Zoom's Growth Strategy and Media Advertising Trends: A Comprehensive Analysis

How Can Zoom Grow?

We've also got a look at what's going on with household names Target, Home Depot, and Lowe's. In this podcast, Motley Fool analyst Jason Moser and host Dylan Lewis discuss: To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. A full transcript follows the video. This video was recorded on August 22, 2024. Dylan Lewis: Target's outlook is a bit off-target. Motley Fool Money starts now. I'm Dylan Lewis and I'm joining over the airwaves by Motley Fool Analyst Jason Moser. Jason, thanks for joining me. Jason Moser: Hey, Dylan. How's it going? Dylan Lewis: It's good. I'm back from Podcast Movement. We have a week full of earnings to catch up on, which is really, a podcast host dream, because there's no shortage of things for us to discuss today. Jason Moser: An abundance of content of options is always a nice problem to have. Dylan Lewis: Yeah, and some big moves, which I think is always fun to discuss. Why don't we kick off with Zoom? Jason Moser: Sure. Dylan Lewis: Up 15% this week following the company's earnings release. Top and bottom line came in slightly ahead of expectations. It seems like part of that was demand for the company's AI tools. Jason Moser: I think with Zoom, the big question a lot of us have had over the last few years is we know how effective and useful the platform is, but the big question is really, how are they going to be able to grow beyond this massive enterprise presence and direct consumer presence that they already have? They have a very good service. But at the end of the day, video conferencing itself, it's basically a one-trick pony. There are other options out there, and it's not exactly terribly specialized. But again, I think Zoom has, to my mind, the superior platform of all of them, and so what we're seeing is efforts from management to expand the platform and the services that they offer. They're doing things like that the platformization of Zoom workplace, becoming that place where you go get all of your work done, introducing things like Zoom Docs, which ultimately is helping employees cobble together all of the stuff that's going on in these video conferences and summarizing them into actionable insights and documents that can help monitor the workflow, so to speak, and then to your point there, they continue to invest in AI all along the way. AI is the fuel. It's what's working behind the scenes to really help all of these developments. It's adding more functionality in utility to Zoom's platform. I think we're starting to see signs that we understand how they can grow. The big question is going to be, will it actually work? It was absolutely, I think, a respectable quarter revenue of just over $1.1 billion. It was up only 2% from a year ago, but that's better than down 2% Dylan. It was a little bit higher than the expectations that management set. Enterprise revenue grew 4% from a year ago, that represents 59% of total revenue now versus 58% from a year ago. Then I thought what was encouraging. They mentioned on McCauley online average monthly churn came in at 2.9%. That's down from 3.2%. In the second quarter of fiscal 24, and that's the lowest rate that they've ever reported, and so for that online segment, that direct to consumer segment. That's really encouraging to see that folks are sticking around in seeing the utility in the platform. Dylan Lewis: When we look back at companies that have had, what I will call a useful product, a large customer base, but have been looking for that next, that second act, that thing that expands them out beyond their current monetizable offering. There are plenty of examples of that working out, and there are plenty of examples of that not working out. I'm curious, so far on the user side, it's felt like so much of the AI stuff that we've been seeing, and some of these next offerings have been baked into this experience that we're already really recording the show on. We're on Zoom, we're within the boxes here. Do you think it's going to live within this, or are you looking for something and maybe something that the market would need to be excited about that looks and feels a little different than traditional video conferencing to really give this company a shot in the arm? Jason Moser: Yeah, I think that's a good question. I think it's going to need to be something that expands beyond just our traditional view of just basic video conferencing. The challenge is going to be making that seamless. It's doing more with the technology that they have. Remember, not all that long ago, they made the effort to acquire Five9, the contact center business. They were looking to build out this contact center side of the business with this acquisition of Five9. That acquisition we know now didn't go through. But I thought, what was need to see on call, they really are building out this contact center side of their business, regardless