIn discussion documented in the attached materials, Chubakov argued that "Amazon can slash margins because they own the pipes" and warned against "a world where only the biggest companies own the ad market. That's bad for buyers, bad for publishers, and bad for the industry. Fewer players means less choice, slower innovation."

The programmatic executive's analysis highlighted fundamental economic realities: "Amazon forces managers to cut the bottom of their team every year, even if your whole team is performing above goal", contrasting with The Trade Desk's culture where "the people there are amazing and the 'culture' is really good."

Notably, Jeff Green liked Chubakov's LinkedIn post analyzing these competitive dynamics, indicating awareness of the margin compression challenges facing independent platforms. This engagement suggests The Trade Desk recognizes the structural economic pressures while positioning itself as the industry's independent alternative emphasizing transparency and innovation over purely financial competition.

Connected TV advertising represents the primary battleground for margin competition. Amazon's recent partnership announcements demonstrate how integrated platforms leverage exclusive inventory to justify pricing models. The company's partnership with Roku announced June 16, 2025, creates the largest authenticated Connected TV footprint available to advertisers in the United States, providing access to an estimated 80 million U.S. CTV households.

Technical capabilities compound margin advantages for integrated platforms. Amazon announced a significant change to its advertising platform three days ago, on January 15, 2025, consolidating first-party advertising inventory across multiple owned properties, enabling unified campaign management that reduces operational complexity for advertisers.

The financial impact of margin compression extends beyond individual platform competition. Research from the Incorporated Society of British Advertisers reveals that publishers typically receive only 36 cents of every media dollar spent through demand-side platforms (DSPs), highlighting systemic inefficiencies in the programmatic supply chain.

Some companies are responding with radical pricing innovations. Sovrn announced a change to its pricing model, eliminating revenue sharing for publishers using its sales house product on October 14, 2024, demonstrating how margin pressure drives structural business model changes across the ecosystem.

Market dynamics show that 72% of marketers plan to increase their programmatic advertising investment in 2025, creating expansion opportunities for platforms that can balance scale economics with competitive pricing. However, this growth occurs alongside intensifying margin pressure as platforms compete for advertiser budgets.

The Trade Desk's stock performance reflects investor concerns about margin sustainability. Following the company's Q2 2025 earnings announcement, shares of Trade Desk plunged more than 38% Friday, as analysts questioned whether current fee structures remain viable amid Amazon's aggressive pricing.

Investment analysts have downgraded expectations based on competitive margin dynamics. MoffettNathanson cut its price target for Trade Desk's stock to $45 from $75, and Bank of America's target dropped to $55 from $130, reflecting concerns about sustainable profitability in an increasingly price-competitive market.

The margin war's broader implications affect the entire programmatic ecosystem. DoubleVerify, Zeta and Magnite, for instance, each had a modest stock bump after reporting positive earnings earlier in the week last week. But after TTD reported its earnings on Thursday, all three companies saw their shares drop by about 10%, demonstrating how The Trade Desk's margin pressures influence valuation across ad tech companies.

Reddit discussions among industry professionals reveal growing awareness of platform economics. Contributors noted that Amazon has a better long term outlook based on their resources and assets, while others observed that TTD does one thing and that is programmatic ads, nothing else. Amazons ads is shadowed by other priorities at Amazon like Cloud, Commerce etc.

The competitive landscape continues evolving as platforms adapt pricing strategies. Recent developments include Pinterest expanding programmatic access through Index Exchange and Criteo, while OpenX launched curation platforms designed to improve operational efficiency and reduce campaign setup costs.

Looking ahead, margin competition appears likely to intensify as advertising budgets migrate toward platforms offering integrated measurement and reduced fees. The industry faces fundamental questions about sustainable business models, with outcomes potentially determining which companies survive the transition to privacy-centric, cookieless advertising environments.

The automotive brand's migration represents broader trends where advertisers prioritize total cost of ownership over individual platform capabilities. Part of the reason for the move is that the brand can now sell its cars on Amazon, demonstrating how commerce integration creates value propositions that transcend traditional advertising metrics.

Amazon vs The Trade Desk

The financial metrics of Amazon and The Trade Desk reveal fundamentally different business models and market valuations, reflecting their distinct approaches to the advertising technology sector. According to FullRatio financial data, these platforms demonstrate contrasting investment profiles that help explain their competitive positioning in programmatic advertising.

