This remarkable chart on the growing dominance of Alphabet and Facebook in the advertising market neatly illustrates comments from Hamish Douglass in a recent Livewire interview on the massive opportunities still ahead for the big platforms.
They haven't even started yet
In the interview, Hamish Douglass told us:
“Already seven of the biggest companies by market cap are digital platform technologies. The largest is Apple and the 2nd is Alphabet and then 4th is Facebook. Are they already too large or are they overvalued? I’d say they haven’t even started yet. Advertising in TV is worth $200bil a year. YouTube, which has about $6bil of revenue now, will probably take half the pot”
“Through these digital platform companies, traditional TV advertising has been ripped up. That model is fundamentally not going to be economic in the future, so dominating TV advertising is not going to give you the winning brand. Both Facebook and Google are giving entry points for upcoming brands. This idea that you buy you detergent at the shopping centre has been ripped up by Amazon, who’s going to have the internet of things connected to your home with automatic fulfilment".
Potential is greater now than it has ever been
In a recent wire by Swell AM specifically on Alphabet, Lachlan Hughes wrote:
"Alphabet’s gross revenue is just about to crack the ton, at USD$90 billion dollars for 2016. They are currently on track to deliver $108B in 2017, a comfortable 20% growth off already large numbers."
"Never in history have we witnessed a business of this size growing at such a rapid rate. However, never have we seen an advertising platform dominate the world like Alphabet. The natural question to ask; can this continue? We believe the future growth potential is greater now than it has ever been for Alphabet"
The next big winners?
On where investors could find ‘the next digital winners’, Nick Griffin of Munro Partners told us in a special interview:
"Today, we're trying to find the next digital winners to a certain extent. Obviously, Facebook and Google have been winners, and we think they still will be, but we're trying to find the next ones. We've spoken a lot here on Livewire before about the video game stocks, things like Activision Blizzard, and EA Sports. We were meeting with them in San Francisco last week, and they still look very good here. They own great content with great communities around the content that they can leverage, not only just into further games sales, but advertising and also e-sports."