"We have a positive fundamental outlook for the interactive media and services sub-industry over the next 12 months, reflecting the improving digital advertising landscape and increasing opportunities to monetize AI investments. Companies like Meta Platforms Inc. (META) and Alphabet Inc. (GOOGL) are beneficiaries. Although we project digital ad spending to grow through 2026, growth rates will likely decelerate as enterprise budgets tighten amid tariff concerns and a softer macroeconomic landscape. We note uncertainty around e-commerce trends/China spend, especially amid greater geopolitical pressure."
"Challenges from verticals more tied to cyclical/economically sensitive industries (e.g., travel) could pull back digital ad spend. But increasing investments in Generative AI (GenAI) will likely improve content/recommendations and translate into a higher return on investment (ROI) for advertisers. We think Magna Global's global digital ad spending outlook, which calls for growth of about 8% in 2025, is attainable. We see a similar high-single-digit percentage pace in 2026, after increases of 13% in 2024 (+70% of total media ad spend) and 12% in 2023."
"In the long term, we see an ongoing shift in total global advertising spend from traditional broadcast TV/radio and print media to Internet/digital media. This shift is led by the increasing time consumers spend on Internet/digital versus traditional media and the superior ROI for advertisers due to more precise targeting, richer feedback, and a more efficient ad buying process that is mostly auction-based and increasingly programmatic."
Expectations are for a positive fundamental outlook for the interactive media and services sub-industry over the next 12 months driven by an improving digital advertising landscape and increasing opportunities to monetize AI investments. Digital ad spending is projected to grow through 2026 but with decelerating rates as enterprise budgets tighten amid tariff concerns and a softer macroeconomic environment. Uncertainty exists around e-commerce trends and China spend due to greater geopolitical pressure, and cyclical verticals such as travel could pull back digital ad spend. Increasing investments in generative AI should improve content and recommendations and translate into higher advertiser ROI. Major social platforms should see continued revenue growth and high profitability.
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