Amazon's Price-to-Earnings ratio stands at 33.45 as of August 20, 2025, calculated on a trailing twelve-month earnings per share of $6.69 and stock price of $223.81. This P/E ratio represents a 75% decrease from Amazon's historical ten-year average of 131.62, indicating the market's recognition of the company's matured profitability compared to its high-growth phases. Amazon's current P/E ratio reflects a more established technology company with diversified revenue streams across e-commerce, cloud computing, and advertising services.

The Trade Desk presents a significantly different valuation profile with a P/E ratio of 62.54, based on earnings per share of $0.84 and a stock price of $52.53. This higher multiple indicates investors' expectations for continued growth in the pure-play programmatic advertising sector. However, The Trade Desk's P/E ratio has compressed substantially, falling 73% below its five-year quarterly average of 228.9 and 47% below its last four quarters average of 118.8, suggesting market recalibration of growth expectations.

Market capitalization differences underscore the scale disparity between these competitors. Amazon's market cap of $2.39 trillion dwarfs The Trade Desk's $25.68 billion valuation, reflecting Amazon's position as a diversified technology conglomerate versus The Trade Desk's focused programmatic advertising business. This scale difference enables Amazon to sustain lower margin advertising services while The Trade Desk must maintain higher fees to support its specialized operations.

Revenue performance metrics highlight contrasting growth trajectories. The Trade Desk reported revenue of $2.68 billion with a gross margin of 79.4% and net margin of 15.6%, demonstrating the high-margin characteristics of software-based advertising technology. Amazon's advertising revenue of $15.69 billion in Q2 2025 represents just one segment of its broader business portfolio, yet this figure alone exceeds The Trade Desk's annual revenue by more than five times.

Profitability ratios reveal different operational efficiencies between the platforms. The Trade Desk's return on equity of 15.2% and return on assets of 7.2% reflect healthy profitability for a technology company, while its EBITDA margin of 23.7% indicates strong operational leverage. Amazon's integrated business model generates returns through multiple revenue streams, enabling competitive pricing in advertising while maintaining overall corporate profitability.

Stock performance over the past year illustrates market sentiment regarding competitive positioning. The Trade Desk shares declined 48.57% over one year and 55.31% year-to-date, reflecting investor concerns about competitive pressures and margin sustainability. The dramatic stock price movement following Q2 2025 earnings, when shares plunged 38% in a single day, demonstrates market sensitivity to competitive threats from integrated platforms like Amazon.

The financial comparison reveals why margin competition poses particular challenges for The Trade Desk. Amazon's diversified revenue base allows aggressive pricing in advertising services to capture market share, while The Trade Desk must maintain higher fees to support its singular focus on programmatic technology. This dynamic explains why advertisers increasingly consider total cost of ownership when selecting demand-side platforms, often favoring Amazon's integrated ecosystem despite The Trade Desk's specialized capabilities.

Timeline

• October 14, 2024: Sovrn eliminates SSP revenue share model, addressing margin pressure in programmatic supply chain
• January 15, 2025: Amazon consolidates first-party ad inventory across owned media properties
• January 28, 2025: Pinterest expands programmatic access through Index Exchange and Criteo partnerships
• March 2025: Q1 period when global auto brand completed $80 million spend migration to Amazon DSP
• May 16, 2024: Netflix opens ad inventory to The Trade Desk, Google DV360 & Magnite
• June 5, 2025: Adweek reports on major budget shifts from The Trade Desk to Amazon platform
• June 9, 2025: The Trade Desk launches Deal Desk platform to improve programmatic transparency
• June 16, 2025: Amazon and Roku announce largest authenticated CTV partnership reaching 80M households
• July 16, 2025: OpenX launches curation platform for agencies addressing operational efficiency challenges
• August 8, 2025: The Trade Desk stock drops 38% following Q2 earnings call addressing Amazon competition

PPC Land explains

Programmatic Advertising Programmatic advertising refers to the automated buying and selling of digital advertising inventory through technology platforms. This process eliminates manual negotiations and insertions orders, enabling real-time bidding on ad placements across websites, mobile apps, and connected TV platforms. The system uses algorithms and data to determine the optimal price and placement for advertisements, making the process more efficient and targeted than traditional media buying methods.

