Online ad industry continues its climb reaching $3.3bn in 2012 with 18% year on year growth

Mobile and video were the star performers for online advertising for 2012 according to IAB Australia’s Online Advertising Expenditure Report (OAER) compiled by PricewaterhouseCoopers (PwC).

The report noted that online advertising expenditure in Australia reached $3.3bn for the 12 months ended 31 December 2012 beating market predictions to reach achieve an 18 percent increase on the previous 12 months. Mobile advertising grew 220 percent for 2012 representing expenditure of $86.2m, while video advertising grew 30 percent in the same period, representing $90.3m.

All three sectors grew year on year with General Display up ten percent, Search and Directories up 27 percent, and Classifieds advertising up by nine percent. On a quarterly basis, General Display and Search and Directories achieved growth while classifieds advertising declined slightly.

As a whole, online advertising expenditure reported an 11 percent increase over the previous quarter to reach $899m for Q4 2012.

While motor vehicles, finance and real estate continued to dominate general display advertising, retail and FMCG showed the biggest increases in expenditure, reflecting the continuing shift of advertising dollars in those sectors to online.

Says Gai Le Roy, director of research for IAB Australia commented: “The inexorable rise of mobile, video and search is showing little sign of abating and we are delighted that the online industry is continuing to beat all reported market predictions about lower growth rates. While mobile is currently experiencing a surge, we expect it will settle into strong and sustained growth rates, just as general online advertising expenditure did in 2000 after an extraordinary period of growth.”

Mobile advertising, which is a subset of general display and search expenditure, achieved growth rates reminiscent of the early days of online advertising. Coming off a low base, the total expenditure for mobile advertising for the three months ended 31 December 2012 was $33.8m, a growth of 55 percent over the previous quarter. Based on submissions from publishers, 58 percent of mobile advertising for Q4 2012 was allocated to smart phones and 42 percent was for tablets. 56 percent of mobile advertising was general display while 44 percent was search.

Video advertising increased last quarter from $20.7m in Q3 2012 to $28.5m in Q4 212. Year on year video advertising compromised $90.3m of advertising expenditure – an increase of 30 percent.

CPM remains the dominant pricing methodology, increasing to 63 percent of general display advertising expenditures, with 37 percent being direct response based.

General display advertising accounted for 26 percent of all online advertising, classifieds advertising accounted for 20 percent and search & directories advertising accounted for 54 percent based on expenditure for the past 12 months.

The report is the third to be prepared under the ‘new approach’ introduced in the June 2012 report. This approach means data collected from industry participants has been supplemented by estimates for Google display, video and mobile advertising as well as Facebook display and mobile advertising; while the prior methodology for estimating Google search has been refined.