Wall Street Bullish On Ad Rebound, Especially Digital

Wall Street analysts have turned extra bullish on digital media -- especially social and connected TV (CTV) and streaming services -- according to reports from equity research firms assessing the impact of the COVID-19 pandemic.

“It started in April when the dynamism of Facebook’s auction shone through and pushed the social media leader’s revenue growth back into positive territory (similarly, Google’s silver lining was YouTube direct response and Amazon advertising didn’t miss a beat),” BMO Capital Markets’ Daniel Salmon writes in the internet and media section of a massive BMO report covering the pandemic’s impact on all the industrial sectors it covers.

The report characterizes the ad industry’s “faster-than-expected” bounce-back as one of the COVID-19 “surprises” it has observed to date.

Salmon’s note goes on to point out that even TV-centric ad sellers appear to have bottomed out, writing, “Sure enough, advertising appears firmly in a V-shaped recovery, albeit with straggling categories like travel still.”

He cautions that the “all-important holiday season” likely will be the next important signal for Madison Avenue, as “many large marketers will be going through budget discussions for 2021. And while visibility is obviously still worse than pre-COVID-19, it also seems clear that March and April’s worst-case scenarios won’t play out.”

BMO does caution about some meta factors, such as the White House’s and Congress’ antitrust signals for big digital media platforms, and a separate note from Pivotal Research Group’s Michael Levine adds: “We remain in a period of great economic uncertainty, exacerbated by the elections, and with COVID-19 case growth reaccelerating. Be mindful, as these factors could impact companies’ ability to forecast the fourth quarter of 2020.”

Levine notes that Pivotal’s ad industry tracking shows that ad demand has “improved with each sequential month’s update” and that another key signal -- “back-to-school”-related ad spending -- “while not great in absolute terms, is not the disaster investors or companies contemplated.”

He estimated the back-to-school ad spending was likely down 10-15% vs. 2019, which is better than the ad industry’s original projections of -30-35% heading into the shopping season.

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