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Published: June 22, 2012 at 03:38 PM GMT
Last Updated: July 31, 2013 at 03:38 PM GMT
Advertising appears to be looking up. Or at least it does to Pivotal's Brian Wieser. He's out with a research piece on the entire industry, introducing forecasts all the way out to 2017. The media analyst believes that advertising will grow 2.4% this year, revised up from 1% as marketers outspend economic growth. Estimates could have topped 3%, but he expects "that nervousness among marketers in the period leading up to the fall elections will restrain expansion because of the looming 'fiscal cliff.'" (Jack Myers Media Business Report's 2010-2020 Media/Marketing Economic Data and Forecasts are available to subscribers at www.jackmyers.com)
Wieser believes Google (GOOG) wins on its expanded grab for ad tech and paid search. Of the agencies, WPP (WPPGY) stands out, though all should benefit from marketers relying more heavily on service providers as the world continues to fragment. Pivotal also favors CBS (CBS), "as national TV remains durable and continually grows at a solid pace."
Not every competitor in media comes out smelling like roses, though. Wieser believes expectations have gotten ahead of themselves for companies like Demand Media (DMD) and the New York Times (NYT), in particular. Pivotal's investor game plan if the economy should materially deteriorate next year? "We think the most defensive names will be those with significant exposure to national television (because large advertisers will place a disproportionate degree of priority on its national TV efforts under such circumstances) as well as Facebook (FB)…and Google…"
Speaking of Google, the search engine was the topic of an investor call hosted by JP Morgan's Doug Anmuth with executives from leading search engine marketing (SEM) firms, Performics and the Rimm-Kaufman Group. The SEM leaders expect solid 2Q search ad spending growth. Performics has forecast 19.2% for 2Q over a year ago, accelerating from 11% in the first quarter. International business appears to remain strong, though JPM's analyst cautioned investors on ad spending habits in Europe. Rimm-Kaufman is seeing 14% of traffic coming from mobile devices, with the biggest contributor coming from tablets. Mobile CPCs are still discounted heavily from comparable desktop traffic — participants said something like 55% less for smartphones, moving up to -20% on tablets.
Hopefully, Pivotal's Wieser gets paid by the word because he was prolific this week, penning another seminal piece on the evolution of TV. The Death and Life of TV was a direct rebuttal to Henry Blodget's Don't Mean to Be Alarmist, but the TV Business May Be Starting to Collapse published last week. In his research, Wieser systematically disassembles many of Blodget's assertions (many which are held by large cross-sections of media investors and analysts).
He demonstrates that the data show that the vast majority of DVR owners watch TV live, with ads, and continue to watch traditional TV content (as opposed to on-demand). While he admits the impact of "zipping" and "zapping" on TV viewership, Wieser still promotes the relative health of the industry and its potential to reward investors. He really likes CBS, as it's "uniquely dependent on the prospects of health for the television industry in the United States and around the world. To that end a view on television and TV advertising in particular." He's got a BUY recommendation on the shares and a $37 PT.
What do you think is happening at Nickelodeon? That's a question Nomura's Michael Nathanson has heard repeatedly over the past few months. So, he decided to do something about it. In an update of Viacom (VIAB), the analyst addresses the recent declines in viewership and its implications for broader kids' TV viewing. For the uninitiated, Nick's viewership has plummeted since August 2011, dropping an average of 23% per month - 2 standard deviations off the historical average. So, what's happening? While Nathanson acknowledges the severity of these numbers, he also wants investors to focus on the fact that K2-11 is suffering in general, trending down −5% in the 4Q of 2011 and −9% in 1Q12. But, these 2 quarters happened only after 9 consecutive quarters of growth in the viewership. Digging deeper, the declines aren't uniform, with much of the drop in Ad-supported Cable (-13%) and Broadcast Network Affiliates (-12%). Still, why such dismal performance at Nick? Nathanson gives four possible reasons:
· Nielsen revised its TV Household demographic estimates
· Netflix introduced improved children's programming
· Nick's content has grown stale while competitors are kicking it
· Warmer winter weather somehow kept kids outside more, away from the TV
Nomura foresees kids CPMs edging up, while ad loads are already on their way up. Additionally, the researchers believe Watch Disney becomes standard for content and advertising delivery through apps. Expecting Viacom to piggyback with its own Nick app, Nathanson's bulled up on the opportunity at VIAB, as it only trades at 82% the market multiple. He's at Buy with a $57 PT on the stock.
Investors have been chatty about Aereo, IAC's (IACI) new over-the-top (OTT) distributor that streams broadcast content for $12 a month. It's being sued by most everyone and anyone for infringement of copyrights. While a decision isn't forthcoming for a few weeks, the Barclays research team takes Aereo's entrance into the OTT space seriously. U.S. Media analyst for the firm, Bo Tang believes that the incremental savings from cutting the cord may not justify the reduced content offerings of the OTT entrants.
Trying to game theorize the industry's moves, he also contends that advertising revenues are fairly insulated and that retrans fees aren't significantly at risk. While nobody's sure how the court will rule, Tang expects the deep-pocketed media companies will keep legal pressure on Aero, delaying the impact of OTT on the entire ecosystem.
Anmuth and team were out with a reiteration of an Overweight call on Zynga (ZNGA) after a lock-up expiration triggered a publishing restriction. They still like the stock but are lowering their PT to $11. The stock is down almost 50% this year, as investors have gotten skittish on user growth expectation. Combined with a series of big lock-up expirations, the JP Morgan analyst sheepishly called his April 27th upgrade of the stock "ill-timed." According to the analysts, ZNGA should see a boost as overall usage diverges from AppData, re-accelerating booking growth, and the end of the first 2 (of a total of 4) lock-up expirations, which account for 70% of the total shares coming online.
Barclays' Perry Gold published an analysis this week on weekly e commerce trends. Recent data point to decelerating growth at Amazon.com (AMZN) and eBay (EBAY). Channel Advisor Same Store Sales (SSS) data for AMZN shows sharp sequential deceleration in May (+40.6%), a serious drop from +52.3% in April. eBay's growth fared better, following up its 23.4% SSS growth in April with 21% growth in May. The analyst noted that after a deal with VeriFone and Equinox, the payment provider has inked Point of Sales (PoS) agreements with all 3 major terminal vendors.
Madagascar 3 had an enormous week, grossing over $60M, way ahead of Barclays Research's estimates of $45M. That was enough to prompt Anthony DiClemente to take numbers up for DreamWorks Animation SKG (DWA). Extrapolating out a total DBO gross for Mad 3 of $175M and continued momentum, DiClemente raised 2012 EPS to $0.95 from $0.93 and left 2013 EPS and his price target of $15 unchanged because it's still hard to monetize CGI films in the aftermarket.
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