Microsoft Has $50 Billion Ad Opportunity, Barclays Says. There Are Multiple Growth Levers.
Microsoft
has a $50 billion opportunity in advertising,
Barclays
argued on Wednesday.
“The company has revamped its
search offering with new generative AI features, and the ongoing antitrust case pertaining to Google’s dominance in search has stirred conversation around a potentially greater opportunity for
Microsoft
to compete,” analysts led by Raimo Lenschow wrote, referring to a 2020 lawsuit the Justice Department filed against Google.
Barclays divides Microsoft’s advertising business into three segments—search, ad technology, and LinkedIn, offering perspectives on each. The search segment, led by Bing, represents the largest market opportunity, the ad-tech offerings are still in their early stages but have potential, and “LinkedIn has become the largest business-to-business advertising player in the world,” the analysts wrote.
The team sees a $30 billion advertising opportunity composed of $15 billon from search revenue, $10 billion from LinkedIn, and $5 from ad tech.
“While organic share gain is no doubt valuable for Microsoft, becoming a notable player again in advertising (search in particular) will require a significantly larger presence in the mobile market,” Barclays continued.
“To make strides here, the biggest factor for Microsoft will be the willingness to spend billions of dollars per-year on distribution for the Bing search engine, similar to what Google does today,” the team wrote, adding that doing so would create a $20 billion additional opportunity, resulting in “the potential for a $50 billion asset over time.”
Barclays maintained an Overweight rating on the stock, with a target of $475 for the price. Microsoft shares were flat at $407.50 in Wednesday trading. Over the past 12 months, they have gained 65%, compared with 28% for the
S&P 500.
Write to Emily Dattilo at [email protected]
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