Record Breaking Quarter: Digital Ad Revenues Cross $10 Billion Mark For The First Time

With the third consecutive year of double-digit annual growth, digital advertising revenues hit new records in 2012, according to the IAB’s annual Internet Advertising Revenue Report conducted by PwC. Released today, the report shows a 15% rise to $36.6 billion in U.S. digital advertising revenues in 2012, with Q4 revenues topping $10 billion for the first time.

Coming in at $10.31 billion, Q4 ad revenues increased 14.9% from the prior year and were up 11.6% from Q3, outperforming the overall media market. Nielsen Company and Kantar both estimated that total media revenues grew just 3% in 2012. Mobile saw triple-digit growth again this year, and digital video remained the fastest growing sector of the display market.

Online Advertising Quarterly Revenue Tops $10 Billion

On the IAB briefing call today, PwC’s David Silverman pointed to three main trends driving this growth. First, the increasing use of multiple screens is leading to new available ad inventory. Second, new ad formats are available for mobile devices featuring improved screen resolutions.  And third, the industry is meeting the growth in mobile with better ways to sell advertising on those devices.

Mobile may have broken out this year, but search remained strong, accounting for 46.3% of the online ad market in 2012 (down negligibly from 46.5% in 2011). Search revenue grew 14.5%, totaling $16.9 billion compared to $14.8 billion in 2011. These numbers do not include mobile search, which is now captured in the Mobile format. Mobile claimed the biggest increase in market share, growing 111% in 2012 to $3.4 billion in revenues.

Digital ad formats 2011 vs 2012

Performance-based pricing (fueled by search) continued to gain preference. 66% of total ad revenues came from performance-based ads, up from 65% in 2011. CPM pricing saw an uptick as well, rising to 32%. Both formats took their growth from Hybrid which fell from 4% to 2% of total revenues.


Internet Ad Revenues by Pricing Models

When compared to other ad-supported media in the U.S., internet continues to gain significance. At $36.6 billion, internet advertising revenues stayed ahead of cable TV ($32.5 billion), which it surpassed in 2011, and came closer to closing the gap with the leading ad revenue source, broadcast TV ($39.6 billion). [Update: This sentence was edited to reflect the correct cable TV revenues of $32.5, not $36.6 as previously reported.]

Digital ad revenue by media 2012

The growth of internet advertising revenue has outpaced other media every year since 2005. The recession year of 2009 is the only year internet advertising has not experienced double-digit growth. In comparison, no other media has seen double digit growth since 2005.

Ad revenue by media 05-12

Looking ahead, social will play a larger role in the digital landscape, predicts Linda Gridley of Gridley & Company which released its findings with IAB today.  Gridley sees that “social is entering the enterprise” and says that mobile and social are the underpinnings in the future growth of digital advertising. Faster networks and more TV programming coming online are fueling digital video, and advertisers are just now catching up with consumer behavior trends in watching digital video on mobile devices.

Gridley & Company points to research showing that in Q1 of this year, as live primetime viewing among 18-49 years old has fallen, advertisers are finally shifting budgets from TV to online.

Media Budgets Reallocated From TV to Online In 2013 we’re likely to see continued growth in mobile and digital video as advertisers evaluate their budget alignments in light of multi-screen usage trends and TV content becoming more prevalent online through TV Everywhere and traditional streaming channels.  And in Search, it is yet to be seen how that segment will be affected by the impending roll-out of AdWords enhanced campaigns and Bing Product Ads this summer.

Postscript: See also The Crazy Way The IAB Defines Internet Ad Revenues and Mobile Ad Revenues $3.4 Billion, Search The Biggest Contributor.

Related Topics: Channel: Display Advertising | Display Advertising | Features & Analysis | Statistics: Market Share | Statistics: Mobile Marketing | Statistics: Online Advertising | Statistics: Online Behavior | Statistics: Spend Projections


About The Author: writes about paid online marketing topics including paid search, paid social, display and retargeting. Beyond Search Engine Land, Ginny provides search marketing and demand generation advice for ecommerce companies. She can be found on Twitter as @ginnymarvin.

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  • SiDevilIam

    Jeff JarvisShared publicly – 8:32 PM
    Selling web ads as time not space

    I just saw some mind-bending work Chartbeat is about to release about measuring the time users spend exposed to an ad online.

    background, to quote Chartbeat CEO Tony Haile: “Chartbeat monitors
    activity by checking in with users every second and looking for signals
    (mouse movement, key strokes, etc) that show they are actively consuming
    the content in front of them. This means they can measure how long
    readers spend actively engaged on a page and what parts they’re reading.
    Because of this Chartbeat knows how long are actively reading while an
    ad is in view — both for an average user and the cumulative time of all
    users.” Chartbeat then did some internal research that found high
    correlation between engaged time exposed and a user’s ability to recall
    the advertiser’s brand and message. This has many implications:

    Measured this way, ads that appear down alongside the middle of a story
    turn out to be more valuable than the supposedly premium banners at the
    top of the page. That’s because people quickly scroll past those
    banners and all the big hair on the top of the page — logos, promos, and
    all that — to get to the substance of an article, where they spend
    time. So inventory that was undervalued becomes more valuable.

    Chartbeat suggests this means that quality content that engages people
    longer yields better ad performance. That, they say, would be a good
    thing for better content makers everywhere.

    * Now web publishers
    can sell time like broadcasters — only this is assured exposure time.
    Advertisers like buying time. Will this make them more comfortable with
    buying on the web?

    * I think this enables publishers to take on
    some risk for advertisers — guaranteeing them assured exposure time —
    thus increasing the value of what they sell.

    * I wonder whether this spells trouble for the big-ass ads and takeovers we users try to escape as quickly as possible.

    I also wonder whether this spells trouble for the slideshows and other
    gimmicks that pump page views without increasing time spent exposed to
    an ad.

    * I’d like to think this opens opportunities to find new
    value in ads next to videos and games and also — this could be important
    — mobile pages (though don’t think that mobile’s value will come from
    exposure to messaging; it will still come from knowing people and
    serving them relevance and value). The longer we spend on a page, the
    longer we see the ad, the more valuable the ad should be, right?

    I can only hope that this is another nail in the coffin of the
    dangerous, old-media-like metrics of unique users and pageviews.
    Engagement will matter more.

    Those who declare advertising dead
    are Mark-Twaining-it, I think. There are still many things to learn to
    find more effectiveness and value in advertising online. This is just
    one lesson. I say the real value of the net and mobile is in
    relationships: in learning more about people by delivering them more
    value so we can be trusted to deliver them greater relevance and value
    and, in turn, extract greater value from the interaction. More on that

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