In a two-part series of articles, we analyze the digital advertising landscape in the U.S., along with its key players such as Facebook and Google. Sized at $49.5 billion in 2014, the U.S. Internet advertising market could grow to over $100 billion by 2019, according to Forrester Research. The primary reason for this is the advent of digital marketing among brand advertisers, owing to increasing ubiquity of smartphones and PCs, coupled with improvement in ad measurement techniques. Future growth in the digital advertising market will be fueled by mobile ads, as the platform is still highly under-penetrated within brand marketing budgets, as compared to the amount of time spent on mobile devices.
The share of mobile devices in the overall U.S. ad market and its Internet ad market could rise to 16% and 45%, respectively, by 2019. At the same time, search advertising will continue to account for the largest share (around 44%) of the overall digital marketing spend, owing to its proven returns. Social media ad marketing is expected to grow at the fastest rate in the coming years, however, its pace could further magnify with the delivery of better and more targeted ads.
See our complete analysis for Facebook
See our complete analysis for Google
How Big Is The Internet Advertising Market In The U.S.?
How Is The Market Split Up By Ad Format?
Non-mobile search comprised for the highest share (37%) of the overall U.S. Internet advertising market during the last quarter of 2014, according to the Interactive Advertising Bureau and PwC. Additionally, non-mobile display-related advertising contributed 27% of the total market, during the same quarter. Display-related advertising comprises of different ad formats such as banner ads, digital video, rich media, and sponsporship. The share of mobile in the overall market increased from 19% in Q4 2013 to 28% in Q4 2014. Mobile advertising can further be segmented into search (45%), display (51%) and other advertising (5%). In terms of revenue by pricing model, almost 66% of the market revenue in Q4 2014 came from performance-based ads, followed by cost per thousand impression ads which comprised nearly one-third of the overall revenues. The share of hybrid ads was the lowest at around 1%.
How Is The U.S. Internet Advertising Market Expected To Grow In The Future?
Search marketing will continue to account for the highest share in the overall U.S. digital advertising budget, but its contribution could drop from 47.0% in 2015 to 43.9% in 2019,according to Forrester Research. This form of digital advertising will continue to remain highly attractive for marketers as its return is easy to measure. At the same time, the share of social media ad spending could rise from 14.5% in 2015 to 16.8% in 2019. In the event the return from social media ads improves significantly, we believe this share could even surpass 17-18% by 2019.
In the next article, we discuss the competitive landscape in the U.S. digital advertising market, and how the market share for various players could possibly trend in the coming future.
Our $87.83 price estimate for FB’s stock and $547 price estimate for Google’s stock, are broadly in line with the current market price.
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