The paradigm shift in the television landscape is ongoing, and cord-cutting continues to take hold. The major pay-TV providers have lost nearly 3.6 million video subscribers during the first nine months of 2019, according to Leichtman Research Group. This is a significant acceleration from the 2.87 million it lost in all of 2018 -- and this year isn't even over yet.
The trend is helping to fuel the booming growth in digital ads. The global advertising market is expected to grow to $725 billion this year, up 4% year over year compared to 2018, according to IDC. Digital advertising is growing at a much faster pace, up about 18%, and will account for roughly half of the total market, according to eMarketer.
Let's look at three companies that are perfectly positioned to capitalize on the growing opportunity in digital advertising: e-commerce juggernaut Amazon.com (NASDAQ:AMZN), programmatic advertising specialist The Trade Desk (NASDAQ:TTD), and streaming pioneer Roku (NASDAQ:ROKU).
1. Amazon: Benefitting from a captive audience
In the world of digital advertising, two names reign supreme: Google (a division of Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG)) and Facebook (NASDAQ:FB). The duopoly captured roughly 31% and 20%, respectively, of worldwide digital ad spending, according to eMarketer. However, the two are beginning to lose the stranglehold on a market they once dominated and now face a powerful new competitor: Amazon.
Nearly two-thirds of U.S. shoppers will begin their search for a product online using Amazon this year, up from about half last year. This gives the e-commerce giant a captive audience when it comes to product suggestions, which attracts advertisers looking to reach an interested audience and results in soaring ad growth. Through the first nine months of 2019, Amazon's "other" revenue -- which is primarily sales of advertising -- grew to $9.3 billion, up 38% year over year. Amazon surpassed $10 billion in advertising in 2018 and is expected to top $14 billion this year.
Amazon's e-commerce platform isn't the only place the company can increase its ad load. The company also places targeted ads on its video game streaming platform Twitch, streaming channel IMDb TV, online book platform Goodreads, and its FireTV streaming devices. This gives the company much more room to grow its digital ad business.
2. The Trade Desk: Placing more productive ads
Programmatic advertising uses sophisticated algorithms to perform the otherwise labor-intensive process of ad buying, and nobody does it better than The Trade Desk. The programmatic market is expected to grow by 20% year over year in 2019, five times faster than the 4% growth in global advertising. The Trade Desk is stealing market share from its rivals, as evidenced by its 40% year-over-year revenue growth during the first nine months of 2019. By using data to target the right customers, The Trade Desk is carving out a profitable niche in the space.
That's not all. The Trade Desk provides an omni-channel solution that places ads where customers are across a broad array of destinations -- apps, video, web, mobile, audio, and connected TV. Some of the newest channels are fueling the company's soaring growth.
Mobile video ads grew 50% year over year in the third quarter, while mobile in-app ads grew 58%. Even more impressive, though, was the continuing breakout performance of connected TV -- which soared 145% -- and audio, which climbed an equally impressive 160%.
The Trade Desk has maintained a customer retention rate of over 95% going back 24 quarters, a testament to its success in the area. Expect its fast growth to continue.
3. Roku: A streaming alternative
While the biggest players fight it out in the subscription streaming space, Roku side-stepped the competition by being an agnostic one-stop shop to help consumers aggregate their viewing choices. Whether customers use one of its namesake Roku streaming devices or one of the growing number of smart televisions powered by the Roku operating system (OS), the company provides access to a comprehensive list of big-name streaming favorites and niche fare.
This includes the likes of Netflix, Amazon's Prime Video, and Disney's recently released Disney+, but it also includes Asian fare from Crunchyroll, British television and movies from BritBox, variety programming from Viacom's Pluto TV, and horror classics from AMC Networks' Shudder.
About one-third of all connected TVs in the U.S. use Roku's streaming platform, giving the company a massive audience for its fastest-growing business: digital advertising. Roku's platform revenue -- which includes digital advertising, the Roku Channel, and its smart TV OS -- grew 79% year over year. At the same time, streaming hours soared to 10.3 billion, up 68%.
This illustrates how Roku has successfully side-stepped the content wars and created a platform that is thriving in an otherwise competitive space.