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Facebook, Google and Amazon are reaping the benefits from advertising’s pandemic hot streak

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The logos of Google, Facebook, Instagram, Twitter, Snapchat and TikTok displayed on a computer screen.

Denis Charlet | AFP via Getty Images

Digital advertising’s hot streak appeared to have lasted into the first quarter as travel starts to return and e-commerce spend persists, analysts say. 

Snap will be the first of the major ad-supported internet companies to report earnings on Thursday, while Alphabet‘s Google, Facebook, Pinterest, Twitter and Amazon will follow next week. These players have seen outsized benefit as certain stay-at-home trends have been accompanied by massive shifts into digital ad spend. 

Bernstein analysts wrote that if the fourth quarter of 2020 was digital advertising’s “perfect storm,” then the first quarter of 2021, and perhaps the rest of the year, will be “hurricane season.” 

“Undercurrents supporting a strong digital ad year include an accelerating upgrade cycle from image to video, TV ad ripe for picking, and brand spend returning,” they wrote. “Investor expectations for the 1Q prints are high across the board, though not without a little noise in the run-up to earnings.”

Some digital ad players had been expecting impact of Apple’s privacy change, which goes into effect next week, to have impact in the first quarter. Bernstein analysts noted that the “IDFA boogeyman mostly missed 1Q, but an imminent rollout of Apple’s policy could well hamper 2Q guidance commentary and management Q&A.” 

The quarter also offered a time when some consumers were starting to spend on travel or return-to-work clothes, while others were still in lockdowns and were still looking for “distraction and delivery.” 

Industry analysts have said they’ve seen evidence of strong digital ad growth in the first quarter, in part due to heightened e-commerce spend that was helped by the latest stimulus checks. Meanwhile, search is expected to steadily come back throughout the year as travel brands expand budgets

But digital ad-supported tech companies’ earnings later this year will also show how likely certain trends that helped them soar during the pandemic, like e-commerce, will bear out in the future.

Evercore analysts pointed out that June will be the first tough comp quarter for e-commerce names and the ability of these “Covid winners” to maintain big growth will help determine if there is a permanent pull forward of demand. 

Here’s what else analysts have to say about the major ad-supported tech players as they prepare to report their first-quarter earnings. 

Snap

Some analysts see Snap’s revenue guidance for the first quarter as conservative since the company’s management had previously indicated it expected to start seeing some impact from Apple’s privacy changes in the quarter. J.P. Morgan analysts said they believe Snap’s revenue guidance of 56% to 60% growth should prove conservative.

Evercore analysts echoed that, saying that the 60% growth could be potentially conservative given positive channel checks and given the fact that the company said growth could be in line with the fourth quarter if momentum continued. They mentioned that Snap’s acquisition of Fit Analytics, which helps consumers pick the right size of clothing when they shop online, is consistent with Snap’s strategy to materially ramp up monetization using augmented reality. 

“Examples include Snap’s partnerships with Clearly (eyewear retailer), Levi’s and Estee Lauder which all benefit from the ‘trialability’ that AR uniquely delivers,” they wrote. “While we believe FB and PINS are better plays on the Social Commerce wave, we are increasingly appreciative of SNAP’s potential to participate.” 

Wedbush analysts said that Snap more than doubled its advertiser count year-over-year in the fourth quarter of 2020, showing an inflection point for Snap as product investments are bearing fruit. But they still see room to grow.

“Snap has made material improvements in its ecommerce offerings, but is still in the very early stages of what we view as a long-term opportunity in social commerce, particularly through its augmented reality offerings,” they wrote.

Facebook

Canaccord Genuity analysts said they expect another quarter of strong ad growth for Facebook, at 33% year-over-year. They wrote that would be consistent with management expectations that the ad revenue growth rate would remain stable in the first half of 2021 as any easing of e-commerce tailwinds are offset by easier comps. 

Evercore analysts believe that 33% year-over-year is potentially conservative, and foresee a 35% year-over-year growth. “As a side note, we believe that the very robust small business formation in the U.S. over the last 6 [to] 9 months has also been a big new driver of ad revenue growth for FB,” they wrote.

