Online Ad Spending

Online advertising revenues in the US reached $25.6 billion in the first half of 2018, with mobile accounting for 63% of the total, according to the latest revenue report from the IAB and PwC. This represents an overall increase of 23.1% year-over-year.

Behind this headline number, there are some other trends worth noting. Here are 5 of our observations.

1. Overall desktop spend is remaining static

While the market continues to grow in double-digit figures, this growth is driven near-exclusively by mobile, as desktop revenues for the first half remain somewhat static over the past three years.

While H1 2015 recorded a high of $9.9 billion for desktop spend (compared to $4.4 billion for mobile at the time), each H1 period following has not reached this level, with desktop spend in 2016, 2017 and 2018 being $8.7 billion, $9.4 billion and $9.6 billion respectively.

Advertisers are following consumer behavior: research previously has shown that mobile accounts for the largest proportion of time spent among online visitors in the US, even if they may still represent a smaller proportion of unique website visitors.

2. Advertisers now spend as much online each quarter as they did annually in 2009

The report contains an interesting opportunity to examine historical trends, now that it is in its 23rd year of publication. One can see that quarterly online advertising spend has exploded from a tiny $30 million in Q1 of 1996, through to $25.6 billion in Q2 2018; this quarterly spend now exceeds the full amount spent in 2009 ($22.7 billion), less than a decade ago.

3. Video remains the fastest growing ad format

While H1 2017 was the first year in which ad spend on mobile surpassed desktop, that wasn’t quite the case for video, where both desktop and mobile had $2.6 billion of spend each.

For H1 2018 the total spend on mobile video ads ($4.2 billion) appears to now dwarf that of desktop ($2.8 billion), accounting for 59.7% of all digital video ad revenues. Total video ad growth overall is 34.8% year-over-year.

This leap comes at no surprise given that separate research from Advertiser Perceptions has shown that almost two-thirds of advertisers hiked their mobile ad investments last year, with 6-second ads being among the most interesting of formats. Smartphones alone also now account for a majority of video plays both in North America and worldwide.

4. While search’s share of ad spend has slipped, revenues are up 19% year-over-year

When comparing search, banner, video and other ad formats, search still leads with 46% of overall digital ad spend, despite a small 2% point drop in share when compared to H1 2017.

Even though there has been a drop in share on a percentage basis, first-half revenues have risen from $19.1 billion in 2017 to $22.8 billion this year – a growth of 19.3%.

For the same period, banner ad spend has increased by 27.4% (from $12.4 billion to $15.7 billion), and video by 34.8% (from $5.2 billion to $7.0 billion).

Other formats account for 8% of spend (down from 9% in 2017), comprised primarily of classifieds ($1.6 billion), lead generation ($1.4 billion) and audio ($0.9 billion). Other research has illustrated how mobile makes up a significant proportion of audio ad spend.

5. Hybrid pricing models are growing in popularity

For the first half of 2017, hybrid pricing models accounted for just 1.7% of spend. In the same period this year, this model now accounts for 4.6% of the total. This growth is the highest ever year-on-year upswing for the time period covered by the report (i.e. since 2005).

This shift has come mostly at the expense of performance-based pricing, although that model still accounts for the majority of spend, at 61.0% of the total. CPM remains roughly the same, at 34.5% of revenues in 2018 (versus 33.4% in 2017).


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