Digital Audio Advertising Surged 39% In 2017 — a $500 Million Increase

Pandora Local Advertising Solutions (via Miller Advertising)

Pandora Local Advertising Solutions (via Miller Advertising)

For years, digital audio advertising has been an underperforming mess.  Looks like that’s changing fast.

Digital audio advertising has been a bastard stepchild for years.  Except now the sector is actually exploding.  Last year, the US-based digital radio market witnessed a surge in ads spending.   According to a just-released report from the Interactive Advertising Bureau (IAB), total ad spend in the category was $1.6 billion in 2017, up from $1.1 billion in 2016.

That’s a solid gain of half-a-billion dollars — in one year.  Hey, not Spotify IPO money, but still half-a-billion dollars.  And this definitely helps Spotify’s bottom line — if they’re capturing it properly.

The digital audio results were part of a broader report on digital advertising, including ads video, search, ‘conventional’ web pages, and a few other segments.  Overall, digital advertising became an $8 billion industry in 2017, partly based on more sophisticated ad products and hyper-targeting.

R.I.P. the MP3: (1995-2017)…

All of which is great news for the like of Pandora, which spent years getting beaten up by Wall Street over moribund advertising rates.

Pandora could get the tonnage, but simply couldn’t monetize it properly (especially after paying royalties).  That started to change with smartphones and better ad positioning, though more recently, the company has also blended paid subscribers into the revenue mix.

Randall Rothenberg, chief executive of IAB, pointed to increased engagement with interactive platforms.  “Consumers are increasingly spending a tremendous amount of time with interactive screens and content — from mobile to desktop and audio to OTT – and brands are in lockstep with a growing commitment to digital ad buys,” Rothenberg noted.

“Mobile captured more than half of the total digital ad spend last year and we can easily expect that share to continue to climb.”

Still, ad-supported remains a low-rent gamble, with the industry vastly preferring paid platforms.  But maybe ad-supported won’t be the butt of the joke much longer.  “Digital advertising revenues have been steadily rising for several years and buyers continue to increase their investment,” said David Silverman, Partner, PwC US.