The Australian online advertising market grew by almost 30 per cent in the 2016 financial year, hitting $A6.8 billion, according to the latest the IAB/PWC report. That’s the best growth result in five years. But, once again, the IAB danced a merry jig around the only issue that really matters: the extraordinary performance of Google via search and YouTube (and, to a lesser but growing extent, Facebook).
In the 12 months ended June 30, the market grew by 29.7 per cent — representing the fastest year-on-year growth in online advertising since 2011 — with video and mobile cited as the two main drivers of growth.
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The IAB/PWC Online Advertising Expenditure Report is based on data provided by publishers. However, the Google and Facebook figures are mere estimates — that’s a nice way of saying the researchers make the number up. Let’s be polite and call it an educated guess.
By the way, any criticism should probably be directed towards Google and Facebook ultimately. Neither of the two dominant digital players provide their local numbers, so the report is a bit like trying to measure the local Telco sector without including Telstra. As they don’t pay any meaningful tax, the least they could do is provide some meaningful market data.
It was a point not lost on local media attending the launch of the report at PWC’s Sydney offices on Tuesday morning. When the Q&A rolled around, the first question from the floor referenced the size of the two Internet giants: “Is there a version of this [IAB/PWC Online Advertising Expenditure Report] that doesn’t include Facebook and Google?”
Vijay Solanki, CEO of IAB Australia, said they were unable to break out stats around specific publishers for confidentiality reasons. “In the spirit of confidentiality we have to keep that together,” Solanki said. “It’s a market of big and small players and actually both sides can learn from each other.”
It’s a silly argument of course. The IAB knows its report is compromised without the Google and Facebook data. But neither company is in a hurry to stump up the information.
Given the point of the research is not really market insights but rather market advocacy — encouraging the shift of budgets to digital — the digital club members have a vested interest in playing along. It’s all very cozy.
Year-on-year total online advertising market value and growth from FY 11-12 to FY 15-16.
Earlier this year Morgan Stanley published an analysis suggesting that 85 cents of every new dollar spent on online advertising in the US went to Google or Facebook in the first quarter of 2016. Subsequent validation suggested the figure was closer to 90 per cent.
When asked if IAB and PWC could share which publishers and platforms were pocketing the new online advertising dollars in Australia, Megan Brownlow, Editor of PWC’s Australian Entertainment & Media Outlook, said the research hadn’t done that particular sum, but that the “pie is there to be eaten by everybody”.
“In terms of new [dollars] we haven’t done that particular calculation, that probably could be doable, but … as an industry we should be collaborative. And it might be provocative if we start making headlines about all new money is going in this direction or that direction,” Brownlow said. “Whereas the pie is there to be eaten by everybody. If anything, I think we should take from it we all need to operate at a high standard; there’s no money up for grabs without working hard.”
Really, why do they bother?
Online approaches 50 per cent of the market
Presenting the IAB report, Gai Le Roy, Chief Operating Officer at Gateway Research, said last year 42.5 per cent of the market was going into digital and it is fast approaching 50 per cent of the market.
This year’s figure — $A6.82 billion — should lift the percentage to around 46 to 47 per cent of the market. “I’ll let the forecasters forecast, but next year we will be very close to half the market,” Le Roy said.
According to the report, general display posted the largest increase at 43.3 per cent — the highest year-on-year growth since the inception of the report — comprising $A2.5 billion of the $A6.8 billion market. Classifieds experienced a 21 per cent year-on-year growth to reach $A1.2 billion, and search and directories grew 24 per cent to make up $A3.1 billion of the market.
“Another year of double-digit growth, driven by the continued rise of the mobile and video category, means that online advertising heads closer to half of all advertising spend,” said Solanki. “It’s brilliant to see real estate along with the automotive, retail and FMCG categories lead the way. They have built capability across all digital platforms especially in mobile and video. They know how to use content, technology and data to help achieve their marketing goals efficiently.”
Mobile grew to $A1.96 billion of the total market, building on strong growth from the year before. Mobile expenditure was split between search and display at 43 per cent and 57 per cent respectively, with 67 per cent of the spend going to smartphones and 33 per cent to tablets.
Video advertising (mobile video advertising is included in the mobile display category) grew 55 per cent from the prior year’s $A388 million to reach $A600 million for financial year 2016. It now makes up 24.3 per cent of all general display advertising expenditure, up from 22.5 per cent in financial year 2015.
The top five industries by expenditure are auto, real estate, retail, entertainment and leisure and, finance. FMCG ranks highly in the video market.
Real estate advertising saw the largest share in growth year-on-year, increasing its category share to 13.2 per cent, compared to 10.8 per cent in the previous year. Motor vehicles remained relatively stable and accounts for the largest category share at 17 per cent for the year, with retail the third largest category at 10.4 per cent, up from a 9.2 per cent in the previous year.
“The uptick in the real estate category is illustrative of an industry that is leading the way in its use of targeted content, personalisation, optimisation in order to lead digital engagement in today’s disruptive environment,” said Solanki.