The three largest internet companies effectively control the advertising space after gobbling up more market share and reporting “truly blowout [ad] numbers” last quarter, CNBC’s Jim Cramer said Wednesday.
“They’ve now pulled away. Advertising is once again a three-horse race, just like when I was a kid … when it was just NBC, ABC and CBS,” the “Mad Money” host said. “Today, we have the same thing, only it’s Facebook, Amazon and Alphabet.”
Facebook, Amazon and Alphabet, parent of Google and YouTube, all posted first-quarter results in late April. Each company said that advertising revenues dropped off in March, a month that marked the start of quarantine, nonessential business closures and a countrywide economic slump due to the fast-spreading coronavirus outbreak.
The companies did say that advertising revenue picked back up in April, the start of the second quarter, but executives are expecting headwinds going forward in the advertising market.
“Over the last 25 years, we’ve seen the rise of the internet, and gradually all sorts of digital operators have pried ad dollars from old media,” Cramer said. “Unlike everything that came before, the web lets you reach a [truly] targeted audience … and you actually know whether your ads are being read or not.”
The online platforms, however, did not feel as much pain as other businesses that have an ad-based business model. Marketing expenditures are typically among the first expenses that firms cut back on in recessionary environments.
Despite the dips in March, advertising revenue for the tech titans is said to have stabilized. Facebook reported that both advertising and mobile advertising were up nearly 20% during the first three months of the year. Google ad revenue rose 10% and YouTube increased about 33% to $4 billion, parent Alphabet said.
In Amazon’s “other” category, sales were up nearly 44% in the quarter, according to FactSet.
By comparison, The New York Times, which continues to enjoy strong subscriber growth and depends on advertising, saw ad revenue fall 15% in the first quarter of 2020. Comcast, owner of CNBC-parent NBCUniversal, posted a 2.2% decline in the advertising department during the quarter.
“Heck, even major online media operations are struggling here, because while the web has been a goldmine for those who can reach both segmented and en masse consumers, that goldmine is now controlled by the new big three: Alphabet, Amazon and Facebook,” Cramer said.
“With this latest quarter, they’ve pretty much become the only game in town.”
Disclosure: Cramer’s charitable trust owns shares of Comcast, Facebook, Amazon and Alphabet.