So far, we’ve talked often about the importance of the cloud, big data, e-commerce, and artificial intelligence.
But there’s another very profitable field largely flying under the radar.
And it’s set to notch a historic milestone that’s going to be a massive win for the digital economy, and for investors like us.
Here’s the thing. When most folks think of advertising, the first idea that pops into their heads is Madison Avenue that has dominated TV, radio, and print for decades.
But a new study shows digital ads – those served up online or through handhelds – are about to surpass “old school” 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.
Today, I want to reveal a great way to play the whole digital ad space with a firm set to double its earnings in the next 18 months…
Cutting the Cord
Now then, you might be tempted to chalk up the big win for digital ads as simply an 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.
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 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.
That granular and real-time feedback is 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 truly momentous. 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 one-third of all ad spending in the United States. Still, that was just the same as legacy advertising media such as newspapers, radio, magazines, and local TV combined.
Group M, the world’s largest buyer of ads, expects digital ads to make up 51% of the total. That’s $110 billion out of the estimated $214.6 billion U.S. total for 2020.
Next year, 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. On one hand “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’s disruption on sports.
That’s going to bring the total number of households that have done that to 31.2 million. By 2024, fully one-third of U.S. households will go without pay TV.
That means TV ads won’t reach them, but digital ads on video streaming services will.
The second unstoppable trend 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.
But young people have way more screen time than that, with 13% of millennials clocking in at a whopping 12 hours or more of smartphone use per day.
Because young people especially are a very desirable demographic for ads, the advertisers have chased them, leaving newspapers and magazines and instead moving to digital advertising.
That’s what makes The Trade Desk Inc. (TTD) such a great way to play the whole digital ad space.
Digital Age Advertising
Based in Ventura, CA, 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.
We ‘re talking roughly 580 billion ad impressions and roughly 450 million devices per day across the globe.
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 COVID pandemic, Trade Desk has been clicking 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 handily beat the expected $180.8 million.
Trade Desk in particular excelled in advertising on connected TVs, a segment where the firm’s revenues 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, they are 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 investing newsletter already had the chance to double their money with The Trade Desk Inc. back in 2019.
I still see plenty of highly profitable upside ahead for this play, but you can be even more ahead of the game as a Nova-X Report subscriber.
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Cheers and good investing,
Michael A. Robinson