If you've been paying attention, 2022 has been a lousy year for digital advertisers. During the second quarter and again in the third, Meta Platforms, parent of Facebook and Instagram, reported declining ad revenue for the first time since its initial public offering.
The drama at Facebook's parent company was minor compared to Snap. A difficult time adapting to new privacy rules that make it harder for social media apps to track their members' behaviors recently caused average revenue per user to fall by a double-digit percentage.
With all the trouble facing social media stocks lately, you might be surprised to learn that one of the best growth stocks you can buy right now belongs to Doximity (DOCS -2.73%), a company that operates a social media platform. Here's how it separated itself from the pack to become an unbeatable destination for advertisers with very deep pockets.
Gaining market share
Doximity's main operation is a social media platform that counts around 80% of U.S. physicians as members. Doximity's curated social media feed doesn't let members post their own content but does help them stay informed about their specialties.
With the vast majority of practicing clinicians already plugged in, Doximity's productivity tools are enormously useful. In addition to allowing doctors to discuss patients together in a professional setting, Doximity has telehealth features that a record 370,000 physicians used in the third quarter.
A curated news feed isn't terribly interesting on a personal level, but it means advertisers can rest assured that their brands aren't seen in proximity to problematic content. Both brand protection and a qualified audience are powerful selling points that have advertisers opening their wallets further for Doximity. In the third quarter, average revenue per existing marketing partner rose 25% year over year.
Room to grow
Doximity reported that third-quarter revenue grew 29% year over year to $102 million. That's just a sliver of a total addressable market Doximity measures at $18.5 billion.
Doximity's total addressable market estimate is enormous but hardly an exaggeration. Americans spend more than $3.5 trillion on healthcare annually, and doctors decide 73% of that spending. In addition to advertising, Doximity has a growing hiring solutions business and premium productivity tool features that hospital systems are increasingly eager to pay for.
Image source: Getty Images.
Know the risks
Doximity is the only big social network geared specifically toward U.S. healthcare professionals. It's tremendously profitable now, and without any serious competitors on the horizon, rapid growth for many years seems likely.
Shares of Doximity are around 65% below their all-time high, but a lot of the company's growth potential is already baked into its price. The stock currently trades at around 51.5 times forward-looking earnings expectations. At this high valuation, any hint of a slowdown over the next few years could lead to a severe stock market beating.
I think Doximity's powerful network effect will keep potential competitors at bay and allow it to continue growing by leaps and bounds. That said, my Doximity position is a relatively small part of a diversified portfolio. If you're going to take a chance on this stock, it's a good idea to do the same.
