Who Benefits as the Online Ad Industry Keeps Growing Rapidly
Though smartphone demand has slumped and cloud infrastructure spending has hit a lull, the online ad industry keeps growing at a very brisk pace.
Research firm eMarketer just estimated that total U.S. digital ad spending (i.e., spending on ads shown on PCs, mobile devices and other web-connected hardware) will grow 19% this year to $129.34 billion. By contrast, spending on traditional advertising formats is expected to drop 5% and fall below digital spend for the first time.
eMarketer's digital forecast fits with what other firms have been reporting. In November, the Internet Advertising Bureau (IAB) estimated U.S. online ad sales rose 23% in the first half of 2018 to $49.5 billion.
Alphabet/Google (GOOGL) and Facebook (FB) are still expected to have nearly 60% of the U.S. digital ad market between them. eMarketer sees Google's share falling by 1 percentage point to 37.2%, and Facebook's rising by 0.3 points to 22.1%.
Amazon.com (AMZN) , which has been getting more serious lately about growing its ad business, is expected to see its share rise by 2 points to 8.8%. No player outside of the top three is expected to have a share above 5%.
Several trends are driving the online ad market's growth, but the biggest one is pretty simple. The average consumer spends an incredible amount of time each day on web-connected devices -- in its 2018 Internet Trends report, Kleiner Perkins estimated 5.9 hours were now spent each day consuming digital media on connected devices, and those devices still punch a little below their weight in terms of ad spend. However, the gap is quickly narrowing.
There are a slew of other factors also at work. Key among them: Massive growth in online video consumption (hello, YouTube); e-commerce and online travel's continued growth; the effectiveness of the ad targeting and measurement tools created by the likes of Google and Facebook; rising spending on mobile ads by local businesses; and the fact that marketers can't rely on TV, radio and/or print advertising to reach many younger consumers rely overwhelmingly on digital media for their entertainment needs.
This trend still presents a major secular growth opportunity for Google, Amazon and (though it could some near-term choppiness as both eyeballs and ad dollars shift towards its stories services) Facebook over the next several years. It will also create opportunities for some smaller players -- in the burgeoning online video ad market, for example, Roku (ROKU) and The Trade Desk (TTD) look poised to see healthy growth.
What to Make of Samsung's Expensive 5G and Foldable Phones Feb. 20, 2019 | 7:28 PM EST
A couple years from now, Samsung's Wednesday Galaxy S10 event might be looked at as a watershed moment for the arrival of two mobile technologies that in time should give a healthy boost to a depressed smartphone market. However, that doesn't mean the Samsung phones featuring the technologies will sell in big volumes in the near-term.
To recap: Samsung unveiled five new phones at an NYC event on Wednesday afternoon. Two of the phones -- the Galaxy S10 and S10+ -- are 4G devices that are meant to directly compete against Apple's (AAPL) iPhone XS/XS Max, as well as rival high-end Android phones. Another 4G phone -- the Galaxy S10e -- has a somewhat inferior display and cameras, and (with a $749 starting price) appears aimed at the iPhone XR.
The S10 and S10+ do pack a handful of notable new features. They each sport an ultrasonic fingerprint sensor that's placed underneath the phone's touchscreen (Qualcomm (QCOM) is the supplier), and they also pack three rear cameras and the ability to wirelessly charge other phones.
However, it was two costlier devices that took the spotlight. One of them, the Galaxy S10 5G, is (as its name implies) the first Samsung phone to pack a 5G radio. It also has a giant 6.7-inch OLED display and -- unlike the other S10 models -- packs 3D depth-sensing cameras on both the front and back that (among other things) enable depth-of-field effects for video.
The other device, the Galaxy Fold, is Samsung's much-anticipated foldable phone. The device shows a 4.6-inch "cover display" when folded shut, and a much larger primary display (its 7.3-inch diagonal doesn't do full justice to how much screen space it provides) when folded open. An innovative hinge system with interlocking gears stays hidden from view, and -- though users can also choose to run three apps at once on the larger display -- apps running on the cover display automatically expand to take up the larger display's extra space.
But the phone, which will be available via both 4G and 5G models, will also cost a whopping $1,980. Limited production volumes likely have something to do with the price: In November, Samsung only said its foldable phone's initial stock "will be over one million units," albeit while adding it could make more of the devices "if the market reaction is positive."
