What Lies Ahead for the $150B Ad Industry (CMGR, ROKU, VIAC, PINS, SNAP, TTD)

There’s $150 billion in annual spending that has become homeless. It now wanders around the global economy, aimless, lost, searching for a new home.

This $150 billion is the global advertising budget, and it used to know exactly where to go each year: about 33% to cable companies and major networks on TV, roughly 33% to major print (magazines, newspapers), 22% to radio networks, and 12% to a mix of celebrities, athletes, billboards, banners, and product placement deals.

Then Web 1.0 came along, and the picture changed dramatically. For the purposes of the ad industry, Web 1.0 was the internet prior to the explosive rise of social media early in the 2000’s. It was static and unresponsive, like a series of brochure’s linked together across the internet. It was basically no different from magazines and newspapers from the standpoint of advertisers.

A lot of that $150 billion moved online, but it was never confused or homeless. It just migrated uptown into new digital, tree-saving digs. Then Web 2.0 came along, and everything changed on a much deeper level. H

Web 2.0 is not just interactive but community oriented. People exchange information on the spot, and they expect answers on the spot. In addition, social media naturally gives rise unpredictably to new influential figures who dictate the collective judgement and opinions of millions of people on the spot.

This change has been a move forward in a technological sense. But it has also been a move backward because it’s suddenly as if the whole has been transformed into something akin to the town square before major media existed at all, where influencing public opinion depends on deeper factors than slogans and banners. You need trusted influencers to back you in a community.

Business Insider put out a recent piece noting that brands are estimated to spend up to $15 billion on influencer marketing by 2022. Statista also shows a big shift underway right now, noting that the global Instagram influencer market is expected to grow more than 100% y/y this year.

This should give you some hint as where that $150 billion is likely going to end up.

That shift will impact a number of key stocks, including Roku Inc (NASDAQ:ROKU), Pinterest Inc (NYSE:PINS), Snap Inc (NYSE:SNAP), Trade Desk Inc (NASDAQ:TTD), Clubhouse Media Group Inc (OTCMKTS:CMGR), and CBS Corporation (NASDAQ:VIAC). We take a look at a few of the more interesting names with recent catalysts below.

Clubhouse Media Group Inc (OTCMKTS:CMGR) is, by any rational process, the first stock that has to be on the list of stocks following the introduction above. It is the only publicly traded company that sits at the dead-center heart of this transition – an influencer-based marketing and branding company with what may be the world’s biggest social media reach.

CMGR is probably already the world’s #1 social media influencer-based marketing company, in terms of potential monetization given its reach. The company’s principal asset is its massive social media reach, now surpassing 300 million aggregate followers. This doesn’t appear on the company’s balance sheet, but it helps to justify the notion that the stock is undervalued at present levels given the many ways its sheer reach can be monetized.

It’s also important to point out that this number – 300 million followers – is also a snapshot data point. It isn’t static. It isn’t falling. It is in fact a snapshot data point in a very rapidly growing trend – that reach has doubled in the past six months after doubling in the prior three months, according to the company. By simple extrapolation, by the end of the year, it might be at 650 million. By next summer, it could be 15% of the world’s population. But let’s be conservative and guess that it will be around 500 million by this time next year – a very conservative bet given the path to this point.

Clubhouse Media Group Inc (OTCMKTS:CMGR) would easily have direct access to more people than any company in world history in terms of the ability to get a single message out over direct channels at any time, day or night, or at least one might reasonably suppose, should this key number stand at over half of a billion people 6-12 months from now.

But there are reasons to believe that may well be the case. First, as noted above, is the trend. But second, we would point out this quote from Chris Young, Co-Founder and President of Clubhouse Media, in its latest press release, “We are also working on a new membership model that would permit affiliate influencers to collaborate within our physical spaces and create new relationships. This may allow us to continue the rapid expansion of our reach and develop the equivalent of a “Soho House” for influencers, while improving our bottom line by maximizing usage of our physical studios and developing new influencer relationships. We are excited to be at the forefront of this new business model and to be the mavens in this space.”

