Advertising – The Hidden Gold Mine
A business that keeps getting better
Advertising is the business that Wall Street routinely ignores. This month the three major advertising-based businesses in the world reported earnings and not one article mentioned how they did it—advertising. I searched for the word “advertising” and “ads” in articles from the Wall Street Journal, Bloomberg, and Barron’s. Not a mention.
These three companies have reinvented advertising by leveraging the internet and mobile phones. However, Amazon, Alphabet (Google), and Meta (Facebook) are labeled (and analyzed) as technology businesses, while nearly all their cash flow comes from advertising.
The table below shows how much money these three businesses produced in advertising dollars. The “B” after each number is “billions”. And these numbers are growing at powerful rates.
| 1st Quarter Sales Results for the Big 3 Ad Businesses | |||
| Alphabet | Meta | Amazon | |
| Total Sales | $110 B | $56 B | $181 B |
| Ad Sales | $77 B | $55 B | $17 B |
| Ads as a % of Total Sales | 70% | 98% | 10% |
| Year-over-Year Ad Growth | 16% | 33% | 24% |
Last year, these three companies generated about $500 billion in advertising sales. To put that massive number in perspective, the three major TV Networks (CBS, NBC, and ABC) combined produced only about $12 to $18 billion in advertising sales. The Wall Street Journal’s annual ad revenue was on the order of $250 million in 2025.
Internet advertising is massively successful for several reasons:
(1) these companies have millions of advertising clients (customers),
(2) the effectiveness of ads are easily measured, and
(3) ads can be tested for little or no money.
Unlike legacy advertising media, these companies do not set specific rates for an ad. Advertisers set the price by bidding on words or clicks– ads are priced in an auction system. And the advertiser only pays when someone clicks on the ad.
No clicks, or not many clicks, means the ad has failed, and the advertiser tries something different.
Maybe I find this fascinating because my first successful business depended on direct response advertising–it was a business opportunity. If Internet advertising had existed when my partner and I got started, the results would have been orders of magnitude better.
This new medium favors small businesses. It allows a small business to focus on a geographic area or even demographic data. The ads are targeted, so more likely to find a potential customer. This kind of reach was previously impossible for small businesses.
Measurable, low-risk, targeted ads have made advertising much more effective and accessible to millions of businesses. Making it highly lucrative for these three companies – and shareholders like us. Artificial intelligence will only make the targeting better. Making the ads more lucrative for the advertiser and valuable to these three companies.
Best regards,
Daniel A. Ogden
Disclosure: Dock Street Asset Management, Inc. and/or our clients may own Amazon (AMZN), Meta (META) and Alphabet (GOOG). This article is not intended to be used as investment advice.
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