Samsung hasn't yet shared how much the Galaxy S10 5G will cost. But it's safe to assume that the phone will be priced above the S10+, which starts at $999.
In addition to high prices, other factors are likely to curtail near-term demand for the phones. As previously indicated, ramping foldable phone production is still a work-in-progress. And -- though Google, Microsoft and certain other big developers are updating their Android apps to better support it -- it could be a little while before many popular apps are updated to properly make use of the Galaxy Fold's display.
The Galaxy Fold also appears to be somewhat bulky, and its primary display likely consumes a fair amount of power when used. Notably, Samsung hasn't yet shared the Fold's dimensions or expected battery life.
Meanwhile, limited 5G network availability will be a handicap for the Galaxy S10 5G, as well as the 5G phones expected to be unveiled next week at the Mobile World Congress, in the coming months. In the U.S., the phone will launch as a Verizon VZ exclusive at an unspecified date in Q2, before becoming available for other carriers this summer.
But while it's fair to question just how many Galaxy Fold and S10 5G units will sell this year, Samsung, which launched the world's first phablet back in 2011, deserves credit for pushing the envelope at a time when global smartphone sales are clearly under pressure due to lengthening upgrade cycles.
5G phone sales will pick up as network availability improve and prices drop. And though foldable phones are likely to be a niche product this year, they're a logical long-term progression for a market in which consumers have demanded more and more screen space over time. That's likely to spell bigger volumes in future years, as volumes ramp, prices drop, thickness and battery life improve and more developers take the effort to properly support foldable screens.
Why Google, Microsoft and Others Are All Betting on Cloud Gaming Feb. 20, 2019 | 12:27 PM EST
Alphabet/Google ( GOOGL) likely has the data center infrastructure and engineering chops needed to create a quality game-streaming service. But it will take more than that to create a successful one.
That said, it's not hard to understand why Google is suddenly showing a strong interest in cloud gaming.
On Tuesday, Google sent out invites for a March 19th event to be held at the Game Developers Conference (GDC). The invite comes not long after Google wrapped up a test for a cloud-based, game-streaming platform known as Project Stream. It also follows multiple reports last year that indicated Google is prepping a console to support its service -- since the console would only need to stream games rather than play them locally, it wouldn't need to be very powerful.
Google's Project Stream test, which involved streaming role-playing game Assassin's Creed: Odyssey via Chrome browsers, was generally met with good reviews. Reviewers praised the visuals that were delivered, as well as Project Stream's reliability and lack of input lag. Google's massive global data center and network infrastructure undoubtedly helped out here.
However, to make its game-streaming service successful, Google also needs to support a healthy library of popular games, and it needs to supply a living room system that's good and cheap enough for consumers to buy on a large scale. And in both of those respects, Microsoft (MSFT) , which has a massive data center infrastructure of its own, might have an edge as its own game-streaming service rolls out.
Microsoft's service, codenamed Project xCloud, will support streaming games on Xboxes, PCs and mobile devices, and will see public trials kick off later this year ahead of a full launch. The service is arriving ahead of an expected 2020 Xbox refresh; two Xboxes are reportedly being prepped for 2020, including a cheaper device focused on cloud streaming.
Sony (SNE) is also playing in the cloud game-streaming space, via its PlayStation Now service -- it costs $100 per year and runs on PlayStation 4 consoles and PCs. And though details remain scant about the efforts for now, Apple (AAPL) and Amazon.com (AMZN) have both been reported to be mulling subscription gaming services.
Thanks to the confluence of several big tech and consumer trends, the cloud game-service market looks poised to take off over the next few years. Chief among those trends: Improved web connectivity (including for low-latency connections, which are needed to enable a quality gaming experience); the buildout of massive cloud data center infrastructures; the desire for multi-platform gaming experiences (Fortnite is a good case study here); and the willingness of consumers to forego goods ownership in favor of subscription services.And though not every subscription gaming service launched will see huge success -- in Google's case, there are certainly some big question marks at this point -- the market's overall growth should benefit GPU suppliers AMD ( AMD) and Nvidia ( NVDA) . AMD, which has been working with both Google and Microsoft on their cloud gaming services, looks especially well-positioned to benefit right now.
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