Street Calls of the Week
Investing.com -- Third-quarter online ad spending is running stronger than anticipated, with artificial intelligence emerging as a key driver, according to Bank of America.
BofA hosted a call with Ben Legg, former chief executive of Ad Parlor, to assess recent sector trends. Analysts said, “Growth in 3Q has accelerated vs 2Q across most platforms and is tracking a few points above expectations.”
They added that “AI capabilities (including automated campaign management, AI-generated creative, and deeper data integration)” are supporting momentum.
Legg noted that AI-powered search is reducing search engine optimization traffic to third-party websites, but that shift is “benefiting sector (incl. Meta) as advertisers redirect more spend into paid channels.”
He is also said to have pointed to TikTok’s weakness as a near-term positive: “Declining spend on TikTok has been a sector tailwind, which could reverse if a TikTok U.S. sale deal is completed.”
Google Search is among the biggest beneficiaries. Legg observed that advertisers are seeing “expanded data & CRM integrations, along with native AI ad formats (like overlay and overview ads)” boost conversions and lift cost-per-clicks.
Looking ahead, he suggested Google could eventually “transition from a CPC to a transaction-based CPA model, optimizing for outcomes.”
Meta is also seeing “relatively strong” growth, according to Legg, who cited AI-driven targeting, adoption of overlay ads, rising Reels usage, and one-click shopping formats. He added that WhatsApp for Business is gaining traction following July’s pricing change.
On YouTube, Legg said growth has been “healthy (but in-line with expectations),” helped by Alphabet’s Gen-AI video creation tools, which lower barriers for advertisers and accelerate adoption.