Is The Trade Desk's New Streaming OS a Roku Killer?

The streaming wars are kicking into high gear, with consumers cutting the bundle en masse and "connected TV" advertising becoming the way to fund all of this content. In fact, even Netflix has turned to ad-supported tiers in recent years.

This puts even more importance on companies that help content creators maximize every ad dollar to fund said content wars.

That's why The Trade Desk (NASDAQ: TTD) has thrived in recent years, as the largest independent demand-side programmatic advertising platform, which helps advertisers efficiently place ads in the best slots on the web.

And just last week, The Trade Desk made a massive move to even further disrupt the industry.

Ventura OS in the spotlight

On Nov. 20, The Trade Desk unveiled its new streaming operating system called Ventura, named after the county that's home to The Trade Desk's headquarters.

The move could be a big deal, putting The Trade Desk in direct competition with streaming OS provider Roku (NASDAQ: ROKU), as well as big tech names like Amazon and others.

In a press release describing the new system, The Trade Desk describes Ventura as a "major advance" in streaming operating systems, promising several improvements. On the viewer side, Ventura promises, "a more intuitive, engaging user experience" with easier and objective content discovery across platforms.

Additionally, The Trade Desk promises Ventura will provide a "cleaner" supply chain in the streaming ad world, with the potential to simplify the path from advertiser to publisher, thereby limiting the costs of going through several ad tech middlemen, each of which takes a fee.

Of course, streamlining the system begins and ends with greater precision per ad, and Ventura promises to do this by incorporating The Trade Desk's latest OpenPath and Unified ID 2.0 (UID2) technologies, which are newer and more privacy-oriented methods for ad targeting.

Why is The Trade Desk doing this?

The Trade Desk has been, up until now, a demand-side platform only, meaning its customers were advertisers and agencies. CEO Jeff Greene would often take shots at other ad tech players which operated on both sides of the "ad trade," or those who lacked transparency as a "walled garden."

So at first glance, getting into operating systems, which represent the "supply side" of streaming ads, appears to violate that "purity" on which The Trade Desk has prided itself.

Yet Greene has also said The Trade Desk has been secretly working on Ventura for three years, so there is obviously a big reason behind this carefully considered move.

One reason, yes, could be to merely get on to the supply side and grab some of those dollars that go to Roku and others. But it also could be that The Trade Desk sees a better way for the connected TV industry to operate. In his address introducing Ventura, CEO Jeff Greene took care to emphasize The Trade Desk's main customer is still the demand side and advertisers.

By tracking viewership and users in a better way with UID 2.0 and other targeting technologies, The Trade Desk may see an opportunity to glean more insights from data, thereby improving the ad targeting capabilities for all advertisers.

Greene also noted Ventura will be the only OS that doesn't also have its own streaming channel or content. In another recent interview about Ventura, Greene said he thought the concentration of streaming OS systems increasingly in the hands of big tech companies like Amazon and Apple (NASDAQ: AAPL), each with heir own content, wasn't necessarily the best thing for viewers or advertisers.That statement indicates Greene believes other operating systems may route lucrative advertising to their own content, or route viewers to the platform's preferred streaming channel.

Finally, in the recent Trade Desk earnings conference call with analysts, Greene criticized certain players in the ad tech world, which he accused of charging too much for their service in a short-term "extraction" operating philosophy -- without naming names. So, Ventura could be a way to potentially cut certain supply side "extractors" out of the digital ad supply chain, lowering costs for all.

So, what's the real objective behind Ventura? It's probably a bit of all these. But how well Ventura lives up to Greene's altruistic rhetoric remains to be seen.

Image source Getty Images.

A threat to Roku?

Ventura seems closest to Roku in terms of its business model. While Roku does have the Roku Channel, Roku doesn't have nearly as many originals as say, the deep-pocketed Amazon and other big tech companies.

As a result of being "mostly" just an OS, Roku has the most third-party integrations with streaming TV OEMs. In the release, The Trade Desk said it would exclusively integrate with third-party hardware makers, as it has no plans to make its own streaming device.

This is where things could get dicey for Roku from a competitive perspective. Because The Trade Desk claims to still concentrate on its demand-side platform, which is where it makes all of its money today, it has the potential to undercut Roku's rates it charges advertisers on the supply side. Ventura also has the potential to undercut Roku's revenue-sharing arrangements with smart TV-makers, thereby displacing it at more smart TV vendors.

In fact, in the aforementioned interview, Greene said The Trade Desk didn't even "want to, or need to, make money on the operating system itself."

That remains to be seen as to whether The Trade Desk will actually make profits on the OS. But Greene's theory is that by improving the connected TV experience, cutting out more middlemen, and improving transparency, consumers and advertisers -- The Trade Desk's main customer -- will ultimately benefit.

That's a scary proposition for Roku and its shareholders.

While there is a risk for The Trade Desk in potentially violating its "buy side only" ethos, if Ventura really benefits customers and advertisers alike, it appears The Trade Desk has a lot to gain from Ventura. And if it can really disrupt big tech's hold over streaming and improve the ecosystem, that's a win-win for everyone outside the Magnificent Seven.

Except maybe Roku, though.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Billy Duberstein and/or his clients have positions in Amazon, Apple, Netflix, and The Trade Desk. The Motley Fool has positions in and recommends Amazon, Apple, Netflix, Roku, and The Trade Desk. The Motley Fool has a disclosure policy.