CHICAGO, Nov. 11, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the eCommerce (part 3), including Yahoo (Nasdaq:YHOO-Free Report), Microsoft (Nasdaq:MSFT-Free Report), Facebook (Nasdaq:FB-Free Report), LinkedIn (NYSE:LNKD-Free Report) and Twitter (NYSE:TWTR-Free Report).
Industry: eCommerce (part 3)
Link: http://www.zacks.com/commentary/35251/online-travel-advertising-boosted-by-stronger-economy
The U.S. digital advertising market has seen some very strong growth in the past few years, such that the discussion has shifted to its most effective channel, which is mobile. eMarketer estimates that while the total digital ad market will grow 47.6% from 2013 to 2017, mobile will grow 271.0%, with desktop declining 17.5%.
Total growth rates are expected to continue declining: 12.6% in 2014, 10.3% in 2015, 9.2% in 2016 and 7.1% in 2017. Retail, financial services, consumer packaged goods (CPG) and travel, in that order, are expected to drive this growth. The mobile platform will remain particularly strong, growing 56.0% in 2014, 41.8% in 2015, 33.1% in 2016 and 26.0% in 2017. Spending on mobile ads is expected to increase as a percentage of total spending on digital as well as total media ads in each of the years.
The underlying drivers of growth are the continued increase in the number of "netizens," greater propensity of users to consume online, a growing inventory of advertisements that serve to lower advertisement prices and the need to create brand awareness online.
But the market is getting increasingly competitive and pushing players to investment and innovation. The increasing propensity to use programmatic buying techniques (automating the inventory buying process) hurts pricing at market leader Google and rivals Yahoo (Nasdaq:YHOO-Free Report) and Microsoft (Nasdaq:MSFT-Free Report). Facebook's (Nasdaq:FB-Free Report) large and growing user base and trove of personal data is driving prices on the platform. A lot of other networking companies, such as LinkedIn (NYSE:LNKD-Free Report), Twitter (NYSE:TWTR-Free Report) and Pintertest are also entering the digital advertising space.
International expansion (where rates are lower) and transition to mobile (where conversion tends to be lower) are near-term negatives for these players.
While digital advertising spend has been moving to non-search portals, such as Facebook, search is likely to remain relevant and important. Google is the leader here and is using its other technologies (YouTube, maps, voice, devices) to increase the value of its services. It is also making a splash in the Internet of Things, with wearables, auto, TV and home automation products. The popularity of Android will increase its opportunity to serve ads.
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