How To Play The Digital Ad Revolution (Hint: Look At Facebook)
Citi analyst Jason Bazinet is out with a detailed research report on the digital ad "revolution," in which for the first time in advertising history, marketers are now able to not only tailor their ads to reach specific groups but also measure the effectiveness of an ad campaign.
Focusing on video ad spend, Bazinet noted there are five key categories: national TV broadcast, local TV broadcast, national cable, local cable, and web-based video. The analyst said that over the last 10 years national and local broadcast ad spending remained "flattish" at around $32 billion while national and local cable ad spend grew "significantly" over the same time period to $41 billion in 2014 from $31 billion.
However, web-based video ads are "relatively" new and certainly didn't exist in 2004 but generated $4 billion in revenue in 2014. In fact, when web-based video growth re-accelerated in 2014 from a sluggish 2013, all traditional forms of video advertising, except local cable, decelerated. As such, the analyst suggested that web-based video is "indeed a substitute" for traditional TV advertising.
Facebook To Benefit ‘Disproportionately
Bazinet argued that Internet media companies that have vast audience targeting capabilities should benefit "disproportionately."
In a report published July 1, Youssef Squali of Cantor Fitzgerald came to the same conclusion and argued that Internet will overtake traditional TV spend globally by the end of the decade. The analyst estimated global Internet ad spend will grow at a 15 percent compounded annual growth rate through 2020.
Squali argued that a beneficiary of the trend will be Facebook Inc (NASDAQ: FB) as the company is the "largest" mass reach Internet platform available for advertisers that offer personalized marketing at scale. In fact, the company surpassed four billion daily video views in the first quarter, up "significantly" from three billion daily video views in the fourth quarter and one billion in the third quarter.
"While ad videos were not broken out separately, video usage is growing very rapidly on the platform, and video ads should inevitably follow," Squali wrote. "As video wins more auctions (advertisers should be willing to bid more for video ads), we expect to see upside to ad revenue per MAU [monthly active users] over time."
Bottom line, Squali argued that the favorable shift in ad spend and Facebook's continued momentum will result in the company growing its revenue at 30 percent for the next five years, more than double the market average.
Latest Ratings for FB
|Feb 2017||Pivotal Research||Downgrades||Buy||Hold|
|Jan 2017||Pacific Crest||Reinstates||Overweight|
|Jan 2017||Raymond James||Upgrades||Outperform||Strong Buy|
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