Internet advertising made a huge rebound in Q4, growing 29% YoY to $45.6 billion, according to the 2020 IAB Internet Advertising Revenue Report.“Q4 was the best quarter we have ever seen in 20 years,” said David Cohen, president of the IAB.
Overall online advertising in 2020 grew 12% YoY to $140 billion.
“The fact that we’re still in double-digit growth for something that is so highly penetrated is still very impressive,” said Sue Hogan, SVP of research and analytics at the IAB.
Digital advertising in Q4 performed so well due to a handful of factors.
The first was increased content consumption. “The ad-supported Internet has been our savior in this pandemic,” Cohen said.
Second, advertisers who pulled back their budgets during the early weeks and months of the pandemic may have released those budgets later in the year, concentrating their marketing dollars in Q4.
Third, even though some sectors, like travel, probably slashed their budgets overall during the year, the rise of ecommerce meant that more marketers had reason to shift advertising dollars online, where they could influence a purchase close to the action.
Finally, online advertising’s use of performance-based, cost-per-action buying models made it easier to justify continued spending. Two-thirds of online advertising revenues came from performance pricing models, while 32% used CPM models.
“If you’re meeting KPIs, you’ll continue to spend,” Cohen said.
Programmatic’s banner year
Programmatic advertising grew 25% YoY to $71.2 billion in 2020. A full 88% of ad spend is programmatic, up from 82% last year.
But programmatic might slow down in the coming year, due to bumps created by the restrictions around tracking online identity.
Cohen said he hopes the reinvention of the addressable market won’t slow down growth in 2021, but programmatic might take a breather to catch up.
Growth by channel
Seven of every $10 spent on digital advertising goes to mobile.
“The year of mobile is over,” Cohen said. With mobile advertising already highly penetrated, growth will likely slow for the format.
Meanwhile, digital video advertising revenues grew 20.6% YoY to $26.2 billion, and accounts for 19% of internet advertising revenue. Of all channels, digital video grew the most in 2020.
Audio was another hot format, growing 13% YoY to $3.1 billion.
Winners and losers
The top ten companies in internet advertising accounted for 78% of total spend in 2020, compared to 76% in 2018 and 77% in 2019.
So while the notion of advertising’s biggest players are swallowing more of the pie, they are doing so slowly.
“While it is increasing, it’s not increasing at tremendous rates,” Cohen said.