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2 Internet Content Stocks to Watch From a Challenging Industry
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The Zacks Internet - Content industry has been suffering from challenging macroeconomic conditions globally, which is having a detrimental effect on advertising spending, the primary revenue source for the industry participants. However, industry participants are benefiting from solid demand for digital offerings, as well as the increasing importance of video content and cloud-based applications. The rapid deployment of AI, Generative AI and large language models is aiding industry players in enhancing the recommendation and search functions of their platforms, thereby improving user experience. Participants like Weibo (WB - Free Report) and WEBTOON Entertainment (WBTN - Free Report) are expanding their presence across social media, display and connected TV and search, driving top-line growth.
Industry Description
The Zacks Internet - Content industry comprises providers of video encoding platforms, personal services, Internet content and information, staffing and outsourcing services, publishing, capital markets, media-based, home service, digital insights and measurement, stock photo, video and music licensing, and online travel companies. The industry is witnessing a rapid change in consumer behavior and ongoing digitalization. Advertising is a major revenue source for industry participants. Therefore, these companies are trying to expand their digital presence to win customers. They are also expanding their presence across social media, display and connected TV and search. Apart from the United States, a number of companies in this industry are located in Israel, the U.K., Germany, Russia and China.
3 Trends Shaping the Future of the Internet - Content Industry
Demand for Digital Offerings Growing: The industry is characterized by rapid technological change, frequent product and service introductions, and evolving standards. An expanding range of mobile, digital and cloud-based offerings by industry participants is a major growth driver. The proliferation of smart devices and the increasing automation of the application development process bode well.
Industry Prospects Driven by Ad Spending Rate: Industry participants are focusing on marketing efforts to boost traffic to websites. Advertising and subscriptions are major revenue sources for these companies. The industry is dependent on consumer spending trends, making holiday spending a major deciding factor. However, macroeconomic challenges are expected to hurt ad spending in the near term.
Increasing Regulations Mar Prospects: Industry participants involved in online search and other social networking activities are increasingly facing regulatory pressure, particularly in China and the European Union (“EU”). The China government has a number of regulations related to direct advertising, which is a prime revenue source for these companies. The implementation of the General Data Protection Regulation in the EU adds to the concerns. Enactment of the Digital Markets Act (DMA) in the EU aims to prevent large online platforms that connect users with content, goods, information and services from abusing their market power. The DMA adds to the headwinds faced by Internet content providers in the EU.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Internet - Content industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #207, which places it in the bottom 15% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since May 31, 2025, the Zacks Consensus Estimate for the industry’s 2025 earnings has moved down 3%.
Given the dull industry outlook, there are only a few stocks worth following. But before we present the stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock market performance and valuation.
Industry Lags S&P and Sector
The Zacks Internet - Content industry has underperformed the broader Zacks Computer and Technology sector, as well as the S&P 500 composite, over the past year.
The industry has dropped 10.8% over this period compared with the S&P 500 sector’s appreciation of 14.2% and the 24.9% rise of the broader sector.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales ratio (P/S), which is a commonly used multiple for valuing Internet – Content stocks, we see that the industry is currently trading at 5.14X compared with the S&P 500’s 5.89X and the sector’s 8.66X.
Over the last five years, the industry has traded as high as 6.59X and as low as 5.14X, the median being 5.86X, as the charts below show.
WEBTOON Entertainment has been expanding its library and audience through the reformatting of existing franchises and titles. The company is seeing improvement in readership driven by these initiatives. The partnership with Disney bodes well for investors as it brings iconic comics from Disney, Marvel, 20th Century Studio and Star Wars to WBTN’s mobile vertical screw format. WEBTOON Entertainment and Disney will bring around 100 blockbuster comics to WEBTOON, starting with an all-new dedicated section on the former’s global English-language app.
The Zacks Consensus Estimate for WBTN’s 2025 earnings has been steady at 24 cents per share over the past 30 days. WEBTOON Entertainment shares have appreciated 40.1% in the past year.
Price & Consensus: WBTN
Weibo: This Zacks Rank #3 (Hold) stock is benefiting from an expanding user base. Weibo has been taking initiatives to enhance the recommendation and search functions by integrating large language models to drive user scale and engagement. The company’s initiative to revamp the homepage information feed by making the interest-based feed a primary interface when users access Weibo is expected to drive user engagement.
The Zacks Consensus Estimate for WB’s 2025 earnings has declined 1.7% to $1.78 per share over the past 30 days. Weibo shares have appreciated 21.1% in the past year.
