RBC Capital's Latest Online Ad Survey is Bullish for Facebook (FB) and Google (GOOGL) and Bearish for Twitter (TWTR)

March 8, 2016 4:56 PM EST
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RBC Capital Internet analyst Mark Mahaney published the results of its 7th annual survey of almost 2,000 advertising professionals to gauge sentiment towards Online Advertising. The results were positive for both Facebook (NASDAQ: FB) and Google (NASDAQ: GOOG) (NASDAQ: GOOGL), but notably negative for Twitter (NYSE: TWTR).

Below are Mahaney's 5 takeaways from the survey:

1. Online Avenues Continue To Rise In Importance As Marketing Channels – Per our survey, a record 57% of marketers (up from 49% in our last 2 surveys) allocate over 20% of their budgets to Online, including a record 23% who allocate over 50% of their budgets to the Internet. We expect Online Ad spend to continue growing robustly, with a record high 82% of our survey respondents expecting their Online marketing budgets to increase over the next year, vs. 16% who expect them to stay the same, and only 2% who expect them to decrease. Key – 40% of respondents now cite TV as a source of funds for Online Advertising, up from 37% in our September survey…TV is now the channel most cited as a source of funds for ‘Net ad spend. Clearly Online has become a crucial marketing channel and is continuing to gain importance – a strong secular investment trend, in our view.

2. ROI Survey Again Places Google At The Top – When asked to rank order all the major Online Advertising platforms based on ROI, marketers placed platforms in three clear groups: Google, Facebook & YouTube (“YT”) again lead, Twitter and LinkedIn are in the middle, and Yahoo and AOL are last. We note that Twitter was the only platform to see a clear falloff in its relative ROI vs. our prior survey, while AOL showed a modest improvement.

3. Marketers Expect To Increase Their Spend With The Major Online Ad Platforms, But Facebook Had The Most Positive & Twitter The Most Mixed Results – 62% of FB, 54% of GOOG, 48% of YT, and 32% of TWTR advertisers expect to increase their ad spend on these platforms over the next year. Only 9% of FB, 10% of GOOG, and 8% of YT advertisers expect to decrease their ad spend on the respective platforms, tho 23% of TWTR advertisers expect to decrease their spend on that platform.

4. Markedly Positive Results For Facebook, Then Google – Facebook and Google had the strongest results of the platforms with the highest and second highest current budget allocations. Specifically, 31% of GOOG advertisers and 28% of FB advertisers spend more than 30% of their Online budgets on these platforms, similar with prior surveys. Looking ahead, FB and GOOG advertisers showed the greatest intent to spend more on the respective platforms next year. And 59% of marketers believe their ROIs have improved on FB over the last six months vs. 42% @ GOOG, 39% @ YT, and 29% @ TWTR. Important to Facebook, 71% of marketers expressed an interest in advertising on Instagram (consistent with prior surveys). And a record high 69% were positively inclined towards Facebook Auto-Play Video Ads, either already buying them, or “very” to “somewhat” likely to purchase them. Finally, FB’s Video Ad ROIs’ were also viewed as “significantly” or “somewhat” better than YouTube’s – to the tune of 38% vs. 25%, with 20% believing the ROIs on the Video Ad services are similar, consistent with prior results.

5. Incrementally Positive Results for YouTube, But Incrementally Negative Results For Twitter – Regarding YouTube, 24% of marketers do not allocate any budget to it (an improvement from 28% in our last survey), and when looking at those who spend more than 20% of their budget on a single platform, YouTube improved to 12% this survey from 10% in the prior iteration. Regarding Twitter, 32% of respondents plan to “significantly” or “modestly” increase their Twitter ad spend -- the lowest level of spend increase intentions for Twitter that we have tracked over the past three years and a sharp fall-off from the 54% level in our February 2015 survey. Overall, Twitter generally had the weakest results with respect to advertiser budget allocation, expected future spend, and general satisfaction. Twitter clearly has a lot of work to do to strengthen its relations with Advertisers. As an aside, a record high 45% of respondents indicated an interest in advertising on SnapChat…this platform is gaining momentum.

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RBC Capital, Twitter, Mark Mahaney