SYDNEY: Internet advertising expenditure is continuing to rise in Australia, and is set to be the primary driver of market growth as spending through traditional channels comes under pressure.

The IAB, the industry trade body, and PricewaterhouseCoopers, the business services firm, estimated web advertising revenues rose by 20% annually in the 2011 financial year, to A$2.5bn.

Search and classifieds both saw improvements of 23% year on year, to A$1.3bn and A$579m respectively. Display logged a 12% uptick, to reach A$612m, encouraged by finance, IT, telecoms and automotive brands.

Video advertising enjoyed 53% growth year on year, but still only takes 6.5% of online display sales, lagging behind a comparative figure of roughly 14% in the US.

The FMCG sector is also at a somewhat nascent stage, as its share of web display fell by half a percentage point to 5.5%, or A$34m, trailing the 13% share the category yields in the UK.

Looking ahead, the IAB/PwC study predicted internet ad revenues should top A$3bn in 2012.

Online could thus be the main source of adspend growth in Australia this year, according to a new forecast issued by Starcom, the media network.

Based on a survey of advertisers in the country, the company stated the ad market would expand by 2.2% in 2011, revised down from the 6% increase anticipated at the end of last year.

While 44% of brand owners had boosted media budgets during the first half of 2011, around a third reported expenditure levels are due to decline across the remainder of the year.

As such, although overall spending climbed by 4% between January and June, the projected expansion for 2011 reached a modest 0.4%.

Some 64% of marketers enhanced their outlay on online display ads by 10% or more in H1 2011, but 60% cut back on radio to a similar extent, and 40% followed the same path for free-to-air TV.

"It's no real surprise that ad budgets are being driven to digital media - it's just a continuation of a long-term trend," John Sintras, CEO of the Starcom MediaVest Group, said.

Data sourced from the IAB/Starcom MediaVest Group; additional content by Warc staff