of the acquisition not going through. They're still going full speed ahead on trying to build out that capability, that functionality, which makes a lot of sense. When you see the benefits in that. It does make a lot of sense. They made a small acquisition of a company called Workvivo, just late last year. Ultimately, this is an employee communication and engagement platform. Rather than focused on like your customers, or whatnot, this is an internal type of mechanism that helps employees within the organization stay up to speed with what's going on. They're seeing some green shoots there. They're seeing some promise there. I think the challenge for them is going to be trying to make it as seamless as possible while expanding that opportunity into those other capabilities, those functionalities like the contact center, like employee engagement, whatnot. Dylan Lewis: I'm curious. At this point, Zoom holds, I think the wildest round trip I have ever seen when it comes to a company stock chart. Shares still slightly down for the year, essentially flat since the company came public in about 2019, after that 600 or 650% rise during the pandemic with the initiatives that the company has going on right now and where the company currently trades, is this interesting to you at all? Or if not, is there anything that you could say, I would want to see this before it becomes interesting? Jason Moser: Well, it is interesting in the sense, so I recommended Zoom and our augmented reality and bond service several years ago. Yeah, it's been a wild ride to say the least. I think from a evaluation perspective, I like the business. I like what I think they offer a great service, and it's encouraging to see leadership continuing to try to innovate and bring new capabilities to the platform. For me, that's very interesting, and I think when you couple that with the valuation today, and again, remember, this is all about from today looking forward, what can we expect? Is this a good opportunity today? Well, their outlook right now for the full year, they're looking at earnings per share of around $5.30, and that puts this stock today at around 13 times full year projection. That is not expensive for an enterprise software type business like this. This is a software business, one that in theory should be able to enjoy robust margins. Their long term gross margin dog is 80%, and they're right there near it. That to me, is exciting when you look at that valuation. I think the one thing I would keep an eye on and this is just something I noticed in McCauley, but it's something at least to pay attention to. The trailing 12 month net dollar expansion rate for their enterprise customers in the quarter came in at 98%. Typically, I'd like to see that better than 100%. That was versus 109% from a year ago. Given that their explicit strategy is to try to continue expanding the relationship with these enterprise customers, they're only going to be able to sign so many enterprise customers, so the key is to be able to expand those relationships. That's the thing I would keep an eye on. Again, this is just one quarter, but it's definitely a number to follow on the coming quarters. Dylan Lewis: Over at Lowe's, and in the home improvement market, the struggles continue. In the company's earnings report this week, management revised full year guidance and comps down from original forecasts. Jason, maybe this one not all that surprising given what we saw from Home Depot earlier this earning season? Jason Moser: Not surprising at all to me, at least. I think Home Depot and Lowe's are very much like a Mastercard and Visa. You just just know what you're going to get with them, and they typically mirror each other for the most part, and in the good times of the bad. Now, this has not been a bad year for Lowe's considering the macro backdrop right there. They're under-performing the market a little bit. But again, given that macro backdrop, the fact that the shares are actually up year to date, I think is pretty encouraging. The numbers didn't inspire a ton of confidence, at least in the near term, revenue of $23.6 billion was down modestly from a year ago. Comp sales down just a little bit over 5%. They did see encouraging signs in the pro-sales business, and that's something that Home Depot has done very where they've really executed on that pro side. It's good to see Lowe's trying to capture that as well. They saw mid single digit positive comp growth there. Then online sales, 2.9% growth, and they saw a better conversion rates and continued to expand the same day delivery. They're expanding with more delivery partners. Now I think I saw on McCauley, they were incorporating Uber Eats into their network as well, so it's funny when you see DoorDash and Uber Eats delivering you your Lowe's, but I think that speaks to just the the mobile nature of our economy these days. They are witnessing continued soft demand on the do at your soft side. They do