Introducing the Digital Advertising Theme

Definition

The digital advertising theme consists of companies that sell, buy or manage advertising spaces
on digital mediums such as mobile phones, in-apps, video, audio, written content, and any other
emerging digital channels. It also includes companies that make the buying and selling process
automated, more efficient, and easier through data, analytics, or software development. Sources

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Market Size

According to ARK Invest, by the end of 2021, global digital advertising totaled $440 billion,
which is 62% of the total advertising market, and it is expected to grow at an 11% compounded
annual rate in the next eight years to $1 trillion by the end of 2029. Source

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Drivers of Growth

• Time Spent Online: Advertising is about monetizing the eyeballs. Therefore, a critical driver of digital advertising growth is the time we collectively spend online, especially the discretionary time we spend online not working or studying. COVID has accelerated it to a new baseline from roughly 20% to 40%. But there is still room for growth. By 2030, almost half (52%) of global discretionary time is expected to be online. This means there are more eyeballs to monetize online.
• Integration of eCommerce: This trend refers to shortening the eCommerce funnel from the advertisement point to the transaction. It is becoming predominant on social media platforms such as Pinterest or Instagram. Users can click on a clickable ad or post on a social media feed and immediately end with an eCommerce transaction. This trend is also enforced by the emergence of new social platforms such as game platforms similar to Fornite and Roblox and content platforms such as YouTube and Medium, among many others.
• Native Advertising: The native advertising trend is related to embedding ads into the content published online and benefiting from the natural association between the topic and the advertisement. The more content is created, the more advertisement dollars will be made, and there is no stopping the rapidly growing content volume online. Source​

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Trends to Watch

Privacy Concerns: 

• Consumers' preference to block ads and the rise of ad blocker software is one challenge.
• Regulators follow the consumers' preferences by limiting the use of 3rd party Cookie technology widely used to target users online based on their online behavior and preferences.
• Device makers follow the consumers' preferences and plan to restrict cross-app tracking through what's known as mobile ad IDs (MAIDs). In simple words, this is when you click on an Ad on Facebook on your phone, and Facebook can track the unique code associated with your device to see where you end up and what you do outside its properties. Apple was the first device-maker to prevent such cross-app tracking. Now, Alphabet announced a similar plan for its Android phones in the next two years.

Source 1. Source 2. 

Privacy Solutions:
The important question is whether consumers' concerns and regulators and device-makers responses through the elimination of the 3rd party cookies and limiting cross-app tracking are
barriers to digital advertisement growth in the coming years. Companies such as The Trade Desk have developed new solutions, and companies such as Alphabet are tweaking their
approach, and consumers may still voluntarily provide access to their information.

• Identity Innovation: Several software developers in the digital advertising space are adamant about continuing targeted advertisement possibilities without privacy concerns. Such intentions have led to various identity innovations, including The Trade Desk's investment in Unified ID 2.0 technology, an open-source ID framework. The technology hashes and encrypts a user's identifiable information and only makes the hashed ID accessible to the advertisers in the network. Source 1. Source 2. 
• From Individual Cookies to Cohort Cookies:  When Alphabet released its plan to eliminate 3rd party cookies, it introduced an alternative approach. Google's Chrome browser uses the users' recent browsing history to generate a "cohort identity" through this alternative approach. The identity is a unique identifier that associates a user to a cohort of users with similar behavior. While the ID is not uniquely identifiable to one specific person, it still represents the behaviors of such users. Source.
• The Power of Free: While regulators prevented the use of 3rd party cookies in regions such as the E.U., companies still choose to ask their users and visitors for consent to the use of Cookies. A significant portion of consumers would voluntarily accept the terms of use upon visiting a website. "Free" access is such a powerful incentive that convinces many consumers to willingly accept the terms and go back to business as usual.

