Written by Ophir Gottlieb
PREFACE
Reuters has reported on data from Zenith that shows global advertising could grow faster than expected powered by a belief that consumer spending will rise.
The news may mean greener pastures not just for the advertising monoliths Alphabet Inc. (NASDAQ:GOOGL), Facebook Inc. (NASDAQ:FB) and Twitter Inc. (NYSE:TWTR), but also the top technology consumer names -- Apple Inc. (NASDAQ:AAPL) and Amazon.com Inc. (NASDAQ:AMZN).
STORY
Alphabet Inc.'s Google and Facebook Inc. are the largest advertising platforms in the world. While about 80% of Google's revenue comes from advertising, fully 97% of Facebook's revenue does. Twitter Inc. (NYSE:TWTR) sees about 85% of its revenue driven by advertising. The triumvirate just got some good news from Zenith. Here is the lay of the land:
"Zenith raised its global growth forecast for this year from the 4.1 percent it predicted in June, despite the uncertainty sparked by Britain's vote to leave the European Union.
The advertising agency also raised its global forecasts for 2017 and 2018, to 4.5 percent and 4.6 percent respectively, from earlier forecasts of 4.3 percent and 4.4 percent. Increased spend on advertising reflects increased confidence levels by companies."
While Facebook Inc. (NASDAQ:FB) and Alphabet Inc. (NASDAQ:GOOGL) are seeing strong growth, there has been a whisper in the air of a slowing global advertising economy which would have meant a non-trivial headwind for the two giants. Twitter Inc. (NYSE:TWTR) is struggling with its own business anyway, but a worsening advertising landscape could have spelled yet more trouble.
With raised forecasts for advertising driven by raised forecasts for consumer spending, anything and everything is looking up for Alphabet Inc. and Facebook Inc., while Twitter Inc. now finds itself ready to draw its own audience into its newly framed live streaming video #GoLive initiative.
FURTHER
The news goes yet further. A stronger ad spending landscape from brands points to a belief that consumer expenditures will rise, and as the Reuters article points out, that comes from a healthy job market.
"This upgrade is mainly the result of stronger-than-expected growth in the U.S., where a strong labor market has encouraged consumers to increase their expenditure, and advertisers have fought harder for their share of the expanding market."
A stronger consumer also means growth for Amazon.com Inc. (NASDAQ:AMZN) and likely the most famed technology brand ever, Apple Inc. (NASDAQ:AAPL). We can turn to a few snapshots from the Vice News that point a strengthening consumer in the United States.
Claims for weekly unemployment are falling. Then we get this very interesting second visual from Vice:
This data comes from the Conference Board's Consumer Confidence survey, which asks part of the American populace about the labor market. Economists track the assessment of respondents who are asked whether "jobs are plentiful" or "hard to get."
In all, the strong advertising market bodes well not just for the mega platforms of Alphabet Inc., Facebook Inc., and Twitter Inc., but also the broader based consumer. While the doom-and-gloom headlines get the clicks, the data suggests anything but gloom, and nowhere near doom.
The author is long shares of Twitter Inc. (NYSE:TWTR) and Apple Inc. (NASDAQ:AAPL). The author has no position in Facebook Inc. (NASDAQ:FB), Alphabet Inc. (NASDAQ:GOOGL) or Amazon.com Inc. (NASDAQ:AMZN).
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