The Innovative Technology Behind an Advertising Revolution

Why I recently broke my own social rule... A powerful message on a handwritten cardboard sign... Two key variables in every advertisement... A major milestone will take place this year... The mind-boggling amount of time we spend on the Internet... The innovative technology behind an advertising revolution...

While walking the streets of Baltimore, I usually ignore the panhandlers...

As I (John Engel) am heading to and from our headquarters in the city, I usually just put my head down and avoid eye contact as I pass. And it's not just in Baltimore...

For as long as I can remember, I've stuck to this informal social policy. Even when I travel to conferences in cities like San Francisco and New York – places with some of the highest homeless populations in the country – I follow the same simple guideline in the streets.

It's not because I'm a cold-hearted jerk...

I'm not against giving handouts to folks who really need them. If someone is hungry, I would be happy to buy him a sandwich or a burrito at a nearby fast-food restaurant.

I'm just not comfortable handing over cash for nothing more than what's likely an empty promise that he'll use it for food. I don't want to feed anyone's alcohol or drug addictions.

But a couple of weeks ago, I broke my own rule for the first time in forever...

Everyone reading today's Digest has come across a homeless person at some point. As you know, these folks often hold a cardboard sign with a handwritten message. They include... "God bless you"... "Anything helps"... "Down on my luck"... or even simply, "Hungry."

Again, I've seen these refrains many times over the years, so it's easy to keep walking. And let's face it... As a society, we've become hardened to all the requests for handouts.

As a homeless person, if you want to get any money, you need to be different. You must grab people's attention as they scurry by, looking at their phones or talking to one another.

That's exactly what one man did as I went to grab lunch recently...

He looked a lot like most homeless folks I come across. He was about 45 years old. He had a thick, scruffy beard and long, greasy hair. His clothes were tattered and dirty.

Judging from his appearance, this man had likely been living on the street for months. Regardless, he proudly held his homemade sign and smiled at everyone who passed.

That's when the message on the man's sign caught my eye...

It was simple and comical. "Too ugly to be a stripper."

When I saw the man's sign, I couldn't help but stop and laugh. The man laughed with me. It was funny. So I dug down into my pocket and handed a couple of dollars over.

I also noticed that I wasn't the only one who was amused by his message...

Other people laughed, too. A young woman beside me snapped a picture with her phone. I watched at least two other bystanders drop change in his cup. The man's sign was working.

Now, this story might appear to be meaningless to you. And maybe you think my sense of humor is offensive. But before you go tossing this essay aside, hear me out...

I'm sharing this story because it includes a critical point that we can use as investors. You see, this homeless man's unique cardboard sign speaks to the power of advertising.

He needed money. His sign called public attention to his need. And most important, he developed a clever message that made folks laugh... and hand over their loose change.

Coincidentally, before meeting this man, I had spent many hours researching the advertising space...

You see, my most recent recommendation in Stansberry Innovations Report is an innovative play on the future of the industry.

For weeks, I studied how companies entice you to click banner advertisements on the Internet. Like panhandling in Baltimore, this is no easy task. The variables that advertisers struggle with on the Internet are quite similar to the variables on the streets...

First, the type of messaging can make a huge difference. If you don't have a strong and creative message, you're just a panhandler with a sign that everyone has seen before.

A less obvious but more critical variable is targeting the right audience with your message. The most effective advertisements have a strong message... and the right people see them.

In today's digital world, targeting the right audience requires sophisticated tools...

Traditional advertising can only hit broad audiences. It's delivered through newspapers, magazines, and billboards. A panhandler's cardboard sign falls into this category, too.

In other words, with traditional media, it's hard to control who sees your messages.

According to market-research firm eMarketer, advertisers in the U.S. will spend about $110 billion on traditional media this year. That's a mountain of money. But as you can see in the following chart, advertisers won't be spending as much on these ads moving forward...

The age of the Internet has taken its toll on the bygone days of traditional media ads...

Men in tailored suits who build expensive advertising campaigns in smoky boardrooms no longer control the industry. Now, technology firms like Alphabet (GOOGL), Facebook (FB), and Amazon (AMZN) hold all the cards. And together, they've changed the industry forever.

This year in particular marks a major milestone...

For the first time ever, marketers will spend more on digital ads than they spend on traditional media ads. And this transformation is here to stay... Based on industry forecasts, the gap between digital and traditional ads will expand for years to come.

While traditional media struggles to capture advertisers' budgets, digital advertising continues to thrive... According to eMarketer, within three years, two-thirds of all advertising spending in the U.S. will target the digital space. The same tenacious trends that we've seen playing out over the past two decades will only get stronger moving forward.

As proof, consider America's seemingly unquenchable appetite for the Internet...

Since the turn of the century, the average time a U.S. resident spends actively browsing the web every week has risen from 9.4 hours to 24 hours today.

