U.S. digital ad revenues topped $100 billion for the first time last year, reaching at $107.5 billion in 2018, a growth rate of 22% from $88.3 billion in 2017, according to the IAB’s annual Internet Advertising Revenue Report released Tuesday.
Trends driving growth
Digital ad giants. Large-scale ad companies are steering a large bulk of the growth, given their access to more sophisticated data and purchasing lifecycles, bolstered by Artificial intelligence (AI) and robust e-commerce technology. Trends show that smaller businesses are riding the coattails of larger ad enterprises, forming strategic partnerships that provide access to insights, influence and increased inventory access.
Storytelling. With consumers increasingly turning to social media to inform their purchase behavior, advertisers are capitalizing on the trend in an attempt to turn engagements into conversations. Beyond traditional social formats, brands are leveraging vertical stories to pivot their value narrative with content that addresses key touchpoints in the consumer’s journey.
Social commerce. Emerging tools and insights across social platforms continue to be a driving force for direct-to-consumer brands. Social DSPs are touting new features designed to ease the customer buying process while collecting deeper targetting insights for advertisers. As a result, trends indicate that advertisers are pouring more investments into social inventory with greater confidence.
Programmatic. Advertisers continue to harvest the benefits of programmatic buying, with the IAB reporting that programmatic ad revenue accounted for 80% of all digital display revenues. Ad tech vendors employ programmatic with the expectation of more intelligent targetting greater cost benefits. Walled gardens like Amazon, in which programmatic transactions are managed by the ecosystem owner, are reported to drive greater adoption of programmatic – especially for smaller businesses.
Data regulations. Privacy directives like GDPR and CCPA have tipped the balance of power in favor of enterprise-level advertisers, who are able to make larger investments to aid compliance. For smaller businesses, this means more focus spent implementing and adhering to safeguards. Even so, the data shows that the privacy regulations are giving way to more innovative targeting strategies aimed at growing ad ROI.
Mobile and video ad revenues continue growing
It’s no surprise that mobile ad revenue is outpacing other devices at warp speed. The report indicated mobile advertising revenues grew 39.7, increasing its share of total revenues from 56.7% in 2017 to 65.1% last year. The industry’s compounded growth rate of the last 10 years is largely owed to mobile, which continues to cash in on single-click purchasing behavior, creative formats and social ubiquity.
The omnipresence of mobile advertising has prompted advertisers to embrace video content, which continues to show the largest revenue growth of all digital ad formats in 2018. According to the report, digital video revenue in 2018 rose 37% from 2017, totaling $16.3 billion. On mobile devices alone, video saw the sharpest growth in the format category, up 65% in revenue compared to the year prior.
Why we should care
As evidenced by its sharp revenue growth, digital advertising is increasingly consuming a majority share of the ad mix, with mobile and video powering it. Brands are using technology to their advantage, embracing programmatic tactics to connect with audiences wherever their eyes are focused.
“Advertisers are placing a premium on mobile and video, and in turn the two are fueling the ongoing rise of digital marketing,” Sue Hogan, SVP of research and measurement at IAB, said in a statement. Impending 5G access to faster internet speeds will work to stimulate even more buying interactions and greater innovation in digital formats, she added.
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