3 Advertising Stocks to Buy for The New Digital Age
The advertising industry has been in a slowly shifting state for decades. Companies like Google and Facebook have created more targeted advertising networks than ever before. Due to this, ad spending has been transitioning from traditional methods to digital ones. More recently, the COVID-19 pandemic rapidly accelerated this trend. In light of this, there’s never been a better time to take a look at advertising stocks.
The COVID-19 pandemic has made humans more reliant on technology than ever. In 2020, quarantines caused industries like eCommerce and digital marketing to soar. This trend has not slowed down either. In 2021, companies spent approximately $228.96 billion on digital advertising. This was a 30.5% increase from 2020.
In general, it feels as if we are at the cusp of entering a new digital age. On top of the transition mentioned above, new digital technologies are also emerging. For example, the metaverse and web 3.0 were huge talking points in 2021. Both of these have the potential to redefine the world that we live in. Regardless of what the future of advertising looks like, there’s a high chance that it will be digital.
With that said, let’s take a look at three advertising stocks to buy for the new digital age.
NOTE: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.
Digital Advertising Stocks: A Duopoly
When it comes to finding digital advertising stocks to buy, there are two obvious choices. Google and Meta Platforms control the overwhelming bulk of the digital advertising space. Google, the world’s most popular search engine, controls 28.9% of the market. Facebook, with its nearly 3 billion-member community, controls 25.2%. Amazon is a relatively close third. It controls about 10% of the market. After these three goliaths, the digital advertising space opens up much more.
A few other companies are trying to chip away at this dominance. For example, video streaming company Roku is making a bid to lure advertisers away from TV ads. Other social media companies like Twitter, Snapchat and TikTok are all trying to dethrone Facebook. However, as it stands, Google and Facebook have a duopoly on digital advertising.
With that said, there are a few advertising stocks that focus on actually running ad campaigns.
No. 3 Omnicom Group (NYSE: OMC)
Omnicom Group is one of the biggest marketing communications firms in the world. It offers solutions for advertising, customer relationship management, public relations and specialty services. However, the bulk of its income comes from advertising. To be exact, in Q3 2021, 53% of its total revenue was from advertising. Omnicom employs about 77,000 people and works with 5,000 clients in 70 different countries. It’s comprised of three different advertising agencies: BBDO, DDB and TBWA.
One reason why Omnicom Group is one of the top advertising stocks is due to its diversified revenue streams. Half of its income comes from advertising. However, its client base is diversified across 15 different industries. Its biggest industries are technology, auto, and healthcare. However, none of these make up more than 20% of Omnicom’s revenue. Having this type of diversified client base is incredibly valuable. This helps to protect Omnicom in the event that one industry reduces its ad spend.
Building on the theme of diversification and safety, Omnicom also pays a hefty dividend. Even during 2020, one of the toughest years on record, it remained committed. It paid out $563 million to investors during 2020. Right now, it has declared a dividend of $0.70 per quarter.
In 2020, Omnicom reported $13.17 billion in revenue and net income of $945.4 million. Its stock was up 22% in 2021 but down 10% over the past five years. When you buy Omnicom stock, you are probably not going to double your money in a year. Instead, you’ll get a diversified business that makes money and pays a consistent dividend.
Advertising Stocks No. 2 The Trade Desk (Nasdaq: TTD)
The Trade Desk offers a different model than most advertising stocks. It’s not a marketplace that shows ads, like Google or Facebook. But it’s also not an agency. Instead, it’s a platform that allows ad buyers to create, manage, and optimize their ad campaigns.
One of the most impressive parts of The Trade Desk’s business is its customer retention rate. In Q3 2021, it boasted a customer retention rate of 95%. This means that it only loses 5% of its buyers to competitors or other services each year. Even more impressively, this is the 7th year in a row that this rate has been at 95%. This could be part of the reason the company was recognized as the 6th fastest-growing company in 2021 by Fortune.
In 2020, The Trade Desk reported revenue of $836.03 million. It also had a net income of $242.32 million. These numbers were up 26.47% and 123.71% respectively. Its stock broke even during 2021 but is up nearly 2,500% over the past five years.
Advertising No. 1 Thryv Holdings (Nasdaq: THRY)
Thryv Holdings is necessarily a digital advertising business. However, it still helps companies get more exposure. It does this by helping them to manage and improve their online presence. For example, it helps clients improve their Google listings, run social media pages, and monitor their status on third-party review sites. In a way, all of these are a form of digital advertising. Thryv might very well be one of the newer categories of advertising stocks.
Just like The Trade Desk, Thryv also has an incredibly sticky platform. In Q3 2021, it boasted a 95% net dollar retention. It also reported just 1.7% seasoned monthly churn. In today’s world, there are so many different parts of running a business. Even something as simple as an Instagram page can require an entire team. Thryv helps simplify businesses’ online presence which saves them time, money, and resources. This is probably why Thryv’s young platform is proving to be so valuable for its clients.
Thryv reported a 2020 annual revenue of $1.11 billion. It also reported a net income of $149.22 million. Thryv just went public in 2020 and its stock is up 200% total.
I hope that you’ve found this article on the top advertising stocks valuable! As usual, please base all investment decisions on your own due diligence and risk tolerance.