You read that right... The average American spends one full day per week – 21% of the time they're awake – browsing the Internet.

You better believe advertisers know these numbers and use them to their advantage, too.

The Internet is the best place for companies to put a message directly in front of you. It's also the best way to avoid putting the wrong message in front of you...

Unlike traditional advertising – which casts a large net without knowing who's seeing the message – digital advertising is targeted and specific. That helps drive better returns.

As I said... Alphabet, Facebook, and Amazon dominate the world of digital advertising.

But if you look past the tech giants, you'll find some lesser-known winners, too...

Take Dataxu, a small technology company that you've probably never heard of.

The company supports the digital advertising industry. It's like electronic brokerage firms E-Trade Financial (ETFC) or Interactive Brokers (IBKR), but for buying ads... Rather than tapping into a stock exchange like those firms, Dataxu taps into an "advertising exchange."

The advertising exchange is a relatively new development in the digital advertising world... It's the central location for the entire inventory of available advertising space. It's where the sellers meet the buyers... And it's all carried out through computer-driven auctions.

In late October, online streaming firm Roku (ROKU) acquired Dataxu for $150 million.

The move allows Roku to implement data-driven ad placement on its streaming platform... Rather than a generic advertisement that everyone will see when they watch their favorite shows, the technology allows Roku to customize its ads using customer-specific data.

Roku's deal for Dataxu is the latest evidence of a growing trend in the digital ad space...

The use of data and artificial intelligence to drive powerful and effective ad campaigns.

It's something called "programmatic advertising."

As I mentioned earlier, digital advertisers don't follow a "spray and pray" model like the old days of traditional media advertising. The most successful advertising doesn't just need to have a strong message... It also needs to hit the right consumer.

Today, digital advertisers use data to buy ads that target the right people... at the right time... and in the right place. And now, in a subsegment of digital advertising, advertisers are leaning on technology – the automated purchasing of ad space on digital platforms.

Every second, roughly 9 million digital ad spots are available for purchase across the Internet. No human could ever keep up with that type of inventory. Instead, companies employ computer algorithms to buy ads... in fractions of a second... based on piles of data.

Even better, the new technology being used can track the success of each ad placement – and allow companies to adjust their buying strategy on the fly. According to eMarketer, by 2021, roughly 88% of all U.S. digital display advertising will be bought this way.

It's the fastest-growing segment in advertising. It's the future... happening right now.

Last month, in Stansberry Innovations Report, I detailed the best pure-play opportunity in the space...

This multibillion-dollar company built the largest independent ad platform of its kind... It's developing technology that taps into ad exchanges. The company uses "machine learning" to place highly targeted ads that lead to higher clickthrough rates for its customers.

Best of all, the company continues to grow at an incredible pace... Its year-over-year revenue grew by 54% in 2018. And it's on pace to hit 40% revenue growth this year.

We sell Stansberry Innovations Report at an affordable price... Normally, it costs $199 per year. That's only about 55 cents per day. But today, we're offering an even better deal...

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The mailbag is overflowing with feedback on Dan Ferris' poignant Friday Digest. As always, send your notes to feedback@stansberryresearch.com.

"[Friday's Digest] was beautiful and unexpected, Dan. Bravo." – Paid-up subscriber Isaac B.

"Dear Dan, loved your writing, as always, in [Friday's] Digest. For you to thank your readers and subscribers just points to how humble you are. It also reminds me of the tremendous caliber of the folks who work as writers and analysts at Stansberry, even if some aren't always the most humble of folks, they all seem to be dedicated to their craft and the subscribers. I agree with Placido. Bravo Dan! P.S. I live in Vancouver, Washington and keep hoping I will run into you somewhere so I can thank you in person." – Paid-up subscriber John P.

"Wow... I've been reading/following Dan Ferris for better than a decade and never really 'knew' him. Thanks for opening yourself up to me and my fellow readers Dan. And you certainly provided a lot to think about for this 76-year-old guy." – Paid-up subscriber Tim N.

"Dear Mr. Ferris, your note on your parents' age and illness struck home with me. Lost my wife of 65 years last month and still think of what we could have accomplished had we had more time together. Life is short – savor every moment of it." – Paid-up subscriber Don C.

"Dear Dan, I have been a regular Stansberry Digest reader for many years. My primary purpose in the continued study of the Stansberry Research body of work has been to increase my knowledge as a personal investor and manager of our assets.

"Your essay today was perhaps the best Digest I have ever read. We all get caught up in the urgent tasks of daily life (career, money, health, etc.) that we often do not put enough focus, effort or time into the things in life that are most important to us. Your message rang loud and clear about what is important.

