Digital advertising saw $72.5 billion revenue in 2016, a 22% upswing from the previous year.
Step aside, TV and desktop: Digital advertising revenue surged nearly 22% to $72.5 billion for the 2016 calendar year, up from the $59.6 billion reported in 2015, the Interactive Advertising Bureau said Thursday in a report prepared by PricewaterhouseCoopers.
Although it marks eight consecutive record breaking years, the IAB’s report represents the first time mobile has overtaken desktop spending, and the first time digital as a whole has passed TV ad spend.
Here are five takeaways from this year’s report.
TV is no longer No. 1 in ad spend
The IAB began recording digital ad spend in 2004 and since that time, it has never surpassed TV in the United States — until now.
TV captured roughly $71.3 billion in domestic revenues in 2016, according to eMarketer, just under digital advertising’s $72.5 billion in the IAB’s digital ad revenue report.
IPG Mediabrands‘ Magna has also recently concluded that digital ad spending outstripped TV last year, when TV ad sales in the U.S. generated $67 billion, according to Magna. In its report, Magna said packaged goods companies were concentrating television spending on fewer brands and products, and even launching some new products without national TV campaigns.
Indeed, digital video hit a record $9.1 billion in 2016, a 53% upswing year-over-year, the IAB said. On mobile, video revenue skyrocketed 145% from the previous year to $4.2 billion.
IAB: The media has overstated the scale of the so-called duopoly
Last year, Facebook reported $27.6 billion in global revenue while Google reported $89.6 billion.
David Doty, executive VP and CMO at the IAB, said, there’s been a lot of “misreporting” in the media regarding the notion that two companies alone are responsible for driving almost all of digital advertising’s revenue growth.
“Some of the outside calculations we’ve seen being used by the media include revenues that go beyond the U.S., for example, and that’s one place they go wrong,” Doty said. “Another thing they don’t understand is traffic acquisition costs. And another thing they don’t seem to take into account is losses from some within the industry are actually hiding gains from a broader base.”
Doty said there have been major gains in fourth quarter of 2016 across all IAB member companies. “Seventy-three percent of revenues in Q4 came from the top 10 digital companies, but they only contributed 69% of the growth,” he said. “That means 31% of the growth came from companies outside the top 10. So the media is mistaken.”
David Silverman, partner at PricewaterhouseCoopers, echoed Doty’s thoughts.
“There’s clearly a broad base of companies that are contributing to the growth,” Silverman said. “The top 10 have changed over time, so that means we’re seeing companies that might not have been a top 10 company a few years ago now become a dominant player.”
Search is fueling mobile’s growth
Mobile advertising accounted for roughly 51%, or about $36.6 billion, of all digital ad revenue reported in 2016. Of that, 47%, or $17.2 billion, came from mobile search, according to the report.
Overall, desktop search fell for the first time in 2016 to $17.8 billion, down 13% year-over-year.
The IAB doesn’t break down digital ad revenue from individual companies, but according to eMarketer, Google is poised to control nearly 78% of the global search ad market by 2017, or about $28.5 billion in revenue.
Banner ads captured the second most in mobile ad spend with 38%, followed by video (11%).
Digital radio has arrived
The 2016 calendar year marked the introduction of digital audio as a standalone category with the IAB survey, as the vertical captured surpassed $1.1 billion in advertising revenue.
“Younger people don’t listen to the radio. They’re consuming their audio through streaming services and maybe are even listening to podcasts and not so much the traditional radio anymore,” said Silverman.
“This is similar to the movement when print went to online and this is the monetization of not eyeballs, but ears,” he added.
About 40% of marketers are interested in advertising on Spotify, which was ahead of social media platforms like Snapchat (35%), according to an RBC Capital Markets study published in partnership with Ad Ag.
This and that
- Social media advertising revenue totaled $16.3 billion in 2016, up nearly 49% from the previous year, the IAB said.
- Retail (21%), financial services (13%), auto (12%), telecom (9%) and travel (9%) were the largest ad spenders in 2016. Travel ad spend increased from 8%, but other leaders remained unchanged, the report said.
- Desktop video is the only segment seeing growth on desktop, increasing 16% to $4.9 billion from the previous year.
Originally posted at AdAge