AI and Targeting Reshape Strategy as Digital Video Ad Spend Surges

U.S. digital video ad spend is projected to grow 11% year over year in 2026, outpacing the total ad market by nearly 20%, according to the newly released “2026 IAB Digital Video Ad Spend & Strategy Report: Part One.” For the first time, digital video will account for more than 60% of total TV and video investment, cementing its role as the dominant channel. This surge is driving a fundamental shift in strategy, where AI, targeting precision, and outcome accountability are becoming central to how advertisers plan and execute campaigns.

As spending scales, advertiser expectations are evolving rapidly. The report highlights a clear move away from experimental video buys toward consistent performance-driven investments. Automation, interoperability, and reliable outcome measurement are now top priorities. Video is no longer a testing ground; it is a core engine for ongoing business goals.

Connected TV (CTV) growth is shifting from a focus on access to a focus on advantage. While CTV remains a strong growth driver, expected to rise 11% in 2026, its value now hinges on delivering precision, efficiency, and measurable results. Three key factors fuel this shift: the migration of live content like major sports and tentpole events from linear TV to streaming, deeper programmatic access to inventory, and improving proof of business outcomes. Notably, streaming is no longer reserved for large advertisers. Small and mid-sized advertisers are entering in significant numbers, with adoption jumping from 60% in 2024 to 85% in 2026, driven by self-service platforms and easier activation.

Targeting has surpassed content quality as the most important factor for ad spend allocation. Its importance rose 10 points year over year, with small and mid-sized advertisers driving a 23-point increase. These advertisers often lack large proprietary data sets, making reliable targeting in biddable environments critical. Identity durability, better data integration, and AI-supported audience modeling are now as important as traditional reach and content considerations.

Agentic AI is moving from concept to operational reality. Two-thirds of digital video buyers are already live, testing, or planning to use agentic AI in 2026, with most remaining buyers actively evaluating solutions. Current and planned use cases include media planning and buying recommendations, inventory discovery and evaluation, creative testing and optimization, pre-planning and brief analysis, and performance analysis. Smaller advertisers use AI to augment limited internal infrastructure for workflow functions, while larger advertisers prioritize AI in inventory discovery to manage fragmentation across PMPs, direct deals, and open auctions. However, AI use drops for externally facing and financially binding decisions, indicating that human judgment still anchors final commitments.

Social video overtook CTV in total spend in 2025 and is expected to widen that lead in 2026. This growth is tied to AI-enabled personalization, creative optimization, and measurement capabilities integrated into native platform stacks. While social video benefits from rapid testing and adjustment, it is increasingly paired with CTV as a complementary engine rather than a standalone strategy.

The report points to three key industry trends: aligning AI investment with workflow needs, shifting video success metrics to emphasize outcome validation, and prioritizing partners that offer reliable and transparent targeting in a signal-constrained environment.