Boom in online ads challenges old media order
By Julian Lee
April 12, 2005

The online advertising market grew more than six times faster than the overall ad market last year to hit $388 million, for the first time eclipsing its nearest rival, the outdoor ad industry.


Australian advertisers spent 64 per cent more online in 2004 than in the previous year, making it the fastest-growing medium, according to the latest revenue figures supplied to the Audit Bureau of Verification Services.


Figures due out later this week are expected to show that the total Australian ad market grew by 10 per cent to $9.1 billion.
The figures confirm that "new media" is posing a serious challenge to traditional media such as radio, magazines and, to a lesser extent, newspapers and television for advertising dollars.


Spending on banner ads, classifieds and sponsored links through search engines was $61 million more than on posters, street furniture, buses and taxis, which last year claimed $327 million of the Australian ad market.
Online has already overtaken radio in ad revenue in Britain and the United States.

Publishers are hailing the figures as a milestone in the industry's recovery from the dark days of the tech wreck.

NineMSN, the joint venture between Microsoft and PBL, claims a growing number of mainstream advertisers are using online to launch products and services.


"The list of [our] top 25 advertisers used tobe dominated by online businesses but now they are the same as those you would find on the TV schedules," NineMSN chief executive Martin Hoffman said.
McDonald's, Pfizer, Procter & Gamble and KFC were all new advertisers to the medium in the past year, attracted by the growing number of "eyeballs" going to the internet, he said.


Eleven million Australians are connected to the internet and 60 per cent are expected to be broadband users by the end of the year. An Australian study conducted last year by mobile phone operator Ericsson found user hours jumped from 17 to 23 a week after users switched from dial-up to broadband.


Although the finance sector remains the biggest spender, pumping $31 million into the medium last year, according to ABVS's 2004 Online Advertising Expenditure Report, the amount spent by fast-moving consumer goods advertisers last year leaped from $1.9 million to $4.7 million.


"It's really brought home the fact that online is becoming an established medium," said Nic Cola, commercial director of Fairfax Digital, the online arm of John Fairfax, publisher of the Herald.
Both Fairfax and NineMSN expect similar growth rates in 2005.


Online ad revenue is split three ways: display, which includes banner ads and sponsorship; classifieds; and search, where an ad is served up in response to a query.


Search had the largest growth, rising 85 per cent to $127 million, and is expected to be the engine room for growth as Google, Yahoo! and NineMSN battle it out for dominance.