Digital Marketing Rebound

In prior years, big social media companies were the class of the tech industry.

It’s not so much like that today but they still have highly profitable models and a lot of juice left in the tank.

I do believe big social media companies will still do well in 2024 because they have proved themselves through the test of time.

However, now that media has fragmented, smaller social media stocks that are tailored to a certain niche are due to overperform in 2024.

This is happening at a time when cord-cutting is accelerating and the lowering of interest rates next year could serve as a catalyst to higher share prices for the likes of Snap and Pinterest.

Then there is the wider trend of potential beneficiaries from a recovery in the digital advertising market.

As marketing clients look to redeploy their dollars following post-pandemic cutbacks, stocks such as Snap and Pinterest could be next in line for a payday.

For Pinterest, I have been highly bullish on them ever since Elliot Management scooped them up and revamped management.

Snap is in the sweet spot catering to a growing demographic who are seeing their earning power rise as they come of age.

Still, the industry faces risks given an uncertain economic backdrop.

I anticipate higher ad sales of online retail platforms that will jump 20% versus last year. Moreover, online ad growth should accelerate meaningfully in 2024.

I believe the media will obtain about $17 billion in political ads next year when many U.S. campaigns will be in full swing.

It’s hard not to see social media stocks winning out in a presidential election year in one of the most polarizing contests in recent memory.

More and more consumers spend most of their days online and most of those funds likely will be spent on digital platforms where these consumers station eyeballs.

And worldwide, ad spending is expected to jump 8.2% next year, a sharp acceleration from the 4.4% gain anticipated this year.

Marketers spend money on platforms in direct proportion to the number of users that they attract.

Digital platforms, which include search, social, commerce, retail media, and digital video platforms, will account for about 64% of all advertising in 2023.

Digital platform-focused companies are expected to collectively grow 11%, led in large part by retail media, which will account for about $42 billion in advertising revenue in 2023, up 20% over 2022. 

Traditional television, both national and local, will experience declines over the year.

The setup is boding nicely for these smaller social media stocks and that is not to say stocks like Meta and Google will perform poorly.

Realistically, the Nasdaq can’t move higher without the Magnificent 7, but based on pure percentage gains, I do believe Snap and Pinterest have a good chance to beat out the heavyweights next year.

There is a high likelihood that tech will lead this next bull market because they are the largest winner from the lowering of interest rates.

Not only will tech IPOs be back in vogue, but the prototypical tech zombie firms that burn cash will pop up again showing that investors reserve large amounts of capital for potential tech growth companies.

Part of the capital allocation will be to Snap and Pins which are solid companies with a great brand image.

I believe 2024 will be a year where investors pile into these 2 stocks much like how investors piled into Uber in 2023.