Marketers are finally following consumers to mobile in a big way.
Mobile advertising has surpassed desktop search as the largest online ad format in US, climbing to 47% of digital revenue in the first half of 2016 from 30% a year earlier, according to IAB/PwC’s Internet Advertising Report. Meanwhile, desktop search’s 27% share was down 10 percentage points. Overall, digital ad revenue jumped 19% year-over-year (YoY), equaling the largest growth rate since the first half of 2011.
Here are the top three takeaways from the report:
- Non-digital ad formats fall in the first half of 2016. While digital ad revenue continued to post double-digit YoY growth, ad spending for the top non-digital media formats – TV, Newspaper, Radio, and Magazine – declined 1% to $54.3 billion in the first half of 2016. Newspapers in particular are struggling mightily, plunging 10% from a year earlier.
- Digital inches closer to topping TV spend. Ad spending on broadcast and cable TV totaled $40 billion in the first half of 2016, only $7.3 billion more than digital. That gap was $12.2 billion in the first half of 2015, and $15.6 billion in the same portion of 2014. Digital ad spending is expected to surpass TV in 2017 for the first time ever.
- Video continues to be the fastest-growing mobile ad format. Digital video on smartphones and tablets grew 178% YoY, reaching $1.6 billion, and besting growth from mobile search (105%) and banner ads (62%).
In order to drive sustained growth into the future, specifically among mobile formats, marketers will need to continue to evolve the way they deliver ads. In the near term, sponsored content will likely propel digital’s growth — while delivering a better user experience — as the line between content and ads continues to blend. In the near future, augmented and virtual reality will present a new and immersive way for brands to target their audience.
Consumers continue to increase their time spent consuming digital media, while advertisers continue to increase their ad budgets into digital channels.
The influx is not expected to let up in the near future. The US digital advertising industry will continue to experience remarkable growth through 2021 to reach nearly $100 billion in annual revenue, driven primarily by the sustained migration of ad dollars from traditional TV to digital video and the continued increase of social spending.
Overall, the strong growth of the US digital ad market can largely be attributed to increased time spent by consumers on digital media and brands’ increased comfort with allocating budgets to digital formats, particularly on digital video. In a recent 2016 survey of almost 400 US ad agencies and marketers, the IAB found that two-thirds of respondents plan on increasing spending on digital video in the next year.
Moreover, mobile will become the top destination for digital ad spending as advertisers continue to attempt to resolve the disconnect between the rapid growth in time spent on phones and tablets and the relatively small share of ad budgets that are allocated to such platforms — known as the mobile opportunity gap. In fact, mobile is set to eclipse desktop ad spend by 2018.
Dylan Mortensen, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on U.S. digital media ad revenue that forecasts revenue trends over the next five years and outlines the key growth drivers for overall digital ad revenue in the U.S.
Here are some key points from the report:
- US digital ad revenue is expected to reach nearly $100 billion by 2021, according to BI Intelligence estimates. This represents compound annual growth of 8% from the $68.9 billion expected in 2016.
- Mobile is positioned to become the top destination for digital ad spending as advertisers continue to attempt to close the “mobile opportunity gap.”
- Digital video advertising will grow faster than any other segment over the next five years, as consumers shift time spent online to phones and tablets. Revenue in this category is forecast to rise from $8.5 billion in 2016 to $23 billion in 2021.
- Social advertising in all formats is gaining traction and will be among the key drivers of digital ad growth in the next five years. Social ad revenue is poised to climb to $30.8 billion by 2021, up from $15.5 billion this year.
- Artificial intelligence, augmented and virtual reality, and sponsored content will help propel further digital ad growth in the next decade.
In full, the report:
- Forecasts US digital ad revenue through 2021.
- Highlights the rising popularity of digital media with consumers and brands.
- Explores why digital video advertising growth will exceed all other formats over the next five years.
- Outlines emerging technologies that will help propel ad growth in the next decade.