Growth in online video advertising surges as total online ad spends hit $2.3 billion

Small businesses should start investigating ways they can advertise through online videos, the Interactive Advertising Bureau argues, saying that many SMEs are missing out on a growing audience because they are too afraid to try new things.

The IAB’s new advertising report shows the online ad market is set to reach $3 billion by 2012, and much of that growth is being recorded in the online video sector.

The new report shows Australians are now watching over one billion videos every month, and that advertising on those videos grew by 83% in the fourth quarter year-on-year to $33.4 million.

IAB chief executive Paul Fisher says there is an entire untapped market here waiting for SMEs to innovate.

“I think all businesses need to consider this. Online video has a tremendous attraction for SMEs, and not just for them but national advertisers too. In the United States it’s a $1.2 billion market every year, and it constitutes a bit of their market.”

“It’s lower here, representing about 1.4% of all advertising. So the growth trajectory is quite strong, and it’s happening. My forecast is that online video will reach around $200 million.”

The IAB report shows spending for online ads reached $2.26 billion in 2010, representing growth of 21% from the 2009 calendar year. In the December quarter, spending reached $627.75 million – a new record. This is up 22% from the last quarter of 2009.

The general display and search sectors both grew by 22% and 50% respectively, with display now accounting for 27% of total expenditure. Classified advertising accounted for 23% and represented $531 million.

There were six sectors that dominated online ads – motor vehicles, (up 35%), finance, (up 20%), retail, (up 66%), health and beauty, (up 37%), government, (up 40%) and leisure, (up 21%).

“We expected growth of about this much, he said. The December quarter was stronger than a lot of people thought it would be. I think the growth overall is quite strong.”

But despite all the growth, Fisher says it’s the retailers that are coming up short. He says businesses in the sector aren’t committing to online ads as much as some would expect.

“We’re still not seeing the retail industry commit substantial percentages of their budgets. They’re up by a lot percentage wise, but that’s off small bases. I think the significant investment is still yet to come.”

Fisher says if retailers, including SMEs, where to spend more money online they may see a better return on investment than their current advertising choices.

“I think there is a basis for them to do this, yes. Anecdotally we are seeing more businesses take money out of some areas such as print and commit it to online, and we think it’s having an impact.”