2014 Digital Advertising Trends: Strong Growth Continues

Online ad revenue reached its highest point ever in the first half of 2014, according to a new report from the Internet Advertising Bureau.

Total digital revenue reached $23 billion and represented a 15 percent increase over the first half of 2013.

The second quarter of this year saw a 14 percent increase versus the same quarter a year ago, the report said.

The 15 percent year-over-year growth compares to an 18 percent YOY growth in 2013 versus 2012.

First half digital ad growth in millions. Source: IAB. Graphic credit: © Promise Media

Mobile Charges Ahead

The other three categories were video with a 13 percent growth, display advertising with a 6 percent growth and search with a 4 percent growth.

The total dollars for each of the five categories broke out this way for the first half of 2014:

$9.1 billion – search
$6.5 billion – display
$5.3 billion – mobile
$2.9 billion – social media
$1.5 billion – video

At the current rate of growth, mobile will bypass display within the next six months and surpass search within the next 12-18 months.

“This report confirms the fact that brands are deepening their commitment to interactive advertising, and that mobile is seen as a crucial part of the marketing mix,” said Randall Rothenberg, President and CEO, IAB.

“Moreover, with second half revenues traditionally surpassing those in the first half of the year, this milestone achievement is potentially a harbinger of even stronger digital ad revenues to come.”

Verticals and Pricing Models

Three advertising verticals made up 46 percent of the total revenue. They were retail at 21 percent, financial services at 13 percent and automotive as 12 percent.

Pricing models showed little change during the 2014 half versus a year ago with performanced-based (CPC) advertising accounting for 65 percent of the total in both years, impression-based (CPM) ad revenue making up 34 percent of the total versus 33 percent last year and hybrid declining from 2 percent to 1 percent.

A product perspective on the ad trends showed that the growth of mobile revenue (search and display) came at a cost to desktop search ads.

Desktop search decline from 43 to 39 percent, while mobile as a whole grew from 15 to 23 percent. That means desktop search revenue shifted and split into both mobile display and mobile search.

“Mobile’s continued rise speaks to consumers’ increasing reliance on smartphones and tablets, whether on-the-go or at home,” said David Silverman, a partner at PwC US. “And, digital video too is seeing gains that reflect a new ‘viewing’ paradigm that is taking place on interactive screens, big and small.”

Death of Email Advertising

It is worth noting that the IAB survey no longer tracks email as a digital advertising format.

Total email ad revenue in the first half of 2013 was $78 million or less than 1 percent of search.

Despite its reputation for higher click rates, rich media showed no growth as a percentage of the total.