Wedbush analysts recently initiated coverage for Facebook with a neutral rating, citing headwinds from stronger privacy standards. 

“We’re bullish on the commerce initiatives Facebook is building into its platform,” they wrote. “While we do expect continued strength in those areas, a rebound in the overall ad market, and a continued shift towards integrating commerce into the platform, but are also balanced by our view that Facebook is the most exposed to privacy risks, particularly around Apple’s App Tracking Transparency (ATT) efforts that will limit the Identifier for Advertisers, or IDFA.” 

They wrote that what has been Facebook’s biggest competitive advantage could turn into a near-term headwind as the digital ad world recalibrates around new privacy standards. 

“We’re not making a call of Facebook’s impending demise, but believe as the privacy landscape changes, there could be a more relative share gain from smaller digital platforms which also have strong commerce functionality,” they wrote. 

Google 

Analysts foresee Google’s ads business as seeing a strong first quarter, given a rebound in search and brand advertising along with continued momentum for YouTube ads. 

Bernstein analysts noted that YouTube ended 2020 on a “phenomenal note,” growing its ads business 46% year-over-year in the fourth quarter. With a rebound in brand ad spend and strong user engagement, “the party should continue in 1Q and we forecast a 50% Y/Y growth rate for the quarter.” 

“The $60 [to] $70B US TV advertising market poised to finally go digital and the channel checks corroborate as much,” they wrote. They said YouTube may be best positioned to capitalize on this growth, with premium services like YouTube Select and traction on shoppable advertiser offerings on the platform.

Canaccord Genuity analysts said they expect Google’s fourth quarter growth will continue momentum into the first quarter as consumer activity normalizes and the vaccine rollout likely drove increasing search interest for travel. Analysts foresee a 24% year-over-year total ad revenue growth.

Evercore analysts also see the street’s ad revenue growth expectations of 22% year-over-year as conservative. They expect to see a 27% year-over-year growth in ad revenue. 

“We believe Google’s exposure to Travel and strong positioning in Local (i.e., physical stores) will provide tailwinds for ad revenue growth under a reopening scenario,” they wrote. 

They added that online retail sales growth will mean positive numbers for e-commerce ad budgets, which are a top vertical for Google. On top of that, they wrote TSA data shows a positive inflection in volumes from the beginning of March to April. Evercore analysts estimate travel had been 10% and 15% of Google’s pre-Covid ad revenue. 

Mizuho said in a note that industry checks with a major agency showed Google’s U.S. search spending growth has accelerated. Travel growth, in particular, moved from -20% year-over-year in the fourth quarter 2020 to 5% in the first quarter of 2021, the note said.  

Amazon

Pinterest

Twitter 

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Russia authorizes use of one-shot Covid vaccine

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A woman is administered with Russian Sputnik V COVID-19 vaccine at a sports arena on May 4, 2021 in Makati, Metro Manila, Philippines.

Ezra Acayan | Getty Images News | Getty Images

LONDON — Russia on Thursday authorized the use of a one-shot coronavirus vaccine called “Sputnik Light,” according to the country’s sovereign wealth fund, a move designed to boost vaccine supplies in countries with surging infection rates.

The Russian Direct Investment Fund said Sputnik Light, a slimmed-down vaccine developed by Moscow’s Gamaleya Research Institute, has an efficacy rate of 79.4% and would cost less than $10 a dose.

RDIF said the shot, the first component of the country’s flagship two-dose Sputnik V vaccine, is compatible with standard vaccine storage and logistics requirements.

It claims one of the potential uses of the single-shot vaccine is for the immunization of a larger number of people in a shorter time frame, noting it can be shipped at speed to a country in the midst of an acute outbreak.

RDIF said late-stage Phase III trials involving 7,000 people were underway in Russia, the United Arab Emirates and Ghana, among other countries. Interim results were expected later this month.

Phase I and Phase II results of the single-dose Sputnik Light vaccine found the shot demonstrated safety for all subjects and no serious adverse events were registered, it said.

