Marketing
12 April 2023
Digital ad spend passed $200B in 2022 for first time; growth slowed
Digital advertising revenue grew 10.8% year-over-year in 2022, according to IAB.
Digital advertising revenue grew 10.8% year-over-year in 2022, according to IAB.
Digital advertising growth surpassed a key milestone in 2022, but still slowed from the prior year.
A report out Wednesday from the Interactive Advertising Bureau and PwC shared the following data for digital advertising:
Growth: Revenue for internet advertising in 2022 grew 10.8% year-over-year from 2021.
Dollars: Total revenue surpassed $200 billion for the first time, rising to $209.7 billion.
Tale of two halves: In the first half of the year, revenue surpassed $100 billion for the first time. Growth particularly slowed down in the second half of 2022, as Q3 was up 8.4%, and Q4 was up 4.4%.
The trends in digital advertising mirrored ecommerce as a whole, which surpassed the milestone of $1 trillion in the U.S., even as growth slowed down.
“After unprecedented growth in 2021, we expected more moderation in 2022. Economic uncertainty, geo-political unrest, a shifting regulatory environment and addressability changes have all contributed to revenue growing at a slower pace,” said David Cohen, CEO of IAB, in a statement. “Looking ahead, there is definitely still growth to be had, but it will be harder to achieve and likely less than we have become accustomed to.”
These results came in a year of major shifts for digital advertising. In particular, attribution changes spurred by Apple’s App Tracking Transparency feature led to a decrease in revenue for social platforms such as Facebook, Instagram and Snapchat as brands adjusted strategies to a more privacy-focused environment. Overall, social media revenue growth slowed, with revenues in the second half of the year virtually plateauing.
Yet there were also rising forms of advertising. Retail media, which places ads on the ecommerce platforms where people shop, grew at a rapid pace as retailers stood up new networks. TikTok also gained increased attention from brands as a result of massive user growth. And CTV, which describes advertising on streaming platforms, is seeing increasing spend as brands see new opportunity to combine the ability to reach viewers on their couch with the targeting and measurement tools of the internet. Shoppable ads, affiliate marketing, and direct-to-consumer advertising other areas seeing innovation, the report notes.
Still, the IAB report indicated that advertisers are spreading spending to a wider range of channels. At the same time, the market share of ad revenue among the top 10 companies declined for the first time since 2016.
“Advertisers are diversifying their spending to target audiences using fewer identifiable data points,” said Jack Koch, SVP Research and Insights at IAB. “Digital video, digital audio, and the long tail of publishers are benefiting.”
It’s worth remembering that these advertising approaches remain in the early stages. Advertisers are going to continue to develop new forms of targeting and measurement for these emerging formats, the report states.
One to watch: A particular area of growth is mobile advertising, which grew 14.1% year-over-year to hit a record high of $154.1 billion. Podcasts and the 5G rollout are likely to continue to drive revenue, IAB said.
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.