The level of spending by large global brands on earned media outlets such as Twitter Inc (NYSE:TWTR), Facebook Inc (NASDAQ:FB) and privately held Pinterest is going to rise in the years ahead, a report by Baird Equity Research said.
Artificial intelligence (AI) and machine learning (ML) will also become an increasingly vital part of the operations of communication companies, a research note to clients by Baird senior analyst Rob Oliver and research associate Matt Lemenager said.
"Spending is happening. Checks with private companies and PR buyers continue to indicate that Earned Media is a key focus area and is likely to see increased spend over the next few years," they said.
"More recent checks show this spending continues to be led by global consumer tech brands that seek to reach their customers through the many new types of influencers in the market. These are mostly household name brands. Identifying, tracking, cultivating and measuring the influence (i.e., the holy grail) of these third-party influencers is a key focus area for these global companies."
Alphabet Inc's Google (NASDAQ:GOOG) and Facebook are the biggest beneficiaries of the shift in ad dollars from traditional media to online.
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AI and ML are also starting to make inroads in the sector and will play a "significant role" going forward, the Baird analysts said.
They explained: "We see this beginning to change, as smaller start-ups (for example Signal Media in the UK) lead with algorithmic prowess, and more established players (Meltwater) acquire AI capabilities."
"SaaS investors are intimately familiar with this trend, which has been a key focus of hiring, acquisition, and product development for software companies over the past 12+ months," he added.
One example of a company that Baird believes can take advantage of such trends is Cision Ltd, a public relations and earned media software company and services provider which has its headquarters in Chicago, Baird said and at this time, they said the earned media market is fragmented and in its infancy.
"We believe Cision’s scale and leadership put it an enviable position to exploit the AI/ML trend. The recent acquisition of VisualIQ is a good example of a technology that sets up beautifully for AI," Oliver explained.