We recently published a list of The 8 best AdTech stocks to buy now. In this article, we take a look at how Meta Platforms, Inc. (NASDAQ:META) 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 team of developers works together to create the company’s messaging application.
Meta Platforms, Inc. (NASDAQ:META)
Number of hedge fund holders: 246
Meta Platforms, Inc. (NASDAQ:META) is the world’s largest online social network with more than 3.6 billion monthly active users. These users interact with each other in many ways, exchanging messages, sharing news, etc.
The company released its financial results for Q2 2024. In it, revenues increased 22% year over year to $39 billion, with advertising revenues coming in at about $38.3 billion. Advertising revenues increased about 22% year over year and Meta Platforms, Inc. (NASDAQ:META) management is quite optimistic about advertising revenues for Q3 2024.
In May, the company introduced a series of new artificial intelligence-based tools and services designed to help businesses improve the performance and visibility of their ads on the company’s popular social platforms, such as Facebook and Instagram.
Meta Platforms, Inc. (NASDAQ:META) management emphasized that expenses are expected to increase significantly in 2025 due to infrastructure costs. This increase is understandable as it is related to the development of a leading large language model that powers GenAI technologies. The company continues to focus on improving its advertising revenue by developing innovations that can provide more personalization to each user. This should help Meta Platforms, Inc. (NASDAQ:META) increase the price per ad.
Analysts at Piper Sandler increased their price target on Meta Platforms, Inc. (NASDAQ:META) shares from $545.00 to $575.00 and gave the company a “buy” rating on March 1.st August. In the first quarter, the stock was held by 246 hedge funds with shares valued at $46.9 billion.
Poland capitalan investment management company, released its second quarter 2024 investor letter and mentioned Meta Platforms, Inc. (NASDAQ:META). Here’s what the fund said:
“In the second quarter, all the companies we do not hold contributed the most to the portfolio’s performance: Home Depot, Meta Platforms, Inc. (NASDAQ:META) and AbbVie. Meta Platforms delivered solid results during the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here on out, and second-quarter revenue guidance fell below market expectations. Following the company’s “year of efficiency” in which it cut costs in its core business, management is now hinting at further increases in spending on GenAI and Metaverse, raising concerns about future profit margins. Metaverse spending is now over $20 billion per year, according to our calculations, with little to no return expected any time soon.”
Total META 2nd 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 META’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 META but trades at less than 5x its 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.