We will also note that, according to its release, Clubhouse Media has recently begun to monetize its accessible social media reach through signed branding and marketing deals. The Company has already forged partnerships and branding deals with many top global brands, including Sony Music Entertainment, Spotify, Champion, Fashion Nova, Hilton Hotel Group, CoverGirl, Honda Motors, and Revolve, among many others.

Clubhouse Media Group Inc (OTCMKTS:CMGR) also notes that it is working toward the development of in-house consumer products to be branded through the large social media influencer-based marketing infrastructure it has now established. That would be a huge step given the massive implications for upside and margins from such a shift in terms and model.

Roku Inc (NASDAQ:ROKU) bills itself as a TV streaming platform that operates in two segments, Platform and Player. Its platform allows users to discover and access various movies and TV episodes, as well as live sports, music, news, and others. As of December 31, 2020, the company had 51.2 million active accounts. It also provides digital and video advertising, content distribution, subscription, and billing services, as well as other commerce transactions, brand sponsorship and promotions, and audience development campaigns; and manufactures, sells, and licenses smart TVs under the Roku TV name.

In addition, the company offers streaming players, and audio products and accessories under the Roku brand name; and sells branded channel buttons on remote controls. It provides its products and services through retailers and distributors, as well as directly to customers through its website in the United States, Canada, the United Kingdom, France, the Republic of Ireland, Mexico, Brazil, and other Latin American countries.

Roku Inc (NASDAQ:ROKU) most recently provided an update on the recent launch of Roku Originals. In late May, Roku added 30 original series to The Roku Channel starring major talent like Kevin Hart, Anna Kendrick, Jennifer Lopez and more. The debut of Roku Originals builds on the significant growth of The Roku Channel, which reached households with an estimated 70 million people in the U.S. as of Q1 2021. In the two weeks following the launch of Roku Originals, May 20 to June 3, a record number of unique accounts streamed The Roku Channel. Furthermore, the top ten most watched programs on The Roku Channel were all Roku Originals in this two-week period.

“We always believed Roku Originals would perform exceptionally well as free, ad-supported entertainment on The Roku Channel.” said Rob Holmes, Roku’s Vice President of Programming. “The first two weeks have surpassed our expectations, with millions of people streaming Roku Originals, and provided a further demonstration of The Roku Channel flywheel, with great content driving record engagement that’s appealing to advertisers seeking to reach the streaming audience.”

And the stock has been acting well over recent days, up something like 9% in that time. Shares of the stock have powered higher over the past month, rallying roughly 27% in that time on strong overall action.

Roku Inc (NASDAQ:ROKU) generated sales of $574.2M, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of -11.6% on the top line. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($2.1B against $628.1M).

Pinterest Inc (NYSE:PINS) frames itself as company that provides visual discovery engine in the United States and internationally.

The company’s engine allows people to find inspiration for their lives, including recipes, style and home inspiration, DIY, and others. It shows them visual recommendations based on people personal taste and interests. The company was formerly known as Cold Brew Labs Inc. and changed its name to Pinterest, Inc. in April 2012.

Pinterest Inc (NYSE:PINS) most recently announced that it is expanding Idea Pins, its multi-page video Pin format, to all creators in India, Indonesia, Spain, Italy, Ireland, New Zealand, Brazil, Mexico, Argentina, Chile, Columbia, Peru, Japan, and Sweden. This new access and capability will empower anyone with a business account in these countries to create inspiring content and closer interact with their audiences, building more engaged communities directly on Pinterest.

According to its release, Idea Pins make it easy for creators to publish high quality, long lasting, save-able content directly to Pinterest. In fact, the number of Idea Pins created daily has grown by nearly 4x since January. With this latest international expansion, Pinterest is highlighting the creators around the world who are creating the ideas and encouraging Pinners to follow them.

The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 8% in that timeframe.

Pinterest Inc (NYSE:PINS) pulled in sales of $485.2M in its last reported quarterly financials, representing top line growth of 78.4%. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($2B against $209M).


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