Recently, IAB released its 2016 Internet Advertising Revenue Report. Today we’ll check out some of the highlights and talk about the digital giants behind the growth.
Digital Advertising is Up, Thanks (Mostly) to Mobile
From 2015 to 2016, internet advertising revenue grew nearly 22 percent, from almost 60 billion to more than 72 billion.
One of the most notable findings in this report is that mobile advertising now makes up more than half of all internet advertising. In fact, mobile is the fuel behind digital ad growth, as non-mobile growth has been relatively stagnant (only 6 percent compared to mobile’s 87 percent).
While internet advertising has grown faster than GDP in the United States, it does appear to be slowing, going from 17 percent in 2015 to 16 percent in 2016.
Distinct seasonal trends exist for internet advertising revenue. Since 2010, revenues tend to peak in the fourth quarter, and then dip in the new first quarter. During the second quarter and through the fourth it continues to grow.
Stepping back to look at the year in two halves, we see that the last six months of the year tend to bring higher revenues than the first. In 2016, second-half revenues made up 55 percent of all revenue for 2016, and were $7.7 billion higher than second-half revenues of 2015. Overall growth and seasonal shopping are the main reasons behind this trend.
At the end of 2016, revenue was quite concentrated within the leading 10 ad-selling companies, which brought in 73 percent of total internet ad revenue (continuing the trend of more than a decade). While this was a slight loss from their 75 percent share of the year before, the top 25 companies gained a percent of overall share from 2015. The remaining internet advertising companies split just 17 percent of all revenue.
Desktop Search and Display each lost some share of revenue (13 and 1 percent respectively) in 2016. However, when mobile is included, both Search and Display gained share (19 and 29 percent respectively).
Mobile’s strong growth has stunted the growth of formats like banner ads, though it has left room for desktop videos to grow 16 percent.
As mentioned earlier, mobile now makes up more than half of all internet advertising revenue. Mobile’s growth helps drive the demand for video advertising, which grew 50 percent from 2015.
This means that mobile video is quickly gaining on desktop video. Mobile’s video revenue was 85 percent of desktop’s in 2016, and grew 145 percent from 2015. Still, video is a growth driver on desktop and mobile, with desktop video revenue increasing 16 percent from 2015. Digital video overall went up 53 percent.
Social media advertising is an increasingly massive segment of internet advertising. It’s grown year-over-year since 2012, and the growth tends to come in the second half of the year. In 2016, social media ad revenue went up more than $2 billion from the first half of the year to the second.
Digital audio advertising – such as the ads you might hear on streaming music services – debuted as its own category in 2016. It brought in more than $1 billion in revenue, with the vast majority of that coming from mobile (almost $700 million more than non-mobile).
Internet advertising revenue varies greatly by industry, though most leading industries didn’t gain any digital ad share from 2015 to 2016. Retail is the leader of the pack with 21 percent of ad share. Leisure travel and consumer electronics and computers were the only major industries to see growth, and even then by a margin of only one percentage point each.
Depending on the pricing model used, revenues went both up and down. Revenues priced on a performance basis went down one percentage point, and revenues priced on cost per medium/thousand went up two percentage points. Revenues based on a hybrid of the two went down two percentage points.
Google and Facebook Control 20 Percent of Global Ad Spend
We know the formats and times of year that drive internet advertising growth, but who are those top companies controlling most of the money?
Not surprisingly, it’s Google and Facebook, according to Zenith and its Top Thirty Global Media Owners of 2017. Together, these two behemoths account for 20 percent of dollars spent on media advertising – globally.
Further, 64 percent of the global ad spend growth in the last four years was Google and Facebook’s as well.
Google is the true leader with almost $80 billion in ad revenue, while Facebook only brings in just under $27 billion. In third place is the leading traditional media company, Comcast, with just under $13 billion in ad revenue. Television isn’t really a competitor in this space anymore.
For many digital advertisers, the path forward is clear: Embrace mobile, and do it on the advertising platforms of Google and Facebook. Also keep your ears open for new opportunities like digital audio advertising. Then, look forward to IAB discussing your success in 2017.