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Whilst growth in internet advertising in 2020 was relatively suppressed by the impact of the pandemic, the sector outperformed the total Australian advertising market. The internet advertising industry recorded growth of 3.3 percent in 2020, reaching A$9.3 billion, with the industry expected to grow at 5.5 percent over the forecast period to A$12.4 billion by 2025 based on the midpoint forecast scenario.
The internet advertising segment experienced a “year of four quarters”. The year started with a similar growth trajectory to that recorded in 2019, while quarter two bore the brunt of the impact of the nationwide COVID-19 lockdown, with many advertisers pausing investment in the face of economic uncertainty.
As much of Australia’s retail sector rapidly pivoted to e-commerce through Q3 2020, internet advertising saw an early resurgence due to its perceived ability to deliver short-term value to advertisers. Quarter four was stronger than forecast with a combination of delayed marketing investment and increased consumer confidence driving growth in all sub-segments.
Video remains resilient and continues to drive growth in the sector, making up more than 50 percent of general display advertising revenues in 2020.
Video increased by 17.2 percent to A$1.9 billion, making it the fastest-growing digital advertising segment. This reflects the increasing popularity of video as a content format for audiences, partially driven by the ongoing audience growth through connected TVs. In addition, a number of new opportunities were realised by the video market. 2020 was the year TikTok, and to a lesser extent Twitch, really took off, putting video creation into the hands of consumers. Consumer-generated content increased exponentially, as much of the population looked for creative outlets during lockdown. It remains to be seen, however, how these platforms will scale their monetisation via advertisers or other means.
Content publishers' video expenditure by device, calendar year
Source: IAB Australia Online Advertising Expenditure Report, December 2020
At the height of the pandemic, advertisers demanded greater flexibility in their campaign bookings leading to an increase in programmatically-bought Broadcast Video on Demand (BVOD). The growth in connected TV ownership paves the way for ongoing BVOD growth as it allows advertisers to access the reach of a more traditional linear TV buy, coupled with modern flexibility, and in a growing number of cases, data targeting.
As the year progressed, buyers returned to the linear TV market. As free-to-air TV supply reduced, advertisers looked to BVOD and other video channels as they sought mass reach for their campaigns. This investment into video is expected to continue through 2021, with the IAB Australia finding that 68 percent of agencies expect their investment in digital video advertising to increase within the year.1
Search reconfigures as competition with Google grows, blurring the lines between previously distinct sectors.
While video outperformed the wider advertising market, the remainder of the Internet Advertising segment experienced ongoing change, notably blurring lines between previously distinct sectors. Search is now blurring with e-commerce as Amazon’s growth in Australia continues and is likely to be the main driver of the forecast 4.6 percent CAGR in search through to 2025, based on the midpoint forecast scenario. E-commerce is also blurring into retail media as many retailers look to commercialise their owned e-commerce platform, offering sponsored search and other formats to suppliers and other adjacent category advertisers.
Led by the pain felt within the jobs market, automotive availability within Australia and consumers’ hesitancy around house purchasing, classified advertising declined 7.3 percent to A$1.55billion in 2020... ahead of a significant bounceback in 2021.
While classifieds was most significantly impacted by advertising spend cuts in this segment, it has also ridden a wave of positive consumer sentiment from Q4 2020 and into 2021. The return of job opportunities across the country and the booming metropolitan housing markets are forecast to drive a bounceback in classifieds of 4.8 percent in 2021. As a sub-segment that had previously experienced slowing growth, this bounceback may, however, be short-lived unless innovation in the space is forthcoming.
The internet advertising segment is entering a period of disruption as leading consumer-facing players, including Google’s Chrome browser and Apple announced changes to how they will allow consumer data to be collected and used - a shift towards a more privacy-centric approach.
Though Google has since delayed the implementation of its signalled change to disallowing cookies within its browser until 2023, these developments will take effect over the forecast period, and shift far more of the power over control of data into the hands of the consumer. Advertisers using online channels will grapple with these changes to tracking, segmentation, and targeting of audiences leading to a forecast decline in banner-type display advertising over the forecast period.
Retail advertising is surging, representing 16.4 percent of display investment for the quarter ended 31 March 2021 and is also leading video advertising investment.3
Classified advertising is rebounding, reflecting the overall health of the Australian economy and increasing consumer confidence.
In March 2021, the ACCC published its interim report2 as part of its ongoing Digital Platform Services inquiry into market dynamics and consumer choice within internet advertising. The inquiry covers internet search engine services, social media services, online private messaging services, digital content aggregation platform services, and media buying agencies and services. It will be followed by a further interim report, expected in August 2021.
Apple launched its updated mobile operating system, iOS14.5 including options for users to specifically request apps to no longer track their usage. At a time where privacy and online tracking is high on global regulatory agendas this aims to put more control in the hands of the user in how their data is shared and monetised.
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