Growth in online classifieds to slow as print-to-online migration loses steam

Growth in the online classifieds sector is expected to slow from 22% in 2010 to 11% in 2011 as a result of the sluggish economy and the fact the migration of ads from print to online is almost complete.

The forecast, from research firm Frost & Sullivan, suggests online advertising revenue will hit $682 million in 2011, up from $617 million in 2010. Over the four years to 2014, Frost & Sullivan is tipping an annual growth rate of 9.5%, with the strongest growth coming from the automotive sector.

According to the firm, online now accounts for 35% of all classifieds advertising expenditure in Australia (excluding print directories), which puts Australia’s use of online classifieds slightly ahead of even the US markets.

Frost & Sullivan estimates print advertising revenues have fallen by 35% since 2007, but senior research manager Phil Harpur says the migration of advertising from print to online is now coming to an end.

“We haven’t reached full maturity yet, but we are getting towards that point,” he says.

Harpur says that while there will still be room for the number of ads to shift from print to online in the areas of automotive advertising and real estate advertising, the main shift will be in terms of the money advertisers spend in each area.

He gives the example of real estate, where agents still sell a bundle of ads that include online and print, despite the fact most houses are sold online. In the future, Harpur expects that more of the print ads sold in a bundle to shift to premium ads online.

“Although most houses are now online, there is still potential for online to get a bigger chunk of the total advertising spend.”

With the migration of ads from print to online now slowing, Harpur says the online classifieds operators will become like their print counterparts – fully exposed to the economic cycle.

“As the online classifieds market becomes more mature, then the correlation with economic conditions becomes much more pronounced,” Harpur says.

“If there is a softening of the economy, that impact is going to be much more noticeable than it was five years ago when online was being driven by the migration from print.”

The other challenge for online advertisers is the rise of social media, which presents a particular challenge for those in the recruitment classifieds sector.

The most obvious challenger is LinkedIn, which now offers paid job listings and has always been seen as a fertile ground for head hunters.

“Last financial year was the first when you could say that LinkedIn was having enough of an impact that the major players could see that it was a real threat.”

But as social media grows and internet users spend more time on these platforms, the potential for online classifieds to shift from specialist operators to social media sites will grow.

“The influence it’s having directly on the recruitment space is quite unique, but having said that social media is a model developing alongside other advertising and other marketing models.”