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Two-Thirds of US Ad Earnings Come from Performance-Based Models

Two-Thirds of US Ad Earnings Come from Performance-Based Models

This week saw the release of the IAB’s Internet Advertising Revenue Report for the US, which served up further proof of an industry-wide move towards performance-based ad models. 

If there was anything to take from last year, it’s that performance is big business in the US - even bigger, in fact, than it was in 2013. 

Readings from the IAB show that 66% of internet ad revenue in 2014 was generated by inventory priced on a performance model, up from 65% in the year before. Cost per mille (CPM) on the other hand, a go-to structure for premium publishers, maintained its share of 33%.   

The remaining 1% is represented by ‘hybrid’ pricing models, accounting for any mix of impression and performance-based pricing, which shrank by the same proportion over 2014.

A graph from the IAB shows just how far performance advertising has come in the US since 2005. It’s been ten years since CPM was the dominant ad-pricing model and the table shows the chances of a comeback remaining slim.

The report also confirmed that internet advertising is the leading source of ad revenue, earning $49.5 billion in 2014 compared to broadcast TV’s $40.5 billion. 

An assessment on TV advertising in general may have thrown up a different result, as cable channels were found to be generating $25.2 billion in ad revenue last year.

But where growth is concerned, internet comes out streaks ahead. It’s a market where search advertising, banner ads and mobile placements are driving spend, according to the IAB’s readings.

In outlining the report’s highlights, IAB CEO Randall Rothenberg cited the 76% full-year increase in mobile ad revenue as proof of marketers recognising that consumers lead “mobile-first lives”. 

David Silverman of PricewaterhouseCoopers also focused on mobile’s growth in comments after the report was released, describing this as a “reflection of a continued shift in consumer behaviour”. 

In the US, mobile advertising generated $12.5 billion in ad revenue during 2014, higher than social media on $7 billion but much lower than search on $19 billion.   

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Richard Towey

Richard Towey

Richard serves as head of content at PerformanceIN. After many years spent covering developments from the automotive, sports, travel and finance sectors, he eventually turned his full attention to reporting on stories from the fast-evolving world of digital marketing. Richard now heads up the editorial team at PerformanceIN: the performance marketing industry's leading publication.  

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