IAB says digital ad revenue on pace for $100 billion this year, but headwinds loom

Digital ad spending revenue surged 23 percent to $49.5 billion for the first half of 2018, putting it on pace to see its first-ever $100 billion year, the Interactive Advertising Bureau said Tuesday in its twice-yearly report prepared by PwC. Mobile continues to capture the most ad spending with 63 percent, and the IAB says the rise of direct-to-consumer brands are helping fuel the growth. But although the industry saw yet another record-breaking first half, potential headwinds loom. Here are several takeaways from the IAB's report. By the numbers Headwinds loom The IAB report, which is in its 23rd year, has shown double-digit growth for digital year-over-year with the exception of 2009, or when the U.S. economy was in a downturn and the industry saw its first-ever decline. The U.S. itself is in a great bull run, but many economic experts feel a market correction is imminent (see here and here). Should that day arrive, digital advertising could also see a dip in ad spending similar to what it experienced in 2009, when overall revenue fell nearly 3.5 percent year-over-year. "What we've seen historically is that slow down occurs during economic downturn," says David Silverman, partner at PwC. "I don't think the ad industry as whole has the capacity of [consistent] double digit growth." Direct-to-consumer is real Direct-to-consumer brands were all the talk at the Association of National Advertisers' conference in Orlando earlier this year, and the IAB is now saying they are having an impact on digital advertising. Digital advertising is giving direct-to-consumer brands more agility to place effective and efficient ads at lower cost of consumer acquisition, the IAB says, adding that as long as consumer acquisition proves to deliver strong return on investment, marketers will continue increasing their spend for future growth. "What we are seeing is these direct-to-consumer companies tend to rely on digital advertising because they can target consumers efficiently and pay for performance," says Silverman. "This media for one is very cost effective and the key to success" is for the format to remain efficient. Next Generation Gen Z is here to wreak both havoc and rewards for marketers. The IAB says that come 2019, Gen Zers will outnumber millennials, making them the youngest generation to adopt mobile devices. Although Gen Z are most likely of all consumers to use "buy" buttons (56 percent) and shoppable photos (34 percent) to complete purchase, they also have increasingly short attention spans and avoid traditional advertising faster and more often, the IAB says. Duopoly fueling growth? The IAB says the top 10 digital media companies delivered 73 percent of the digital advertising market, a minor decrease of 2 percent when compared to the previous year. Silverman declined to share what percentage the top two contributed to the overall ad spend. "I think everyone would know who the top two would be, sadly," he said. "It's important to note that our figures are U.S. only … we are not double counting."

IAB says digital ad revenue on pace for $100 billion this year, but headwinds loom

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