The bright future of digital advertising could propel ARKW
Thanks to the evolution of the internet, digital advertising has long been a staple for businesses in various industries and the advertising agencies that represent them, but there are compelling investment implications on this front as well.
Among the various listed index funds exposed to the Internet, the ARK Next Generation Internet ETF (NYSEArca:ARKW) has the goods when it comes to helping investors access promising trends in digital advertising. Indeed, these trends are encouraging, especially for investors considering making ARKW a long-term holding.
“Digital advertising is a good example. During the pandemic, digital advertising has gained market share as traditional advertising has declined,” wrote Nicolas Grous, analyst at ARK Investment Management, in a recent note. “At the end of 2021, global digital advertising was around $440 billion, or 62% of the market. According to our research, it will continue to grow at a compound annual rate of 11% over the next eight years, surpassing $1 trillion by the end of 2029, as shown below.
While these forecasts seem ambitious, it can also be argued that past digital advertising outlooks underestimated its power and related expenditures, indicating that ARKW could potentially offer investors some pleasant surprises.
“According to our research, previous forecasts significantly underestimated the potential of digital advertising. by 2019, and finally in 2016 to $335 billion by 2020,” adds Grous.
There are at least a few important factors to consider with ARKW regarding digital advertising. First, companies only started investing aggressively in digital ads about 15 years ago, indicating that this trend is still young compared to other advertising mediums.
Second, people are spending more time and money online. This could force companies to increase their digital ad spend. In fact, there’s a long way for digital ad spend to catch up with time spent online.
“Although time spent online increased by around 60% during the pandemic in 2020, digital advertising only increased by 11%, which led to a sharp drop in its monetization per hour to around 0.04 $, as shown above. Now that the impact of the crisis is diminishing, however, we are confident that the migration of online advertising dollars will accelerate, catching up with the increase in time spent online,” notes Grous.
The fact that this spending is expected to arrive in disruptive places, such as augmented reality and streaming entertainment, among others, strengthens the long-term case for ARKW’s ties to digital ad spending.
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Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.