Wells Fargo analysts assessed the digital advertising sector in a note to clients Monday, providing their thoughts on whether Meta Platforms (NASDAQ:META) or Alphabet (NASDAQ:GOOGL) owned Google's stock is preferred.
The firm noted a divergence in digital ad market share, with Meta regaining lost share and Google search losing share to retail media.
"[We] expect Meta mkt share recovery in '24 back to '19 levels at 28.1% while Google search extends share loss to ~600bps since '19," wrote Wells Fargo analysts. "While Meta growth in 2H23/1H24 appears extraordinary, argue Meta simply regaining share lost in '21/'22 and gaining share in e-commerce.
"Conversely, Google search has lost ~4pts of share since 2019 and continues to cede e-commerce dollars to retail media and Meta."
Furthermore, they see Meta's transition from a social network to a content recommendation engine with a commerce overlay as a key driver behind the sustained strength in usage minutes growth.
On the other hand, the bank says it believes retail media's proximity to final transactions and superior targeting capabilities, powered by a trove of past purchase data, have allowed it to gain share from Google search.
"Retail media has gained 400bps+ of share between '19-'23 and currently accounts for ~9% of digital ad market, making it one of the fastest-growing digital ads categories over the past few years," said the firm.
Furthermore, Wells Fargo believes category normalization and share dynamics in the e-commerce vertical benefit Meta relative to Google.
"We forecast eComm GMV growth to outpace travel bookings growth in '24 and beyond, a shift reflective of a normalization of goods & services trends," added the bank. "Meta [is] also gaining share in the eComm ad vertical, 30% in '23 (+5pts vs '19), while Google share declined by 6pts."
As a result, Wells Fargo maintains its preference for Meta Platforms over Google despite the Facebook owner's already significant year-to-date outperformance (+38%).