McDonald’s Corporation (NYSE:MCD) said on September 23 that it will build its own advertising business, selling space on the digital screens customers already stand and sit in front of.
A pilot began last month across 450 company-owned restaurants, running third-party ads on digital drive-thru order boards. The plan extends to the app and to self-order kiosks, and the company is aiming at a business worth $1 billion.
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McDonald’s Can Add Advertising Revenue Without Adding Cost:
The appeal of this business is that the asset already exists and has already been paid for. McDonald’s built those screens to take orders. Selling advertising on them adds revenue without adding restaurants, staff, or food cost, which is why retail media has become the most sought-after line in consumer businesses.
Amazon and Walmart proved the model. Both found that knowing what a customer is about to buy makes advertising at that moment far more valuable than advertising anywhere else. A drive-thru board sits at exactly that moment.
Scale is the other half. McDonald’s serves tens of millions of customers a day, and an advertising network needs that volume to price its inventory.
The company also already runs at a 46.49% operating margin. Retail media typically carries margins above that, so even a modest business would lift the blended figure. The incremental cost of showing one more advertisement on a screen that is already switched on is close to nothing.
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A Billion Dollars Does Not Change This Company:
The ambition is small relative to the size of the business. Annual revenue runs near $27.7 billion, with $8.79 billion of net income behind it. A $1 billion advertising line, if it is ever fully built, would be a useful addition rather than a transformation.
It is also a target rather than a result. The pilot covers 450 restaurants out of a global system running into the tens of thousands, and no revenue figure has been attached to it yet.
Retail media also takes years to build, because advertisers buy inventory only once it has been measured. McDonald’s is at the start of that.
Those screens are part of something larger too. The company said on September 30 that it is spending $8.5 billion modernizing its restaurants, including an AI ordering assistant called Archy built with Google. Advertising is one return being sought from that investment rather than a project of its own.
There is a customer risk too. People at a drive-thru are ordering rather than browsing. If advertising slows the order, it costs throughput, which is what the format exists to maximize.
The wider problem is what the share price has been saying. The stock has lost roughly 23% over twelve months, and an advertising network does not address why. Traffic and pricing power do, and neither is helped by selling screen space.
Conclusion:
The underlying idea is sound, because McDonald’s is selling access to screens it has already paid for, and that is the cheapest revenue a retailer can add. However, the target is worth about 3.6% of revenue, and the pilot covers a few hundred restaurants rather than the system. Advertising on an order board also risks slowing the queue that produces the money. Traffic and pricing power are what the share price is questioning, and an advertising line does not address either.
What the Price Assumes:
McDonald’s closed at $230.94 on September 30, down about 23% over twelve months and sitting at the bottom of its range. Revenue grew 3.70% last quarter and earnings 4.80%, so the business is expanding at roughly the rate prices rise.
The shares trade near 19 times trailing earnings and 17 times next year’s estimates, with a dividend yielding 3.30%. That is the trade on offer. Paying 19 times earnings for low single-digit growth assumes either that growth accelerates or that the multiple holds while the dividend does the work. An investor collecting 3.30% against current inflation is earning very little in real terms, and an advertising network does not change either calculation.
Market Sentiment:
McDonald’s Corporation was held by 79 hedge funds with a combined stake value of about $4.0 billion at the end of Q2 2026 in the Insider Monkey database. This is down from 83 hedge fund holders with a cumulative investment value of around $5.0 billion in the previous quarter.
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This article is originally published at Insider Monkey.
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