Internet advertising industry cracks $2 billion mark

New figures showing the Australian internet advertising industry has cracked the $2 billion barrier is yet another sign small businesses must pay more attention to online marketing, one industry expert believes.

The latest Interactive Advertising Bureau Online Expenditure Report, compiled in tandem with PricewaterhouseCoopers, reveals total online ad expenditure came to $2.04 billion for the year ending June 30, 2010.

The figures also show spending came to $552.5 million in the June quarter of this year, representing a 22% year-on-year increase from the same period in 2009. The study shows general display advertising grew by 11%, followed by classifieds at 9% and search and directories at 16%.

Frost & Sullivan senior research manager Phil Harpur says savvy small businesses will be using all three of these categories to market their business as the internet advertising industry becomes a more “mature” market.

“Businesses should be paying more attention online. The point I’d make is that you should at least be looking at online directories, and then moving on to display and so on. But most switched-on small businesses will be looking at advertising across all three of those channels.”

The $2.044 billion figure represents a 13% increase from $1.8 billion in 2009. Prior to last year, spending in 2008 was only at $1.5 billion, and was only at $778 million in 2006.

For the full 2010 year, general display advertising accounted for 26.8% of the total expenditure, with classifieds accounting for 23% and search and directories at just over 50%.

The IAB study reveals finance, motor vehicles, computers and communications all dominate the general display advertising market, all accounting for 44% of ads in that category. Motor vehicle manufacturers are the largest spenders, taking up 10.7% of all general display ad spending.

Email advertising came to $33.8 million during the year, and $8.7 million in the June quarter alone, while video advertising is also continuing to grow – it recorded $25.3 million during the year.

The “Cost Per Thousand” or CPM model is still the most popular, with three quarters of general display ads using the model.

Harpur says the figures are in line with what his own firm is seeing, and maintains that businesses should still be putting as much as they can into online, and even start experimenting with relatively new models like mobile advertising.

“You wouldn’t call it a mature medium yet but it’s certainly not far off. With any new industry you often go from a very high base, but we’re seeing the signs now of online being quite a mature medium, or at least not being far out from it, like in the US where you see the industry being dominated by macroeconomic factors.”

“For small businesses, we have to separate mobile from online, because mobile is still in an experimental stage and is not high on the agenda. But I think most companies will need to have a multichannel approach.”

Generally, he says, “these figures are in line with what I would expect at this stage”.

IAB chief executive Paul Fisher said in a statement the breaking of the $2 billion barrier is a significant milestone for the local industry.

“The long awaited and much forecast $2 billion dollar mark has finally been breached. Powered by strong growth in all three categories and with continued double digit growth forecast, Australian online advertising expenditure is on track to exceed $3 billion in the next four years.”

“With increased online consumption, explosive growth in the use of social media and online video content and advertising; and improved online audience measurement, advertisers and media agencies continue to grow their advertising investment where they get the best results – online.”