Facebook: Political Advertising Will Drive Victory In 2016

Anthony Ruben profile picture
Anthony Ruben
3.81K Followers

Summary

  • Political advertising is expected to double from 2012 levels with digital media quadrupling (or more).
  • "Facebook is going to be the advertising monster of 2016", Zac Moffatt (Republican strategist).
  • Political spending could add an additional $0.17/share to 2016 earnings.

Facebook (FB) shareholders have been quick to move from exulting over the company's fantastic Q2 earnings to worrying about costs and growth rates. It is my opinion that 2016 revenues from the United States will soar on the wings of secular growth turbocharged by political advertising.

As we are all too aware, the presidential political season has already begun. State primaries (and local advertising) begin in February 2016 with the New Hampshire primary (and the Iowa caucus).

Election Money Doubling in 2016

In 2012, the presidential election cost $2.3 billion. The Hill speculated that the 2016 presidential campaign will cost twice as much (inflation will have increased less than 10% between 2012-2016). The Washington Post weighs in with a more conservative estimate of only $4.4 billion. In 2012, the National Journal estimated 66% of the Obama campaigns' budget (excluding PACs) was spent on media; they note that if campaign spending was flat, digital advertising would more than triple (to over $260 million). USA Today reported the conservative Koch brothers have budgeted $889 million for the 2016 election cycle, up from the $240 million their Freedom Partners PAC spent in 2012. I think it is clear that political spending during the 2016 cycle should double from the (then) record amount spent in the 2012 cycle.

Source: NationalJournal.com; Interesting as a visual as the numbers are based on flat spending and continuation of digital media's growth (not a projection taking into account growth in overall spending and digital media's greater emphasis).

Media Company's (Like Facebook) Do Really Well During Election Cycles

Sinclair Broadcasting (SBGI), a diversified television broadcasting company with 164 stations in 79 markets, in their Q4 2014 conference call, noted that "fourth quarter net broadcast revenues were up 46% versus the fourth quarter of '13, political revenues were $80 million as compared to $7 million in

This article was written by

Anthony Ruben profile picture
3.81K Followers
I have been attracted to the intellectual and financial challenges of identifying opportunity and making above average returns- again on a risk adjusted basis. Professionally, I am currently the CEO of a start-up medical device company. I have served as the CEO, CFO,COO, CRO and President of public and private companies. My academic background includes a BS in accounting from the University of Illinois and an MBA in finance and corporate strategy from the University of Michigan. I have CPA and CGMA designations. Generally, I seek outsized appreciation opportunities with below average risk and often favor stocks that have downside protection through one or more of the following- robust dividend yield, high book value, cash balance or other backstop. I tend to shy away from momentum stocks and those with very high PEs or PEGs.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in FB, SBGI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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