Surfing the internet and streaming videos can be a chore these days. Why? It’s not about the content, but it’s about all of the online advertising that comes with it. I remember when we used to go to websites and not be bombarded with pop up ads or auto-played videos. I also understand that online and digital advertising is an industry worth hundreds of billions of dollars every year. So what online advertising stocks should you watch?
Digital Advertising is Here To Stay
Digital marketing has overtaken other mediums like radio and television. Think about the last time you were on a social media platform or a non-subscription based video streaming site.
Chances are your video was interrupted by at least two ads and your social media stream is full of them. It is really just the nature of how we spend our time now.
We spend more hours on a computer or smartphone than we do in front of the television. We can watch anywhere after all.
For many web-based sites and companies, ad revenues are an essential part of their business. It is valuable real estate that has a legitimate effect on users.
While it does seem like some sites are obnoxiously filled with online ads, take a look at your local newspaper. Or count how many commercials come on during your favorite show.
It is just the world we live in. And the more time we spend online, the more ads we will be exposed to. Hence our online advertising stocks list.
What Are Some Types of Online Advertising?
The thing about online advertising is that it comes in all shapes and sizes now. The more advertising there is, the more it gets seamlessly integrated into our user experience. Here are a few types of online advertising that you have probably encountered before! And they make for great online advertising stocks.
Pay Per Click Ads: This is exactly what it sounds like. Your site makes revenue every time a visitor clicks on an ad. It can be intentional or it can be by accident. Either way, you still make a few cents! On the other side of that click, companies or retailers are paying for the ad space on your site through platforms like Google Ads. They will pay $1.00 to $2.00 per click and hope that the return they receive from each visitor more than makes up for the costs.
Video Ads: Don’t get me started on how many ads platforms like YouTube play during a video my kid is watching. But they’re effective and are often catered to the particular video you are viewing. If it’s a well-known kids show then you’ll often be presented with ads for toy companies. If it’s a sports-related video you’ll get advertising for streaming. Or even betting on professional sports. The thing is, you won’t see these ads if you pay for the premium YouTube Premium subscription. The same can be said for platforms like Netflix or Disney+. Subscription revenues are enough to offset adding in advertising. So if you don’t want any ads to show up, you may have to crack open your wallet.
How We See Ads
Promoted Posts: We’ve all seen these ads show up in your timelines on platforms like Facebook or Twitter. Promoted posts often show up frequently in your timeline. They’re meant to attract new visitors and increase traffic and engagement. These can be pretty deceiving these days as they flow seamlessly into the rest of your feed. Sites like Twitter do make sure to label them as promoted posts. So if you do see one, know that it’s a paid advertisement!
In-Game Ads: This applies to both real-life games and in video game environments! Sports games are able to digitally alter certain parts of the screen in order to place advertisements. One great example of this is in the National Hockey League, where the boards and glass are used to project different forms of digital ads. In video games, developers will often include things like virtual billboards that can attract players as they play. This isn’t as popular. However, theoretically, the advertisement does exist in that game environment forever! So let’s take a look at some online advertising stocks.
Online Advertising Stocks
So you can see exactly why online advertising is a booming industry. You’re also safe to presume that companies that actually deal in buying and selling advertisements are very profitable investments. I always like to talk about having our investing radar on.
Even when we’re doing things in the real world. Just surfing the net or streaming videos should give you a good idea of just how well these companies are doing! Let’s take a look at some great online advertising stocks.
Alphabet (NASDAQ: GOOGL): Google is the king of online advertising, with nearly 80% of its annual revenues coming from its Google Ads segment. It is estimated that advertising brings in nearly $150 billion annually, and Google accounts for about 30% of the world’s share of digital ad spending.
Perhaps most importantly nearly 70% of all desktop users will use Google Chrome as their web browser, and about 90% of the world uses Google Search as their primary search engine.
That gives Google an incredible advantage over its peers and allows them to have a near-monopoly over the digital ad space. Shares are expensive and sell at a premium, but Google continues to be the global leader in digital advertising and should be for the foreseeable future.
