Our theme of Ad Tech Stocks – which includes Internet platforms and ad technology players – has had a tough year declining by around 41% year-to-date, compared to the Nasdaq-100, which remains down by roughly 28% over the same period. While tech stocks, in general, have seen a sell-off, as investors rotate out of growth stocks and pandemic winners, amid rising interest rates, there are a couple of factors specific to the advertising space that are hurting these companies. For one, mobile device behemoth Apple made privacy changes to its iOS mobile operating system late last year, essentially preventing advertisers from tracking iPhone users without their consent. The move hurts the ad targeting abilities and revenue growth rates for many digital advertising players. Moreover, with inflation surging and supply chain issues persisting, companies have been revisiting their advertising budgets and this is also likely impacting the ad tech space to an extent.
So what’s the outlook like for the theme? There are concerns about a recession in the United States after GDP contracted over the first quarter, and this could also put pressure on advertising spending if the economy remains weak. However, this might be a good time to look at the theme, as the secular trend of marketers shifting ad budgets from traditional channels to digital channels is likely to hold up over the long run. Within our theme, Google’s parent company Alphabet (NASDAQ:GOOG) – the Internet’s largest search and video ad vendor – has seen the smallest decline in the theme, declining by around 24% year-to-date. On the other side, Roku (NASDAQ: ROKU), a company that sells streaming media players and software, has been the weakest performer, with its stock down by almost 60% year-to-date.
|S&P 500 Return||-6%||-18%||74%|
|Trefis Multi-Strategy Portfolio||-5%||-21%||209%|
 Month-to-date and year-to-date as of 5/23/2022
 Cumulative total returns since the end of 2016