Digital ad revenue in the U.S. rose 10.8% to $209.7 billion last year as marketers continued to spend in online channels despite slower economic growth, market uncertainty and mass layoffs at big tech companies, according to a new report from the Interactive Advertising Bureau and PricewaterhouseCoopers LLP.
But the increase was smaller than the 35% leap seen in 2021—when marketers, including a flood of new businesses, competed to reach consumers spending more time and money online—as well as the 12.2% rise in 2020.
In addition to broader economic uncertainty, which led some companies to draw back on marketing budgets in the last part of 2022, the online ad business has been grappling with evolving privacy regulation and increased consumer privacy protections from companies such as Apple Inc., which some industry players say have made it harder to target messages and measure their efficacy.
“Coming off of 2021, which was extraordinary growth—I think the strongest growth that we had seen in 15 years—we were expecting certainly a slowdown or reduced growth in 2022,” said
David Cohen,
chief executive at the IAB, a digital advertising trade group.
Digital ad sales got a boost from factors including the growth of so-called retail media networks, in which consumer businesses such as grocery and big-box chains offer advertisers ways to reach consumers using their retailer data.
Retail media will make up a quarter of global online advertising spending by 2025, and will drive 45% of the growth in online ad spending between now and then,
Morgan Stanley
analysts said last week.
Brands will be willing to increase their spending on such networks as long as retailers find ways to generate more insights from their data on customers, said
Matt Cost,
U.S. internet analyst at Morgan Stanley.
“Retail media has advantages that are very well suited to the moment,” Mr. Cost said in an email. “Privacy seems to be getting a bigger premium over time and that is fueling the rise of retail media, because of the advantages it has when it comes to ad measurement and attribution.”
Ad-supported streaming video, including ad-supported tiers from services including
Netflix
and HBO Max, is another major growth driver in the digital ad space.
As media companies’ traditional TV networks come under pressure because of consumers’ shift toward streaming, many are now offering ad-supported tiers to their streaming services, said Bloomberg Intelligence Senior Media Analyst
Geetha Ranganathan.
“Since they now have these streaming solutions, especially the ad-supported streaming solutions, they are able to offset a lot of leakage from the linear TV ad system,” Ms. Ranganathan said. “With the help of [free ad-supported streaming television] or [advertising-based video on demand] services, I think it’s helping them overall reclaim some of the lost dollars.”
For the first time since 2016, the market share of the top 10 companies in the IAB report has declined.
Ten digital publishers and platforms contributed 76.8% of total digital ad revenue in 2022, down from 78.6% in 2021, according to the IAB, which doesn’t identify the companies. In 2018, those top 10 publishers and platforms made up 75.9% of total digital ad revenue.
Research firm Insider Intelligence said in March that
Alphabet Inc.’s
Google,
Meta Platforms Inc.
and
Amazon.com Inc.
siphoned 60.6% of digital ad budgets in the U.S. in 2022, down from 61.6% in 2021. Those giants of online advertising are facing new pressure from ByteDance Ltd.’s TikTok and other challenges.
Social media ad revenue grew 3.6% in 2022, a slowdown in growth from 39.3% a year earlier, according to the new IAB report, as privacy protections affected companies in the sector in particular.
“Social media, of all the different kinds of [media] types that we looked at, was the most adversely affected in 2022” as a result of tech platform policies, Mr. Cohen said.
Write to Megan Graham at megan.graham@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Digital ad revenue in the U.S. rose 10.8% to $209.7 billion last year as marketers continued to spend in online channels despite slower economic growth, market uncertainty and mass layoffs at big tech companies, according to a new report from the Interactive Advertising Bureau and PricewaterhouseCoopers LLP.
But the increase was smaller than the 35% leap seen in 2021—when marketers, including a flood of new businesses, competed to reach consumers spending more time and money online—as well as the 12.2% rise in 2020.
In addition to broader economic uncertainty, which led some companies to draw back on marketing budgets in the last part of 2022, the online ad business has been grappling with evolving privacy regulation and increased consumer privacy protections from companies such as Apple Inc., which some industry players say have made it harder to target messages and measure their efficacy.
“Coming off of 2021, which was extraordinary growth—I think the strongest growth that we had seen in 15 years—we were expecting certainly a slowdown or reduced growth in 2022,” said
David Cohen,
chief executive at the IAB, a digital advertising trade group.
Digital ad sales got a boost from factors including the growth of so-called retail media networks, in which consumer businesses such as grocery and big-box chains offer advertisers ways to reach consumers using their retailer data.
Retail media will make up a quarter of global online advertising spending by 2025, and will drive 45% of the growth in online ad spending between now and then,
Morgan Stanley
analysts said last week.
Brands will be willing to increase their spending on such networks as long as retailers find ways to generate more insights from their data on customers, said
Matt Cost,
U.S. internet analyst at Morgan Stanley.
“Retail media has advantages that are very well suited to the moment,” Mr. Cost said in an email. “Privacy seems to be getting a bigger premium over time and that is fueling the rise of retail media, because of the advantages it has when it comes to ad measurement and attribution.”
Ad-supported streaming video, including ad-supported tiers from services including
Netflix
and HBO Max, is another major growth driver in the digital ad space.
As media companies’ traditional TV networks come under pressure because of consumers’ shift toward streaming, many are now offering ad-supported tiers to their streaming services, said Bloomberg Intelligence Senior Media Analyst
Geetha Ranganathan.
“Since they now have these streaming solutions, especially the ad-supported streaming solutions, they are able to offset a lot of leakage from the linear TV ad system,” Ms. Ranganathan said. “With the help of [free ad-supported streaming television] or [advertising-based video on demand] services, I think it’s helping them overall reclaim some of the lost dollars.”
For the first time since 2016, the market share of the top 10 companies in the IAB report has declined.
Ten digital publishers and platforms contributed 76.8% of total digital ad revenue in 2022, down from 78.6% in 2021, according to the IAB, which doesn’t identify the companies. In 2018, those top 10 publishers and platforms made up 75.9% of total digital ad revenue.
Research firm Insider Intelligence said in March that
Alphabet Inc.’s
Google,
Meta Platforms Inc.
and
Amazon.com Inc.
siphoned 60.6% of digital ad budgets in the U.S. in 2022, down from 61.6% in 2021. Those giants of online advertising are facing new pressure from ByteDance Ltd.’s TikTok and other challenges.
Social media ad revenue grew 3.6% in 2022, a slowdown in growth from 39.3% a year earlier, according to the new IAB report, as privacy protections affected companies in the sector in particular.
“Social media, of all the different kinds of [media] types that we looked at, was the most adversely affected in 2022” as a result of tech platform policies, Mr. Cohen said.
Write to Megan Graham at megan.graham@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8