Facebook (NASDAQ: FB): Nearly 98% of Facebook’s revenues come from advertisements on its various platforms like Facebook and Instagram. It is safe to say that Facebook is the industry leader amongst social media platforms, and should continue to be so with its nearly 3 billion active users on Facebook and 1.4 billion active users on Instagram. Facebook hasn’t even added advertisements into its messaging service WhatsApp; which has over 2 billion users itself.
The Trade Desk (NASDAQ: TTD): The Trade Desk is a popular company that is the industry leader in demand-side platform advertising. A demand-side platform is where companies can bid on ad sources and theoretically pay cheaper fees.
The Trade Desk utilizes cloud-based solutions for its customers and prides itself on providing more customer-friendly and relevant advertisements. The company underwent a 10 for 1 stock split earlier this year and has returned an impressive 2,500% to its investors over the past five years.
Magnite (NASDAQ: MGNI): Magnite is a sell-side advertising platform that is kind of the opposite side of the transaction as the Trade Desk. Now Magnite is considerably smaller than these other companies, and only has a market cap of about $3.7 billion.
Magnite actually recently purchased a company called SpotX for $1.1 billion. This acquisition is meant for Magnite to move more into digital advertising rather than television-based ads.
Groupon, Inc. (NASDAQ: GRPN) is a Chicago-based e-commerce based firm that has been operational since 2008. It connects consumers to different merchants through a website and mobile application. The company operates in more than 500 cities in 48 countries and has more than 48 million active users. The company has a market capitalization of over $1.5 billion, and it also showed more than $1.4 billion in annual revenue in 2020.
Online Advertising Stocks That are Tech Based
Pubmatic Inc (Nasdaq: PUBM): Pubmatic is a tech company that creates strategies for the digital publishing and advertising industry; the company also carries out development and implementation processes for online advertising software as well.
The software provides a specialized could infrastructure platform that enables real-time programmatic advertising transactions. PubMatic recently received a favorable response at its recent IPO posting 64% revenue growth. In addition, the EBITDA almost tripled, and the adjusted earnings per share jumped from $0.06 to $0.34.
Criterio (Nasdaq: CRTO): Criterio is a company that has a strong focus on retargeting products for its consumers. The company allows its consumers the option to provide targeted ads for recently viewed items the consumers may want to revisit. Considering the recent ban on third-party cookies by search engines, Criterios business was at risk; however, Criterio acted quickly and started diversifying away from the ad retargeting market.
Criterio now works on developing software solutions that can help improve media outreach, boost e-commerce value e.t.c.
Amazon (NASDAQ: AMZN)
It’s hard to write any article about eCommerce and technology these days, without mentioning Amazon. The eCommerce site incorporates more and more targeted ads, as Amazon uses your previous search histories and pages viewed to send you exactly the type of purchase you want to make. Recently, Amazon started to add video ads like the ones seen on YouTube, into its Amazon Prime streaming platform.
Now between each episode, Amazon will play one of its own ads, or an ad paid for by another company. Amazon is also alleged to have its Amazon Alexa smart home pieces listen in to our conversations around the house. This allows Amazon to determine what we want or what we need to buy off of the site.
Conclusion: Online Advertising Stocks
There’s just no way to avoid these online advertisements these days. With fewer people watching television and more people spending time online, it makes sense that a shift from television to digital advertisements has taken place. If we’re watching television and the show goes to commercials, it’s generally our time to stretch, get a snack, or hit the restroom. Online advertisements, on the other hand, are integrated directly into the site or your feed. And they’re far more effective. This is why we have this online advertising stocks list.
There are so many different types of online advertising that it is difficult to know exactly which one you are viewing. Some sites have pay-per-click advertising, while some will add in-video ads of either your product or other companies. We all know how frustrating it can be to have your YouTube video interrupted three different times, but it is partly our fault for not wanting to pay for the premium subscription.
Finally, we have some incredibly powerful companies like Google and Facebook, that make a large chunk of their revenues from advertisements. They can be annoying, but if you are an investor in these companies, just think that you are adding to the revenues each time you click on an ad. When surfing online next time, don’t think of online advertisements as ads, just think of them as television commercials you can’t get up and miss! As the world continues to gain more smartphone users and more high-speed internet users, the online advertising industry should see a major ascent in the tech sector.