Online advertising up 18.5% as traditional media struggles

The online advertising market has recorded growth of 18.5% during the most recent financial year, according to new data from the Interactive Advertising Bureau of Australia.

The announcement comes as PricewaterhouseCoopers claims the whole $25.5 billion advertising industry will only see growth of about 3.8% until 2013, and warns that traditional advertising mediums should not expect pre-crisis revenue levels to ever return.

But IAB Australia says online is the future of advertising, with its latest Online Advertising Expenditure Report showing that online advertising spending exceeded $1.8 billion during the 2008-09 financial year.

Search and directories accounted for 49% of total advertising expenditure, with general display accounting for 27% and classifieds 24%. Search and directories grew by 25%, general display grew 19.6% and classifieds by 6%

Finance, computers and communications and motor vehicles were the most dominant sections using general display advertising, and account for 45.5% of general display spend. The largest subcategory was motor vehicles – manufacturers, and comprised 9.8% of general display spending for the second quarter of 2009.

Australian Governments have also increased their share in the general display category, claiming 4.5% during the six months ending 30 June 2009.

IAB chief executive Paul Fisher says the figures send the message that online is the safest form of advertising during the downturn.

“I think the anecdotal evidence tells us a lot of advertisers have seen online as the safest option. While we know marketing and advertising budgets have been cut, and they have also been cut for online spending, a lot of advertisers have maintained their online presence.”

“This is because, depending where you are investing your money, a lot of people feel that actually there is a more measurable return on investment with online media. Particularly with search engine optimisation, a lot of marketers feel they can get a more measurable ROI.”

Fisher says struggling SMEs should definitely look into online advertising as an alternative to traditional media, particularly with the different methods available for advertising on the internet.

“The number one reason online advertising is good is because that’s where consumers are spending more of their time, and advertising is all about engaging those consumers. Secondly, you can engage those users in different ways, interact with them, you can build communities, you can follow what they’re talking about, and so on.”

Meanwhile, PricewaterhouseCoopers maintains the entire advertising industry is in trouble, with its latest media outlook paper suggesting traditional media is being overtaken by online advertising.

PricewaterhouseCoopers lead partner David Wiadrowski said in a statement the industry will not see pre-crisis revenue levels until well into the next decade.

“This is due largely to the structural change in the industry where attention and advertising dollars from traditional media are migrating online, where the conditions of supply and demand are dramatically different,” he said.

The company’s annual Australian Entertainment and Media Outlook paper suggests the advertising industry will see just 3.8% annual growth each year until 2013, with consumer spending only growing by 1.7%, well down from its usual average of 5.5%.

“Consumers are going to be the growth engine of the future,” the report said. “Entertainment and media businesses must adjust their business models so they are not left behind.”

“Entertainment and media advertising spending growth will continue to increase, as new technological developments such as high-speed broadband and internet-enabled smartphones provide more access to advertising,” Wiadrowski said.

Other traditional forms of advertising including free-to-air television, radio and magazines will stall or decline over the next four years, while paid television, interactive games and the film industry will be the areas in which to invest.

Entertainment and media revenue will grow by 2.3% in 2010, 4.1% in 2011, 5.7% in 2012 and 7.4% in 2013. Additionally, internet revenue will grow by 10.4% on average per year, pay-TV revenue will grow by 9.1% a year and film entertainment revenue will grow by 4.9% per year.

“The Rudd Government’s revision of the national broadband policy and promised investment of $43 billion in an infrastructure backbone will support commerce and productivity growth for the new global digital economy in the decades ahead,” he said.

“Additionally the web-enabled mobile phone is leading the charge as a primary distribution platform for the entertainment and media of the future.”

The report also said revenue from free-to-air TV and newspapers will shrink by an average of 0.7% a year over the next five years, with magazines to contract by 0.2%.