see a little strength they're on the pro side to offset that. But I think with Lowe's, you want to look at the three core drivers of this business, which make me wonder if we're not looking at a little bit of a coiled spring at some point. Home prices continue to appreciate modestly, which is increasing levels of home equity. We're at a position now where disposable personal income is actually growing faster than inflation, and so that's something that could play into their numbers positively. Then obviously, the aging housing stock just means there are going to be a lot of projects on tap here as the consumer continues to get a little bit stronger and as the housing market continues to recover, so I think there's reason to be optimistic. Dylan Lewis: It was interesting management noted this quarter in the call. I think 90% of Lowe's customers are homeowners and most have fixed 30 year mortgages of less than 4%. Jason, I feel like until rates come down, we are going to be staring at a very similar situation quarter to quarter. There is going to be this waiting game that happens, particularly for some of those more expensive projects that might need financing. As you noted, I'm impressed that the company and Home Depot too have held up as well as they have given the headwinds that they're facing. It's a slightly different story when you look at a company that is related to this industry, but not quite in the robust home improvement space. Trex, this is a business that we would associate with home improvement, but they're much more narrow in their scope. They're down 20% year to date, and there have been some very sharp sell offs to their recent results. What do you make of the divergent market experience for these companies given the headwinds are very similar? Jason Moser: Well, it's funny. I feel like I had so much to draw on here, just from personal experience. My family, we are one of those families with a 30 year fixed mortgage at absurdly low rate. I think it's 3% now and it's very difficult to rationalize giving that up any time soon, just given the cost of capital today. I think that's the way a lot of folks are feeling. Definitely the interest rate environment is going to play into that. The nice thing about home ownership and even from the rental side, housing is a necessity, it's not something that's going to go away. It can be cyclical. It can have flow, but those projects eventually are going to need to be done. It's interesting when you mentioned Trex, and we, several years ago, had our deck replaced at our house with a Fool on Trex deck. I'll tell you, it is unbelievable. This is a great product, and it's durable. It's easy to clean. It's long-lasting. It really does up the value of your home. The flip side of that coin though. It's not cheap. It is expensive to put in a Trex's deck, no matter the size, and so I can understand why people would be putting those types of projects on the back burner. If we see home prices continue to appreciate, we continue to see equity build, and we can see that interest rate environment start to come down. That's going to make accessing that capital a little bit easier through things like home equity loans and lines of credit. I suspect when we see that tide turn, we'll see Trex's numbers improve a little bit, but you're right. Trex is absolutely more niche, and I think a much easier project to put on the back burner than some of your typical DIY projects that Lowe's and Home Depot would benefit from. Dylan Lewis: Rounding us out with retail. Some signs of life from Target this week, retailer had shares up 7% following earnings that were ahead of expectations and on the one hand, company sales return to growth, on the other, comps guidance still not all that inspiring. Jason Moser: No. This wasn't a Walmart-level quarter, but it was a decent quarter, and it definitely points to things headed in the right direction for this company, I think. The consumer continues to focus on value, and that's an area where Target can really shine. Looking at the numbers, the revenue was up 2.7% to $25.5 billion total. Comp is up 2%. Then they saw adjusted earnings-per-share growth of 40% versus a year ago. All of this was fueled by traffic growth of 3% that helped offset a modest decline in ticket size, which is not surprising at all. Then we saw digital comps grow 8.7% with strength and things like Same Day services, Drive Up, the Target Circle 360. One of the encouraging things too about this business, and I didn't realize this was as large apart, but it makes sense is the Target Circle program, and this is essentially like their loyalty program, like you'd go into a grocery store, you have your Safeway or your Giant card or whatever it may be. But the Target Circle program is really gaining traction. It's free to sign up. They have now over 100 million members, and this is one of those loyalty programs that drives engagement, that drives repeat visits. Then it also