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Mobile-first video helps US digital ads revenue break $100bn barrier

The advertising industry has just reached a significant milestone as mobile and over-the-top video services helped blast US digital ad revenues through the $100bn mark for 2018, according to the IAB (Interactive Advertising Bureau). In the face of increasing criticism and ever-waning interest in ads among consumers, the findings are a staunch reminder of the value in mobile-first video’s digital marketing prowess.

Recognition was given for technological advances in the voice market, as well as nods for emerging use cases for virtual reality and 5G, albeit small in the grand scheme of things as the report teeters dangerously at times on wearing buzzword blinkers. Of course, programmatic advertising is a prominent trend, enabling advertisers to reach audiences in more effective ways as companies get to grip with monetizing consumer data, with programmatic ad revenues currently accounting for 80% of all digital display advertising revenues.

The full year 2018 total of $107.5bn, the first time US digital ad revenues have exceeded $100bn, represents an impressive 22% increase from $88.3bn over the previous year, according to the latest Internet Advertising Revenue Report released this week jointly by the IAB and PwC.

Most pressingly, before we touch on the report’s loose references to 5G and AI, is the fact ad revenues from digital video saw the greatest growth of any format measured, rising by 37% year on year to $16.3bn in 2018. But this is still dwarfed by mobile, accounting for 65% of total Internet ad revenues last year, that’s $69.9bn, a rise of 40% from 2017’s mobile and video contribution of $50.1bn.

But what about the crucial mobile-video overlap? Unsurprisingly, digital video on mobile devices experienced even greater growth, surging by 65% year on year to reach $10.2bn for 2018, with digital video ad revenues now comprising 63% of all digital video revenues last year, rising from 52% in the prior year.

Audio ad revenues also saw substantial gains, rising 23% to $2.3bn – testament to music streaming services offering both ad-supported tiers alongside paid versions, particularly relating to podcasts which accounted for a large percentage of audio growth. In fact, the rising popularity of podcasts has prompted the IAB to put out a separate report detailing podcast advertising revenues at a later date.

It would be interesting to know whether music tracks uploaded to the main YouTube site fall into the video or audio category, but we presume the former considering Google has developed the separate YouTube Music site for pure audio streaming.

So, which emerging technology fields does the report pinpoint as prospective drivers of future digital ad revenues? As expected, blockchain is given a small cameo, although this sector was approached more cautiously than other fledgling technologies as the report warns the technology is still in its infancy with respect to digital advertising. It does note, however, that the digital ledger and smart contract technology may well fill in an important need in the future.

“Blockchain presents a number of opportunities for the digital advertising space, and publishers and advertisers continue to explore how these technologies can be implemented to connect with the digital advertising stack with greater efficiency,” states the report.

As for 5G, the report argues a more immediate opportunity, highlighting how companies across the US are already jostling for position as 5G network roll-outs loom. “5G will enable advertisers to operate at higher efficiency with the potential to reduce latency, spur advancements in location-based technology and programmatic technology, as well as to allow for developments in creative formats. What this means for consumers is an overall improvement in the mobile video experience,” it writes.

Artificial intelligence offers both immense opportunities and a minefield of wasted investments, one which the digital advertising industry is arguably less well versed in than other digital verticals. But this is changing as platform networks evolve into more complex ecosystems where a convergence of big data and AI will forge new innovations in digital advertising.

The report adds that “AI will allow advertisers to harness data and deliver ads with higher perfection (think greater relevance, matched context, and greater personalization), and as a result, drive revenue-earned per ad higher and higher. This development and its adoption has been of particular value to DTC brands, where the cost efficiency of customer acquisition becomes a defining factor in the long term success of the business.”

Conclusively, Internet advertising was the only media type to experience double digital growth year on year. Elsewhere in the wider advertising landscape, TV advertising has seen a slight decline in the past two years, as have B2B formats and radio, while music, video games, cinema and out-of-home advertising sectors have been flat for the past four years.

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