Video Ads RTB Will Boost Google's Revenue!

  • Google has launched its video ad space bidding platform.
  • Google could be the biggest beneficiary of the same.
  • Google's valuations are attractive at its current stock price.

Video Ads RTB Will Boost Googles Revenue

Google (NASDAQ:GOOG) has launched ‘Google Partner Select’, its programmatic video ad space bidding platform, a move that will strengthen its ability to serve video ads. The platform will allow advertisers to bid for video ad spaces through Google’s DoubleClick ad-exchange or bidding platform which has so far served as a marketplace for display advertising. As per the release on the DoubleClick blog,

“This new premium programmatic marketplace will connect a select set of publishers investing in top-quality video with the brands that want to buy against it.”

Even as Facebook ramps up the geographical reach of its video ads and Yahoo mulls the acquisition of a YouTube rival, Google has taken the next step. Video advertising spends are expected to grow at a fast pace in the years to come. With its reach, Google is certainly in a position to benefit from the developments. We think the move could drive Google’s revenue and stock valuations in the medium term.

Growth of Video Advertising

Video Advertising Market Forcast

eMarketer expects video ad spends to grow from a little over $4 billion in 2013 to about $5.75 billion by 2014. The projections estimate the video advertising market to reach a scale of over $9 billion by 2017, implying that the market will more than double from its 2013 levels.

Image Source: eMarketer

Growth of Programmatic Buying or RTBs

What’s more, as we had mentioned in a previous article, programmatic ad buying platforms are the way forward. Programmatic platforms, also known as RTBs (Real Time Bidding System) are platforms where ad-space/ad-inventory is sold to advertisers who bid to advertise on ad-spaces of their choice.

The reason this is gaining traction is because it allows advertisers to pick their spots for advertising, pushing up their return on investment and the efficiency of advertising. The system is better than the one where, for instance, Google or Facebook choose where your ad should be displayed. Further it is also more transparent, and lets advertisers take control of their campaigns and measure their effectiveness more efficiently.

Projection of ad sales through RTBs

eMarketer’s study of digital display ad spends shows that the share of spends via RTBs is increasing constantly. It expects that by 2017, RTBs will account for 29% of digital display ad spends in the US translating to a little over $9 billion.

So far, Google, Facebook and the likes, only have RTBs that facilitate sales of display ads. Google’s RTB named DoubleClick has tie ups with Yandex and Facebook’s RTBs enabling cross selling of ad-spaces. However, one would expect to see a similar growth in the share of video ad spends via RTBs.

Why Google Could Be the Biggest Beneficiary of the new RTB

Google will benefit from revenue sharing arrangements with publishers. More importantly, Google (primarily YouTube) is the largest library of videos. Given that Google accounts for such a large piece of the total videos served and the video advertising pie, if Google sells its own inventory via the exchange, it will undoubtedly be the biggest beneficiary.

US Online Video Content Properties Ranking By ComScore

Image Source: ComScore

The table above shows the standings of video viewership on properties in the US. Outside the US, the equation would tilt far more in favour of Google.

Further, a few months ago, Google opened up YouTube to Neilsen’s Online Campaign Ratings (OCR), a third party mechanism which will evaluate the performance/effectiveness of ad campaigns hosted on YouTube. Many believe that a positive validation from Neilsen could divert TV ad spends to YouTube and other digital advertising platforms.

Undoubtedly Google will benefit from the launch of the video ad sales RTB, as it will aid revenue growth by increasing the accessibility/visibility of publishers’ ad inventory to advertisers who will benefit from higher ROIs on ad spends.

Google Stock Valuation

Google’s stock price of $564 a share translates to Price/Sales and Price/Equity multiples of 6.2 and 29.2 respectively. Google’s valuation is relatively far more attractive when compared to that of companies like Twitter and Amazon which make no to low profits.

Google is a stable company with consistent revenue growth and profitability and makes it to our list of top stock picks. Our analysis of Google's stock at its current price assigns it a ‘buy’ rating.

To see Google’s latest stock price movement, click here (NASDAQ:GOOG)

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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Mariana Morales
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