On Wednesday, Barclays argued that Microsoft potentially has a $50 billion opportunity in advertising. The company has recently enhanced its search offering with new generative AI features. The ongoing antitrust case against Google’s dominance in search has sparked discussions about a possibly greater opportunity for Microsoft to compete.
Segments Analysis
Barclays identifies three segments within Microsoft’s advertising business: search, ad technology, and LinkedIn. The search segment, driven by Bing, is seen as the largest market opportunity. Ad-tech offerings are still developing but show promise, while LinkedIn has emerged as the top business-to-business advertising player globally.
Revenue Breakdown
The analysts forecast a $30 billion advertising opportunity for Microsoft. This includes $15 billion from search revenue, $10 billion from LinkedIn, and $5 billion from ad tech.
Future Outlook
Barclays notes that organic share gain is significant for Microsoft, especially in re-establishing itself as a key player in advertising. To achieve this, the company will need a more substantial presence in the mobile market. This could entail investing billions annually in distribution for the Bing search engine, mirroring Google’s current approach. Such efforts could unlock an additional $20 billion opportunity, leading to a potential $50 billion asset over time.
Stock Ratings
Barclays maintains an Overweight rating on Microsoft stock, with a price target of $475. In Wednesday’s trading session, Microsoft shares remained steady at $407.50. Over the past year, the stock has surged by 65%, outpacing the S&P 500’s 28% growth.
For more information on this topic, contact Emily Dattilo.