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Takeaways from Monday’s IAB Report on U.S. Digital Ad Spend

Published: October 22, 2019

Author: Hillary Read

Mobile, Video, Audio Ads Drive 17% YoY Growth as Digital Revenue Surges to $57.9B

U.S. digital advertising spend continues to set new records, but the growth drivers are shifting, according to yesterday’s IAB Internet Advertising Revenue Report. The first half of 2019 saw 17% year-over-year growth for a total of $57.9B in digital advertising spend, with more than two-thirds of that spend coming from mobile. Yet advertisers should pay attention to possible slowdown factors ahead.
“What’s gotten mobile to this point is, to an extent, what will account for a future growth slowdown,” said Alex Funk, 3Q’s VP of Strategic Development. “Everyone in the U.S. has a smartphone now, and the population isn’t growing fast enough to push first-time adoption rates much higher.”

Mobile advertising surged to a 49% increase from the first half of 2018, thanks to powerful mobile ad networks and wholesale advertiser adoption of mobile as a primary device. Funk says that the eventual nation-wide rollout of 5G will fuel future growth that will in part offset slowed adoption growth rates.
The next-biggest significant growth driver, video advertising, grew 36% year over year for a total of $9.5B. Funk said that video platforms like YouTube and Hulu have helped change user consumption habits, clearing a path for OTT and CTV to reach people in their homes. Our data bears this out: 3Q has seen YouTube spend in 1H 2019 greater than the entirety of 2018 spend. Much of this growth has come in the home; TV is one of the fastest-growing mediums for YouTube ads.
Other advertising media making a leap are audio advertising, up 30% year over year to $1.2B, and rich media, up 20% to $1.7B. While rich media, which often takes the form of ads breaking up content, has a greater market share, Funk says that the avid listening groups tuning into online radio and podcasts may allow more opportunities for brands to engage targeted audiences with the emergence of programmatic audio.
The predominant media channels of search and social continue to grow, but with some deceleration in the former. Search revenue of $26B was up nearly 14% from the first half of 2018, but its total internet advertising share of 44.8% is down from 46.1% a year ago which, given the channel’s relatively high CPCs and mature U.S. market, should come as no surprise. Social, which is a slightly less mature market with more platform diversification, checked in at $16.5B in revenue, an increase of 25.7% year over year. 
All of that said, advertisers should keep an ear to the ground on factors that may contribute to a growth slowdown. Beyond the uncertainty of an upcoming election year, which has in the past affected the macroeconomy and consumer spending habits, the California Consumer Privacy Act (CCPA) and other state data regulations will force advertisers to adopt different methods of data ingestion and consumer targeting. With Google and Facebook still dominating the digital landscape and holding their data within walled gardens, Funk says that the CCPA and similar laws won’t have a huge effect on advertisers unless Google and Facebook are broken up by antitrust pressures.
For now, Funk argues, advertisers must continue to aggressively adapt to shifting consumer habits and media with a particular focus on creative that fits its environment.
“If you’re not putting a majority of your marketing efforts towards small-screen, vertically oriented video content,” he said, “you’ll find yourself sitting on the sideline in 2020.”
YouTube Expert Tom Leonard contributed to this post.

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