Jefferies analysts gazed into their crystal ball to view the future of online video advertising and see some major beneficiaries. They believe Google Inc (NASDAQ:GOOG), Facebook Inc (NASDAQ:FB) and AOL, Inc. (NYSE:AOL) stand to benefit greatly as the industry evolves.
Growth expected in digital advertising
Analysts Brian Pitz, Brian Fitzgerald, Timothy O’Shea, Sachin Khattar and Stan Velikov issued a report to investors this week highlighting some statistics and their expectations for the digital advertising industry. They believe the TV advertising industry in the U.S. is about $60 billion annually and that this industry has “yet to be disrupted.”
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They expect the digital video ecosystem to look very different in a year or two and that there will be more consolidation in the sector. They believe more public players will figure out how to capitalize on the rapidly growing industry. In their estimates, online video advertising spending in the U.S. alone will hit $8 billion by 2015 and surpass $10 billion by the following year.
The importance of targeting, reach, content
The analysts highlighted three major areas which marketers are concerned about when it comes to online video advertising. Eighty-seven percent of marketers said targeting was the most important ingredient, while 85 percent said reach was more important. Eighty-one percent said content was most important.
According to Jefferies, although television advertising is the closest comparable industry to online video advertising, clients are not allocating their ad funds in this way. Many of them continue to allocate funds for each of the two segments separately, and they believe this will continue for a while. Instead of online video stealing from television advertising budgets, they expect that it will steal from online display and print advertising.
Google, Facebook, AOL likely winners in the market
The analysts say it’s difficult for investors now to determine which companies will win in the digital video ad evolution. However, they see Google Inc (NASDAQ:GOOG), Facebook Inc (NASDAQ:FB) and AOL, Inc. (NYSE:AOL) as being good targets. They have a Buy rating on all three stocks. Their price target for Google is $1,000 per share, while Facebook’s price target is $37 per share. AOL’s price target is $50 per share.