Online advertising set yet another peak in Q4 2013, growing by 17.5% to reach $12.1 billion, the largest quarter on record, according to the latest revenue report [pdf] from the IAB and PricewaterhouseCoopers (PwC). Needless to say, the full-year total of $42.8 billion was also the largest seen yet, representing a 17% increase from the prior year. What didn’t change? The prevailing trends in the online advertising industry.
Here’s a look at some of those trends:
- Search Remains the Largest Format; Mobile Still Grows Most Rapidly
In terms of the main trends in ad formats, this result doesn’t come as a surprise. As with last year’s results, search remains the single largest ad format, with its share slowly retreating, from 46% in 2012 to 43% in 2013 as search budgets move to the mobile column.
Mobile advertising continues to make great strides, more than doubling from $3.4 billion in 2012 to $7.1 billion in 2013. Mobile’s share of total online advertising revenues almost doubled from 9% to 17% as a result, and it now challenges display/banner as the second-largest format.
For their part, display/banner ads’ influence continued to shrink last year, dropping a couple of points to 19% share of online ad spend. Other related formats had mixed results: digital video grew a point to 7% share, while rich media and sponsorship ads stayed mostly flat at 3% and 2% share, respectively. None of these trends present a marked changed from 2012.
Not surprisingly, the share of online ad spend going to classifieds has also continued to diminish, falling a point to 6%.
One new point: email has been eliminated from this latest report, presumably as its share of ad spend has become too small to warrant inclusion. (In 2012, email captured just 0.4% share of online advertising.)
- Retail Leads Among Advertising Verticals, Again
The top 10 industry categories accounted for 90% of online ad spend in 2013, down from 95% a year earlier. Retail was again the biggest spender, responsible for 21% share of online ad revenues, up a point from 2012. Financial services (13%) and auto (12%) were the next-largest industries by spend, with their share of expenditures unchanged from the year before. Telecom (9%) and leisure travel (8%) rounded out the top 5 again, though each dipped slightly in spending share from the year prior.
- Seasonal Spending Trends Persist
Second-half revenues ($22.7 billion in 2013) continue to outpace first-half revenues ($20.1 billion), as they have for at least the past decade, mainly due to higher ad spend in the fourth quarter. As the analysts note, during the past 4 years, fourth-quarter spend has been followed by a dip in the first quarter of the following year, although since 2010, that first quarter total has been larger than the previous year’s 3rd quarter.
- Internet Advertising Still Highly Concentrated
The 10 largest ad-selling companies accounted for 71% of total revenues in Q4 2013, consistent with the 71-72% range seen during the prior two fourth-quarters. Expanding that range to the top 25 nets a results of 81% share of revenues, which is again on par with last year.
The researchers note that over the past 10 years, the concentration of revenue among the top 10 companies has hovered in the 69-74% range.
- Performance-Based Pricing Shift Slows
Performance-based pricing was once again the leading pricing model in 2013, as it has been since 2007. For the first time going back almost a decade, though, performance-based pricing dipped as a percentage of revenues, falling a point to 65% of total revenues.
That point was made up by CPM/impression-based pricing, which gained a point to 33% of revenues.
Hybrid pricing remained at 2% of revenues.
- As a result of its 17% year-over-year growth, US online advertising revenue overtook broadcast TV ($40.1 billion), a year after overtaking cable TV ($34.4 billion in 2013). While online advertising revenue is growing more quickly than TV advertising overall, it won’t overtake it by 2017, according to PwC forecasts.
- Online advertising revenues have increased at a compound annual growth rate (CAGR) of 18% over the past decade, though that figure has not been adjusted for inflation, and is down from prior decade-long growth rates. A detailed look at online advertising growth, adjusted for inflation and for online population growth, can be accessed here.
- Mobile’s CAGR of 123% in its first 4 years has outpaced comparable rates for broadcast TV (98% CAGR) and cable TV (72%), but not the internet (159%).