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Here's Why Facebook Could Be in Trouble, Even as Other Digital Advertisers Are Surging

By Danny Vena and Jason Hall - Feb 4, 2021 at 9:00AM

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Not all ad tech companies are created equal.

In the wake of its recent fourth-quarter earnings report, shares of Facebook (FB 1.18%) slipped, even though the company surpassed expectations on both the top and bottom lines. This came in stark contrast to several other digital advertising stocks that have climbed higher so far this year.

On this video clip from Motley Fool Live, recorded on Jan. 27, "The Wrap" host Jason Hall and contributor Danny Vena discuss the changing ad tech landscape and why some players are better positioned than others.

Jason Hall: Danny, you got one?

Danny Vena: I do. I got a comment and question here from Srinivas. Hopefully, I'm pronouncing that correctly.

Hall: Srinivas. Yeah.

Vena: "Facebook down after earnings, are other ad tech companies going to be under pressure like The Trade Desk (TTD -1.94%), Magnite (MGNI -0.65%) and [Alphabet's (GOOGL -1.34%) (GOOG -1.29%)] Google?"

First, let me say that I actually just took a look and Facebook is currently now up after earnings. Keep in mind that after-hours trading is much more thinly traded than regular hours. Can be extremely volatile. Don't make decisions to buy or sell based on what you're seeing in after-hours trading. But I also want to say you can't really paint all these ad tech companies with the same brush.

One great example of that is that Apple's (AAPL 0.17%) decision to increase user privacy by forcing them to make a decision. Later on this year, Apple is changing the way that it does permissions, so that when you go into an app, there's going to be a pop-up that says this app tracks your activity. Do you want to allow that? You have to actively say yes in order to do that.

Hall: It's opt-in, not opt-out. That's a big change.

Vena: That is a huge change. Facebook is one of the companies that had come out and said, we only expect roughly 10% of the people to opt-in for that. That could adversely affect how we do. It's 15% or 20% actually, I think. On the other hand, The Trade Desk says, and they said in their last earnings conference call that only roughly 1 million out of their 12 million ad impressions came from Apple ID. The identifier that Apple uses. As a result of that, they're going to see a minimal impact, if any.

It depends on the company, and while advertising is advertising and ad tech is ad tech, how these companies' stocks are going to react to each quarter is really going to depend on their individual results. Don't worry about what the Trade Desk and Magnite are going to look like because the market may not be happy with Facebook.

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Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$193.54 (1.18%) $2.25
Apple Inc. Stock Quote
Apple Inc.
$137.59 (0.17%) $0.24
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,178.16 (-1.34%) $-29.52
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,186.26 (-1.29%) $-28.65
Magnite, Inc. Stock Quote
Magnite, Inc.
$10.64 (-0.65%) $0.07
The Trade Desk Stock Quote
The Trade Desk
$52.64 (-1.94%) $-1.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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