When most folks think of advertising, the first idea that pops into their heads is Madison Avenue; television, radio, and print have been dominant to one degree or another for decades.
But, as we've seen time and again here, we live in an era of radical change - massive, profitable, and altogether life-changing disruptions are underway across the entire global economy.
As it happens, Madison Avenue is the next candidate for disrupting.
You see, a new study shows digital ads - those served up online or through handhelds - are about to surpass old-school legacy marketing.
We're talking $110 billion in digital ads just for 2020 alone. That's 51% of the ad industry's forecast sales of $214.6 billion.
The company I have in mind - an advertising industry go-to - is going to grow its earnings even faster than that. Its stock price has zoomed nearly 400% since the March lows, and, as you're about to find out, I have every reason to believe that's just the beginning...
The Cord-Cutters Are Absolutely Unstoppable
It's tempting to chalk up the huge growth in digital ads as yet another unforeseen effect of the pandemic shutdowns that have folks shopping online.
And while that is no doubt a factor, it's only one part of the story; there's much more going on here.
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Digital ads have really started to gain critical mass these past few years, as the technology to target and tailor outreach to specific audiences has gotten better.
Advertisers get much clearer performance metrics than they would with a newspaper or TV.
These digital platforms allow marketing teams to see exactly how many and what kinds of people clicked on which ads, and whether any of them bought anything.
Outside of the classic "Nielsen box," that granular, real-time feedback is basically impossible in old-school advertising, making ads in older media hard to justify spending money on.
Still, the speed with which digital advertising has grown has been nothing less than impressive. When the smartphone revolution really began to hit its stride a decade ago, digital programs made up less than 20% of ad sales.
Even three years ago, digital advertising made up just 33% of all ad spending in the United States. That was just the same as legacy advertising media such as newspapers, radio, magazines, and local TV combined.
When they're done crunching the 2020 numbers, Group M, the world's largest buyer of ads, expects digital ads to have made up 51% of the total, or $110 billion out of the estimated $214.6 billion United States total this past year.
In 2021, however, Group M expects total ad spending to grow by 12% to $240 billion, and digital advertising to grow to 54% of the market, or $130 billion.
This rapid growth is due to two unstoppable trends, not unlike the predicted $353 billion "capital wave" headed toward five companies (details).
One is "cord-cutting," or the tendency for more and more Americans to get rid of cable TV. This year alone, over 6 million U.S. households will "cut the cord," no doubt in part because of COVID-19's disruption on sports.
Over the long term, cable's lack of so-called "à la carte" offerings has been a cord-cutting catalyst; viewers today want to be able to pick and choose their entertainment, news, and sports options, and are increasingly reluctant to pay high flat fees for channels they don't watch mixed in with the channels they watch regularly.
That's going to bring the total number of "cord-cut" households to 31.2 million. By 2024, fully 33% of U.S. households won't use cabled.
That means TV ads won't reach them... but digital ads on video streaming services most certainly will.
And there's a second unstoppable trend playing out, which is the increasing time we spend on our mobile devices, with the average American looking at their smartphone screen for 5.4 hours a day.
That's the average - young people clock in way more screen time than that, with 13% of millennials clocking in use of smartphones and other devices for 12 hours or more per day.
Because young people are an especially desirable demographic for ads, the advertisers have chased them - leaving newspapers and magazines - and instead moved to digital advertising.
That brings me to my recommendation - The Trade Desk Inc. (NASDAQ: TTD). It's the best way for investors to play the entire digital ad space.
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Based in Ventura, Calif., this firm has built the perfect business model for today's changing ad landscape. Using the company's cloud-based advertising platform, Trade Desk's clients can buy ads from more than 70 different exchanges and networks.
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We're talking roughly 580 billion ad impressions and roughly 450 million devices across the globe all day, every day.
Trade Desk's platform is so simple and transparent that you wonder why nobody else thought it up before.
Clients can buy spots on just one platform, such as mobile phone screens, or they can be part of a coordinated campaign that also targets streaming TV, radio podcasts, web browsers, as well as traditional television spots.
Trade Desk's clients are first assessed for their needs and goals and then presented with an extensive plan that delivers the greatest reach for the best cost.
This is all backed up by Koa, Trade Desk's artificial intelligence (AI) engine that constantly adjusts to account for shifts in consumer surging habits.
So, it's no wonder that despite the coronavirus pandemic, Trade Desk has been firing on all cylinders. In fact, the company recently beat expectations on both earnings and forward guidance.
The firm reported adjusted earnings of $1.27 per share, up 41% from the year before and almost three times Wall Street's expectation of $0.43 per share.
Meanwhile, revenue was up 32% from the prior year and came in at $216.1 million. That blew the expected $180.8 million figure clean out of the water.
Trade Desk in particular excelled in advertising on connected TVs, a segment where the firm's revenue doubled in this latest quarter alone.
As you can see, Trade Desk is a great way to play the trend of advertising moving to the digital world and leaving old-school media behind.
With per-share profits growing by 50% a year, it is set to double again in just 18 months.
It doesn't take many digital economy leaders like this one to super-charge your portfolio.
In fact, subscribers to my Nova-X Report investment research newsletter already had the chance to double their money with The Trade Desk Inc. back in 2019; the folks who bought and held on through the "COVID-19 Crash" have been able to reap gains as high as 389%.
I still see plenty of highly profitable upside ahead for this play, but you could potentially be even more ahead of the game as a Nova-X Report subscriber.
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About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.