Advertising Unlocks Scale for the Next Generation of Consumer Platforms

EXECUTIVE SUMMARY

With the scale of Gen AI in 2022, ad spends have outgrown revenue at ~1.4x. In a ~$1 Tn global ad market, where digital spends account for ~76%, AI has changed gears.  

Adoption lags are compressing as emerging markets reach scale faster, despite the concentration of ad dollars in a handful of verticals. Programmatic advertising has taken between 5-7 years to scale in India, but AI-native ads are on their way to close the gap within ~3 years.  

With AI apps commanding strong user attention, advertising is the most natural way to monetise it, converting it into distribution and revenue. 

Redseer Strategy Consultants believes that integrated platforms with stronger advertiser relationships, SDK distribution and 1P surface are best positioned to win the next 5 years. 

This report goes beyond tracking advertising trends. It provides a strategic understanding for platform leaders to evaluate where the next wave of advertising revenue will emerge, which AI-native formats will create premium inventory, and what capabilities, from owned consumer surfaces and SDK distribution to AI-led innovation, will separate future advertising leaders from everyone else.  

REPORT CONTENT

01. Advertising is accelerating within budgets of the world’s largest companies 

• How internet companies treat advertising as growth capital 
• Why ad budgets have outgrown top line advertisers 
• What are the three key axes of the market cube 

02. AI-first consumer apps will expand the market beyond core verticals 

• The top 5 verticals driving 3/4^th of the digital advertising spends  
• Why digital advertising spends for Retail and Technology & Electronics is growing the fastest 
• Why advertising has become a key monetization layer within the AI consumer stack 

03. LLM-adapted user behaviour is creating a new generation of ad formats 

• How each ad format has chased performance 
• How AI assistants are redirecting shopping traffic, rewiring ad formats and creating new AI-native formats simultaneously 
• How AI is compressing the display value chain 

04. Developed markets are pioneering advertising’s technology shifts 

• Where are digital ad spends concentrated with distinct ecosystems 
• Emerging markets have significant headroom for growth 
• What is driving digital advertising in the US and India 

05. What does winning the next phase require 

• How both sides of the advertising market are making their decisions 
• The Three-Phase playbook 

WHAT DECISION MAKERS WILL LEARN

Why ad budgets are growing faster than the businesses funding them: Targeting precision, automation and creative iteration speed have compounded enough to allow advertisers to act on spends faster than before. As a result, internet companies are capturing the share. 

Why advertising is the new moat for AI apps to monetise at scale: Subscription revenue comes from a small paying base and cannot outrun rising inference costs. Advertising monetises the complete user base. 

Why the next ad format war will be won by integrated platforms: As AI rewires search, display and commerce simultaneously, the winners will be the ones who own both demand and supply relationships (backed by first-party data). 

REDSEER PERSPECTIVE

Redseer believes that advertising is entering a new phase where advertising intensity is growing faster than income across economies, with emerging markets having enough headroom for growth. 

AI is constantly expanding the ad market’s addressable base, compressing legacy formats into fewer but higher-value impressions, and creating an entirely new inventory that already commands a pricing premium. Integrated platforms that combine SDK distribution, own consumer surfaces and AI-led innovation, are best positioned to take advantage of the shift. 

WHO SHOULD READ THIS

AI-native consumer app builders: Understand how advertising can convert distribution and attention into sustainable, scalable revenue alongside or instead of subscriptions. 

AdTech platforms and publishers: Identify where SDK integration and owned consumer surfaces will decide who captures the next wave of premium inventory. 

Brand and performance marketers: See how new AI-native formats pricing are at a premium and outperforming legacy channels on conversion, and what capabilities are needed to participate. 

Private equity and venture capital investors: Evaluate AdTech and AI-native consumer platforms against the three-axis growth framework: verticals, formats and geographies. 

STRATEGIC TAKEAWAYS

This Redseer Strategy Consulting report is designed for decision-makers responsible for growth, monetisation and platform strategy: 

• Digital ads dominate the ~$1 Tn global market with ad budgets outgrowing revenue at ~1.4x pace since Gen AI scaled in 2022. 
• While ad dollar pool continues to be consolidated in developed markets, emerging markets are closing the Adtech gap. 
• Of the 2 Mn+ AI native apps launched in 2024-25, scaled apps are increasingly monetising through ads or hybrid models, creating new premium advertising and improving unit economics. 
• Integrated platforms with SDK distribution and 1P surface are best positioned to win in the next 5 years. 

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