gives them the opportunity to pull an Amazon, and they had what's called Target Circle Week, where they can really try to showcase this program and the savings and the deals that consumers can get. They saw the highest digital traffic of the year so far with their Target Circle Week this year. Again, I didn't like the world on fire, but definitely it feels like these guys are heading the right direction. Dylan Lewis: Heading into this quarter, I feel like some of the main focuses for management were, that loyalty program you just mentioned, and also the focus on value and really looking to get prices down. I think they wound up reducing prices on, like 5,000 different everyday items, things like milk, things like diapers, just to be able to get customers back into the stores. It seems like that's starting to show up a little bit in some of the traffic numbers that we're seeing from them and the trends that we're seeing from them. Jason Moser: I think that's right. As they noted, they're in the penny business, these retailers are not operating on huge margins. When you get down to that bottom line, your big retailers are operating on very razor thin margins, and they know that they have to compete on cost and that's going to be just the way that is. I thought it was encouraging to see. Again, they are witnessing some top line challenges. Continuing to grow that traffic is tough, and we saw the traffic growth offset by a little bit of a shrinking ticket size there. But they've done a very good job on the operating side, focusing on the costs of the business. While they're witnessing some challenges on that top line, they are still seeing a little bit of an acceleration on the bottom line. They actually raised adjusted earnings guidance for the year up to a range of $9-$9.70. That was up from a previous range of 860-960. You look at this business at the midpoint of that guidance and put shares around 17 times full year estimates. That doesn't seem unreasonable for a business as well established as Target. They're always going to have to compete on cost, and they're always going to have to compete with the Walmarts and the Amazons of the world. But the good news is it seems like they're doing the right things, beyond just being that physical retailer, introducing things like the circle program, and focusing on e-commerce and drive up, delivery, whatnot. Again, a very difficult market in which to compete, but they are given it they're all. Dylan Lewis: Certainly, the back to school season, another opportunity for the company to reengage with some of those shoppers that maybe aren't making quite as many trips to the store. Jason, you have a couple kids heading off to college this season. I'm guessing you've had a couple of trips to Target recently. Jason Moser: I was going to say Target, yeah, we just moved our older daughter back to college for her sophomore year, and our younger daughter is headed off for her freshman year, and Target has definitely gotten a few of our dollars of this back to school season. For those of you who think back to school season is just up through high school, you're wrong. If you got kids going to college, I dare I say you'll probably spend a little bit more at Target for those college years than you ever would those elementary and high school years. Dylan Lewis: Have you been in the stores and had your boots on the ground there? Any impressions just from the way that they're positioning some of the back to school stuff or the dorm stuff or anything like that? Jason Moser: It's always when you go in there, they always just seem to be very thoughtful about having that type of merchandise front and center so it's obvious. They're big stores, and you can get a little bit lost in trying to find what you're trying to find. But they do seem to really capitalize on seasons like back to school. Then they mentioned the holiday season as well. That's just around the quarter and we're going to start seeing a lot of Halloween stuff. They just always make the in store experience rather pleasant. Maybe that's a function of the fact that they're not as big as Walmart and probably really not as busy as Walmart. Stores are maybe a little bit less crowded in some cases. But generally speaking, they do seem to really be operating with some real rigor in making sure that that retail experience for the customer is always a consistent and a good one. Dylan Lewis: We'll see if management notes a Moser bump in next quarters management earnings call. Jason, thanks for joining me today. Jason Moser: Thank you. Dylan Lewis: As we wrap up here, listeners, just a quick program. No second segment for us today, but we'll be back with our regular shows next week. As always people on the program may own stocks mentioned, and the Motley Fool may have formal recommendations for or against, so don't buy or sell anything based solely on what you hear. I'm Dylan Lewis. Thank you for listening. We'll be back tomorrow.