"As a recent retiree, I have begun to experience the wonderful joys that await when you can actually dream a little about what you want in your life and what you do not want in your life. The three Graham rules that you shared are a fantastic articulation of a process to sort out all of these choices. While we still have the time to have the time of our lives! Thank you so much for sharing this intimate and personal story with us." – Paid-up Stansberry Alliance member Tom S.

"I am not a subscriber to your Extreme Value newsletter. But I do read and pay attention to your view of the financial markets. In [Friday's] email, I am thankful that you found the time to write about what is going on with your parents. I can tell you that 'I have been there and done that.' Thanks for the candor of your writings and for inspiring me to reflect on all that life has to offer." – Paid-up subscriber Frank S.

"Dear Dan, there really are things more important than money, and clearly family is one of those things, as you so eloquently pointed out. That's a long-winded way of wishing you and especially your mother well as you go through this health crisis with her." – Paid-up subscriber Andrew Q.

"Dan, while I have always enjoyed your professional perspective on the markets and investment recommendations, I felt really privileged for you to share the personal side of your being with us today. Moreover, for this 73-year-old, I am so personally pleased that you realize just how important family is to real happiness in life. We can choose our friends, we can't choose our family and need to love them, broken though they may be. You will look back on this trip as one of the best decisions you ever made, especially when your mom and dad are no longer alive. Cherish every moment you can be with them. One day you will look back and be so happy that you did. You have your priorities right, my friend. Not everyone does." – Paid-up subscriber Steve K.

"Dan, I so identify with what you're going through with your mom. I had a very similar experience. My mom, too, had a catastrophic fall. She had the same problems... falling, not using the walker we got, refusing to do the physical therapy and she had dementia. Double whammy, I'm an only child. I moved in with her so she could stay in her home. Between me and the caregiver who stayed when I was out, we kept her safe for 5 more years. One of the hardest things I ever went through.

"And as far as following one's bliss, I did pursue acting... and am still. LOL. Not exactly successful, but won't give it up. Can't. About to shoot 4 more episodes of my web series for YouTube. Perhaps you took the right path after all. I do enjoy your podcasts and takes on things and it seems that you love what you do, which, if you do, makes all the difference. I certainly wish you all the best with your dear parents." – Paid-up subscriber Catherane S.

"Dan, thanks greatly for this Friday evening's Stansberry Digest. That's why I am writing you – just to say thank you. You shared something inspirational and poignant. It provoked memories of my extraordinary mother who passed away five years ago now. I made many inconvenient visits to see her and spend whatever time with her circumstances allowed. I don't regret even one of those inconveniences ... but I do cherish every one of them beyond any measure of words. I know this is a difficult season of life, and I pray God's will for you and your family." – Paid-up subscriber Steve L.

"Living life to the fullest? So hard to say. But two and a half years ago I left the Silicon Valley grind, 2+hours of commuting a day, 10-hour workdays for people who didn't care or appreciate it, and chronic cough from the air quality. I moved to a rural spot in Oregon where I have a business that supports my household, a house that is paid for, and time to work outdoors 3 or 4 hours a day. I've lost almost 40 pounds, with 40 or 50 more to go and the cough is gone. I sleep until I'm ready to get up. I have virtually no commuting time on a regular basis. All my plans are now my own, and I'm pursuing my dreams instead of more money. It feels fuller. I'd advise anyone considering it to just do it." – Paid-up Stansberry Alliance member John W.

"Dan, life is fleeting indeed. My 88-year-old mother recently suffered a stroke but she is now home with rehab and therapists daily. This is good and welcomed relief to my 90-year-old father who is also confined to home dependent on his aids. I have come to look at my weekly visits as very temporal – this is just another, all too short, season of my life. While I could resent the time it takes from other seemingly important daily workplace obligations, the brevity of the task is a continual reminder. I have come to realize the siblings do not and often cannot make equal contribution. I welcome their contribution and assistance however it comes.

"A good friend spoke at his father's funeral of the honor he felt in caring for his father in his last days. Putting the difficulties of time management aside, it is an honor to be there for them. The role reversal we experience in this season of life is so important to their care and comfort. The medical system we have at hand is indeed wonderful, but the elderly need a family advocate to help navigate the sometimes murky and stormy waters of a health crisis. You too will be honored for honoring your parents in this season." – Paid-up Stansberry Alliance member Jeff W.

"Hey Dan, such a sad story about your mother in Friday's Digest. I recognize a lot you write about. My mother is 92 as well and your mother and mine seem to have a lot in common, character wise. My mom is hardly able to stand and walk anymore, what makes her very dependent on the help of others. She hates it like hell. Fortunately, I am in the situation that I can help more or less permanently. Although it is pretty tough, it is very rewarding as well, making this episode of our lives very special to both of us. We have never been closer than now. I wish you all the best and your mother a quick recovery." – Paid-up Stansberry Alliance member Henk V.

Regards,

John Engel
Baltimore, Maryland
November 11, 2019