- According to latest internet advertising revenue Interactive Advertising Bureau (IAB) and PwC report.
- All major digital channels saw significant gains despite privacy, measurement, credential depreciation and supply chain challenges. Digital video continued its momentum, up 50.8% year-on-year to $39.5 billion, while social media jumped 39.3% year-on-year to $57.7 billion . Search also grew “significantly” to 32.8% year-on-year, but not keeping pace with other areas, leading to a 0.8 percentage point drop in its share of total revenue for the category.
- The IAB and PwC predict that 2022 will see continued momentum through innovations in areas such as retail media, connected TV and gaming, as well as experiences related to the metaverse and Web3. But the year got off to a rocky start, with strong inflationary pressures and the Russian invasion of Ukraine creating new instability that impacted the growth projections of other companies.
Overview of the dive:
The IAB and PwC’s annual assessment of U.S. online advertising is the latest to position 2021 as a banner year for the category, with revenue growth rates nearly tripling from 2020. This is partly due to the drop in ad spend at the start of the pandemic – budgets fell sharply in the second quarter – with many marketers using 2021 to catch up. But major marketing windows also hit new highs, with the fourth quarter seeing 20.6% year-over-year growth to $55 billion amid a flurry of holiday spending.
Government stimulus packages and the reopening of the economy have further boosted the industry in 2021, according to the research. Census Bureau data cited by the IAB and PwC revealed that the year saw the creation of a record 5.4 million new businesses, many of which use ad-supported internet services.
“We believe this small business engine will be a key contributor to fueling the continued growth of the digital media and marketing ecosystem,” IAB CEO David Cohen said in a statement.
Even allowing for some atypical pandemic fluctuations, it’s hard to ignore how entrenched digital has become in media consumption habits. A separate study by the IAB and Harvard Business School recently found that the online economy has grown seven times faster than the US economy as a whole over the past four years and now accounts for 12% of the country’s GDP.
The upward trajectory of digital seemed to lift all ships, although some segments benefited more than others. Search, a mainstay, actually saw its share of total revenue decline in 2021 as new entrants saw larger gains. Digital audio, a breakthrough that includes podcasting, saw the highest level of growth, up 57.9% year-on-year to $4.9 billion. It’s still peanuts compared to digital video, which encompasses the hot streaming market, and social media, where platforms like TikTok, Snapchat and Meta Platforms’ Instagram have held a strong pull on consumers’ attention.
The IAB and PwC offered an optimistic outlook for 2022, hoping that new bets in areas such as augmented and virtual reality and the metaverse will help support growth. Other reports have indicated that the industry is heading for some sort of cooling.
This was the case before the crisis in Ukraine, as advertising spending levels were expected to stabilize somewhat from their 2021 highs. Today, the war has created new inflationary and supply chain pressures that have a severe impact on consumers. Magna Global late last month lowered its ad spend growth forecast for the year, but only by one percentage point. The company said organic revenue drivers, including e-commerce growth, could help offset the effects of the crisis in Ukraine.