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IAB Full Year 2016 and Q4 2016 Internet Advertising Revenue Report

IAB/PwC Internet Advertising Revenue Report Detailed Analysis

April 2017

Full Year 2016 and Q4 2016

David Silverman, Partner, PwC

PwC

IAB Internet Advertising Revenue Report

2016 full year results

www.pwc.com

www.iab.com

Any trademarks included are trademarks of their respective owners and are not affiliated with, nor endorsed by, PricewaterhouseCoopers LLP.

PwCPwC

Agenda

1

April 2017

Survey methodology

2016 full year results

Full year and quarterly trends

Advertising formats

Digital video

Social media

Digital Audio

Pricing models

Industry category spending

About PwC

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Survey Methodology

2

April 2017

Survey Scope

The IAB Internet Advertising Revenue Report is part of an ongoing IAB mission to provide an accurate barometer of Internet advertising growth.

To achieve differentiation from existing estimates and accomplish industry-wide acceptance, key aspects of the survey include:

• Obtaining historical data directly from companies generating internet (desktop and mobile) advertising revenues;

• Making the survey as inclusive as possible, encompassing all forms of internet advertising, including websites, consumer online services, ad networks and exchanges, mobile devices; and

• Ensuring and maintaining a confidential process, only releasing aggregate data.

Methodology

Throughout the reporting process, PwC:

• Compiles a database of industry participants selling internet advertising revenues.

• Conducts a quantitative mailing survey with leading industry players, including web publishers, ad networks, commercial online service providers, mobile providers, and other online media companies.

• Requests and compiles several specific data items, including monthly gross commissionable advertising revenue by industry category and transaction.

• Acquires supplemental data through the use of publicly disclosed information.

• Identifies non-participating companies and applies a conservative revenue estimate based on available public sources.

• Analyzes the findings, identifies and reports key trends.

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Annual revenues totaled…

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April 2017

In b

illi

on

s

$59.6

$72.5

FY 2015 FY 2016Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

Annual revenues totaled $72.5 billion in 2016

Online advertising revenue increased $12.9 billion in 2016

In b

illi

on

s

$59.6

$72.5

FY 2015 FY 2016

21.8%

Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

Fourth quarter revenues totaled…

In b

illi

on

s $17.4

$21.6

Q4 2015 Q4 2016Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

Fourth quarter revenues totaled $21.6 billion in 2016

Revenue in Q4 2016 was $4.2 billion higher than in Q4 2015

In b

illi

on

s $17.4

$21.6

Q4 2015 Q4 2016

24.3%

Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

Strong growth between Q3 2016 and Q4 2016

In b

illi

on

s $18.2

$21.6

Q3 2016 Q4 2016Source: IAB Internet Advertising Revenue Report, FY 2016

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Source: IAB Internet Advertising Revenue Report, FY 2016

8

April 2017

Strong growth between Q3 2016 and Q4 2016

In b

illi

on

s $18.2

$21.6

Q3 2016 Q4 2016

18.9%Revenue in Q4 2016 was $3.4 billion higher than in Q3 2016

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Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

Quarterly growth continues upward trendQuarterly growth comparison, 1996–2016

In b

illi

on

s

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16.9

21.2 23.4 22.7

26.0

31.7

36.6

42.8

49.5

59.6

72.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

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April 2017

2016 showed record revenuesAnnual revenue 2006-2016

Source: IAB Internet Advertising Revenue Report, FY 2016* CAGR: Compound Annual Growth Rate

In b

illi

on

s

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April 2017

2016 showed record revenuesAnnual revenue 2006-2016

In b

illi

on

s

16.9 21.2 23.4 22.7 25.4

30.1 33.2 35.7 37.0 38.9 35.9

0.6

1.6

3.4

7.1

12.5

20.7

36.6

16.9

21.223.4 22.7

26.0

31.7

36.6

42.8

49.5

59.6

72.5

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mobile

Non-Mobile

87%MobileCAGR

6%Non-mobileCAGR

Source: IAB Internet Advertising Revenue Report, FY 2016* CAGR: Compound Annual Growth Rate

