Internet stocks underperformed the broader market this week (-2.9%) in the wake of a broad tech sector sell-off, but maintain a lead over the S&P 500 on a YTD basis (+14.3% vs. +8.6%, respectively). Internet advertising and digital media news from the week included a plethora of industry reports from IAB/pwC (digital ad spend), Ooyala (digital video), comScore (May multi-platform traffic data), Magna (updated ad forecast), and Chartbeat (mobile web engagement). Cantor Fitzgerald also discusses Acxiom's partnership with Pinterest and comScore's win with the Sinclair Broadcast Group. The firm's top picks are Overweight-rated FB and GOOGL among larger caps, and Yelp Inc (NYSE:YELP) and ACXM among smaller caps.
The Cantor Internet Index (a broad index of 80+ Internet & digital media names) underperformed the broader market for the week ended 6/15, down 2.9% vs. the S&P 500 down 0.1%, resulting in a YTD rise of 14.3% vs. the S&P 500's +8.6%. Top movers from the firm's coverage include TTD (-12.2%), SNAP (-9.8%), NFLX (-8.5%), and RUBI (+12.4%). The CII is trading at 18.2x EV/ NTM EBITDA, in the upper half of the ten-year range of 6-24x.
1Q17 digital ad revenue increased 23% Y/Y, the strongest beginning to a year for digital ad spend, according to a recent IAB/PwC report. US digital ad revenue increased 23% Y/Y to $19.6B, the 7th consecutive quarter of double-digit growth, fueled by interactive advertising's power to reach consumers where they are spending more and more of their time. This data is particularly good news for the largest digital advertising players, Alphabet and Facebook, in the firm's view, which accounted for ~85% of US digital ad growth in 2016.
Video report shows continued shift to mobile, long-form content included, according to Ooyala's most recent Global Video Index report. In 1Q17, 56.5% of all video plays were on mobile devices, up from 54.3% in 4Q16 and 47.7% in 1Q16. Smartphones represented 46.9% of all plays (+20% Y/Y) and tablets represented 9.6% of all plays. Perhaps more important, long form content (>20 minutes) is comprising a larger chunk of time on mobile devices and now represents a majority of time watched on every screen. Long form content represents 55% of time spent on phones, 81% on tablets, 65% on PCs, and 98% on connected TVs.
May U.S. multi-platform traffic data from comScore showed that Snap's total minutes decelerated to +5.5% Y/Y (vs. +24.7% in Apr; -4.2% M/M) and avg minutes per user decreased 40.1% Y/Y (vs. -30.3% in Apr; -4.7% M/M). Yelp's total minutes increased 4.9% Y/Y (vs. +4.6% in Apr; +4.8% M/M) and avg minutes per user increased 4.9% Y/Y (vs. +2.5% in Apr; +4.7% M/M).
Sinclair to exclusively use comScore for Local TV Ratings in 2018, according to a recent article in AdWeek/TVSpy. Sinclair Broadcast Group, one of the largest local broadcast groups in the country, informed advertisers/agencies that it would exclusively utilize comScore for its local TV ratings starting in 2018. Sinclair provides services to 233 stations in 108 markets, and reaches 70+% of American households. This is incrementally positive for SCOR and negative for NLSN's local TV business, the leader in local TV ratings with measurement in all 210 designated local TV markets.
Acxiom announced a partnership with Pinterest, which will enable advertisers to measure the impact of their Pinterest campaign spend on in-store and online sales via Acxiom's privacy safe haven solution (matching retailer transaction data with Pinterest campaign insights) and Acxiom-generated lift reports. Pinterest has 175 million monthly users, and 68% of US women ages 22-54 use the platform. The firm views this partnership as incrementally positive for ACXM's Audience Solutions business.
According to a recent Chartbeat report and MarketingLand article, Google’s Accelerated Mobile Pages (AMP) and Facebook’s Instant Articles (FIA) content have been receiving larger shares of publishers’ mobile traffic, with 16% and 14.8% of content, respectively. The firm views this as incrementally positive for both GOOGL and FB as readers engage more and have a better user experience. Data suggests that 47% of consumers expect a web page to load in 2 seconds or less, and 40% of consumers abandon websites that take more than 3 seconds to load. AMP and FIA have load times of 1.4 seconds and less than 1/1000th of a second, respectively.
Magna forecasts that TV ad sales will be down (-1%) for the first time since 2009, according to a recent Business Insider article. In a spring update, Magna’s latest ad forecast calls for media owners net advertising sales to grow by 3.7% to $505B in 2017, and US ad sales are expected to grow 1.6% to $185B. Importantly, TV ad sales are expected to decline 1% this year, the first decline since the height of the Great Recession in 2009. Additionally, in the US, linear national television advertising revenue is expected to decline 3%, while online advertising sales are expected to grow by 14%, driven primarily by mobile ads. The firm views this as a net positive for digital advertising players, particularly megacaps Alphabet and Facebook, as traditional ad dollars continue to migrate online.