Traditional forms of online advertising including display is set to decline as video and rich media will increasingly gain traction, according to a new report from Frost & Sullivan.
Frost & Sullivan's Australian Online General and Mobile Advertising Market Report 2011 said more mature inventory segments including display, advertorials, integrated site content, sponsorships and eDM will decline. The report predicts those forms will come under challenge from strong growth in online video advertising and rich media content.
The report found the online general advertising market (excluding mobile) is worth $635 million, a growth of 11.9% in the 12 months to June 2011. Frost & Sullivan predicts the market will increase at a compound annual growth rate of 10.6%, reaching a value of $1.05 billion in 2016.
The report found over half of the respondents said they had increased online ad budgets, particularly in finance and insurance, and FMCG/retail. Frost & Sullivan said the growth of social media advertising is impressive, with Facebook the dominant player in that segment.
Frost & Sullivan senior researcher manager Australia and New Zealand, Phil Harpur, said: "The two big trends in advertising over the next five years will be a rapid growth in video advertising driven by an increased presence in online video streaming and significant growth in mobile advertising."
The report found the mobile advertising market is valued at $13.9 million, a growth of 26%. The report said while the growth rate remains steady, it is below expectations set by the market a few years ago.
The report said restraints faced by the mobile advertising industry include a lack of locally available mobile sites, under-use of consumer targeting, lack of rich media ad serving functionality, fragmentation of mobile operating systems, and insufficient industry and agency awareness.
Frost & Sullivan predicts the market will grow at a compound annual rate of 43% over the next five years with an expected market value of $82 million by 2016.
Harpur said: "Right now Australian mobile advertising expenditure is low compared to the UK and the USA, despite the fact that Australia's smartphone penetration is now roughly on par with those markets.
"But this is already starting to change and we anticipate rapid growth in Tablet PCs, gains more acceptance amongst advertising agencies as a crucial part of the overall advertising mix."
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