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April 2017

Historical Revenue Concentrations

Source: IAB Internet Advertising Revenue Report, FY 2016

70% 69% 71% 71% 71% 71% 73% 71% 71% 74% 74%

10% 8% 8% 8% 8% 7% 7% 8% 8%9% 10%

19% 23% 22% 21% 21% 21% 21% 22% 21% 17% 17%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

% OF REVENUETop 10 11 to 25 The Rest

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Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

Historical trends in internet advertising formatsRevenue share by major ad formats, 2008–2016

0%

10%

20%

30%

40%

50%

60%

Mobile Search Banner Digital Video Other

2008 2009 2010 2011 2012 2013 2014 2015 2016

% o

f to

tal

re

ve

nu

e

PwC

Distributing Mobile across formats demonstrates its importance to Search and Display

24%

12%

7%6%

51%

Search Banner Video Other Mobile

Formats –2016(Mobile separated)

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April 2017Source: IAB Internet Advertising Revenue Report, FY 2016

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48%

31%

13%

8%

Search Banner Video Other

Distributing Mobile across formats demonstrates its importance to Search and Display

Formats –2016(Mobile separated)

Formats –2016(Mobile included)

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April 2017Source: IAB Internet Advertising Revenue Report, FY 2016

24%

12%

7%6%

51%

Search Banner Video Other Mobile

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50%

31%

10%

9%

Search Banner Video Other**

2016 saw Video grow and Search take a slight stumble

Formats –2015(Mobile included)

Formats –2016(Mobile included)

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April 2017Source: IAB Internet Advertising Revenue Report, FY 2016

48%

31%

13%

8%

** Other includes: Classifieds, Lead Generation, and Audio

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Digital video – The gap between formats is closingDigital video ad revenues, 2015 – 2016

Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

In b

illi

on

s

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Social media demonstrated continued growthSocial media ad revenues, 2012 –2016

Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

* CAGR: Compound Annual Growth Rate

In b

illi

on

s

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Social Media and Mobile ImpactPercentage of Revenues 2012 - 2016

Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

8%11%

14%

18%

22%

9%

17%

25%

35%

51%

0%

10%

20%

30%

40%

50%

60%

2012 2013 2014 2015 2016

% of Total Revenues

Social Mobile

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Digital audio makes its report debutDigital audio ad revenues, 2016

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April 2017

In m

illi

on

s

Source: IAB Internet Advertising Revenue Report, FY 2016

Digital audio generated $1.1B in FY 2016; mobile represented 81% of the total

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33%

65%

2%

2015

Impression-based Performance-based

Hybrid

Total – $59.6 billion Source: IAB Internet Advertising Revenue Report, FY 2016

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April 2017

Impression-based pricing showed slight uptickInternet ad revenues by pricing model, 2015 vs. 2016

Total – $72.5 billion

35%

64%

1%

2016

Impression-based Performance-based

Hybrid

PwC

Historical pricing model trendsInternet ad revenues by pricing model, 2005–2016

46% 48%

45%

39%37%

33%31% 32% 33% 33% 33%

35%

41%

47%

51%

57%59%

62%65% 66% 65% 66% 65% 64%

13%

5% 4% 4% 4% 5% 4%2% 2% 1% 2% 1%

0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CPM Performance Hybrid

% o

f to

tal

re

ve

nu

e

Note: Pricing model definitions may have changed over the time period depicted both within the survey process and as interpreted by respondents

22

April 2017

Source: IAB Internet Advertising Revenue Report, FY 2016

PwC

4%5%5%

8%

6%

9%9%

12%13%

21%

EntertainmentPharma &Healthcare

MediaConsumerElectronics &

Computers

ConsumerPackaged

Goods

Leisure TravelTelecomAutoFinancialServices

Retail

FY 2016

Internet ad revenues by major industry category

% o

f to

tal

re

ve

nu

e †

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April 2017

† Amounts do not total to 100% as minor categories are not displayed.

Source: IAB Internet Advertising Revenue Report, FY 2016

PwCPwCOctober 2015

For information, contact one of the following PwC professionals:New York

David SilvermanPartner, Assurance Services646.471.5421david.silverman@pwc.comYork

Russ SapienzaPartner, Advisory Services646.471.1517russell.j.sapienza@pwc.com

Brian GaffneyManager, Advisory Services646.471.4722brian.gaffney@pwc.com

24

Technology and Entertainment, Media, and Communications practicesContacts

April 2017