Organic Traffic Will Tumble As Google And Meta Take Over

Key Takeaways

• Increasing dominance of major tech platforms and generative AI threatens Future's digital revenues, forcing constant adaptation amid shrinking advertising and affiliate margins.
  
• Reliance on affiliate income and struggling legacy magazines exposes Future to abrupt earnings declines and ongoing pressure on overall profitability.
  
• Proprietary tech, effective acquisitions, and AI innovation drive Future's ability to grow and diversify revenue, enhance monetization, and maintain disciplined, flexible financial performance.

Catalysts

Future plc, together with its subsidiaries, publishes and distributes content for technology, gaming, sports, fashion, beauty, homes, wealth, and knowledge sectors in the United States and the United Kingdom.

• The accelerating dominance of large tech platforms such as Google, Meta, and TikTok in content discovery and distribution is expected to erode Future's organic traffic, which management acknowledges through increased volatility and the need for ongoing adaptation to new search algorithms and AI search formats. This will result in persistent pressure on digital advertising and affiliate revenue growth in the coming years.
  
• Heavy reliance on affiliate marketing income and partner platforms exposes Future to ongoing risks from abrupt changes in algorithms, affiliate payout structures, or user acquisition channels, all of which could suddenly diminish top-line growth and render e-commerce and price comparison models substantially less profitable.
  
• Developing consumer fatigue with digital subscriptions and an industry-wide skepticism toward paying for content are expected to cap Future's ability to diversify away from advertising reliance, constraining both expected growth in high-margin recurring revenues and long-term ARPU expansion.
  
• The proliferation of generative AI and automated content undercuts the unique value proposition of specialist publishers, making it increasingly difficult for Future to command premium advertising or affiliate rates as the quality gap with lower-cost AI-generated competition narrows, leading to margin compression and earnings risk over time.
  
• Deteriorating prospects in the company's legacy magazines segment, which management admits remains in structural decline despite recent efforts, will continue to drag on group earnings and overall operating margins as print profitability shrinks further, offsetting digital gains and limiting net margin expansion.

Future Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Future compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Future's revenue will decrease by 0.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 11.0% today to 12.7% in 3 years time.
• The bearish analysts expect earnings to reach £95.8 million (and earnings per share of £0.87) by about July 2028, up from £85.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 8.8x on those 2028 earnings, up from 8.7x today. This future PE is lower than the current PE for the GB Media industry at 11.8x.
• Analysts expect the number of shares outstanding to decline by 3.38% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.55%, as per the Simply Wall St company report.

Future Future Earnings Per Share Growth

Risks

• Future's proven ability to leverage its proprietary tech stack and data-driven audience segmentation enhances targeted advertising and monetization potential, which could improve digital advertising revenue and net margins as first-party data becomes more valuable.
  
• The company's track record of integrating bolt-on acquisitions (like Rnwl and Kwizly) and expanding premium brands (e.g., T3 Germany, Who What Wear) suggests an ongoing capacity to diversify revenue streams and mitigate margin pressure long term.
  
• Investments in AI-driven content recirculation, engagement tools, and platform scalability enable increased user dwell time and impressions without incremental cost, supporting long-term operating leverage and potentially stabilizing or growing earnings.
  
• Financial discipline is evident through strong cash generation, prudent capital allocation, and a stated aim to maintain or improve operating margins, which increases flexibility for reinvestment and shareholder returns (such as buybacks and dividends), supporting stable or rising EPS.
  
• The shift toward multi-channel audience engagement and successful deployment of innovative ad and commerce formats (shoppable ads, newsletters, podcasts) positions Future to capitalize on evolving consumer preferences, increasing addressable market and supporting sustainable revenue growth.

Valuation

• The assumed bearish price target for Future is £7.33, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Future's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £18.75, and the most bearish reporting a price target of just £7.33.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be £754.1 million, earnings will come to £95.8 million, and it would be trading on a PE ratio of 8.8x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of £7.21, the bearish analyst price target of £7.33 is 1.6% higher. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.