Returns as of 9/18/2021
Returns as of 9/18/2021
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It can be an important exercise to observe the trends affecting the stocks you own or are considering buying. Your focus should be on those trends that have the power to move vital metrics such as revenue, costs, and profits.
One trend that smart investors are paying attention to right now is the rapidly rising price of digital advertising. Plenty of companies use it to acquire customers, boost sales, and raise brand awareness, but rising prices threaten the cost effectiveness of those campaigns.
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To find evidence of the rising costs of digital advertising, you need not look further than the quarterly financial statements of the two giants in the arena: Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) and Facebook (NASDAQ:FB). Between them, they currently control more than 50% of the digital advertising market in the U.S. Therefore, looking at how their prices are changing offers a lot of insight into the overall market.
Alphabet’s cost per click — what advertisers pay to the tech giant when a potential customer clicks on their ad — rose 31% year over year in its most recently reported quarter. Similarly, its cost per impression — how much businesses pay each time their ad is shown to a customer — increased by 63%.
Although Facebook does not break its reported figures out by the type of advertising, it did report similar price increases: Its average price per ad increased by 47% year over year in the second quarter.
What’s more, both companies’ price increases are accelerating.
The current rise in digital ad rates can partly be attributed to a jump in demand as businesses make an effort to get the word out that they are open again, and to recover public awareness with consumers. There is no telling if this trend will persist or reverse in the longer term, but investors should pay attention to the metric with regard to how it can impact the stocks they are following.
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Stock Advisor launched in February of 2002. Returns as of 09/18/2021.
Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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