Digital ad spend grew 12% in 2020 despite hit from pandemic

Despite an initial falloff due to the Covid pandemic, digital advertising spending grew 12.2% year over year in 2020, according to a new report commissioned by the Interactive Advertising Bureau and conducted by PwC. But the report also showed the largest players in the ecosystem further entrenched their hold on the U.S. digital ad market in 2020, commanding more share year over year. 

The pandemic caused an immediate pullback in ad budgets in 2020, with certain areas like travel remaining slow throughout the year. But in the latter half of 2020, political ad spend and holiday season sales helped to offset the losses in the first part of the year to reach $139.8 billion total for the year. The growth was slower than between 2018 and 2019 when spending increased 15.9%.

The IAB said a huge surge in connected television, e-commerce shopping and at-home deliveries created a “pendulum swing” that helped the sector continue growing despite the turbulence earlier in the year. 

But the spend was largely concentrated with the major ad players, and even more so than in previous years. The IAB said the top 10 companies held a 78.1% share of the revenues in 2020, with overall revenues of that group alone exceeding $109 billion. The top 10 companies accounted for a 75.9% share of revenues in 2018, rising to 76.6% in 2019. The IAB said companies ranked 11th to 25th account for just 6.2% of revenues, while smaller companies make up 15.7%. 

The IAB does not break out how much of this is made up of companies like Facebook, Google and Amazon. In a new report this week, eMarketer said that Amazon’s share of the U.S. digital ad market was more than 10% for the first time in 2020. Google’s share was 28.9% of the U.S. digital ad market in 2020, and Facebook’s was 25.2%, according to eMarketer. 

Year-over-year growth declined by 5.2% in the second quarter, the IAB report said, but spending during the third and fourth quarters was up by 11.7% and 28.7% year-over-year, respectively. The report said the fourth quarter of 2020 saw the highest revenue on record for digital advertising in more than 20 years, which it attributed in part to advertising leading up to the election. Advertisers were also spending 2020 budgets that had been paused earlier in the year because of the pandemic. 

Social media ad revenues reached $41.5 billion in 2020, the report said, making up nearly 30% of all internet ad revenue. Digital video saw 20.6% year-over-year growth, increasing its share of total internet ad revenue by 1.3% to reach 18.7%. 

Programmatic ad revenue also increased by 24.9% to reach $14.2 billion in 2020, but the IAB report questioned whether privacy changes like Google’s deprecating of third-party cookies will mean that growth is unsustainable going forward. 

“Changes in consumer identity and attribution models announced by Google and Apple did not have a material impact in 2020, and are expected to build to a tipping point disruption as ecosystem participants and consumers adapt to new models,” the report said. “Rather than a direct and significant impact immediately, the loss and blocking of identifiers on advertising products, tracking and other capabilities will be felt over time.”