Trends in Advertising and Media | The Motley Fool

Motley Fool hosts Ricky Mulvey, Dylan Lewis, and Mary Long were live at Podcast Movement, and they discussed: To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our beginner's guide to investing in stocks. A full transcript follows the video. This video was recorded on August 20, 2024. Ricky Mulvey: We're live at Podcast Movement, and you're listening to Motley Fool Money. I'm Ricky Mulvey joined live at the Residence Inn with Mary Long and Dylan Lewis. It's so good to see both of you in person. This is a rare opportunity. Dylan Lewis: It's a rare opportunity. I think this is maybe the second or third time I've ever recorded a show in a hotel room. Ricky Mulvey: This is the pirate radio of podcasting. There are studios there. You don't need it. We got a table. We got Dan Boyd. We got mixing board. We don't need any of that. Mary Long: It's down to Earth. It's authentic. Ricky Mulvey: We've only been at Podcast Movement for less than a day. But how are you enjoying it so far? What are some things you've picked up? Dylan Lewis: It's been fantastic so far. I think there's an energy to being around a bunch of people who do the same thing that you do and are as equally excited about it. Especially in the virtual world, where we're doing a lot of our stuff from home. It's easy to lose sight of the fact that there's a lot of people who listen to the show and also who participate to make shows, and so that's fun. I'm thriving on that. Ricky Mulvey: One of the coolest things is you meet interesting people who are curious about niche topics. It can be hit or miss. This is a convention. There's a lot of entropy here, but that part has been a lot of fun. Mary, how about? Mary Long: People that are interested in niche topics, but also, again, like Dylan said, people that are all interested in podcasting and telling stories in an audio format and sharing that. Even you can meet somebody who runs a podcast on the legal issues of podcasting. As Ricky and I met last night at one of the networking parties, and you can still have something to talk about, even though typically, I'm not chatting with people about legal issues. Ricky Mulvey: We're going to talk about general trends in advertising and media a little bit later, but it has been interesting for me to see the number of podcasts about podcasts. Podcasting exists in a circle sometimes. We've seen a couple of the sessions. Any key takeaways that you've picked up from those. Dylan Lewis: Well, so far in the morning, we've seen Steven Bartlett, diary of a CEO. We saw Ira Glass, the grandfather of podcasting, and that's a pretty good kickoff. It's about as good as it gets. Steven Bartlett was interesting. I actually had been in a car on the way here in a lift, and his show was on. Then I showed up, and I was here we are, recognizing the voice, hearing again. That was neat. Ricky Mulvey: It's cool to see Ira Glass and walk by him and go. That's Ira Glass. That's the granddaddy of this thing. He's a real human. He is a real person. Mary, how about you? Mary Long: I thought, listening to Stephen talk, he had a lot of really interesting things to say about details, and how much experimentation can go into an interview show, which on the surface might sound pretty simplistic or simple. You talk to somebody. You ask questions. They answer. He's talking about, when I say detail, he's talking about measuring the parts per million of CO_2 in a room to make sure that people aren't too drunk on the carbon. That is a crazy level of detail to go into when just chatting with someone. Those are the types of things that he measures on a show. We're not necessarily going. We didn't do that today before recording in person at the residence inn. But there's little takeaways about how you can experiment and look at interesting details to try to make a show just slightly better. Dylan Lewis: On that note, one of the things that I was amazed by was he was talking through some of the interviews that he had done and some of the prep for it. He talked about interviewing Daniel Eck, CEO of Spotify. He said when he was coming into the room, he had, I think Swedish House Mafia playing because Daniel Eck loves Swedish House Mafia, and he was just trying to prime the pump to have him excited for the conversation. I don't know, maybe that's something we need to be thinking about doing. Ricky Mulvey:: I think that's a good idea. One more on that is I like thinking about things in terms of being 1% better. I like that he brought that up. He talks about how it's easy to get trapped into the next big innovation. That's honestly what we're looking for as investors, if you're looking at a rule breaking company, who's absolutely just disrupting something. But realistically, if you're working somewhere, if you're working on a project, it's much better to be motivated by a 1% consistent win thing. Tell you speaking nice interactions. I do have a story. We'll see if Dan cuts it. This is my favorite so far. I was waiting in line. You always ask, what's your podcast? What are you doing? Guy tells me he's I'm looking for a co host for a show I want to do about loneliness. I'm that's. Ricky Mulvey: It's pretty on the