Social Media Advertising Heats Up: 3 Stocks to Watch

According to a recent survey conducted by The Creative Group, 62% of ad and marketing executives polled stated they expect an increase in social media advertising spending by companies in general over the next twelve months. For investors looking for opportunities in this growing market, watch out for social media and tech companies Izea (IZEA), Facebook (FB), and Google (GOOG), as each have smart strategies going forward.

Izea

Izea provides an easy-to-use platform that allows advertisers to create and send content for social media publishers to place on websites, social media pages, social media feeds, blogs, and forums. Along with the ability to focus on specific social media websites mostly liked viewed by target groups, Izea has turned into a valuable asset for ad and marketing professionals with limited budgets or time to devote to online advertising.

Investors should consider Izea for several reasons. First, the company has plans to expand its current platform to several countries within the next year. Second, management seems to have a clear vision going forward. CEO Ted Murphy, for example, managed to cut general and administrative costs without sacrificing service. Third, Izea’s expected revenue for 2016 is $5 million or more; this is an increase of just under $5 million for 2015. Lastly, Izea’s gross profit margins hover around 55%, an impressive number for any company.

Facebook

While Izea has a firm grasp in helping advertisers reach target markets via online content, Facebook has seen great success in its mobile device ads – ad revenue from mobile devices totaled 41% of its earnings during Q2 2016; up 14% from Q2 2015. Ads placed between newsfeeds get reader’s attention, which means increased sales. In addition to placing these ads in strategic locations throughout its website, Facebook has also updated tools advertisers can use to create, monitor, and maintain profitable ads.

A recent jump in stock price should cause investors to consider investing in Facebook. Even though the company has seen some rough times since going public, harnessing the power of mobile device ads and giving advertisers the tools they need to sell goods and services should make this stock very desirable.

Realty Check

Before investors start writing out those big checks to social media and tech companies, it’s important to keep in mind that not everyone believes in the greatness of social media advertising. According to a recent report by the American Customer Satisfaction Index (in partnership with analytics firm, ForeSee, the overall satisfaction rating for the Internet, which includes social network sites, and search engines, was 71.3 (out of 100) – 3.9% lower than last year and the lowest since 2002. Social networks by themselves scored 68 out of 100. The ACSI cited social media advertising and consumer dissatisfaction with these ads as one of the reasons for the decline in overall Internet ratings.

So while ad and marketing executives expect an increase in social media advertising spending, this does not mean consumers will continue to respond to it like these executives hope. Short-term investing may mean the difference between earning a return or losing out if consumers decide to suddenly ignore online ads or start boycotting the tech companies and social networks that promote them.

Perhaps as a way to caution these companies that ad overload could cause consumer fallout, the FTC recently sent notices to 24 Internet companies including Google, Microsoft (MSFT), Yahoo (YHOO) to clearly identify paid ads on search engines to avoid confusion by consumers.

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