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Digital Ad Spending Forecast To Rise 8% Next Year. But IAB Says Consumers Are Changing Too.

Podcast ad revenue is forecast to grow again next year as more Americans turn to on-demand content. But the medium will also be boosted by a growing marketplace for digital advertising overall. A new report from the Interactive Advertising Bureau and PwC forecasts U.S. internet advertising will total $165 billion in 2022, an eight percent increase compared to this year. And by 2025, it predicts internet ad spending will hit $200 million.

Yet the IAB/PwC report is as much a warning for digital media companies as it is an outlook. It says bad experience has the risk of driving users away, especially younger consumers. The risk of inaction, it says, is significant. If that happens it says the digital ad-supported industry faces a decline as more consumers flock to ad-light and ad-free content models. If that happens, brands and ad agencies will need to invest more to reach their target segments that reside within declining audience pools – and as a result, publishers won’t be able to rely on advertising dollars to fuel innovation, content and experiences for consumers, resulting in diminished supply.

The IAB Outlook: 2022 Digital Ad Ecosystem report offers a high-level view of the digital ad industry and is largely based on interviews with approximately 20 thought leaders within the digital advertising ecosystem. Among the issues they see on the horizon for the digital ad industry is the elimination of third-party cookies, while delayed until mid-2023, is likely to lead to what the report says will be a “tectonic shift” for many industry players which it says will need to “reimagine” strategic planning and budgeting for future brand growth. There are also some indicators pointing to declining consumer tolerance for digital ads in some segments.

“Interviewed leaders across the ecosystem voice concern that the industry is not moving fast enough to meet consumers where they are, in the way they want, with advertising embedded in an authentic consumer-connection strategy,” the report summarizes. “Many flag the need for stronger partnerships between the buy and sell sides to unlock a new consumer-focused lens. Several call for the industry to put forward fair standards that set a strong foundation for future industry models to embrace modern consumer behaviors and ongoing evolution in technologies in order to keep pace.”

Among its recommendations for digital publishers –

  • Educate brands and agencies about your platform.

  • Listen to brands and agencies about their needs, wants and expectations. Understand where current models break down, and invest in building full-stack solutions that transparently (and compliantly) share data and signals to help brands tune their models to make advertisements improve performance over time.

  • Solidify the connection between ad sales teams and your broader organization to enable them in providing a cohesive and insightful way of engaging brands. Connect product innovation and consumer research teams to brands directly to innovate new models that are so relevant and consumer focused they don’t feel like advertising on your platform.

  • Invest in ad models and experiences that fit the current role advertising plays on the platform.

  • Protect the consumer experience on your platform. Do not let heavy ad loads ruin the value your platform offers.

The report also has advice for marketers, including they spend more money on experimentation and avoid repurposing ad creative across media channels. “Rather, increase the customization and volume of creative to deliver more relevant (to types of consumers and platforms) experiences,” it says. It also says they should also abandon creative that is redundant, irrelevant or delivered to the wrong target audience.

“This report makes it crystal clear that we must acknowledge that consumer expectations are rapidly changing. Irrelevant and increased ad loads are not the solution. They want better, more useful ad experiences,” said IAB Chief Executive David Cohen. “They want us to re-focus on their needs, reimagine ad formats, and reinvent what advertising can be. The next creative revolution needs to be about utility, not just cleverness.”

The full IAB Outlook: 2022 Digital Ad Ecosystem report can be downloaded HERE.

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