Social Media Outlook: Advertising Disruption | ITEK
In this outlook, we show how social networks
are winning an ever-growing slice of global advertising spend versus
traditional media options. We highlight
why advertisers have made this shift and highlight four leading global social
media platforms, well positioned to benefit from these trends. Companies
included in this article are:
- Sina Weibo
- Meet Group
The Growth of Social Media
Nearly one-third of the world, or 2.5bn
people are active social media users. By 2021, this total is estimated to have
exceed 3bn, driven by emerging markets users coming online for the first time
via low-cost smartphones and mobile broadband. Through social media platforms,
advertisers will have the potential to reach an additional 500,000,000
consumers by 2021.
Social Media User Growth 2010-2021: Billions of Users .
The Digital Disruption of Advertising
There is a seismic
shift occurring in the way the average person consumes information and
entertainment content. Historically, TV and Radio have been the primary
opinion-shaping media, taking the greatest ‘share of mind’ of the audience. Yet
now, for the first time, audiences are spending more time looking at their
mobile phones than TVs. This profound change in consumer behaviour, information
dissemination and use of leisure time has significant knock-on effects for
advertisers who must now develop new strategies to deliver effective, impactful
content and messages.
Average Time Spent Per Day (Minutes) .
In an increasingly
fragmented media landscape, traditional advertising strategies are no longer
cost effective. As consumers spend more time on mobile devices and less time on
newspapers, magazines and TV, marketing managers must develop new strategies to
deliver their message. With userbases that dwarf the audiences of even the most
successful prime-time TV shows, social platforms offer a more compelling
proposition to advertisers that want cost effective targeting.
Some see a Zombie Apocalypse, Others See an Advertising Opportunity
This evolution in the
viewing habits of consumers has catalysed a profound change in advertising
buying patterns. While most traditional advertising mediums have been in
long-term secular decline, digital advertising spend has rapidly accelerated.
In 2016 the ad industry became digital-first - more advertising dollars were
spent online than on TV, or any other form of media. In total, online ad
spending grew from ~$48.4bn in 2008 to ~$227bn in 2018 and is estimated to
reach ~$274bn by 2020.
Global Ad Spending by Medium. $Billions 
Social media advertising, as a subset of internet advertising, reflects these broader trends. In the UK, Europe’s largest digital advertising
market, two-thirds of all advertising budgets are now deployed online,
and a quarter of that is deployed on social media .
In the UK social media advertising is predicted to even eclipse TV ad spend by
2020, taking an estimated 30% share of all advertising budgets. This is a
phenomenal land grab by social platforms, most of which did not exist 15 years
UK Digital Ad Spend
advertising revenues have also shown consistent growth. In May, 2018 the PWC
The Interactive Advertising Bureau (IAB) report showed that since 2012, social
media advertising revenues have grown from US$2.9 Billion a year to $22.2
billion a year and now capture a quarter of all advertising revenues.
Revenues US$ Billions  2012-2017.
Positioned for Growth
Given the seismic shift from traditional to internet
advertising, we highlight four social media companies with the potential to benefit
from this long-term change in advertising buying and consumption. Each company highlighted is a constituent in
the HAN-GINs Global Innovative Technologies UCITS ETF (ITEK).
Snapchat: ~300 Million Monthly Users
Snapchat is recovering from a disappointing 2018 which saw
its shares slump to all-time lows. However, it’s shares have soared
upwards of 20% in February 2019, following its fourth-quarter 2018 earnings
surprise. The social media company earned $390mn in revenue and posted
far smaller losses than expected .
Global daily active users also beat estimates reaching 187mn – ensuring Snap
stopped its user base attrition. This helped it add more advertisers, keen
on using its automated tools.
allows photos, pictures and messages to typically appear for only a short time,
before they become inaccessible to recipients. The app has evolved from
originally focusing on person-to-person photo sharing to presently featuring
users' "Stories" and 24 hours of chronological content. It’s
"Discover" option lets brands show ad-supported short-form
content. Snapchat emphasizes users interacting - with virtual stickers
and augmented reality objects. In the US, Snapchat attracts a younger
demographic, with the majority of users in the 18-24 age bracket.
SnapChat Users By Age Group  2018.
Meet Group: ~2.8 Million Mobile Daily Users
The Meet Group’s
(NASDAQ: MEET) portfolio of mobile social entertainment apps – helps
millennials and Gen Xers connect. Their primary apps, MeetMe®, LOVOO®, Skout®,
and Tagged®, keep millions of mobile active users entertained – resulting in
very active casual chats, friendships, dates, and marriages. Their innovative
products let users stream live video, send gifts, chat, and share photos.
Their newest game app (Battles) – offers live competitions for the best dancer,
musician or comedian, bringing large audiences and participants together.
