For today’s investing advice, we turn the spotlight on The Trade Desk. Shares of this digital advertising platform just jumped 30% on blow out earnings.  And it’s still not too late to buy.

But what exactly is this company whose shares are now up over 300% since it’s initial public offering in late 2016.

According to the company website The Trade Desk is “a global tech company that enables ad buyers to purchase and manage data-driven digital advertising campaigns through a self-service omnichannel software platform.”

What really matters is the omni-channel part; this means they are an independent third party that can help the buyers of online advertising with a fair price discovery, telling them and how much they pay for targeted ads.

A bit of background is in order.

In the early days of the internet, advertisers bought media/advertisements through agencies. This ran the gamut from publishers with established content creators such as Sports Illustrated and Wall Street Journal, to new streaming services like Spotify and Roku, down to the millions of blogs out there.

Each of these firms wants to generate revenue by selling space on their sites.

This space on the web page is known as inventory, and was sold to marketers manually, at a set rate per a thousand impressions, depending on the type and quality of the inventory. As the internet grew, there were eventually billions of impressions to sell with varying types of inventory quality.

Eventually, transparency became an issue. Advertisers didn’t know where their ads were being placed, and publishers weren’t sure who was buying their inventory. Ad exchanges emerged to help trade inventory in an auction-based model, where advertisers could bid on varying qualities of inventory and more specific audiences. This led to advertisers using trading desks or demand-side platforms to carry out the bidding directly, with ad exchanges and publishers doing the same thing with supply-side platforms to sell inventory.

The beauty and driving force of digital or online advertising is the ability to target and buy and sell the inventory based on what, when, and to whom you might show an ad impression.

Historically, most advertising inventory was sold in bundles or blocks based on a set price with limited targeting, customization, or attribution.

For example, with broadcast TV, ads could only target a specific network, program, or geography, but not a single household or individual. If every ad impression is worth something different to every advertiser, they should be transacted and valued separately. With the rise of the internet and now programmatic advertising, ads can be digitally delivered on a 1-to-1 basis.

But online advertising will always be a buyer’s market because it’s easy to add supply by having an extra impression on a web page to meet increased demand. This basic economic reality means advertising supply is more elastic than demand and will forever put the buy side in the power position.

The Trade Desk levels the playing field. As more businesses, from small to large, shift marketing budgets online to leverage ability to target their audience TTD has a huge addressable market in a high growth industry.

What makes TTD so attractive as an investment is and takes nominal capital to scale; the platform, tools and software are already in place meaning each new customer comes with little investment leading to higher profit margins.

Like any auction market scale or network effect becomes self-fulfilling creates a competitive moat.

To get an idea of customer stickiness, Trade Desk has maintained over a 95% client retention rate since its 2011 launch.  This comes even as competitors such as RocketFuel have flamed out.

It’s always tough to buy a stock that has already had a big run and I’d probably wait for some pullback after today’s earnings gap.

But TTD looks to be in front of huge wave in the shift towards online advertising and should have a long way to run in coming years.

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