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Blockchain and Advertising:

There are two advantages to the blockchain platform. The first one is in its ledger structure.
This means once you spend money online, everyone in the network knows that money is being
spent. So, advertising blockchain can create more transparency on buying which ad inventory.
But a more exciting aspect is the ability to reward users for the advertisements they see
through tokens and enable them to share their profile and information only with companies
and ad providers they like. Assuming it is pretty easy for a user to set up an identity and
decide what to share and with whom to share, the platform can reward the user for watching
or interacting with specific ads with tokens. There is a blockchain project called Brave that
plans to achieve something similar, and it would be interesting to track its progress. Source.

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Stock Card Digital Advertising Theme

What's Included:
There are several sub-segments in the digital advertising market. Traditionally, market research companies divide the industry based on the medium. For example, mobile and social advertising are two of the most common subsegments of the overall market. However, at Stock Card, we focus on the ways stock market investors would prefer to divide the market and invest in them. As such, we created the following sub-segments:

1. digital advertising business model (view) - This theme includes the companies that generate revenue from placing various initial advertisements to their users or audience. It includes mobile advertisement, in-app advertising, video advertising, native advertising, and search engine optimization (SEO), among other forms of digital ad placements. Most companies that belong to this theme are publishers, media companies, or consumer-facing websites and platforms that engage their users and audience through various activists such as social interactions, gaming, news, and other forms of audio, video, or written content.
2. digital advertising software (view) - This theme includes software providers that enable more efficient and accurate digital advertisement placement and targeting and may include cloud-based providers, analytics providers, and those software companies that develop software to improve the overall performance of digital advertising.
3. programmatic advertising (view) - This theme includes companies that specifically provide automated technology for buying advertising space instead of the manual and tedious process of finding the best ad spots. This theme is technically a part of the digital advertising software theme. However, due to its importance and potential impact on the industry's future, it deserves its own category. Programmatic advertising providers may include optimizing media placement on traditional TV. However, due to the use of sophisticated software, such providers are also included.
   
4. digital advertising agency (view) - This theme includes companies that act as a broker to find the best advertisement spots for brands and advertisers. This collection mostly includes the traditional advertising agencies that have expanded into digital advertising.

What's Excluded:
The world of digital advertising is wide and ever-expanding. Naturally, some companies could
still be a part of the theme, but either there aren't too many of them, or their focus is too
arrow or adjacent to the core digital advertising activities that we exclude from the list.

1. list providers - Companies such as Salesforce.com or TechTarget play an important role in digital marketing, especially in the B2B segment. They curate, clean, and grow a database of business purchasers and decision-makers and sell such databases to
   advertisers. We decided to exclude them from this collection.
   
2. search engine optimization (SEO) - While many companies included in the digital
   advertising space offer search engine optimization services, we do not include it as a
   standalone sub-segment of the industry because it doesn't come across as a trend or
   functionality shaping the future of the industry anymore.
   
3. customer analytics: Without any doubt, effective digital advertising starts from an
   in-depth understanding of one's customers. However, to include an entire set of
   customer analytics providers in this collection is a bit of a stretch because the
   application of customer analytics is much broader than digital advertising. 

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Theme Creation & Refresh Methodology

To create and refresh Stock Card's Digital Advertising theme, we followed a few steps:

1. Identified companies listed on all U.S. stock exchanges with more than $300M in market capitalization that use the word "advertise" in their company description. Afterward, we verified each companies' primary business and eliminated those focused on traditional or physical advertisement.
   
2. Identified the ETFs focusing on digital advertisements (e.g., MRAD and ARKW) and pulled their total holdings to verify any additional companies that focus on digital advertisement but are not included in the list created in step 1.
   
3. Looked up industry publications and research for AdTech and digital advertising and identified any publicly-traded companies that are not yet included in the list as the result of steps 1 and 2.
   
4. The final result is a list of 100 or so stocks in the digital advertising theme that you can access easily on Stock Card.

Get the digital advertising companies now.

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How To Use It

Use the search bar on StockCard's website to look for and access Stock Card's digital advertising theme and its subsegment.

​You can also use those themes to create a digital advertising Screener of stocks or ETFs that
meet your additional fundamental or technical filters.