In January at the IAB Annual Leadership Meeting, our colleagues in the US released their 2025 Outlook Study. While the data is US focused, it offers an early glimpse into ad spending trends for the coming year and should be on the reading list for all locally who want to gain an understanding of brand and agency buyers' growth strategies and the challenges they foresee. For those who want only the highlights for Australia, I’ve taken the liberty of offsetting the US experience against local data points.
Total Market Growth
IAB estimates that US digital ad spend grew by 11.8% in 2024 compared to 2023, driven by investments tied to the Olympics and the US election. In Australia, the first three quarters of 2024 saw an 11.9% increase in our local digital ad market boosted by the Olympics, though growth varied significantly across different formats and environments. We can expect to see the final quarter Australian investment data by end February.
Even though the Australian data was for three quarters, it is a solid market performance, particularly given it was influenced by Australia’s slower growth in 2023 (which was 3.7% year-on-year, compared to the US’s 7.3%).
For 2025, the US forecasts a solid 7.3% growth in the digital ad market. These figures currently exclude retail media from the base calculation, though projections for retail media are covered separately.
Channels, Formats, and Focus Areas
What’s driving the US growth? Excluding retail media, Connected TV (CTV) led in 2024 with 18.4% growth, a trend expected to continue in 2025 with a projected 13.8% increase. Other key contributors include social media, online video (excluding CTV), and paid search.
In Australia, these channels are also expanding, with podcasts and digital audio especially in a high-growth phase, albeit from a smaller market share.
Retail media is another US standout, with marketers reporting a 25.1% increase in 2024 and projecting a further 15.6% rise in 2025.
Another growing priority for US advertisers is the focus on publishers with strong first-party data, with 55% of buyers planning to prioritise such placements. Similarly, creator partnerships continue to gain traction, with 48% of buyers intending to increase investment in collaborations across platforms like podcasts and social media.
Marketing Objectives, Operational Efficiency, and Measurement
As expected, customer acquisition remains the primary objective for US media investments. The shift toward performance-focused media continues, with 54% of buyers planning to allocate more budget to performance advertising, while 22% aim to increase brand advertising. The need to demonstrate ROI is the key driver behind this shift.
Concerns about a slowing US economy and access to first-party data have diminished in recent years, though this may yet shift through 2025. Cross-channel media measurement and managing reach and frequency remain key challenges. Additionally, 35% of brands now cite concerns about having sufficient budget to invest in emerging channels—an increase from the previous year.
Advertisers are dedicating more time and resources to improving measurement strategies indicating intention to increase investments in cross-platform measurement (64%), attribution modelling (61%), marketing mix modelling (56%) and attention metrics (47%).
AI in Media Planning and Activation
The final piece of the puzzle centred around the use of generative AI in media planning and activation. The unsurprising headline: it rose, with 42% of buyers actively integrating AI into their processes and another 36% exploring its potential. To mitigate risks and ensure accuracy, over half of those using generative AI have implemented mandatory human oversight of AI-generated outputs.
Cautious Optimism
From the conversations I’ve had over the last few weeks with a wide range of people across the industry, I’m sensing a more positive sentiment, dare I even say, cautious optimism, for the investment year. Here’s hoping that feeling translates to a healthy ad market in 2025 (and keep an eye out for our release of the CY24 Internet Advertising Expenditure Report for Australia in late February).