Is the Digital Marketing Industry a Sleeping Giant? – GuruFocus.com – GuruFocus.com

The digital marketing industry is one of the most exciting marketplaces in which to invest. Yet over the last couple of years, companies have struggled for growth.

The digital marketing space provides opportunities for both startups and veteran internet information providers. Currently, nearly every business that is serious about growth has an online selling plan as a crucial catalyst in its growth strategy.

Small businesses are also finding it easy to join the online selling community thanks to platforms like Shopify (NYSE:SHOP), Facebook (NASDAQ:FB), Pinterest and BigCommerce, among others that facilitate smooth entrance into this exciting marketplace.

The intersection of digital marketing with brick-and-mortar selling has led to the emergence of what is now being referred to as omnichannel marketing. This type of marketing requires businesses to integrate their online marketing strategies with their storefront operations in order to maximize conversion rates on various e-commerce platforms.

Today businesses are engaging their customers in more than one platform. We are talking about social media, Web sites and blogs, mobile phones and tablets and TV and radio as well as face to face via their storefronts.

This has been the trend for the last few years as more businesses continue to launch their online platforms to augment sales from mainstream stores. In fact, as of 2015, more than 62% of businesses indicated that omnichannel marketing was a crucial part of their marketing strategy while 70% of the businesses surveyed said they had thought about it, according to AdWeek. These numbers have obviously increased over the last two years as more businesses continue to embrace the strategy.

Some of the businesses that have launched their products and services online have experienced more success than others. And according to research, their successes could be attributed to some very basic, yet crucially important, aspects of running an online business. Reports indicate that while ranking high on Alphabet’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google search and other search engines is important, the period it takes your landing page to load can determine your conversion rates and online sales.

According to reasearch, if a Web site page takes longer than five seconds to load, the visitor abandons it almost immediately. As such, making the landing pages load faster is as crucial for any e-commerce platform as ranking higher on Google. Google shares in this goal and has recently launched new features aimed at speeding up landing pages. Last year, it launched accelerated mobile pages (AMP) and recently added a web-based version of the same in the form of accelerated landing pages (ALP) for ads and landing pages.

The AMP framework helps Web site developers design lightweight pages that load within a second thereby increasing traffic conversion rates. According to SITE123, a Web site development company that allows designers to build free Web sites with no designing or coding skills necessary, most businesses want to take full advantage of the new features launched by Google as they seek to remain competitive in the online marketing space and they want their developers to optimize their sites accordingly.

As the competition increases in the online selling space, this should boost revenue potential for digital marketing companies. In addition, more features like Outstream Video are also increasing the appeal of digital advertising.

Web site users can easily block Google image ads from displaying while they browse. The introduction of Outstream Video has proved to be a little difficult to dodge when it comes to browsing the internet and publishers are liking this change according to a post on Instapage.

From an investment perspective, most of the stocks that operate in this unique digital space have struggled over the last couple of years thereby raising questions over the long-term future of the industry.

For instance, Rubicon Project’s (NYSE:RUBI) shares are down about 80% over the last 12 months while Rocket Fuel (NASDAQ:FUEL) is down nearly 90% since 2014. YuMe Inc. (NYSE:YUME) is pretty much the shining light in this category of small players in the digital marketing space after gaining more than 60% since 2015.

Overall, most of the stocks have experienced a torrid campaign over the last few years. This is despite significant revenue growth due to the increasing number of businesses that seek to capitalize on e-commerce success.

Conclusion

The digital marketing space has massive growth potential. Companies are launching new tools to enhance customer experiences while at the same time helping businesses enjoy more success.

The impact of this growth has not been reflected on the bottom lines of most digital marketing stocks, but as revenues continue to increase profit margins will improve.

Disclosure: I have no position in any stock mentioned in this article.

About the author:

Nicholas Kitonyi

Nicholas is a financial analyst with extensive experience in investment research and stock market analysis. His analysis has been featured on research sites like Seeking Alpha and Benzinga.

Nicholas has solid knowledge of both U.S. and European markets. His investment style is focused on undervalued plays and growth stocks. As a trader, Nicholas classifies himself as a swing trader and likes to trade GBP/USD, gold and FTSE 100, among other liquid instruments.

Visit Nicholas Kitonyi’s Website


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