nose. Dylan Lewis: That's something a lot of people deal with. That's pretty interesting. You get a co host, and then you're going to talk to people about how they've overcome loneliness and maybe get some actionable things. Guys, like no. It's just going to be about loneliness. I really I'm hoping he finds his partner. I hope this works out for him, but so far, I think that's been my favorite interaction. Dan, thinks it's made up. Mary Long: You got to find this podcast. Proof them wrong. Ricky Mulvey: Let's get into some high level stuff. This is the business part of the show. Because there's a lot of talk. There's podcast industry trends. There's higher level media trends that become apparent here. I think Jeff Green in the latest Trade Desk earnings call summed up the state of play pretty well with basically talking about a conversation he had with a chief marketing officer. Describing this advertising landscape is one with "the illusion of growth", where it appears that companies are doing well, stock prices are up, but the average consumer feels more constrained than ever in terms of purchasing power. That has significant implications on how companies market product from a pricing to packaging to advertising. Let's go then. We each have two takeaways from the audio industry, from the ad industry. We'll go Dylan, Mary, and then me. Dylan, kick us off. What is a takeaway that you've seen? Dylan Lewis: I think on that note of Jeff Green, talking about the ad industry, something I know we're supposed to be very excited about the podcast industry here. I will caution. I think the Podcast ad industry is probably one to watch for a general slowdown in ad spending and consumer activity in general. It's not because I don't love it, but it's because in the grand scheme of where Spen goes, podcasting, I think still is probably toward the bottom of a lot of marketers' lists. It's true when you look at overall digital spend and a lot of the spaces that money tends to go. I think podcast spend about $2 billion for 2024 for context, I think digital video spend, about $60 billion. I think if we see any sensitivity with podcast spend, if you start listening to episodes, and you start catching gaps in those episodes where there would be a normal ad firing something like that, it's probably a sign that there's going to be a little bit of weakness in some other places. Ricky Mulvey: They're looking for that really not quick, but measurable return on investment. For a lot of podcast, advertisers, even though you're seeing top of the funnel, just awareness marketing, which we've done a few of those ads on this show. The primary thing that marketers are looking for is for you to enter a code at a website so they can directly track where you've come from. I wouldn't be surprised to see things slow down a little bit in that area, too. Mary, how about you? Mary Long: The thing that I keep seeing everywhere is video. I feel that's not really a surprise, but what's interesting to me is from a creative standpoint, how you tell a story in an audio format versus a video format? To are different mediums.. They are best suited for different stories. Why at a convention that's geared toward audio story tellers, do we see this push toward video? If, if again, they are formats that are best suited toward different types of stories. It's largely because video is a growth mechanism. That's a way to grow a podcast. You can you're telling the same story, but you're using something like YouTube to grow the show. I don't know. I just think that that growth whether you see audio become a springboard to a video podcast becoming a totally different way to tell the original story. That'll be interesting for me to watch or if it just continues to be no, it's just the video version of our podcast is just sitting around on headsets, talking. Ricky Mulvey: There's video options from Spotify coming, and that's something we were talking about earlier, Dylan is the YouTubization of Spotify. Dylan Lewis: I think that's something to watch. It will take a long time to happen, but we see a drumbeat here of encouraging creators to make video content. Steven Barlett and his conversation was talking about how he doesn't view what he makes as a podcast. He uses it as a show. If you think about it that way, you have these different avenues for where the show can go. You have the audio expression of that. You have the video expression of that, you have clips that are going out there. I think more people are going to be thinking about it that way because for one, if you're a creator, it diversifies you away from any one specific platform. But also Spotify is pointing people there. They want people to be doing that. Ricky Mulvey: I would say one thing I've seen in this. I went to one Podcast movement in 2019, 2023, 2024. This gets into video a little bit, but there's generally been, I would just say, a hardening of the podcast industry. You used to see companies spending a lot of money on limited series where we'll find a sponsor, and then the ad dollars will come later based on the number of listeners that they're able to attract. I think that's largely over, and you've seen that at Spotify two with shows like heavyweight