Dive Brief:

• Digital advertising revenue in the U.S. rose 12% to $139.8 billion last year, a sign of resilience as marketers coped with the negative effects of the pandemic on their media plans. Digital video saw the highest growth at 21% to $26.2 billion, expanding its share of total internet ad revenue by 1.3% to almost 19%, according to a report commissioned by the Interactive Advertising Bureau and conducted by PwC.
• Social media ad revenue also was strong, rising by 16% to $41.5 billion to make up 30% of all internet ad revenue. As more marketers bought ads through automated exchanges, programmatic ad revenue rose 25% to $14.2 billion for the year.
• After digital ad revenue fell 5.2% from a year earlier in Q2 as marketers canceled or delayed campaigns during the onset of the pandemic, it bounced back by 12% in Q3 and by 29% to a record in Q4. The growth was attributed to political ad spending and the need to spend budgets that had been paused during the first half of the year, according to the report.

Dive Insight:

The strong rebound in digital advertising during the second half of last year came as people spent more time consuming media through connected devices like smart TVs and mobile phones. As marketers sought to reach consumers who were spending more time at home and shopping online, especially as the holiday season ramped up, the second half of the year completely erased the weakness of the second quarter.

"The clear and resounding message here is: The industry as a whole is very healthy," CJ Bangah, principal at PwC, said in an online presentation for the report. "All players at this point in time appear to be benefitting from that growth, and while the top 10 companies in terms of revenue continue to gain share, the industry as a total is growing."

Those top 10 companies include Google, Facebook and Amazon, which all reported double-digit growth in ad revenue for the year. Among the three, Google did see the first decline in ad revenue in its 26-year history during the second quarter, but ended the year with record sales that included a 46% jump for video-sharing site YouTube. Facebook said its ad revenue surged 21% from the prior year to $84.2 billion as marketers targeted consumers who had increased their social media usage. With more people shopping online, Amazon expanded its share of the U.S. digital ad market to more than 10% for the first time, according to a separate study.

While digital advertising on desktop computers surpassed $40 billion for the first time last year, mobile platforms showed stronger performance, PwC's Bangah said. As more consumers sign up for higher-speed 5G service, mobile's share is likely to grow, she said.

"It's unquestionable that mobile is cannibalizing the percentage of ad spend," Bangah said. "With the innovation we're seeing in 5G, and with the expectation that consumers really start getting out a bit more, the mobile growth or mobile percent of share could potentially move up."

As more consumers shifted their viewing habits from traditional linear TV to digital video platforms, marketers boosted their spending on those channels. As ad-based video-on-demand (AVOD) services like the Roku Channel, Pluto TV and Tubi expand their audiences, digital video ad spend is likely to grow.

"When we break it down by format, digital video was a clear breakout star of last year in terms of their growth overall and their increase in share," Bangah said. "If you look at the formats between 2019 and 2020, you're still seeing search, display and other [categories] also grow in total, but digital video just had the most significant growth."

Social media also is poised for continued strength, Bangah said, helping to confirm a study by Pew Research Center that found about seven in 10 Americans use social media, a percentage that has remained stable in the past five years.

"Advertisers [are] looking for safe choices, performance choices, outcome-based marketing and really things that allow increasingly personalized ads and ads that are increasingly targeted to very specific demographics that enable very specific business outcomes," Bangah said. "That does seem to have benefitted social media advertising in total. We're also seeing consumers continue to spend a lot of time with their social devices across a number of apps and with a number of different brands."