2014 Digital Ad Revenue Grows 16% over 2013

U.S. digital ad revenue had its fifth consecutive year of double digit growth in 2014 with a 16% increase over the previous year, according to a new report from the Internet Advertising Bureau.

The increase is in line with the 17 percent growth in 2013 and 15 percent growth in both 2012 and 2010. The total jumped 22 percent in 2011.

Total spending by advertisers reached $49.5 billion during the year compared to $42.8 billion in 2013, the industry organization said.

Mobile advertising led the way with a 76 percent growth rate, the IAB reported. It now makes up 25 percent of total revenue, up from 17 percent the previous year.

“High double-digit growth in mobile advertising is a reflection of the continued shift in consumer behavior away from desktop and towards mobile devices,” David Silverman, Partner, PwC US, said in the AIB announcement. “A prominent rise in social, a significant mobile activity, is driving growth in advertising revenue as consumers spend more time connected.”

Social media advertising had the second largest jump with a 57 percent increase. Total spending in that category was about $7 billion in 2014 versus $4.5 billion in 2013.

During the same period, the share of desktop search declined from 43 percent of the total to 38 percent. The IAB report for mobile includes mobile-based search and display.

Desktop display-related advertising also dropped as a percent of the total from 30 to 27 percent. Total spending in that category was up 3 percent the previous year while the much smaller sponsorship and rich media categories were flat. Digital video grew 17 percent in total expenditures.

The smaller classified and directory category, which made up 6 percent of the total in 2013, grew slightly while losing 1 percent in total share.

Another small category, rich media, maintained a 3 percent share of the total.

The IAB said that retail continues to spend the largest amount of money on advertising at 21 percent of all expenditures. Financial services and automotive had 13 and 12 percent of the total respectively.

Pricing Models

Pricing models showed little change; they are cost per thousand, cost per click and a hybrid of the CPM and CPC.

Impression-based or CPM pricing continued to have about 33 percent of all spending while performanced-based or CPC pricing pricing increased slightly from 65 to 66 percent at the expense of hybrid, which declined from 2 to 1 percent.

CPM pricing is used most often with banner ads while CPC is used most often with search engine advertising.