leaving. Also just fewer people, I would say, who are here trying to make podcasting a second job or a full time job. Interest rates may have changed a few things here. Speaking of hardening of the industry, I was at an advertising session on just what brands are looking for in shows. One of the things they did is they said they gave a number for basically a listener's time per hour listening to podcasts. This includes content and the ads in the average hour of podcasting. Then I took this to the length of a human life. Dylan Lewis: As one does. Ricky Mulvey: As one does to just see how do marketers value this thing. I got a number that I got to, but I'll pose it to Mary and Dylan. We'll say, Dylan saying, we start from 10. Age 10. Zero through 10 don't count for an advertiser. We'll see sugary cereal. I don't know. We'll do 10-72. You wake up in the morning, you only listen to podcasts, and then you sleep eight hours at night. Sixteen hours a day for 62 years. How much do you think that is worth to the marketer. The marketer saying, but does it scale in a board room? Mary Long: I feel I'm back to being a child looking at a container of M&Ms at the library. I have to guess how many are in there. I'm going to be wildly off face $5 million. Dylan Lewis: Five million dollars. I want to say first that that sounds like a terrible existence. As much as I love listening to podcasts, nonstop for 62 straight years. Ricky Mulvey: That's right. Dylan Lewis: I'm saying that loud because 'cause I need to reason through this aneral, but 62 years Mary's five million sounds pretty good. I'll go three million. Ricky Mulvey: Three million, Dan do you have a guess you want to do? I know I'm putting you on the spot. Dylan Lewis: 2,999,999. [laughs] Ricky Mulvey: Dan going for the prices, right answer, $2,999,999 repeating. Cool, Dan. We're all off $22,000. Wow. Dylan Lewis: That has made me a little bit mindful in terms of the time I spend watching ads where you realize this is how maybe marketers are valuing my time. I should say there is a sliding scale for podcasts, I don't know if it's two inside baseball. This shows for investors, so advertisers pay more to be here. But basically, they value your time. It's $0.06 per hour listening to a podcast, including content. It's $0.08 for radio, $0.08 also because there's way more ads listening to a radio. Mary Long: Here's a question that we might cut. How much of that is because on a podcast, like platform, you can just skip over the ads. I can do that on Instagram, but less likely to. Ricky Mulvey: This is just an average out from a media consultancy study. Mary Long: But that's why I'm thinking it's got to be so low because it's so easy to pass by the ads. Ricky Mulvey: Maybe. Dylan Lewis: Well I guess my question on that. Wanting to dig into it is, how do you take that number and then reconcile it with an industry that has $30-$50 CPMs for shows that have relatively affluent audiences? Advertisers must have some justification for that. Ricky Mulvey: I think CPMs change also based on, you're in the strike zone for investing podcasts, but there's a lot of sports, true crime news podcasts where that goes down a little bit. Also, the ad load for a podcast is significantly lower than something like radio. Shows are less willing to put a bunch of ads on the show because we've seen what happens to radio. Another big trend. On big trend, the media consultancy group M expects total worldwide ad revenue spend to surpass $1 trillion in 2025. They're looking at a few things. One is digital growth. The second is growth in China, more ad spend there than anticipated. The other trend that they're expecting is that by 2029, just five years away, connected TV ad revenue, stuff on Roku is going to overtake traditional TV revenue. Both of you, any reaction to that big trend. Any surprise there. Dylan Lewis: I totally buy that. I absolutely buy that. I think what we see with digital advertising in general is it a much more advertiser friendly environment. You have tracking, you have much better targeting. When we look at traditional media, it's big in the audience that it reaches, but it's an incredibly blunt tool. Ricky Mulvey: You got nothing to add. There we go. I will go to one other trend before kicking it around. One thing I'm seeing more here. Can you guess what I'm seeing more here than I saw in 2019? One trend that advertisers are so happy to talk about in Podcast. They're going to help you with it. It's a thing they're going to help you with. I'm doing a lot of quizzes. Dylan Lewis: Is it AI? Ricky Mulvey: It's AI. I think AI is in an interesting spot for advertising for a couple of reasons. One is I'm interesting to see, and this is outside of podcasting, just display ad growth. The banners on websites, and how that's going to be hit by Google just summarizing stuff when you search. One place that we might be seeing that is problematic. They sell a lot of display ads, and for them, that display ad growth slowed to 2% year over year. They would point to a craziness with a buyer canceling an order issues with Yahoo and a change to their sales platform. But I do wonder if a lot of these display ads are going to continue to face, and I'm using