To The Moon

$Wal-Mart(WMT)$ $Apple(AAPL)$ 

The outlook for digital advertising in 2023 will likely disappoint investors in internet and social media companies. But there still will be bright spots in digital ad growth for Apple (AAPL), retail giant Walmart (WMT) and internet television.

Advertising agencies in December lowered 2023 digital media market forecasts, citing weakening economic outlooks. Mediabrands' Magna lowered its forecast to 8.4% growth, to $586.5 billion, from 10.8%. WPP media investment arm GroupM cut its forecast to 7.6% from 7.8%.

Meanwhile, Insider Intelligence in December cut its forecast for 2022 U.S. social network spending by $9 billion, down to $65.31 billion for a gain of 3.5%. In 2023, though, it forecasts nearly 9% growth to $71.05 billion.

One factor still impacting digital ad growth for social media and e-commerce companies will again be Apple.

How Apple Impacts Digital Ads

Apple in 2021 introduced new consumer privacy rules restricting how iPhone users are tracked, or targeted advertising. Apple's policy requires apps to ask users if they want to be tracked, and many consumers have opted out.

At the same time, though, Apple's own ad revenue growth is a plus for Apple stock. Apple doesn't break out its ad revenue growth in financial reports. But it does report growth in services revenue for AAPL stock. And, some AAPL stock analysts extrapolate from that.

In 2023 Apple ad revenue will grow 26% worldwide to $8.92 billion, estimates market research firm Insider Intelligence. App store search ads are fueling most of the growth, says Insider Intelligence analyst Peter Newman.

"We see this as a fairly steady growth space, not hugely explosive, because it's already relatively saturated (iPhone user figures aren't growing that rapidly)," Newman said in an email.

App Store Searches Driving Digital Ad Growth

Also, Apple brings in revenue from display ads inside its News and Stocks apps.

AAPL stock analyst Samik Chatterjee from J.P. Morgan estimated Apple's ad revenue a bit lower in a June report. He estimated that Apple's ad revenue could reach $5.8 billion in 2025, up from about $3 billion in 2022.

"We expect App Store searches will remain the primary driver of ad revenues for the company," Chatterjee wrote in a recent note to clients.

At Baird, AAPL stock analyst Colin Sebastian said in a 2023 outlook report: "Apple will take additional steps to build out a large ad business."

Walmart's Business Growing 42%

Walmart's U.S. digital ad business will grow 42% to $3.2 billion in 2023, forecasts Insider Intelligence. On a global scale, Walmart said its worldwide ad business was growing at 30% in its June-quarter earnings report.

Walmart has teamed with digital ad company Trade Desk (TTD) to grow its ad business.

Trade Desk's automated platform enables brands and ad agencies to buy online and mobile ads in real time, rather than in advance manually. Trade Desk gets access to Walmart's ad targeting data, according to an RBC Capital report.

Still, Walmart lags archrival Amazon.com (AMZN) in the digital ad market. Goldman Sachs estimates that Amazon will grow its ad business at an annual compound rate of 19% from 2022 to 2026 to reach $77 billion, or 9% of total company sales. In response, Google has changed its online shopping strategy

Both Google and Meta Platforms, meanwhile, face growing competition from TikTok.

TikTok's worldwide digital ad revenue will boom 43% to $14.15 billion, according to Insider Intelligence. Google aims to slow down TikTok with its own short-form video service, YouTube Shorts, while Facebook has launched Reels.

Google's 2023 ad revenue will grow only 7.2% to $180.6 billion, Insider Intelligence says. It adds that Facebook's ad revenue will grow 2.8% to $71.32 billion while Instagram rises 17% to $50.6 billion.

@TigerStars 

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