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IAB Compass: Exploring fast-growing digital ad channels

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Person looking up in Times Square New York News 22 Feb

The digital advertising market is as dynamic as ever, with new forms of digital media and entertainment gaining traction with users, evolving business models and innovation in ad formats.

In this context, MTM has been working with IAB UK to explore four fast-growing areas of the digital advertising market: AR/VRconnected TV (CTV)gaming and shoppable advertising. These are all sizable markets, e.g. we predict CTV and gaming ad spend to reach £4.15bn combined by 2026, and represent new opportunities, as well as potential competition, to established media owners and ad platforms.

For each of these areas we explored emerging consumer services and uptake, ad offerings, business models (e.g. balancing advertising with subscriptions and in-app purchases), the overall scale of the opportunity and how all this is likely to develop in future. The full ‘IAB Compass’ reports are available to IAB members, with an overview of the research and helpful summary available more generally, here.

AR/VR: Emerging tech offering new buyer experiences

Immersive technologies allow marketers to engage with consumers in new ways helping them stand out and raise awareness, enhance online shopping experiences (e.g. via virtual try-ons, showrooms and tours) to drive consideration and conversion, and enhance products and services themselves. AR can be embedded in native experiences (e.g., AR filters, visual search results), launched from standard ad units or integrated into bespoke sponsored & editorial content. Consumer uptake is already relatively high, 79% of under-25s have used AR, and AR advertising is used by a range of sectors. Investments from the likes of Meta, Alphabet, Apple and Microsoft amongst others will continue to drive development in the market.

CTV: New ad opportunities on the big screen

Over 2/3 of UK households now use CTV devices and, across subscription, broadcaster and other ad-supported streaming services, CTV accounts for an increasingly significant share of viewing. For advertisers, it combines the benefits of digital e.g., targeting and lower minimum spends, with the big-screen TV experience. CTV is already widely used by advertisers and, through BVOD and AVOD (including YouTube), sees significant spend. The introduction of Netflix and Disney+ ad tiers is expected to act as a catalyst for the market, helping drive CTV spend to £2.61bn by 2026. There are still challenges around fragmentation and a lack of standards, and growth is somewhat dependent on overcoming these.

Gaming: Where adtech meets the mainstream

Gaming has become a mainstream entertainment market – 60% of UK adults play – and advertisers are (finally) recognising this. Recent developments in ad-formats, such as in-game native & audio ads, along with programmatic buying methods, have helped encourage a broader profile of advertisers to enter the market e.g. entertainment and fashion brands are now joined by FMCG, financial services and healthcare brands amongst others using gaming for brand and performance marketing. Mobile gaming, the core part of the ad market, is set to continue to grow and PC/Console gaming offers a largely untapped opportunity. Overall we anticipate the gaming ad market more than doubling to c.£1.84bn 2026.

Shoppable advertising: Collapsing the funnel

The boundaries between ecommerce and digital advertising are blurring with the emergence of shoppable advertising e.g. on social media, search and streaming TV platforms. Ad formats allow advertisers to promote and sell the products within the same platform, helping reduce friction in the shopping journey and presenting opportunities to ‘collapse the funnel’. Variations on this model have been hugely successful in Asia-Pacific, e.g. social commerce sales were c.$352bn in 2021, and companies are looking to replicate this in North America and Europe. We predict that the model will continue to gain traction in the UK, accounting for 3%+ of ecommerce in the UK by 2026.

If you are interested in hearing more about this work, or what MTM does in this space, please get in touch with Nick – to hear more.

Emily Harrison
22 February, 2023