The world of advertising is rapidly changing, with digital advertising taking a dominant position in the market. According to recent forecasts, digital ad spending is set to increase in the coming years, with digital accounting for 71.8% of US media ad spending in 2023. This represents a significant increase from 2019 when digital accounted for just 55.6% of total US media ad spend.
Let us dive deeper into the latest forecasts for digital ad spending, and explore the trends and factors driving growth in this market.
Digital Ad Spending Forecast for 2023 and Beyond
Despite a turbulent year in the world of advertising, digital ad spending is still set to grow. According to a recent forecast, digital ad spending in the US will reach $248.72 billion in 2023, up 12.5% over 2022. This follows a period of significant growth in 2021 when digital ad spending grew by 37.2%. However, this growth has slowed in 2022 as the market normalizes from the pandemic-driven surge in digital ad spending.
Looking ahead, the forecast predicts that digital ad spending will continue to grow in the coming years, reaching $385.47 billion in 2026. This represents a significant increase from current levels and would make up 80.9% of total media ad spend.
Breaking Down Digital Ad Spend by Format
When it comes to digital ad spending, different formats are seeing different levels of growth. One of the most significant trends in recent years has been the rise of video advertising, which is set to make up nearly one-third of digital ad spending this year. The video has taken over from banners as the dominant display ad format, driven in large part by connected TV (CTV).
As CTV continues to perform well, it’s eating into mobile ad spend, which currently accounts for 68.4% of digital ad spending compared to CTV’s 8.5%. However, by 2026, mobile’s share of digital ad spending is expected to fall to 66.6% as CTV rises to 11.3%.
Search is another important format in digital ad spending, accounting for 40.6% of spending this year. However, its stronghold within the display is set to weaken over the next two years, with growth dropping from 16.9% this year to 7.4% next year. Within the display, which makes up more than half of digital ad spend, growth is expected to falter to 9.9% this year, down from 37.5% in 2021. This is largely due to social advertising, which is taking a hit in ad spend.
Factors Driving Growth in Digital Ad Spend
So what’s driving the growth in digital ad spending, and what factors are likely to impact the market in the coming years? One of the key drivers of growth in digital ad spending has been the rise of programmatic advertising. Programmatic ad buying allows advertisers to purchase digital ads automatically, using data and algorithms to target specific audiences. This has made digital advertising more efficient and effective, driving increased spend in the market.
Another factor driving growth is the shift in consumer behavior toward digital channels. As more people spend time online, advertisers are following suit, increasing spend on digital channels to reach their target audience. This trend is likely to continue in the coming years, as the world becomes increasingly digital.
However, there are also challenges facing the digital advertising market. One of the biggest is the impact of privacy regulations, such as Apple’s AppTrackingTransparency (ATT) framework. These regulations limit advertisers’ ability to track user data and target them with personalized ads, which has impacted social media platforms’ ad revenues. Additionally, the COVID-19 pandemic has resulted in reduced ad spending across the board, as businesses have been forced to cut back on their budgets.
Besides, there is reason for optimism. Despite the challenges faced by social media, overall digital ad spending is expected to continue its growth trajectory, fueled by the shift to online channels and the increasing importance of digital advertising in reaching consumers. In fact, our forecast shows that digital ad spending will reach $248.72 billion in the US this year, up 12.5% over 2021.
The Rise of Video Advertising
One of the key drivers of this growth is the increasing popularity of video advertising. For the first time this year, video is set to make up nearly one-third of digital ad spending, overtaking banners as the dominant display ad format. This is being driven by the rise of connected TV (CTV), which allows viewers to stream video content on their TVs, as opposed to traditional cable or satellite TV.
CTV is rapidly gaining in popularity, as more and more consumers cut the cord and switch to streaming services like Netflix and Hulu. This presents a huge opportunity for advertisers, who can use CTV to reach a large and engaged audience with targeted ads.
As CTV continues to gain ground, we expect it to eat into mobile ad spend, which currently accounts for 68.4% of digital ad spending compared to CTV’s 8.5%. In 2026, we predict that mobile’s share of digital ad spending will fall to 66.6%, while CTV’s share will rise to 11.3%.
Search’s Stronghold Weakens
Another area of growth within digital ad spending is search, which is set to account for 40.6% of digital ad spending this year, up about 1.5 percentage points from last year. However, search’s stronghold within the display is set to weaken over the next two years, with growth dropping from 16.9% this year to 7.4% next year.
Within the display, which makes up more than half of digital ad spend, growth is expected to falter to 9.9% this year, down from 37.5% in 2021. This is largely due to the struggles being faced by social media, which is taking an ad spend beating.
The Social Media Challenge
The third quarter of 2022 was challenging for big tech companies, including social media platforms, due to a number of factors. These included a slowing economy, the continued impact of Apple’s AppTrackingTransparency policies, and an overall sense of uncertainty in the market.
These challenges have limited the ability of social media platforms to track user data and target them with personalized ads, which has impacted their ad revenues. However, we believe that social media will continue to be an important part of the digital advertising landscape, particularly as platforms find new ways to engage with users and offer more targeted and effective advertising options.
The Future of Digital Advertising
Looking ahead, our forecast predicts that digital ad spending will continue to grow, reaching $385.47 billion in the US by 2026 and accounting for 80.9% of total media ad spend. This represents a huge opportunity for advertisers, who can leverage digital channels to reach consumers in new and innovative ways.
However, it is important to note that the digital advertising landscape is constantly evolving, and advertisers need to stay on top of the latest trends and technologies in order to remain competitive. This includes staying up-to-date with the latest developments in areas like CTV, social media, and search advertising, as well as embracing new technologies like artificial intelligence and machine learning.
Partner With Foreignerds As A Digital Marketing Company For Your Business.
In conclusion, while the third quarter of 2022 has been challenging for the digital advertising industry, the overall outlook remains positive. The shift towards digital advertising is set to continue, with digital ad spending accounting for an increasing percentage of total media ad spending each year. Video advertising, driven by connected TV, is emerging as the dominant display ad format, while search’s stronghold within the display is expected to weaken over the next two years.
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