Desktop Search Ads Fall for First Time, IAB Says, as Digital Ad Revenue Sets Another Record

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Digital advertising revenue surged to a new high of $32.7 billion for the first half of 2016, up 19% from last year's record $27.5 billion, the Interactive Advertising Bureau said Tuesday in its latest Internet Advertising Revenue report, which is prepared by PricewaterhouseCoopers.

Growth was fueled by mobile, which looks on pace to overtake desktop as soon as this year's end.

"I have seen not just a continuation of change in mobile, but a rocket booster change in mobile," said David Doty, exec VP and chief marketing officer at the IAB. "And we don't do predictions as to what the rest of the year will look like, but you can read this trend as well as any of us can."

Mobile represented 47% of all digital ad spend, according to the IAB report. Advertising on smartphones and tablets climbed to $15.5 billion in the half, up 89% from the $8.2 billion in the period a year earlier, the report said.

Digital advertising revenue has now seen double digit growth for seven consecutive years.

Unlike desktop, where advertising is all about the browser, digital advertising on smartphones takes place both in apps and the open mobile web. The IAB was unable to break out app and mobile spending in the new report but said it would likely provide those figures in the future.

Such information would help shed light on a number of key trends. Video advertising on smartphones and tablets grew 178% over the year-ago period to $1.6 billion, for example, but it isn't clear how much of that took place on apps from companies such as Snapchat and Facebook or on the mobile web.

Regardless, video appears to be desktop's last man standing: As eyeballs shift to mobile, digital video was the only ad format on desktop devices that delivered meaningful growth in the first half, increasing 13% to $2.3 billion, the IAB said.

Total video advertising for both desktop and mobile came in at $3.9 billion, up 51% from $2.6 billion from the half a year earlier.

Meanwhile, search advertising on desktop saw its first-ever decline, falling 12% to $8.9 billion. Mobile search advertising, meanwhile, grew a whopping 105% to $7.4 billion from $3.6 billion.

"Search was a stellar growth category for long time, but the shift to mobile devices was kind of hiding that deterioration [on desktop]," said David Silverman, a partner at PwC. "But now the base of mobile is so high and the growth continues. So it's reflective of where people are conducting their searches."

About 45% of overall search revenue came from mobile, up 26% from the previous year. Desktop search contributed roughly 54%, down from 74% in the first half of 2015, the report said.

Total search revenue, which includes both desktop and mobile, came in at $16.3 billion and represents nearly half (49.8%) of all digital advertising revenue, the report said. That's an uptick in dollar terms but the same proportion of the digital total as a year earlier.

Search may also see small declines in the future as a growing number of consumers begin the discovery process on mobile devices within apps like Amazon or Pinterest.

Mr. Silverman pushed back when asked whether apps could eat into search market share, pointing to mobile's growth, but added that "it could be happening."

Social media, meanwhile, has experienced growth each year since it was first measured in 2012, the IAB said. Revenue for social media across mobile and desktop reached $7 billion during the first half of 2016, a 57% rise from $4.4 billion in the first half of last year.

Finally, desktop display advertising accounted for $3.2 billion, or 19% of total digital revenue during the first half of 2016, down 8% from $3.5 billion in the half a year ago, then 24% of total.

The IAB's report is an industry survey conducted independently by the New Media Group of PwC. It includes data concerning online advertising revenue from web sites, commercial online services, free email providers and other companies that sell online advertising. PwC does not audit the information and provides no opinion or other form of assurance regarding the information.