SYDNEY: Online advertising expenditure is expected to pass A$3bn for the first time in Australia this year, after recording impressive growth during the opening quarter of 2012.

The IAB Australia and PricewaterhouseCoopers reported that internet ad revenues rose by 19% on an annual basis in Q1 to A$713m, with a similar pace of acceleration anticipated going forward.

"There is no doubt that online advertising in on track to surpass $3bn and 20% share of all advertising this calendar year," said Paul Fisher, the chief executive of IAB Australia.

"It's quite possible that we'll reach that milestone this financial year thanks to increased consumer confidence sparked by further interest rate cuts, which we believe will support continued growth in online advertising in key sectors."

In the first quarter, paid search and directories collectively registered a 21.4% leap in ad sales, hitting A$395.7m and claiming 55.5% of the market as a whole.

Classifieds also witnessed a meaningful hardening in demand, up by 13% and securing A$165.3m as a result.

Elsewhere, display logged its fastest growth since 2008, enjoying an 18% jump compared with the same period last year, to some A$154m.

Within the overall display figures, email advertising experienced a contraction from A$9.6m to A$7m, whereas video saw a modest improvement from A$11m to A$11.6m.

Cost per thousand remains the primary form of pricing for general display ads, supplying 74% of expenditure, while direct response provided 26% of returns.

Financial services, automotive and real estate made up the top three categories where display was concerned, delivering 41.6% of sales, as computers and communications fell out of this group.

Real estate, recruitment and automotive assumed the equivalent positions when it came to classifieds, a situation exactly reflecting the previous quarter.

"The retail and government sector online spend continues to flat-line which is surprising considering both are facing tough marketing and communications conditions," Fisher added.

"There is a real opportunity for these sectors to invest their advertising budgets online where they will reach, engage and influence their audiences most effectively."

Data sourced from IAB Australia; additional content by Warc staff