$209.5 billion. That’s the total amount of revenue Alphabet (GOOGL) – Get Alphabet Inc. Class A Report generated in 2021 from Google advertising, up 42.5% year-over-year.
This staggering figure is a reminder of just how strong the digital advertising industry has become in wake of the pandemic and could also point towards an improving economy.
Brands and businesses all over the world are increasingly turning to digital mediums as a means of attracting new customers, which makes a lot of sense considering how many consumers have been staying home or working remotely over the last few years.
It’s pretty straightforward – more web traffic means more online advertising opportunities for companies to take advantage of.
While there was initially some uncertainty related to advertising budgets and how it would impact companies selling digital ad space at the onset of the pandemic, those concerns have certainly been assuaged over the last few quarters.
In fact, digital advertising is truly thriving in a post-pandemic world.
Big tech companies like the aforementioned Alphabet, Microsoft (MSFT) – Get Microsoft Corporation Report, Amazon (AMZN) – Get Amazon.com, Inc. Report, and even Apple (AAPL) – Get Apple Inc. Report have each developed winning digital advertising platforms that are contributing nicely to their top-line growth in recent quarters.
Since they rely on businesses of all different sizes to spend on their digital advertising services, one could conclude that such robust revenue figures in their advertising segments are a healthy indicator for the economy.
It could mean that businesses are feeling comfortable enough about their financial positions to allocate capital towards digital advertising, or that consumers are buying sufficient goods and services at this time to warrant spending on digital ad space.
One thing’s for sure – digital advertising is here to stay and could provide some fantastic investing opportunities at this time.
Here are a few reasons why the industry is thriving post-pandemic.
Consumer Habits Have Permanently Changed
Most consumers were on board with trends like online shopping, streaming entertainment, and social media usage long before the pandemic began.
Then, social distancing measures and remote work policies rapidly accelerated their widespread adoption.
Although life is starting to return to normal now, it’s safe to say that many consumer habits have permanently changed following the pandemic.
The eCommerce industry is booming and has become the default way for people to shop, evident in the fact that global retail eCommerce sales reached approximately $4.9 trillion dollars in 2021.
More consumers than ever before are watching movies, television programs, and sports online, even with movie theaters and stadiums open again.
Social media platforms continue to explode with user growth, and according to a recent report from Hootsuite, there were over 4.62 billion social media users worldwide in 2021, up 10% from the prior year.
Each one of these digital mediums offers incredibly valuable advertising space, and marketers definitely acknowledge how important it is to tap into their potential.
Digital Transformations Continue
Another interesting impact of the pandemic was the massive amount of companies deciding to pursue digital transformations.
With so many enterprises updating their business products, customer experiences, and culture, many of their management teams also recognized the importance of taking their advertising into the digital age.
After all, platforms like Google Ads help marketers to run specific data-driven ads catered to their ideal target markets around the world.
These types of digital advertising platforms also offer measurable results that companies can use to make the most out of every ad dollar spent, which is particularly important given that many of them are operating on tight budgets.
We should continue to see more businesses pursue digital transformations going forward, and it’s only natural that these companies will also look to update their marketing practices.
That means more big things to come for digital advertising companies.
Check Out These Stocks for Digital Advertising Leadership
It’s quite evident that digital advertising is becoming the go-to form of marketing for businesses around the world, which means there are plenty of rewarding investment opportunities out there to capitalize on the industry’s continued growth.
With that said, it’s important to be selective when choosing companies with exposure to this burgeoning trend.
For example, social media giant Meta Platforms (FB) – Get Meta Platforms Inc. Class A Report has plummeted in recent sessions following a concerning earnings report in which CEO Mark Zuckerberg mentioned that new privacy features introduced by Apple could result in $10 billion in lost sales in 2022.
While the company’s valuation is getting more attractive with every downtick, there are simply too many dark clouds hanging over Meta Platforms at this time for institutions to be comfortable with buying, making this one an avoid for now.
The aforementioned Alphabet stands out as a much better pick for exposure to digital advertising thanks to a knockout Q4 report, a dominant business model, and a 20-for-1 stock split announcement.
Amazon could also be a great way to gain exposure to this thriving trend, as the company recently announced its advertising business grew 32% year-over-year and delivered $31 billion in revenue last year.
Finally, investors should take a look at a name like Microsoft, a company that reported search and news advertising revenue up 32% and LinkedIn revenue up 37% last quarter.
The bottom line is that each one of these stocks is a diversified tech powerhouse that should only see its advertising business get stronger as companies continue spending big on this incredibly effective form of marketing.