Online Advertising continues to achieve strong year on year growth

Posted: May 10, 2010 in Digital Marketing, Online Marketing
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The Australian online advertising market continues to record strong growth with online advertising expenditure for the March quarter 2010 growing by an impressive 17 per cent year on year, according to data released today by IAB Australia in its Online Advertising Expenditure Report (OAER) compiled by PricewaterhouseCoopers (PwC).  Online expenditure for the first three months of 2010 totalled $512.5 million, unchanged from the fourth quarter 2009.

Classifieds and search and directories delivered significant growth in comparison with the prior quarter, however, this was balanced by a reduction in the general display market, reflecting the usual seasonality of the first quarter of each calendar year.  Importantly, the decline was less than the historical average, indicating the strength of the general display market.

Commenting on the Report, Paul Fisher, CEO of IAB Australia, said the year on year increase in online advertising expenditure reflects marketers’ increasing confidence in the medium and supports anecdotal evidence that brands are rapidly shifting marketing budget to online advertising.

“Less than two years ago, many advertisers were asking ‘why should I advertise online?’.  Today, the question we hear most is ‘how or where should I advertise online?’.  Driven by increasing consumer engagement with online content and advertising, this fundamental shift across the marketing and advertising industry underpins the continued double digit growth in online advertising expenditure.

“This latest data brings total advertising expenditure in the 2010 financial year to nearly $1.5 billion and the industry is well placed to surpass $2 billion by the end of June 2010.  All three industry sectors – search and directories, general display and classifieds – grew strongly year on year, as finance, automotive, real estate, and recruitment advertisers invested to reach, engage and influence consumers online,” Mr Fisher continued.

“Retail and FMCG advertisers and Government continue to grow their share of the online general display market, foreshadowing significant shifts to online away from other media.  Reports of global and local brands doubling their annual online advertising budgets and increasing online’s share of total marketing budget to 40 or 50 per cent and above are now commonplace as branding and direct response budgets are directed to where they can reap the greatest returns,” commented Mr Fisher.

Classified advertising and search and directories advertising were the key growth drivers during the quarter, growing by 9.4 per cent and 2 per cent respectively, while general display declined by 11.1 per cent on the prior quarter.

Search and directories advertising continued to account for the largest share of total advertising expenditure, representing 51.7 per cent of the market or $264.75 million, with general display accounting for 24.6 per cent ($126m) and classified advertising accounting for 23.8 per cent ($121.75m) during the quarter.  Within the search and directories market, search is growing at a faster pace.

The finance, motor vehicles, computers and communications sectors were the dominant users of general display advertising during the quarter, representing 45.6 per cent of general display spending.  The finance industry was once again the biggest spender during the quarter, responsible for 20 per cent of general display advertising expenditure, up from 18.6 per cent in Q4 2009, while the motor vehicle industry was second with a 14.6 per cent share, up from 11.6 per cent in the prior quarter.

Within general display, video based advertising comprised $5.7 million of advertising expenditure, up from $5.3 million in the previous quarter.  However, email based advertising decreased from $9.3 million in Q4 2009 to $7.9 million in Q1 2010.

Real estate was the leading category for classifieds advertising expenditure during the quarter, followed by recruitment and automotive, as it was in the prior quarter.

The dominant pricing method continues to be Cost per Thousand (CPM), with 75 per cent of general display advertising based on CPM while direct response accounts for just 25 per cent.  CPM pricing is based on a straight Cost per Thousand pricing methodology, sponsorship, or CPM-like pricing, while direct response pricing is based on a non-CPM display methodology.  This may include any pay per click, pay per sale, pay per action or pay per lead.

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