Good morning,
We are moving Facebook (FB) from an active long to the long bench following lackluster 3Q21 earnings (Click Here for Morning Call Commentary). We are replacing Facebook (FB) with Google (GOOGL). GOOGL is more insulated from the negative effects of iOS 14 changes, and we believe search likely took market share from social in 3Q21 as a result (Click Here for 3Q21 Google Data Updates AND Agency Field Notes). Note that our pivot on GOOGL is not a directional call into earnings this evening, instead reflects our view that GOOGL will continue to outperform FB over the next 3-6 months. As a reminder, given our negative industry view over the next 6-9 months, we have pivoted to playing more of a relative performance game than absolute (Click Here for Q4 Internet Themes Presentation).
We are moving Pinterest (PINS) one notch higher on the active short list. We wrote about Pinterest (PINS) yesterday, and we view any strength on a relief rally post-FB results as shortable since estimates still need to come down. Lastly, we are moving Spotify (SPOT) a few notches higher on the active long side ahead of earnings tomorrow morning. The mobile app download data continues to be strong, along with the Top 200 streams (Click Here for Data Update/Media Themes - Slide 153). One of our agency contacts also flagged a consumption shift back to music in 3Q21 (Click Here for Field Note).
We believe multiple factors are driving slower growth in digital advertising (iOS 14 changes, CPM/price inflation, tough comps due to e-comm shift, and 2-year pull-forward of digital demand). In the coming weeks, it will become clearer, which variable has the highest coefficient with Google (Search) and Twitter (Brand) earnings this evening and Roku (CTV) and The Trade Desk (CTV/Display) reporting next week.
We will discuss all these changes, takeaways from earnings, and thoughts going forward during our October Wrap Call this Friday at 12:30 PM ET (Click Here for Invite).
Until then, call or e-mail with any questions.
Best,
Andrew