quotation marks, headwinds, is more people just get information straight from search without visiting a single website. Dylan Lewis: I think that's entirely possible. I think that's one of the big existential risks for a company like Google when it comes to just the way that people are accessing information on the Internet. Ricky Mulvey: The other thing we're going to start seeing that I heard a experimentation with because brands are uncomfortable right now. But I think there's going to be more AI host red advertisements. They know, Dylan, that you live in near. Mary Long: I know Ricky doesn't know. [laughs] Ricky Mulvey: I know. Well, I was like I don't want to give too much Dylan information away. Dylan. Dylan Lewis: At home game here in Washington DC. Ricky Mulvey: They know what colors you like, they know maybe your physical activity, they know what teams you're interested in. Your favorite podcast host could appeal to you with your name, with customizable information in order to sell you shoes or meal kits. Dylan Lewis: I don't know whether that concerns me more as a consumer or as a podcast host. Because I don't really like the idea of being a part of ultra targeted AI marketing. Ricky Mulvey: That's coming, though. It's going to be like Cloud Atlas from David Mitchell, where they're just showing you things that are exactly what you want that hit those stimulation buttons better than they're able to do with mass targeting. Mary shaking her head. Mary Long: Well, I loved the Cloud Atlas, David Mitchell reference, but I was not expecting that? Ricky Mulvey: I'm going to kick it to Mary. Any other big trends you're noticing in advertising or from the conference perhap? Mary Long: From the conference, I think another thing is just like the effect of the influencer and how that plays into podcasting. There are obviously exceptions to this, but it seems like there are two large buckets. Again, there are exceptions, but it seems like there are two large buckets of people who start a podcast. One is you're an existing brand and you want to use your brand to start a podcast, to pursue your own interests. Or you are just a person that wants to build a brand by carving out a niche within your interest. If you are a person who wants to build your brand, but you're just a regular person who wants to build your brand by building a podcast that caters to people that share interest is similar to you. That's a really crowded market, even if you're playing to a niche interest because people only have so much time to listen. How do listeners find that podcast in a crowded market. I think that that's a hard question to answer. How you see that play out will be interesting to me. Ricky Mulvey: I think there's also hobbyists in there, where people who are just like this seems fun to do. It's basically everyone can have their own public access show. This one, Dan, is not a bit. This happened last year, and it was in Denver. I promise it's a real story. I was talking to a podcasts and the first question, of course, what's your podcast? What's it about? It's an interview show. She told me that her podcast was a great way to find closure in a relationship because she had her ex boyfriend on the podcast, and then did an interview for two hours. Still and Louis reactions to that. Do you think we should start implementing that at the full? Dylan Lewis: I'd prefer we didn't. [laughs] You need to have a thick skin to do a show like that bless them. That's wonderful. Ricky Mulvey: How about a trend? How about something you're more comfortable being asked? Any other big trends as we're starting to wrap up the show today? Dylan Lewis: Well, you've done a lot of quizzing, so I'm going to ask you a question. Ricky Mulvey: Let's do it. Dylan Lewis: What percentage of Americans have ever listened to a podcast? Dylan Lewis: According to Edison research and a session that I attended before you guys showed up. [laughs]. Ricky Mulvey: Which is why I was able to surprise you with that data point. I think is interesting about that is it's clearly higher than what we thought. That's not necessarily habit listening. That's ever listened. There is still growth. There's still ceiling for this industry to rise to. But I think a lot of the reason that we look for things like video coming in is we need to get outside of the core podcast distribution audience, because there's actually a decent amount of saturation's already happening. I think that's fair. Also a decent place to wrap it or a good place to wrap it. That was a really good data point, Dylan. You did beat me on the quiz. I was off by a factor of two, and I work in this thing. Mary Long, Dylan Lewis. Thanks for joining me in person live. At the residence in Marriott across the street from Podcast movement. This was a lot of fun. Ricky Mulvey: As a heads up since all of us are gonna be at the convention for the rest of day and tomorrow. We will not have an episode on Wednesday. We will be back on Thursday. Thanks for listening. As always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have formal recommendations for or against St buyer sell anything based solely on what you hear. I'm Ricky Moly. Thanks for listening. We'll be back on Thursday.