President Donald Trump and former Vice President Joe Biden are ready to deploy some of their campaign money on aggressive advertising. So which—if any—stocks are poised to benefit?
First, Twitter bans political advertising, while Facebook and Google allow political ads to be integrated into their revenue streams around election seasons. We can pretty much write Twitter off as an “election stock,” but we can dive into Facebook and Google.
Political ad spend for the presidential election is expected to total about $13.4 billion, according to a data source used by tech stock analysts at RBC Capital Markets. And $3.5 billion of that total pie is expected to be digital.
That $3.5 billion is about 4.5% of the roughly $77 billion Facebook is expected to generate in 2020 revenue, according to FactSet estimates. It's 17% of the roughly $20 billion in second half 2020 North America revenue. RBC thinks Facebook can grab enough of the $3.5 billion to get to 6% of second half North America revenue, or about $1.2 billion, using FactSet estimates.
RBC sees 3% of Google’s second half North America revenue represented by political ads, which, by FactSet estimates, would be somewhere around $1 billion. RBC thinks Facebook is slightly better positioned to take advantage of this election season than Google.
The reality right now is that these are very small slices of total revenue and far greater industry and stock market forces will push and pull shares of the two tech giants. And to some degree, these political ad spend figures are worked into consensus estimates at this point, and therefore the stock price. To the degree that projected political ad spend varies, Facebook and Google’s revenue projections may vary, but again, the variance will be heavily influenced and overpowered by other forces.
Political ad spend still will be worth paying attention to. There is a discernible revenue contribution from this spend and these ad giants are certainly interested in grabbing as much of the opportunity as they can.