We recently published a list of The 8 best AdTech stocks to buy now. In this article, we take a look at how Baidu, Inc. (NASDAQ:BIDU) compares to other AdTech stocks.
It goes without saying that the advertising technology industry is an exciting and ever-evolving sector as digital advertising continues to dominate market trends and be at the forefront of strategic marketing. According to industry data from Allied Market Research, the global AdTech market was valued at $748.2 billion in 2021 and is expected to reach $2.9 trillion by 2031, representing a compound annual growth rate of ~14.7% from 2022 to 2031.
This growth is due to the increasing adoption of digital and internet technologies, increased use of advanced technologies such as AI and machine learning, improved prospects for the gaming industry, and growth in social media apps such as Facebook, WhatsApp, and others. The key trends dominating the AdTech industry include increased use of connected TV (CTV) advertising, in-app advertising, and interactive ads.
Growth prospects of the AdTech industry
The AdTech market is segmented into solutions, advertising types, company sizes, platforms, etc. The AdTech industry includes a wide range of companies and products, such as demand-side platforms (DSPs), supply-side platforms (SSPs), ad exchanges, data management platforms (DMPs), and more. Experts predict that the global supply-side platforms (SSPs) market will reach approximately $117.32 billion by 2033. This means that the industry will grow at a CAGR of approximately 13.3% from 2023 to 2033. This growth is expected to be driven by technological advancements, higher consumer demand, and supportive government policies.
Similarly, the demand-side platform software market is expected to reach $120.1 billion by 2033 due to the increasing trend toward programmatic advertising and the need for better targeting and measurement capabilities in online advertising. The AdTech industry seems promising, but the inclusion of artificial intelligence (AI) makes it even more attractive.
The role of AI in AdTech – opportunities and challenges
The global AdTech industry continues to prepare for the complete elimination of third-party cookies by Google, which accounts for about 65% of the web browser market share. This transition seems to be a crucial step in ensuring user privacy and data security. Artificial intelligence is expected to play a crucial role due to its ability to process large amounts of data.
According to research, about 54% of companies believe that AI will enable cost savings and efficiency gains in advertising, and about 30% of marketers have decided to allocate more than 40% of their marketing budget to campaigns run by AI. The emergence of smart speakers, voice search, and podcasts can help advertisers find new ways to connect with their audiences using audio and voice technology.
While advertisers can leverage the opportunities offered by the AdTech industry, they must beware of challenges such as ad fraud. These frauds are mainly caused by bot traffic, domain spoofing or ad stacking. Other challenges include inventory quality, ad creativity and brand safety.
AI and ML are revolutionizing digital advertising by enabling advertisers to analyze massive amounts of data in real time. This enables advertisers to make data-driven decisions to optimize their advertising campaigns. Advertisers are now leveraging algorithmic advertising, personalization, and performance metrics to maximize ROI.
AI algorithms help automate media buying and ensure ads reach the target audience. Personalized ads can be delivered using AI-powered recommendation engines. These engines enable real-time tracking, allowing quick adjustments to be made to increase success.
The global AdTech industry is expected to grow by a mid-teens value over the next decade, and since it is still in its early stages of growth, now is the time to look at some of the best AdTech stocks.
Our methodology
For this article, we selected the holdings of the SmartETFs Advertising & Marketing Technology ETF and sorted them in ascending order by the number of hedge funds that own shares in them. To do this, we went through Insider Monkey’s hedge fund data for Q1 2024.
Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A modern internet space with a person using Baidu services on a laptop.
Baidu, Inc. (NASDAQ:BIDU)
Number of hedge fund owners: 48
Baidu, Inc. (NASDAQ:BIDU) is the largest Internet search engine in China and specializes in Internet services and AI (artificial intelligence).
At the time of releasing its Q1 2024 results, the company stated that Baidu Core’s online marketing revenue was stable and that the end-to-end optimization of the AI technology stack continued to drive AI cloud revenue growth in the first quarter. The company’s investment in AI is evident after it recently launched its generative AI Ernie Bot, which focuses on competing with Open AI’s ChatGPT. As a new era of gen AI is emerging in China, basic models like ERNIE should be able to serve as the underlying infrastructure. The company is focused on making the ERNIE model family affordable and efficient, which should lead to improving margins and stable profitability.
In Q1 2024, Baidu, Inc. (NASDAQ:BIDU) beat revenue and earnings estimates thanks to healthy online marketing revenue and improved sales from its AI cloud business.
The company has had a dismal year so far, with the stock down more than 20% year-to-date. However, experts believe the company is now set to return to growth. Baidu, Inc. (NASDAQ:BIDU) has seen slower growth in its core advertising revenue in recent years, so the company has been looking for new growth drivers.
This led to increased investment in areas such as self-driving cars, cloud computing and artificial intelligence (AI). Baidu, Inc. (NASDAQ:BIDU) said Ernie Bot’s user base has doubled to over 200 million in recent months.
Notably, three investment analysts rated the company’s shares as “Hold” and 14 analysts rated it as “Buy.” At the time of writing, the stock has an average rating of “Moderate Buy” with an average price target of $146.60. Baidu, Inc. (NASDAQ:BIDU) was held by 48 hedge funds in the first quarter of 2014 and the shares amounted to $1.42 billion.
Ariel Investmentsan investment management company, released its first quarter 2024 investor letter and mentioned Baidu, Inc. (NASDAQ:BIDU). Here’s what the fund said:
“On the other hand, several holdings weighed on performance. China’s leading internet search engine and online community provider Baidu, Inc., traded lower along with Chinese equities as mounting problems in China weighed on investor sentiment during the period. The company continues to invest heavily in artificial intelligence (AI) and recently launched its generative AI Ernie Bot to compete with Open AI’s ChatGPT. While monetization of the new technology largely depends on regulatory review, we believe Baidu should continue to deliver margin improvement with ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations and political rhetoric toward Taiwan, we remain excited about Baidu’s longer-term opportunities for revenue growth and margin improvement in internet search, cloud, autonomous driving, artificial intelligence and online video.”
Total BIDU takes 8th place on our list of the best AdTech stocks to buy. You can visit The 8 best AdTech stocks to buy now to see the other AdTech stocks that are on hedge funds’ radar. While we recognize BIDU’s potential as an investment, we believe AI stocks are more promising to deliver strong returns and do so within a shorter time frame. If you are looking for an AI stock that is more promising than BIDU but trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: Analyst sees a new $25 billion “opportunity” for NVIDIA And Jim Cramer recommends these 10 stocks in June.
Disclosure: None. This article was originally published on Insider Monkey.
