Digital ad spending in the US grew yet again last year despite difficult economic conditions, registering a 7.3% year-over-year increase to a new high of $225 billion, according to the latest revenue report from the IAB and PwC. That represents a decelerated rate of growth from last year’s 10.8% gain, but in a reversal from last year, digital ad spend growth rates accelerated with each consecutive quarter.
Indeed, year-over-year growth rates climbed from 2.1% in Q1 to 4.7% in Q2, 9.1% in Q3, and 12.3% in Q4 as the second half of the year posted double-digit growth of 10.8% and accounted for 54% of the full year’s revenues.
Here are 3 takeaways from the report.
1. Digital Video Climbs to Almost One-Quarter of Revenues
As has been the case for a few years, digital audio and video were the fastest-growing formats once again in 2023. And as with last year, their increases were more modest, in line with the overall trend.
Digital audio formats grew by 18.9% year-over-year, more than double the rate of digital ad revenues overall, though these formats garnered only a small fraction of spend (3.1% share). Podcast advertising is expected to continue to expand in the coming years, likely factoring in to sustained growth in digital audio.
Digital video also outperformed the average growth rate last year in registering a 10.6% increase, taking its total to $52.1 billion, and garnering 23.2% share of total spending, up from 22.5% share in 2022 and 20.9% share in 2021.
Within digital video, the ever-popular CTV/OTT channel accounted for 42% share of revenues.
2. Search Is Still the Top Format, but Is Ceding Share
As video and audio creep up, traditional formats search and display are making way with slightly smaller – yet still dominant – shares of the total. Search continues to be the leading digital advertising format, but last year fell below 40% of total digital ad revenues for the first time. Its 39.5% share was down from 40.2% in 2022 and 41.4% in 2021, while display comprised 29.4% share (down slightly from 30.3%).
Search’s shrinking share of the pie was the result of smaller-than-average growth (+5.2%), though that was better than what display (+4%) was able to muster.
3. Social Rebounds, and Retail Media’s a Growth Engine
After a drop-off in 2022, social media rebounded last year to post a solid 8.7% rise in ad spending to reach $64.9 billion, or close to 29% of all digital ad revenues for the year. The bulk of that rise came in the second half of the year, where revenues grew by more than 13% on a year-over-year basis.
Meanwhile, numerous studies have pointed to burgeoning retail media spending, and that’s also reflected in this latest report. Per the IAB and PwC, retail media advertising revenues jumped by 16.3% year-over-year to reach $43.7 billion. That represents almost one-fifth (~19.4%) of the annual total for digital ad revenues.
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