“The single dose regimen solves the challenge of immunizing large groups in a shorter time, which is especially important during the acute phase of the spread of coronavirus, achieving herd immunity faster,” Kirill Dmitriev, CEO of RDIF, said in a statement.

Dmitriev said that while Sputnik Light had “an affordable price” of under $10, the two-dose Sputnik V vaccine “remains the main source of vaccination in Russia.”

“The Sputnik Light vaccine will be exported to our international partners to help increase the rate of vaccinations in a number of countries in the face of the ongoing fight with the pandemic and new strains of coronavirus,” he added.

As of Wednesday, RDIF said over 20 million people around the world had received their first dose of the Sputnik V vaccine.

“Sputnik Light will help to prevent the spread of coronavirus through the faster immunization of larger population groups, as well as supporting high immunity levels in those who have already been infected previously,” Alexander Gintsburg, director of the Gamaleya National Research Center of Epidemiology and Microbiology, said in a statement.

“Sputnik Light offers strong value in initial vaccination and re-vaccination, as well as boosting efficacy when taken in combination with other vaccines.”

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France and Britain deploy navy patrol boats to Jersey in dispute over fishing rights

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HMS Tamar is deployed as French fishing boats sail into harbour to protest against new fishing licenses on May 6, 2021 in St Helier, Jersey.

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LONDON — France sent two navy patrol boats to the British Channel Island of Jersey on Thursday as tensions with the U.K. grow following the latter’s departure from the European Union.

The latest French move follows the U.K. government’s decision on Wednesday to send two of its own military boats to the region. Comments by France’s Maritime Affairs Minister Annick Girardin sparked the British move, after she told French lawmakers that France could cut supplies of electricity to Jersey — a small self-governing dependency of the United Kingdom that lies between England and France.

The core of their dispute is over fishing rights.

French fishermen are angry and have complained of tougher conditions placed upon the issuance of fishing licenses. A group of French vessels sailed to Jersey’s port of St Helier on Thursday to protest.

However, authorities in Jersey have denied these accusations, saying they are following the rules established in the U.K.-EU trade deal when issuing fishing permits.

The French maritime affairs ministry was not immediately available for comment when contacted by CNBC on Thursday.

A spokesperson for the U.K. government said Wednesday: “To threaten Jersey like this is clearly unacceptable and disproportionate.”

The island’s main source of electricity comes from France.

The European Commission, which negotiated the trade deal with the U.K., said on Thursday that the bloc is engaging in good faith to solve the dispute with the British government.

Fisheries were one of the main stumbling blocks in trade negotiations between the U.K. and the EU. While the U.K. was a member of the EU, fishermen from both sides could work in each other’s waters and sell fish freely within the Union.

However, this freedom changed slightly in January, once the U.K.’s transition period out of the EU ended.

Under the new trade agreement, EU boats can continue to fish in U.K. waters, but U.K. fishermen will get a higher share of fish from U.K. waters through a phased-in approach. The deal also says that the U.K. could end the right of EU boats to fish in U.K. waters after 2026.

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IPOs are making top investors a fortune — now amateur traders want in

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Coinbase employees spray champagne during the company’s initial public offering (IPO) outside the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021.

Michael Nagle | Bloomberg | Getty Images

LONDON — Stock market listings are making founders, venture capitalists and large institutional investors a fortune. Now, retail traders are looking to get in on the action by using a slew of new digital investment platforms.

David Middleton, an M&A advisor based in Warrington, England, bought shares of companies that listed recently, like Palantir, Snowflake and Coinbase, on the stock trading app Freetrade.

“For me it was just a case of: I just like the sound of the business,” Middleton told CNBC over the phone.

Middleton, who is a member of London-based financial education website Finimize, says it’s been a “bumpy road” when it comes to his investments, but that he’s in it for the long term. So far, he’s made a gain on his investments.

“I’m not someone that goes into massive amounts of financial details — there are so many other things that affect share prices,” he added. “I don’t really care what happens in the short term. It could go up or it could go down. I sort of just want to be there for the ride.”