(Each ‘battle’ lasts just a few minutes, and the winner is the streamer earning
more diamonds - by receiving gifts from viewers during the battle period.)
As mobile usage soars worldwide and grabs an
ever-increasing slice of advertising spend – MEET’s share price recently hit a
high of $6, almost doubling in 12 months. (It has retreated to $5.40 at
close Feb 11, 2019 – well above the $4.60 price at the start of 2019) .
MEET has a diversified revenue mix consisting of
in-app purchases, subscription, and advertising. It is currently one of
HAN-GINS INNOVATIVE TECHNOLOGIES (ITEK) ETF’s largest holdings at 1.9%.
Facebook: ~2.2 Billion Monthly Users
the well-known privacy scandals surrounding Facebook, it is enjoying record
advertising sales across its portfolio of apps. The share price is
starting to recover, but at levels of $160 remains well below record highs
above $200 .
Much of the negative news is already priced in for Facebook.
Meanwhile, the company has increased limits on the outside use of its data,
while ratcheting up its own data collection practices. The new California
Consumer Privacy Act expected to take effect within the next year – will ensure
tougher privacy protection laws. The US Congress is expected to pass a
similar law that has features resembling the EU’s GDPR regulation which has
particular, Instagram is now its fastest-growing App according to Bloomberg .
While WhatsApp. has not become a huge cash earner yet - Facebook Inc. is working
on making a cryptocurrency that will let users transfer money via this WhatsApp
messaging app. The focus is likely to be on the remittances market in
is developing ‘stablecoin’ -- a type of digital currency pegged to the U.S.
dollar, to minimize volatility. Facebook, now has 2.5 billion global users with
more than $40 billion in annual revenue. It would be the first large tech
player to launch such a coin. Interestingly a new launch/plan involves
merging the background messaging functions of the various apps it owns
(Instagram, WhatsApp, and Facebook Messenger) – allowing users to send chats
among services. Facebook will encrypt the messages so that only senders and
receivers can see them.
China Social Media - is Different
Social Media Platforms:
Monthly Users, Millions 
above chart shows the largest social media platforms ranked by monthly users.
While Facebook, Snapchat and Twitter will be familiar to most western investors
an entirely different array of social providers operate in Asia-Pacific.
Western investors may be unfamiliar with companies like Baidu, Sina Weibo or
Tencent, but with over 2 billion combined users, they have huge audiences and
an established social and e-commerce businesses that position them well against
the backdrop of increased social and digital ad spend.
tremendous penetration of social media companies into the Chinese e-commerce
space highlights one of the main cultural differences between Eastern and
Western social media usage (and the importance of including both in a social
portfolio). In the West, social media is mostly used to send messages and
photos to one another and connect with friends. In China, social media has
significant ecommerce aspects, allowing users to buy directly through WeChat,
Weibo, and other live streaming platforms.
This allows Chinese consumers to use social media as a news platform, to
follow celebrities, participate in events/campaigns and engage in ecommerce.
Sina Weibo: ~446 Million Monthly Users
Sina Weibo (NASDAQ: WB) is a Chinese microblogging website.
While often described as China’s version of Twitter, Sina Weibo is closer to a
combination of Twitter and Facebook. Most of the topics going viral on Weibo,
originate on the platform itself, unlike Twitter which relies on news or
events. Weibo's long-term outlook is attractive – based on China's online
advertising industry growth and consumer discretionary spending expected to see
strong gains. With Chinese tech stocks having had a tough 2018, Weibo stock
trades down roughly 50% from its all-time high in early 2018. Sina Weibo
now has over 445 million monthly active users. At the start of
2018, it surpassed US$30 billion market valuation mark .
Users are encouraged to use graphical emoticons (emojis) or attach their own image,
music, video files in every post. It is an incredibly effective site to reach
Chinese consumers and millennials.
Accessing the Social Media Story: HAN-GINS Innovative Technologies UCITS ETF (ITEK)
The HAN-GINSInnovative Technologies UCITS ETF (ITEK) - a UCITS compliant Exchange Traded
Fund domiciled in Ireland which tracks the Solactive Innovative Technologies
The ETF seeks to
provide exposure to a diverse basket of companies poised to benefit from the digital
revolution, including social media leaders. The index includes world-changing
companies from developed and emerging markets whose products and services are
driving innovation, transforming industries and changing lifestyles across the
world in emerging industries including:
- Social Media
- Cyber Security
- Future Transportation
- Clou Computing
- Augmented and Virtual Reality
HAN-GINS InnovativeTechnologies UCITS ETF (ITEK) is issued by HANetf and listed on London Stock
Exchange, Borsa Italiana and Deutsche Boerse XETRA with a TER of 75bps.
Innovative Technologies UCITS ETF has been created in conjunction with
GinsGlobal Investment Management, a multi-billion dollar asset management
company, founded in 2000 with operations in North America, Africa, Middle East
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