Advertising is an age-old industry that is growing at a brisk pace to this day. GroupM, a market intelligence firm, projects global ad revenues will rise by nearly 10% in 2024. Moreover, it predicts that total revenue will eclipse the $1 trillion mark this year. A key factor contributing to the strong growth of this mature industry is innovation. The use of AI is the success story of 2024 in advertising. Below, I’ll detail three stocks implementing AI that investors can use to take advantage of this trillion-dollar industry.
Meta: A Dominant AI-Driven Advertising Ecosystem
Meta Platforms (NASDAQ: META) is a perfect example of AI and advertising coming together. The tech giant controls the huge social media platforms, Facebook and Instagram. They have a lot of data on these users. The company can target users with highly personalized advertising by feeding this data into AI algorithms. This creates an extremely valuable platform for sellers to buy ads on, increasing the demand for space on these apps. This has allowed Meta to drastically reaccelerate its last 12 months' advertising revenue growth to over 20%. It has also massively increased margins in the segment.
Data from eMarketer shows an important indicator of Meta’s dominance in this space and why it can continue. Meta’s digital platforms had nearly the same market share as Alphabet (NASDAQ: GOOGL) YouTube in 2024 when it comes to where U.S. adults spend their time online. The platforms each come in at around 7.5% of the time spent on digital platforms.
However, in terms of digital advertising spending market share, Meta’s platforms account for over 21.3%. That’s nearly four times higher than YouTube’s 5.6%. Although people spend similar time on these platforms, advertisers are willing to spend much more in Meta's environments. This is likely due to the better personalization Meta offers advertisers. It means advertising dollars spent there translate to relatively more business success.
AppLovin: Use AI to Drive Downloading for Gaming Companies
AppLovin (NASDAQ: APP) uses AI to help mobile game developers maximize the effectiveness of their advertising spend. It helps them figure out the best places to advertise that will translate into the maximum amount of people downloading their game. It also looks to attract people who will make purchases within these games. These app developers have been willing to pay a pretty penny to use AppLovin’s software. AppLovin’s sales growth has been greater than 60% in each of the last five quarters compared to the previous year's quarter.
The company is also seeing each customer pay more, with the average monthly revenue from each rising by 13% last quarter. AppLovin’s adjusted earnings before interest, taxes, amortization, and depreciation (EBITDA) are growing significantly faster than its revenue, indicating strong margin expansion.
In 2025 and beyond, AppLovin is targeting other industries that it can help with its technology. This includes the e-commerce industry, which it is already tiptoeing into. This represents a massive opportunity. Despite returning 478% in 2024 as of the Dec.17 close, analysts still see significant room to run. The average of four price targets released in December implies 36% upside in the shares.
The Trade Desk: Connected TV Focus Is a Differentiator
The Trade Desk (NASDAQ: TTD) is another player making waves in the advertising space. The company operates an ad-buying platform that helps ad agencies and advertisers decide the optimal places to spend. The company’s expertise spans a broad range of advertising channels. This includes video and music streaming platforms, websites, digital billboards, and social media. The company’s Koa AI Engine helps recommend the best ad placements and optimize the budgets customers have available.
The company’s revenue growth is consistently strong. Sales growth compared to the previous year’s quarter has been above 20% each quarter since Q3 2020. Spending on The Trade Desk’s platform is highly diversified by industry. This contributes stability to the company’s revenues.
The company’s strong focus on connected TV and streaming ad placement is a growth driver that can propel its value. The company’s assertion that the future funding of streaming services is ad-based is poignant. Netflix’s (NASDAQ: NFLX) introduction of an ad-supported tier backs this idea up. Analysts project revenue from streaming services to continue taking market share from traditional TV, growing at 20% in 2025.