Digital advertising stocks are perhaps one of the most intriguing areas of the tech space for investors to consider at this time. With people using their devices like smartphones, personal computers, and connected televisions more than ever thanks to the pandemic, the companies that offer marketers a way to connect with potential clients digitally are very attractive. Keep in mind that advertisers are likely going to increase their ad budgets for digital channels going forward, which means there is plenty of opportunity for the best companies in digital advertising to grow their businesses.
It’s fair to assume that we are entering the golden age of digital advertising, particularly when you look at some of the statistics. According to eMarketer, the global digital advertising market is expected to grow by roughly 20% this year to reach $450 billion. With ad spending recovering in a big way following the pandemic, there are plenty of great companies for investors to consider at this time. Let’s take a look at 3 stocks to buy in the golden age of digital advertising.
Another quarter, another monster earnings beat from tech industry leader Alphabet
. It’s a company with perhaps the best business model the world has ever seen, and the perfect stock to buy if you are bullish on digital advertising. Alphabet is the largest search and video advertising seller on the internet and a company that is certainly thriving in a post-pandemic environment. The company saw its total Google ad revenue increase to $50.44 billion in Q2, up 69% year-over-year, which is confirmation that advertisers are certainly willing to spend big in order to reach consumers that are spending a lot of time on their devices.
While Alphabet does have some risk related to antitrust investigations brought on by the Department of Justice, it will likely take a while for those issues to play out in court. In the meantime, Alphabet is poised to rake in billions in advertising spend, particularly when you think about the company’s connected TV ad growth. Alphabet’s YouTube revenue came in at roughly $7 billion in Q2, up 83% year-over-year, and could be a huge growth driver for the company going forward.
Roku is also a strong stock to buy if you want to ride the growth in the digital advertising industry. The company owns & operates a major streaming video platform in the United States, which is perfect for advertisers and publishers that want to take advantage of Roku’s high levels of consumer engagement. We know that more and more people are opting to stream their television versus pay for cable, which is part of the reason why Roku’s platform has been growing at such a rapid pace.
The company added 2.4 million incremental active accounts in Q1 to reach 53.6 million total and saw its average revenue per user grow by 32% year-over-year in the quarter. It’s also worth noting that Roku
generated record revenue, gross profit growth, and Adjusted EBITDA in Q1 and saw its streaming hours increase by 49% year-over-year. There is also digital marketing potential here thanks to Roku’s content distribution partnerships including a recent deal with NBCUniversal to provide streamers with easy access to the Tokyo Olympics. We’ve already seen strong ad revenue from companies like Alphabet, Snapchat, and Twitter, and if Roku continues with that trend when it reports its Q2 numbers on August 4th, it won’t be surprising to see this stock hitting new all-time highs.
Finally, we have a company that has created a self-service technology platform enabling clients to purchase and manage digital advertising campaigns across tons of different formats. The Trade Desk
is a leader in demand-side programmatic advertising, which essentially allows advertisers to bid on ads and optimize their ad performance based on data such as cost per click and other performance indicators. The stock has been rallying on the back of Snapchat’s strong ad revenue and seems to be benefitting from a 10 for 1 stock split that occurred back in June.
Q1 was strong for the company, with revenue growth of 37% year-over-year to $220 million, and its management is expecting even stronger top-line growth in Q2. What’s also intriguing about The Trade Desk is that the company is great at retaining its clients, as customer retention remained over 95% in Q1, as it has for the previous 7 years. Finally, The Trade Desk recently launched a new platform called Solimar that completely reimagines the media buying experience and partnered up with Walmart to help advertisers access shopper data, which are additional reasons to consider adding shares.
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