Media Release from Frost & Sullivan

Revenues for total online search advertising grew 50 per cent from 2006 to 2007 and is expected to grow consistently at an average rate of 30 per cent yearly for the next three years.

New analysis from global growth consulting company, Frost & Sullivan (www.frost.com), The Australia Online Search Advertising Market 2007 – 2011, reveals that revenues in this market totalled AU$637 million in 2007 and is forecasted to be worth AU$1.8 billion by end-2011, growing at a CAGR of 29 per cent (2007-2011).

Mr. Darryl Nelson, research manager at Frost & Sullivan Australia, comments: “search engine keyword sponsorships will remain the growth engine for the online search adverting market during the forecast period.”

“This will be driven by existing advertisers in the short term, competing heavily for premium inventory, and by new advertisers in the mid-to-long term, increasing the yields across the greater range of keyword phrases.”

Paid search revenues (keyword sponsorships and contextual search) will remain the largest segment in 2011, and are forecast to be worth an estimated AU$1.3 billion, while online directories revenues will reach an estimated AU$520 million in 2011. The major drivers overall include increasing adoption by new advertisers, and rising search advertising budgets.

However, Frost & Sullivan has identified that one of the few significant barriers to search advertising growth is the limited inventory available, owing to Google’s dominance. While the auction model continues to increase average costs per click in key industries, more advertisers are finding their budgets restrained or locked out as a result.

The online directories advertising segment remains dominated by Sensis’ Yellow Online, but improvements to content, distribution partnerships and pricing models are set to boost the viability of a range of directories. Advertisers continue to see good returns from online directory advertising, and this will increase as more targeted niche directories (listings sites with single content or geographic focus) emerge, share of traffic grows and more performance-based pricing models evolve from the current paid inclusion pricing.

Adds Mr. Nelson, “travel and accommodation remained the highest spending industry for paid search, accounting for 26 per cent of paid search advertising revenues in 2007.

“Many niche online directories also started to see stronger growth during 2007, having reached critical mass in terms of viable audience. As a group, niche directories accounted for just under 10 per cent of total online directories revenues.”

A survey conducted by Frost & Sullivan found that search engine keyword sponsorships and online directory listings continue to dominate search advertising spend with less than a third of advertisers using contextual search.

Online directories are used most by advertisers from the retail industry, while keyword sponsorships are most prevalent among travel & accommodation advertisers.

The advertiser survey, which forms part of Frost & Sullivan’s online search advertising subscription, was conducted with 206 senior management level executives, with control or insight into the business’ marketing budget and strategy.

The Australia Online Search Advertising Market 2007 – 2011 report and Advertiser survey form part of Frost & Sullivan Australia’s digital media subscription, which also includes research on the following segments: Online Classifieds Advertising (May 2007) and General Online Advertising (August 2007). This service can be purchased separately or bundled as a full report.

All research included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Analyst interviews are available to the press.

If you are interested in a virtual brochure, which provides the methodology adopted for this research, a brief synopsis along with a complete table of contents, then send an e-mail to Sharmin Jassal, Corporate Communications, at sharmin.jassal@frost.com with your full name, company name, title, telephone number, fax number, city, state, country and e-mail address. Upon receipt of the above information, an overview will be sent to you by e-mail.

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