Australia’s online advertising market grew 7 per cent to reach $9 billion in the last financial year, according to figures from the IAB, the peak trade association for online advertising.

But while online ad spend continued to grow, the rate of growth is tapering off in Australia, even with a federal election bump.

The IAB says nearly half of last year’s $9 billion went to search and directories and 37 per cent went to general display, the two categories which contain market leaders Google and Facebook’s core business.

The industry group does not break out Google or Facebook’s share of the ad spend but it is widely reported to be around half globally and over two thirds in Australia, meaning the US giants collect billions from the local market.

However, both companies bill huge amounts overseas in lower taxing countries like Singapore meaning their Australian tax bills are much lower.

For example, The New Daily reports, last calendar year Google had a corporate tax expense of just $26.5 million in Australia, despite collecting local revenues of $4.3 billion in the same period.

Digital Advertising still growing but slowing

The year-on-year growth rate in digital advertising slowed (7.1 per cent last year versus 11 per cent in 2018 FY), something the IAB put down to the downturn in Australia’s overall advertising market. All online revenue categories still experienced growth, just not as much as previous years.

“We are seeing steady digital growth within a universally challenging advertising environment,” said Gai Le Roy, CEO of IAB Australia. “When we look [at] some of the notable drivers of this growth, it’s clear that small and medium business investment in digital is growing at a higher rate than traditionally larger advertisers.”

Online advertising expenditure, FY19 compared to FY18. Source: IAB

“There are also some key category shifts. Automotive is again the largest advertiser category for display, but for the first time it is also the largest video advertising category – taking over from [fast moving consumer goods] as their spend softens.”

Programmatic growth

The IAB report, compiled by PwC, says one third of of general display advertising was bought programmatically in the last quarter, an increase of 4 per cent on the previous quarter; taking share from media agencies.

In Q1 2019, 58 per cent of general display advertising viewed on content publisher’s inventory was bought by media agencies via an insertion order or non-programmatic method. But in the latest quarter the amount has fallen to 48 per cent.

Mobile and video growth

According to the IAB data, advertisers are continuing to follow consumers to their phones, with mobile and video gaining a larger share of digital budgets. 

The total mobile advertising market, inclusive of search and display, increasing by $1 billion (or 28.4per cent) to $4.6 billion. While video – the fastest growing display format – now makes up 44 per cent of the total display spend, equal to around $1.5 billion per year.

According to the report, the two advertiser categories that increased their share of display spend for the quarter were government (6.7 per cent, up from 5.1 per cent last year) driven by election spend and travel which has gradually increased share over the last year to now represent 7.3 per cent of display up from 5.7 per cent last year. 

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