Online advertising spending increased by 23% during the September quarter to reach $571.75 million, with expenditure now correcting itself following a slowdown during the financial crisis, according to the latest IAB Online Advertising Expenditure Report.
And while the old favourites of search and display advertising are continuing to perform well, accounting for 48.9% and 26.5% of the market respectively, IAB chief executive Paul Fisher pins video advertising as the next big growth market.
“This means sites like YouTube, but also anywhere with video content. So that includes pre-roll video, and other display advertising in video. I think in terms of percentage growth it is growing well, and it’s continuing to do well.”
The report reveals advertising expenditure on video increased from $4.7 million in the third quarter of 2009 to $7.6 million. Fisher says businesses should consider moving advertising dollars into such a high-growth area.
“You already have significant amounts of growth for video in the United States, and that growth is going to continue over here as well,” Fisher says.
The report, compiled by PricewaterhouseCoopers, reveals spending increased by 23%, or $105.5 million, to a total of $571.75 million during the third quarter. This puts total expenditure on track to exceed $2.2 billion for the 2010 calendar year.
This comes after the online ad market experienced a slowdown in 2008 and 2009. During the third quarter of 2009, spending dropped 4% year-on-year, with the fourth quarter only recording 9% growth year-on-year.
“I think this is a correction, and we’re now seeing growth back on trend. I think the industry is very happy with double digit growth, but this is the first quarter where we are seeing growth back at pre-GFC levels.”
“There is also evidence that this growth is due to advertising coming out of television and newspapers. Based on separate figures we can see money is coming out of newspapers and into online.”
General display advertising accounted for 26.5% of spending, while classifieds advertising accounted for 26.5%. Search and directories advertising accounted for 48.9%.
Within general display advertising, email-based advertising took up $7.6 million, an increase of 6% from the third quarter in 2009. CPM based advertising continued as the main expenditure type, with 75% of all advertising conducted on a CPM basis, and 25% on a direct response basis.
The report also confirms a long-term trend, with the finance, motor vehicles and computer industries continuing to dominate the general display advertising market, with those three industries taking up 44.3% of spending.
Motor vehicle manufacturers were the largest subcategory at 10.5% of general display spending, while the health, beauty and pharmaceuticals industry also increased to reach the top five.
Entertainment leisure also recorded a 6.9% share, down from 7.2% in the second quarter, although it retained its status among the top five.
“Since we started this report back in 2002, those industries have pretty much stayed the same and have constituted around 50% of spending. Just those three industries are spending hundreds of millions online, and we’re seeing others come through as well.”
“We know the health and beauty and entertainment industries are coming from a low base, and these are small movements from a low base, but they are trending upwards and we think that will continue.”
Fisher says SMEs need to watch the trends and see where online spending is heading, especially in high-growth areas such as video. But he also says the report confirms that businesses should continue putting more money online.
“We are seeing the display and search advertising are still growing, they are taking up a large amount of spending. And of course, let’s not forget classifieds, which have definitely expanded. Online spending is continuing to grow.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
