IAB and PwC report shows digital advertising hit $294.6 billion in 2025, with social media up 32.6% and digital video up 25.4%, signaling continued shift from traditional media.
The Interactive Advertising Bureau (IAB) and PwC have released their latest digital advertising revenue report, revealing that the U.S. digital ad market reached $294.6 billion in 2025, representing a 13.9% year-over-year increase from 2024. This growth continues the long-term trend of digital advertising capturing an ever-larger share of total ad spending as brands shift budgets away from traditional media channels.
Social Media Advertising Leads Growth
Social media advertising emerged as the fastest-growing segment, surging 32.6% to reach $117.7 billion. This explosive growth reflects the continued dominance of platforms like Facebook, Instagram, TikTok, and emerging social networks in capturing consumer attention and advertising dollars. The report indicates that social media now accounts for approximately 40% of all digital advertising revenue, up from 35% in 2024.
The acceleration in social media ad spending comes despite ongoing concerns about platform safety, data privacy regulations, and the potential impact of AI-generated content on user engagement. Industry analysts suggest that the growth is being driven by improved targeting capabilities, the rise of social commerce, and the platforms' ability to deliver measurable ROI for advertisers.
Digital Video Shows Strong Momentum
Digital video advertising grew 25.4% to $78 billion, maintaining its position as the second-largest digital ad category. This growth encompasses both in-stream video ads on platforms like YouTube and social media, as well as out-stream video ads embedded in articles and apps. Connected TV (CTV) advertising continues to be a significant driver, with more consumers cutting traditional cable subscriptions in favor of streaming services.
The report notes that advertisers are increasingly investing in high-quality video content and programmatic buying to reach audiences across multiple devices and platforms. The rise of short-form video content, particularly on TikTok and Instagram Reels, has also contributed to the category's growth.
Search Advertising Remains Dominant
While growing at a more modest 8.5%, search advertising maintained its position as the largest individual category at $118.3 billion. Google continues to dominate this space, though Amazon's advertising business and other retail media networks are gaining ground. The slower growth rate compared to social media and video reflects the maturity of the search advertising market and increasing competition from other digital channels.
Display Advertising Shows Steady Growth
Display advertising, which includes banner ads, rich media, and native advertising, grew 12.3% to $67.2 billion. The category has benefited from improved creative formats, better targeting capabilities, and the integration of AI tools that help optimize ad placement and creative elements. Native advertising, in particular, has seen strong adoption as publishers seek to provide less intrusive advertising experiences.
Mobile Continues to Dominate
Mobile advertising now accounts for 72% of all digital ad revenue, up from 68% in 2024. This growth reflects the continued shift in consumer behavior toward mobile devices for content consumption and shopping. Mobile video and social media advertising have been particularly strong drivers of this trend.
E-commerce Integration Drives Innovation
The report highlights the increasing integration of advertising with e-commerce capabilities, particularly on social media platforms. Features like shoppable posts, live shopping events, and integrated checkout experiences are blurring the lines between advertising and direct sales. This trend is particularly pronounced in categories like fashion, beauty, and consumer electronics.
Privacy and Regulation Impact
Despite the strong growth numbers, the report notes that privacy regulations and the phase-out of third-party cookies continue to impact the digital advertising ecosystem. Advertisers and publishers are investing in first-party data strategies, contextual advertising, and privacy-preserving measurement solutions to adapt to the changing regulatory landscape.
Looking Ahead
The IAB projects continued growth in digital advertising for 2026, with social media and video expected to maintain their strong momentum. However, the report also warns of potential headwinds including economic uncertainty, increased competition for consumer attention, and ongoing regulatory challenges.
The data underscores the continuing transformation of the advertising industry, with digital channels capturing an increasing share of marketing budgets at the expense of traditional media. As AI and machine learning technologies mature, the report suggests that personalization, automation, and measurement capabilities will continue to evolve, potentially opening new avenues for growth in the digital advertising ecosystem.
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