IAB: U.S. digital ad revenues surpass $100 billion for first time
Digital ad revenues surged into the triple digits for the first time in 2018, reaching $107.5 billion, up from $88 billion, or 22 percent, when compared to the previous year, according to the Interactive Advertising Bureau’s twice-yearly report, which was prepared by PwC.
For context, TV ad revenues were $71 billion for the same time period, the IAB says. Although it marked the ninth consecutive year that digital advertising saw double-digit growth, potential headwinds loom, including browsers adopting cookieless solutions and imminent U.S. privacy regulation. At the same time, verticals like digital audio, digital out-of-home, and advanced TV, along with the use of blockchain, may negate any possible downturn, says David Silverman, partner at PwC.
“The only time we saw less than double-digit growth was during the recession, or post recession, where growth was either negative or in the single digits,” Silverman says. “It’s tough to keep up continued double-digit growth, but there are a lot of opportunities for future innovation.”
Here, we share several takeaways from the IAB’s report.
By the numbers
In 2016, mobile surpassed desktop for the first time since the IAB began tracking digital advertising revenues in 1996. The IAB now says that mobile captured nearly 65 percent, or $70 billion, in 2018, a 40 percent upswing from the previous year. Video, meanwhile, saw the largest spike among all formats, increasing 37 percent to $16.3 billion, up from $12 billion when compared to the previous year.
Desktop continues to dwindle, as it only captured 35 percent of 2018 revenues, down from 43 percent in 2017. Social media, which the IAB describes as “advertising on delivered social platforms, including social networking and social gaming websites and apps,” grew to $29 billion, up nearly 31 percent when compared to the previous year. The IAB says story formats such as those on Instagram, Snapchat and the rise of direct-to-consumer brands fueled social’s growth.
Search advertising still continues to capture nearly half of all digital ad revenues, totaling $48.4 billion in 2018, up from roughly $40 billion when compared to the previous year.
Marketers tune into digital audio
Digital audio grew to $2.3 billion in 2018, up 23 percent from 2017. The IAB says that recent technological innovations, as well as a surge in podcast revenues, drove growth. Despite the increase, digital audio overall share of ad revenues remained flat at 2.1 percent, the IAB says.
“There are big players and it is a new space, but I think traditional publishers and radio stations will all have the ability to get in on it," says Silverman when asked about the rise of streaming players like Spotify and Pandora in relation to terrestrial giants like iHeartMedia. "It’s also early days; only two or three of the top 10 companies [from 2009] are still in the top 10 today. We would expect the same with audio or any other vertical.”
Of course, also fueling digital audio’s growth is the increasing use of the format in vehicles, on mobile and through smart speakers in homes.
Hello, digital out-of-home
Although the IAB did not include digital out-of-home in its most recent report, it’s likely only a matter of time until it does. “It is on the table for discussion, but it hasn’t been decided yet,” Susan Hogan, senior VP of research and measurement at the IAB, says. “But it is something we are talking about including moving forward.”
Historically, the IAB only includes new verticals in its report if they capture at least a 2 percent share of overall digital ad revenues. That means digital out-of-home would have needed to generate at least $2 billion to be included in this year’s report.
Out-of-home overall saw $10 billion in ad revenues, up 4 percent year-over-year. Recent technological advancements, such as the ability to buy OOH billboards programmatically, have contributed to the vertical’s overall growth.
People are spending more time online
The number of people accessing the internet in the U.S. sees relatively flat growth. In 2018, for example, there were 257 million digital users, the IAB says, up 1 percent from 253 million when compared to the previous year.
Despite the small increase, people are spending much more time online thanks in large part to social media and video, Hogan says.
“When we looked at time spent online, we saw that 65 percent of digital users access the internet through both mobile and desktop,” Hogan says. “But all time spent online overall increased by 20 percent, and mobile time spent online increased 31 percent year-over-year.”
The cookie crumbles
Apple’s Safari browser has made tracking consumers all over the web through cookies increasingly difficult for marketers and on Monday, the Wall Street Journal reported that Google’s Chrome may adopt a similar solution.
What sort of impact that will have on digital ad revenues growth remains to be seen, but Silverman notes that other factors, such as data regulation, may drive digital ad revenue growth into the single digits in the near future.
“We certainly don’t have a crystal ball, and it’s going to be a challenge,” PwC's Silverman says in regards to browsers significantly limiting cookies and the imminent arrival of U.S. privacy regulation. “On the flip side, consumers are willing to provide information if it useful to them.”
The current industry consensus is brands can negate any impact felt by regulation and a cookieless world through first-party consumer data, and companies specializing in gather that info would contribute to digital advertising’s bottom line, Silverman says.