Huatai Securities: Overseas Advertising Platforms Enter New Cycle of Synchronized Technology Dividends and Valuation Restructuring

Huatai Securities points out that in the era of anti-monopoly and post-privacy policies, overseas advertising is ushering in an AI-driven revolution in monetization efficiency. The industry’s core logic has shifted from tag tracking to real-time intent prediction. The walls of the user ID-based ecosystem are loosening, and leading platforms with full-stack AI infrastructure are emerging strongly in open networks. With superior monetization efficiency and profit flexibility, they are leading structural budget reforms and enjoying valuation premiums. We recommend focusing on targets with relatively complete industry chain layouts, deep vertical data accumulation, self-developed algorithms, and strong engineering capabilities in this long-term technological cycle.

Huatai | AI Breakthrough: The Efficiency Revolution in Overseas Advertising Platforms

Overseas advertising platforms enter a new cycle of technological dividends and valuation restructuring

In the era of anti-monopoly and post-privacy policies, overseas advertising is experiencing an AI-driven revolution in monetization efficiency. The core industry logic has shifted from tag tracking to real-time intent prediction. The walls of the user ID-based ecosystem are loosening, and top platforms with full-stack AI infrastructure are rising strongly in open networks. Leveraging leading monetization efficiency and profit resilience, they are driving structural budget reforms and enjoying valuation premiums. We suggest paying attention to targets with well-developed industry chain layouts, extensive vertical data, self-developed algorithms, and robust engineering capabilities in this long-term technological cycle.

Key Points

Anti-monopoly and AI technological advancements create new opportunities for open network platforms

As global digital advertising reaches a trillion-dollar scale and traffic distribution stabilizes, the budget landscape dominated by walled gardens is undergoing a “rebalancing” driven by anti-monopoly policies and AI technology. The implementation of policies like DMA forces “walled gardens” to open certain key data interfaces and traffic access points to open network platforms. Meanwhile, deep AI integration helps independent platforms like AppLovin achieve breakthroughs in long-tail traffic monetization efficiency. This transformation offers new growth opportunities for open network advertising platforms, enabling them to become the core incremental field for the structural shift in global digital advertising, thanks to their efficiency advantages in vertical sectors.

Revolution in Underlying Logic of Targeting in the Post-Privacy Era, Accelerated Differentiation Due to Technological Gap

New privacy regulations previously dealt a heavy blow to traditional programmatic advertising, causing attribution mechanisms relying on deterministic tracking to fail. However, AI technology can fill the data gaps left by signal loss through advanced probabilistic modeling and intelligent bidding algorithms, enabling a shift from “manual tag-based targeting” to “real-time intent prediction.” This paradigm shift accelerates industry segmentation: platforms with massive first-party closed-loop data and engineering capabilities can redefine precise targeting in anonymous environments, building competitive barriers through technological first-mover advantages; smaller and mid-sized platforms lacking underlying algorithmic strength face marginalization due to inaccurate attribution.

Our View Differing from the Market

The market worries that AI agents will disrupt existing advertising platform moats. We believe: 1) General AI agents are difficult to replace in experience-driven applications like gaming and entertainment. Leading ad tech platforms possess more comprehensive first-party user data assets in gaming and entertainment, giving them an efficiency edge; 2) General AI agents face engineering challenges in handling massive real-time bidding, high-frequency settlements, and complex attribution. Top ad tech platforms are expected to leverage mature engineering, extensive advertiser ecosystems, and verifiable user pricing capabilities to transform into monetization bases in the AI era.

Efficiency as the New Industry Pricing Anchor, Full-Stack Platforms Likely to Enjoy Valuation Premiums

In the context of AI-driven efficiency reconstruction, whether AI algorithms can be converted into a deterministic ROAS is the key metric determining valuation premiums: ad platforms with full-stack layouts and “AI-native” foundations enjoy significant valuation premiums thanks to stable ROAS and attractive profit resilience, with forward PS ratios exceeding 15x; platforms with core data assets and in the process of technological catch-up are generally valued at 5-10x forward PS; independent SSPs and traditional MMPs, heavily impacted by new privacy policies, typically have valuations below 5x forward PS.

Risk Warnings: Macroeconomic pressures leading to reduced ad budgets, tightening regulatory policies causing data loss and increased compliance costs, slow algorithm iteration, and intensifying industry competition.

(Source: People’s Financial News)