U.S. digital ad revenue stalls after a record haul of $125 billion in 2019: IAB Report
U.S. digital ad revenue grew to a record-breaking $125 billion in 2019, up 16 percent over the previous year, according to the Interactive Advertising Bureau’s twice-yearly report prepared by PwC.
But although 2019 marked the 10th consecutive year of double-digit growth in digital revenue, it was also the lowest growth rate reported since 2012.
And many fear that in 2020 the impact from a “perfect storm” of circumstances—the coronavirus pandemic, economic recession, the demise of third-party cookies and increased consumer privacy regulation—may lead to the first decline seen in U.S. digital ad revenue for more than a decade.
“COVID-19 will have a massive impact on this year and it will likely overshadow most other trends,” David Silverman, partner at PwC, told Ad Age. “What that impact will look like is not knowable at this point.”
The IAB coupled its annual report with revenue figures for the first quarter of 2020, which showed 12 percent growth year on year, or about $31 billion. March, however, was “sharply impacted” by the coronavirus, the IAB says.
“The first quarter of 2020 revenues mark the slowest year-over-year quarter growth since 2010, when revenues increased 8.6 percent from the prior year,” according to the report. “Many companies are expecting a continuing negative impact to the second quarter and significant uncertainty as to the severity and duration to the quarters beyond.”
The IAB also included a survey highlighting how the pandemic has impacted ad pricing through various channels, such as display and connected TV. It’s the fifth survey the trade body has conducted since the start of the pandemic, and sentiment from media buyers and sellers sometimes shifts wildly from week to week, the IAB says.
By the numbers
Mobile ad revenues in 2019 totaled nearly $87 billion, up 24 percent year over year. Mobile now represents 70 percent of all digital ad spend, having overtaken desktop in 2015.
Search advertising continues its dominance over all digital ad channels, contributing nearly $55 billion to revenues for 2019, up 13 percent year over year.
Social media, meanwhile, now accounts for roughly 29 percent of all internet ad spend, according to the IAB. Revenue for the channel totaled about $36 billion, a 23 percent upswing when compared to the previous year. Overall, social media revenue has seen a 43 percent compound annual growth rate between 2012 and 2019, the IAB says, adding that “growth remains very strong.”
Digital video continues to be the industry’s bright spot, as revenue climbed to about $22 billion in 2019, up $5.5 billion, or 33.5 percent, compared to the previous year. The format, which includes connected TV, now represents 17 percent of all ad spend, with the bulk of that (68 percent) coming from mobile.
Newcomer digital audio, which the IAB first included in its revenue report in 2016, saw revenue of $2.7 billion, a 21 percent increase year over year. Mobile now represents 79 percent of all digital audio revenue, according to the IAB.
Pandemic’s impact on ad pricing
The IAB fielded insight from media sellers between April 29 and May 11 to pair with its ad revenue report.
At a high level, the report found that two-thirds of advertising sellers—which includes publishers, platforms and programmatic—have seen ad rates decline since the lockdown began in late March. Publishers that sell ads directly have been significantly more impacted by ad rate reductions than those that sell programmatically. While CPMs, or cost per thousand impressions, have fallen across the board, connected devices, including CTV, are showing the greatest price resilience, the IAB says.
Roughly 62 percent of those surveyed said the coronavirus pandemic has led to a decrease in their CPMs, while another 35 percent said they saw very little change or no change. Media cancelations, fewer face-to-face meetings and lower ad budgets were the primary reasons publishers cited for the declines.
“Publishers who are direct selling are controlling their own CPMs,” says Sue Hogan, senior VP of research and measurement at the IAB. “They are pulling that pricing lever as a tactic to hold onto business and remain competitive so they can ensure they are getting the buy.”
Video and digital audio, meanwhile, have shown the greatest resilience when compared to other ad channels. Podcasting CPMs fell about 6 percent, while ad-based video on demand (AVOD) fell 7 percent, the IAB says. “Video is having its moment,” Hogan says. “Entertainment is being embraced by viewers who are sharing and talking about it in ways I haven’t seen since the early days of cable. And it is gaining traction from a dollar standpoint.”
Open web display CPMs were hit hardest, falling 34 percent, while popular channels such as social media fell 18 percent, the IAB says.