Digital advertising revenue increased to $32.7 billion in the first half of 2016, increasing 19% from the same time period a year ago, according to the Interactive Advertising Bureau’s Internet Advertising Revenue Report. The shift to mobile advertising was a key driver in the increase of digital ad spend. In fact, mobile advertising revenue totaled $1.6 billion, a 178% increase from the same period in 2015. Mobile advertising now account for 47% of all online ad revenues for the first half of 2016, up from 30% the prior year whereas desktop video ads remained the same at 13% of total revenue.
Among the key trends reported:
- Total display-related advertising (mobile + desktop) is up 26% to $13.9 billion and accounts for 43% of all internet ad revenue.
- Display-dollars are also shifting to mobile: Mobile display is up 78% to $7.6 billion while desktop display is down 7% to $6.3 billion.
- Total digital video ad revenue (mobile + desktop) is up 51% to $3.9 billion.
- Video now accounts for 12% of internet ad revenue for the first half of 2016, up from 9% in HY 2015.
- Ad spend on a whole for social media increased to $7 billion, up 57% from one ago.
Other key findings
In terms of pricing models, performance-based pricing, defined as cost-per-click, sale, lead, acquisition, or application (e.g., credit card application) or straight revenue share (e.g., percentage of commission paid upon sale), continues to lead although slightly declined to 65% of total revenue in HY 2016.
CPM/impression-based pricing increased up to 34% of revenues in the first six months of 2016 from 32% in HY 2015.
Hybrid pricing, defined as any mix of impression-based pricing plus performance-based compensation within an ad campaign, declined to 1% of total revenues in HY 2016, down from the 2% reported in HY 2015.
The report also stated that digital ad spending is becoming more concentrated with the top 10 digital ad-selling companies accounting for 74% of online advertising revenues in Q2 2016. The 10 companies were not disclosed in the report.
Many are forecasting that digital advertising will continue to be a larger and larger share of overall revenue generation for businesses. The question is who is capturing the increased profits? In an article in the Financial Times, Anna Nicolaou notes that “Google and Facebook have capitalised on the rise of the smartphone, swallowing the lion’s share of digital advertising revenues. In the US, 85 cents of every new dollar spent on digital went to the two companies in the first quarter of 2016, according to Morgan Stanley.”
Peter Kafta of Recode also offered insight the companies capturing the profit margins. Kafta’s shared the individual analyses done by Jason Kint’s, CEO of Digital Content Next, and Brian Wieser’s, an analyst at Pivotal Research, each illustrating that Google and Facebook account for 85% and 90%, respectively, of every dollar spent on digital. Their analyses also indicated that while Google’s and Facebook’s captured significant growth of ad revenues, the rest of the digital marketplace is diminishing.