Online services and advertising will continue to grow, but COVID-19 will become a disruption on media buying and impact revenue for some top companies in the advertising space, according to Baird Capital Markets analysts.
A health check on revenue suggest weakness in travel and automotive categories, in part offset by health and wellness, retail and insurance verticals, Baird Capital Senior Research Analyst Colin Sebastian wrote in a research note published Tuesday.
The analyst firm expects Facebook and Google to outperform in a rebound, while steep pullbacks in Pinterest and Twitter will offer the optimistic a better stock price to start investing.
The firm lowered Alphabet’s 2020 revenue estimate to $153.8 billion, up 15.6% year over year from $155.7 billion, and EPS' estimate to $52.55 from $54.42.
For Alphabet’s Google, search remains among the highest advertising channels when considering a return on investments.
“We expect Google to perform comparatively well in a downturn, consistent with historical patterns,” he wrote. “Travel is an important vertical for Google (around 10% of paid search), and naturally, spending trends reflect the broad slowdown in travel bookings.”
Andy Taylor, director of research at agency Tinuiti, points to Amazon as one of the companies pulling back on Google advertising. On Tuesday, Amazon announced it would temporarily prioritize products coming into its fulfillment centers. Petriello believes that will impact the amount of ads Amazon runs on Google.
It seems people are logging in and spending more time on Facebook. Still, Baird’s Sebastian wrote the firm lowered its 2020 Facebook revenue estimate to $84.1 billion, up about 19% year over year, from $85.6 billion.
“[The] Facebook family of apps may have less exposure to the travel vertical, there is more exposure to SMB advertisers and to VC-backed DTC brands that may be forced to reduce spending in the current environment,” he wrote.
The downside to Pinterest, which has been called a search engine, is its dependence on site visitors looking for ideas on projects such as house remodels and weddings, which are on hold. Depending on how long consumers halt projects and parties will depend on the length of time Americans will self-quarantine. Still, 2020 estimates put revenue at $1.49 billion, 31% year over year, from $1.52 billion.