Several platforms have emerged over the years that let amateur investors own a small slice of companies in both the public and private markets. In venture capital, equity crowdfunding services like Crowdcube and Seedrs have long allowed start-ups to raise funds from users, the idea being that this bolsters the relationship between customers and brands.

On Thursday, Crowdcube will launch a secondary market called Cubex, which lets existing shareholders offload some of their stakes in privately-held businesses to retail investors. The platform pulls in data from Crunchbase, a site that shows insights on start-ups, to provide users with information about the companies it lists.

“What we’ve done well over the past 10 years is to enable ordinary people be able to invest in exciting companies,” Darren Westlake, Crowdcube’s CEO and co-founder, told CNBC.

“Our marketplace will list thousands of European companies, the idea being retail investors can come into the platform, use powerful search and discovery tools on the platform and customization to be able to find companies that are of interest to them.”

It’s a particularly timely product launch, especially as a flurry of European tech start-ups look set to go public in the coming months. This year has already seen the likes of Deliveroo and Darktrace enter the public markets, and several other firms are mooted to list soon, including Wise, WeTransfer and Klarna.

Investing in IPOs

Novice investors are increasingly looking to buy into companies’ debuts. Deliveroo let its customers and the general public invest in its IPO through a platform called PrimaryBid. However, due to something called conditional trading restrictions, these investors were locked into their positions until a week after Deliveroo’s first day of trading. The food delivery firm’s shares slumped sharply in its debut, becoming one of the worst London IPOs in history.

“Enabling retail investors to get access to the IPO at the same stage as institutional investors is vital to the market,” said Westlake, who invested £1,000 ($1,390) into Deliveroo via PrimaryBid.

In Britain, some investment platforms are lobbying for the government to let retail investors take part in IPOs to help level the playing field between individual and institutional investors.

“As it stands, retail shareholder rights are almost completely ignored when it comes to the vast majority of IPOs, which largely take place between City institutions behind closed doors,” the CEOs of the CEOs of Hargreaves Lansdown, AJ Bell and Interactive Investor wrote in an open letter to City Minister John Glen in February.

The U.K. Treasury department — which is currently looking to reform London’s listings regime — was not immediately available for comment when contacted by CNBC.

Stateside, Robinhood is reportedly developing a platform that would let its users buy into IPOs, including its own, according to Reuters. The company played a key role when retail traders piled into highly-shorted stocks like GameStop and AMC. Robinhood faced criticism from users for restricting trading in such shares due to volatility and regulatory requirements.

Robinhood declined to comment on Reuters’ report.

Avishek Das | LightRocket | Getty Images

Meanwhile, a U.S. firm called Forge provides a marketplace similar to Crowdcube’s that lets users invest in pre-IPO companies. The company recently raised $150 million from investors including Wells Fargo and Temasek.

Making early bets

Some investors want to back companies at the earlier stage of their journey, in the hope of securing sizable gains by the time a firm floats or is acquired.

Equity crowdfunding sites already let consumers buy shares of early-stage companies. But now some venture capitalists are looking at ways of giving individual investors exposure to their start-up bets.

In the U.K., Passion Capital, an early investor in digital bank Monzo, opened up its third fund to the public through Seedrs. The move meant anyone could become an investor in Passion Capital’s new fund — a role usually limited to pension funds and family offices — and would therefore benefit if the fund’s portfolio rises in value.

“We’ve already heard from other venture fund managers who were just as excited about this, and who have told us they’ll also be using Seedrs to do the same in the near future,” Eileen Burbidge, founding partner of Passion Capital, told CNBC.

Burbidge said she saw a link between the Reddit-fueled stock market frenzy and her initiative.

“Clearly one of the guiding themes was to try and diminish some of the impact of ‘faceless’ hedge funds and bring some of that ‘market power’ to the retail investor,” she said. “Access to market impact, exposure and assets that have been historically been preserved for institutions or the ‘wealthy’ for more individuals is a good thing.”

But, she added, individual investors should be informed of the risks involved before making such investment decisions.

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