Digital Advertising Revenue Grew 21% and Surpassed TV Ad Spend Last Year

Mobile is driving the growth

Mobile advertising is driving growth.
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Despite all the worries about ad fraud, ad blocking and other ailments of the internet, the growth of online advertising seems to show no signs of slowing down.

According to a new report by PwC, digital advertising revenues continued to climb in 2017, rising 21 percent to $88 billion in the U.S. The annual Internet Advertising Revenue Report, released today, was created for the Interactive Advertising Bureau and conducted independently by PwC’s New Media Group.

While 2017 was yet again another record year for digital ad revenue, it was also the first time online ad spend surpassed the combined total of TV, broadcast and cable advertising, according to PwC. Much of that growth was driven by mobile, which accounted for $49.9 billion in digital revenue—or around 57 percent of the total for the year. Social media also sped up the pace of its growth, increasing 36 percent to now account for about a quarter of all online ad revenue.

“One of the things we looked at when combing this report is that the industry is growing at such a sustained high clip, while the rest of the industry is fairly flat growth,” said David Silverman, a partner at PwC.

As a part of the report, PwC conducted surveys with ad agencies, publishers and ad-tech companies and found that many companies attributed growth to the increased use of data, artificial intelligence and analytics.

“The thing I’m always interested in is how does this continue with such high rates over a long period of time?” Silverman said. “It’s not like the internet is new anymore. … When one part of the internet becomes more mature, there is something new that pops up.”

An IAB rep said the results include all revenue made in the U.S. However, the report doesn’t break down which companies are getting the revenue. Therefore, it’s impossible to tell how much of the growth is good news for media companies struggling to make money off the internet and how much of it is going straight into the pockets of Google and Facebook—which some analysts say collectively already get around 85 percent of every new digital dollar.

Most areas of online advertising experienced growth at varying paces. For example, while search revenue increased 17 percent in the fourth quarter, its share of all ad revenue decreased to 44 percent from 46 percent a year earlier. And while companies like Google tend to pitch intent-based marketing based on users looking for things on the go, mobile search actually slipped to 44 percent of search revenue from 46 percent in 2016.

Banner advertising revenue was up 22.6 percent to $8.4 billion in the fourth quarter, while video increased 31.4 percent year over year to total $3.6 billion. In fact, mobile video finally surpassed desktop video. In 2016, mobile video accounted for $4 billion in revenue while desktop accounted for $4.9 billion. Last year, mobile video grew to $6.2 billion while desktop video grew to just $5.7 billion.

According to Anna Bager, evp of industry initiatives at the IAB, sports video content was one of the key drivers of video growth. (That’s good news for companies like Twitter and Amazon which have been investing in building their portfolios of live sports content.)

“I think there’s also massive content innovation that’s ongoing,” she said. “Media companies and advertisers are starting to understand the consumption behavior and how different needs of media—long-form, short-form, sound, video, mobile, in-feed, out-feed—have changed as well.”

While the online ad space continues to grow, so does ad fraud. In a separate report released today by the mobile measurement company Adjust, mobile ad fraud nearly doubled in the first quarter of 2018 compared to 2017. By measuring 3.4 billion app installs across 350 billion events, the company found that 37 percent of ad fraud came from SDK spoofing, while another 27 percent came from click injection. Another 20 percent came from faked installs, while click spam another 16 percent.

Ecommerce ads were the industry most affected. The sector made up around 40 percent of all ad fraud detected by Adjust, followed by games, which made up 30 percent. Travel was third highest, accounting for 10 percent of ad fraud.

There was also a difference in fraud frequency between Android and iOS, with Adjust reporting fraud happened twice as frequently on Android mobile devices than those on iPhones.

“Naturally, the fraud rates we see in active rejections only show the level of fraud prevented for advertisers who actually chose to protect themselves,” said Adjust fraud specialist Andreas Naumann in a statement. “Yet, the aggregate amount of preventable fraud is significantly higher. The number of unreported cases of advertisers being victims of mobile ad fraud is undoubtedly a much high number.”

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