Price & Consensus: WB
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2 Internet Content Stocks to Watch From a Challenging Industry
The Zacks Internet - Content industry has been suffering from challenging macroeconomic conditions globally, which is having a detrimental effect on advertising spending, the primary revenue source for the industry participants. However, industry participants are benefiting from solid demand for digital offerings, as well as the increasing importance of video content and cloud-based applications. The rapid deployment of AI, Generative AI and large language models is aiding industry players in enhancing the recommendation and search functions of their platforms, thereby improving user experience. Participants like Weibo (WB - Free Report) and WEBTOON Entertainment (WBTN - Free Report) are expanding their presence across social media, display and connected TV and search, driving top-line growth.
Industry Description
The Zacks Internet - Content industry comprises providers of video encoding platforms, personal services, Internet content and information, staffing and outsourcing services, publishing, capital markets, media-based, home service, digital insights and measurement, stock photo, video and music licensing, and online travel companies. The industry is witnessing a rapid change in consumer behavior and ongoing digitalization. Advertising is a major revenue source for industry participants. Therefore, these companies are trying to expand their digital presence to win customers. They are also expanding their presence across social media, display and connected TV and search. Apart from the United States, a number of companies in this industry are located in Israel, the U.K., Germany, Russia and China.
3 Trends Shaping the Future of the Internet - Content Industry
Demand for Digital Offerings Growing: The industry is characterized by rapid technological change, frequent product and service introductions, and evolving standards. An expanding range of mobile, digital and cloud-based offerings by industry participants is a major growth driver. The proliferation of smart devices and the increasing automation of the application development process bode well.
Industry Prospects Driven by Ad Spending Rate: Industry participants are focusing on marketing efforts to boost traffic to websites. Advertising and subscriptions are major revenue sources for these companies. The industry is dependent on consumer spending trends, making holiday spending a major deciding factor. However, macroeconomic challenges are expected to hurt ad spending in the near term.
Increasing Regulations Mar Prospects: Industry participants involved in online search and other social networking activities are increasingly facing regulatory pressure, particularly in China and the European Union (“EU”). The China government has a number of regulations related to direct advertising, which is a prime revenue source for these companies. The implementation of the General Data Protection Regulation in the EU adds to the concerns. Enactment of the Digital Markets Act (DMA) in the EU aims to prevent large online platforms that connect users with content, goods, information and services from abusing their market power. The DMA adds to the headwinds faced by Internet content providers in the EU.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Internet - Content industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #207, which places it in the bottom 15% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth potential. Since May 31, 2025, the Zacks Consensus Estimate for the industry’s 2025 earnings has moved down 3%.
Given the dull industry outlook, there are only a few stocks worth following. But before we present the stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock market performance and valuation.
Industry Lags S&P and Sector
The Zacks Internet - Content industry has underperformed the broader Zacks Computer and Technology sector, as well as the S&P 500 composite, over the past year.
The industry has dropped 10.8% over this period compared with the S&P 500 sector’s appreciation of 14.2% and the 24.9% rise of the broader sector.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month price-to-sales ratio (P/S), which is a commonly used multiple for valuing Internet – Content stocks, we see that the industry is currently trading at 5.14X compared with the S&P 500’s 5.89X and the sector’s 8.66X.
Over the last five years, the industry has traded as high as 6.59X and as low as 5.14X, the median being 5.86X, as the charts below show.
Trailing 12-Month Price-to-Sales (P/S) Ratio
2 Internet Stocks to Watch
WEBTOON Entertainment: This Zacks Rank #1 (Strong Buy) company is benefiting from its initiatives to boost user experience. You can see the complete list of today’s Zacks #1 Rank stocks here.
WEBTOON Entertainment has been expanding its library and audience through the reformatting of existing franchises and titles. The company is seeing improvement in readership driven by these initiatives. The partnership with Disney bodes well for investors as it brings iconic comics from Disney, Marvel, 20th Century Studio and Star Wars to WBTN’s mobile vertical screw format. WEBTOON Entertainment and Disney will bring around 100 blockbuster comics to WEBTOON, starting with an all-new dedicated section on the former’s global English-language app.
The Zacks Consensus Estimate for WBTN’s 2025 earnings has been steady at 24 cents per share over the past 30 days. WEBTOON Entertainment shares have appreciated 40.1% in the past year.
Price & Consensus: WBTN
Weibo: This Zacks Rank #3 (Hold) stock is benefiting from an expanding user base. Weibo has been taking initiatives to enhance the recommendation and search functions by integrating large language models to drive user scale and engagement. The company’s initiative to revamp the homepage information feed by making the interest-based feed a primary interface when users access Weibo is expected to drive user engagement.
The Zacks Consensus Estimate for WB’s 2025 earnings has declined 1.7% to $1.78 per share over the past 30 days. Weibo shares have appreciated 21.1% in the past year.
Price & Consensus: WB