Demand-Side Platform (DSP) A demand-side platform is a technology platform that allows advertisers and agencies to purchase digital advertising inventory from multiple ad exchanges and supply sources through a single interface. DSPs enable automated bidding on ad impressions in real-time, utilizing data and algorithms to optimize campaign performance. Major DSPs include The Trade Desk, Amazon DSP, and Google's Display & Video 360, each offering different fee structures and inventory access.

Connected TV (CTV) Connected TV encompasses any television set that connects to the internet and enables streaming of digital video content. This includes smart TVs, gaming consoles, streaming devices like Roku or Apple TV, and mobile devices that cast content to televisions. CTV advertising allows marketers to deliver targeted video advertisements to viewers consuming streaming content, combining the visual impact of television with the precision targeting capabilities of digital advertising.

Margin Compression Margin compression occurs when competitive pressures force companies to reduce their profit margins to maintain market share or attract customers. In programmatic advertising, platforms face margin compression when competitors offer similar services at lower fees, forcing them to choose between reducing prices or losing clients. This phenomenon particularly affects intermediary platforms that don't own content or inventory, as they compete primarily on service fees.

Amazon DSP Amazon's demand-side platform enables advertisers to programmatically purchase display, video, and audio advertising both on Amazon's owned properties and across third-party websites and apps. The platform leverages Amazon's first-party commerce data for audience targeting and provides access to exclusive inventory including Prime Video and Fire TV. Amazon DSP typically charges lower fees than competitors due to its integrated business model that generates revenue from multiple sources.

The Trade Desk The Trade Desk operates as an independent demand-side platform that helps advertisers purchase digital advertising inventory across the open internet. Founded in 2009, the company focuses exclusively on programmatic advertising without owning content or competing with its clients for advertising budgets. The Trade Desk charges fees ranging from 12% to 15% of media spend and emphasizes transparency and independence as key differentiators from walled garden platforms.

Fee Structure Fee structure refers to how advertising technology platforms charge clients for their services, typically calculated as a percentage of total media spend or flat fees. In programmatic advertising, fee structures vary significantly between platforms, with Amazon DSP charging approximately 1-2% while traditional DSPs like The Trade Desk charge 12-15%. These differences create substantial cost variations for large advertisers and influence platform selection decisions.

First-Party Data First-party data consists of information that companies collect directly from their customers through owned channels such as websites, mobile apps, or purchase transactions. Amazon's first-party data includes shopping behavior, search history, and viewing patterns across its ecosystem, enabling sophisticated audience targeting capabilities. This data type provides higher accuracy and compliance with privacy regulations compared to third-party data sources.

Attribution Attribution in digital advertising refers to the process of identifying which touchpoints or interactions led to desired customer actions such as purchases or conversions. Integrated platforms like Amazon can provide end-to-end attribution by tracking users from ad exposure through purchase completion within their ecosystem. This capability offers advertisers clearer return on investment measurements compared to platforms that cannot track post-click behavior.

Supply-Side Platform (SSP) A supply-side platform enables publishers to manage, sell, and optimize their available advertising inventory through automated auctions. SSPs connect to multiple ad exchanges and demand sources, allowing publishers to maximize revenue by selling inventory to the highest bidders. These platforms handle the technical aspects of real-time bidding while providing publishers with controls for brand safety, pricing floors, and buyer preferences.

Summary

Who: Global advertisers, particularly a major automotive brand, The Trade Desk, Amazon, and industry analyst Vlad Chubakov whose margin analysis was liked by Trade Desk CEO Jeff Green.

What: A $80 million annual advertising spend migration from The Trade Desk to Amazon DSP, driven primarily by significant fee disparities ranging from 1-2% (Amazon) versus 12-15% (The Trade Desk).

When: The migration occurred during Q1 2025, with public reporting on June 5, 2025, and subsequent industry analysis highlighting margin compression as a competitive factor.

Where: The budget shifts affect connected TV and programmatic advertising markets globally, with particular impact in the United States where fee competition intensifies between integrated platforms and independent demand-side platforms.

Why: Margin compression drives platform migration as Amazon's integrated business model enables aggressive pricing below 2% while traditional DSPs maintaining 12-15% fees face competitive pressure, prompting industry debates about sustainable pricing models and market consolidation risks.