Digital Ad Spending Tops $40B In First Half, IAB Reports

Digital advertising revenue in the United States for the first half of 2017 rose to $40.1 billion, according to the Interactive Advertising Bureau (IAB).

The IAB Internet Advertising Revenue Report, released Wednesday and prepared by PwC US, represents a 23% year-over-year rise from the $32.7 billion reported during the same period in 2016.

Mobile took 54% of total digital ad revenue in the first half of the year -- up 22% from the first half in 2016. Advertisers spent $21.7 billion on mobile during the first six months of 2017 -- up 40% from $15.5 billion in the first half of 2016, and surpassing the $8.2 billion reported just two years ago in the first half of 2015.

Overall, search growth slowed to 18%, but the media remained a large part of digital revenue at 48% in the first half of the year in 2017 digital ad dollars -- down from 49% a year ago.

Social rose 37% to account for $9.5 billion in ad revenue in the first half of 2017.

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A new category -- audio, which the IAB began tracking last year -- generated $603 million during the first six months of 2017, with $155 million coming from mobile.

Digital video, including mobile and desktop, rose 36% to $5.2 billion. Video on mobile overtook video on display for the first time. Mobile video reached $2.6 billion in the first half of 2017, compared with display video.

In a departure from analyzing digital advertising spend from the largest companies, the IAB has begun to take into consideration smaller companies with minimal spend. There are about 9,000 of these companies, estimates Chris Kuist, senior vice president of research and impact at the IAB.

While the advertising industry continues to see double-digital growth in internet ad revenue, the question as to why created a new "hypothesis," Kuist said.

"The hypothesis we've landed on isn't so much about an expansion or reallocation of existing national advertising budgets, but an influx of small and medium-size businesses in the local market," he said during the IAB webinar.  

About 75% of the SMBs in the U.S. have spent money on advertising. Of these, 80% have used self-service platforms and 15% have leveraged programmatic advertising. These findings indicate significant ad spend going to publishers with these capabilities that really have not been accounted for by the IAB.

Along with the IAB's release of the first-half 2017 numbers, Gordon Borrell, CEO and founder of Borrell Associates, ran through local advertising -- specifically SMBS, or businesses generating less than $50 million in revenue. The analyst firm only polls companies that spend money on advertising. About 76% have been in business more than 10 years.

Borrell brought a new perspective to the IAB's numbers. In general, he said smaller, local companies this year spent 22% of their budgets on broadcast TV, only because the cost is substantially more than media such as search engine marketing or social marketing. About 8% went to search engine marketing.

Some 76% of those that spend on advertising invest in digital. Among those, 63% spend on social media or viral advertising, 47% spend on email marketing, and 35% spend on search marketing and advertising.

Smaller companies' spend on advertising stands in contrast to spending by larger companies. In 2017, of the U.S. local advertising estimates of $120.4 billion, about 50.4% goes online, whereas 9.7% goes to newspapers; 8.2%, TV; 7.8% radio; direct mail, 6%.

Borrell also estimates about $1.9 billion will be spent on political advertising in 2018.

Thousands of companies participated in the digital long tail -- defined as companies that sell advertising online such as newspapers like Gannett, as well as Yellow Pages and Yext -- are not being accounted for, Borrell said. However, this is likely to change. 

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