This is the fourth in a four-part series examining dynamic and durable growth themes that affect the US economy and present opportunities for investors. The first post examined the biotech revolution, the second explored the enormous implications of shale energy, and the third looked at the impending mobile data tsunami.
In the US, we’re now spending almost 20% of our media time on mobile devices, which is more than we spend on all of print and radio combined, and that percentage is continuing to grow.1
Because this change has occurred quickly, we believe many of the companies that effectively produce mobile content are substantially undermonetized and still have room for growth. Traditional media content providers that cannot effectively migrate to mobile are likely to see portions of their business cannibalized by this evolving platform.
Ad budgets not keeping up with consumer habits
In 2013, mobile advertising nearly doubled from 2012, going from 3% to nearly 6% of companies’ advertising budgets. But consumers’ time spent on mobile grew from roughly 12% to 18% in that same year.1 As seen in the chart below, other forms of media still receive a much larger portion of advertising budgets versus the time that consumers now spend with them. Generally, ad budgets do follow time spent, but the shift to smartphones and tablets has been so rapid over the last few years that the money allocated to mobile is having a hard time catching up.
With this shift, we see huge underappreciated growth in many of the companies with strong mobile content portfolios. In our view, the market doesn’t appreciate the magnitude of the dollars that still need to shift to mobile advertising or the fact that time spent on mobile is still growing very rapidly.
We believe advertising companies do get this phenomenon and are in the process of developing the means to better support mobile content, including new advertising formats and targeting methods.
Ad Dollars Are Slow to Follow, but Eventually Do
The advantages of mobile advertising
We believe mobile is going to be the most powerful ad platform yet. For example, in contrast with traditional media, but similar to the Internet, on mobile advertisers can target consumers based on historical activity, provide click-through opportunities, and provide confirmation that ads are being viewed.
Additionally, in contrast with personal computers, mobile devices are generally not shared devices in a household, meaning they are attached to a specific person, making them far more efficient for advertising.
What’s more, mobile devices are also location-specific — the advertiser can know, for example, what city you’re in or if you’re in a restaurant, mall or a car dealership, such information can increase the value of an ad.
Most importantly, mobile is becoming a transaction hub. Your phone is becoming your wallet — in addition to serving as a marketplace for items and services, it may soon become the primary means for accessing your bank and your finances. Large-purchase decisions are increasingly being made on a mobile device.
Simply put, advertisers can’t afford to ignore this shift in behavior toward mobile. And that’s why we’re investing in content companies that provide such mobile ad platforms.
It’s a time of tremendous change, and we’re just feeling the first ripples now of a much more connected world. That makes it a very exciting time to invest in growth strategies.
To learn more, watch this video on the growth of mobile advertising from the Invesco US Growth team.
1 Sources: KPCB, eMarketer, IAB, Magna Global, Macquarie Capital
Important information
Growth stocks tend to be more sensitive to changes in their earnings and can be more volatile.
Investments focused in a particular industry or sector, such as the media industry, are subject to greater risk and are more greatly impacted by market volatility than more diversified investments.
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
The information provided is for educational purposes only and does not constitute a recommendation of the suitability of any investment strategy for a particular investor. The opinions expressed are those of the author(s), are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
All data provided by Invesco unless otherwise noted.
Invesco Distributors, Inc. is a US distributor for retail mutual funds, exchange-traded funds, institutional money market funds and unit investment trusts.
Invesco unit investment trusts are distributed by the sponsor, Invesco Capital Markets, Inc. and broker dealers including Invesco Distributors, Inc. These Invesco entities are indirect, wholly owned subsidiaries of Invesco Ltd.
©2014 Invesco Ltd. All rights reserved.
