Internet advertising revenues reached a record level in 2023, and the Interactive Advertising Bureau says no segment of the market grew faster than digital audio for the second consecutive year. The IAB says digital audio – which includes podcasts, streaming radio, and online music services – had 18.9% year-over-year growth in 2023 as it continued to outperform other formats, with $7 billion in total revenue. That compares to $5.9 billion of revenue a year earlier and is more than double the $3.1 billion recorded in 2020.
The IAB will release podcast-specific data in May, but the growth of spoken-word audio has accelerated digital audio’s revenue gains. The IAB also points to more Americans opting to spend directly with streaming services.
“Many services have now expanded their audio subscription offerings and introduced ad-supported tiers, making subscriptions accessible to more listeners. AI driven personalization is also likely to be contributing to this growth,” the annual report says.
The revenue growth of digital audio comes as audio overall is seeing a renaissance, with traditional over-the-air radio holding on to its reach. Nielsen says nine in 10 Americans listen to AM/FM radio each week.
While digital audio advertising remains the fastest-growing segment of online advertising, it remains a small slice of the overall marketplace. The IAB Internet Advertising Revenue Report, which is released in partnership with PwC, calculates digital audio had 3.1% of the overall digital ad market last year. While that is up 41% from 2020’s share of 2.2%, digital audio’s size means it will likely continue to benefit from double-digit growth in the current year.
“Based on submission data, the outlook for 2024 remains positive with all participating companies signaling that they anticipate growth in the year ahead,” the report says. It also notes that 2023’s growth rate was slightly behind the 20.9% increase posted in 2022. The coming months will reveal whether that was an indication of a maturing market or simply the impact of a choppy advertising market that audio publishers endured last year – especially during the first half of the year.
The robust expansion of digital audio came as internet advertising revenue overall reached a record high of $225 million, increasing by 7.3% year-over-year between 2022 and 2023 according to the IAB and PwC. “This is only a minor slow down in growth compared to 2021-2022, demonstrating a continuation of the U.S. market’s resilience despite challenges such as high inflation, rising interest rates and sector job cuts,” the report says.
The data shows each quarter brought consistently higher revenues versus 2022 as the year progressed, culminating in Q4. The report says last year’s highest growth rate came during the fourth quarter as revenue rose 12.3% from the prior year thanks to more holidays and consumer spending in the second half of the year.
“Despite inflation fears, interest rates at record highs, and continuing global unrest, the U.S. digital advertising industry continued its growth trajectory in 2023,” said David Cohen, CEO of the IAB. “For 2023, the winners were retail media, CTV, and audio which saw the highest growth.”
As more podcasters embrace video, they will enjoy an expanding ad market in that sector too. The IAB says video advertising revenue grew 10.6% last year to $52.1 billion in 2023. Connected TV (CTV) and OTT (over the top/streaming) generated 42% of the revenue and the IAB projects that CTV/OTT will be the fastest growing media channel in 2024 – not digital audio – especially as ad-supported tiers of major streaming services continue to capture a growing share of consumer attention.
The 2023 data also shows that after a period of slower revenue growth in 2022, social media advertising rebounded with 8.7% year-over-year growth in 2023. At the same time, search and digital displays, which pocketed tens of billions of dollars in revenue, are now showing relatively modest annual growth rates. The IAB says display ad spending increased 4% last year, while search revenue climbed 5.2%. Retail media networks are also capturing a greater share of ad dollars. The IAB says their revenue totaled $43.7 billion last year, a 16.3% growth rate from the prior year.
The IAB does not forecast 2024 digital advertising revenue, but it says the one thing that is clear is that the advertising landscape is undergoing a “rapid transformation” driven by the proliferation of channels that offer addressable audiences at scale and personalized messaging in privacy-compliant ways. It says channels that are equipped with large first-party data sets, sophisticated contextual models, and native measurement capabilities have gained a competitive edge. It also says companies are aggressively adopting AI to replace the data lost from a more privacy-focused ecosystem.
“Looking ahead, while there are no shortage of challenges, there are also strong opportunities in sports streaming, creator-based marketing, retail media networks, and beyond,” said Senior VP Jack Koch. “2023 is proof that the industry can stay resilient in the face of change.”
Download the full IAB report HERE.