Investment ‘nerves’ flatten online advertising market

The total internet advertising expenditure in the March quarter was $4.182bn, down from $4.258bn in the final three months of last year.

Advertising revenue across search engines and directories such as Google rose by 10 per cent year on year. Picture: AFP

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Australia’s online advertising market continues to be flat and investment in the sector has slipped almost 2 per cent in the first three months of 2025.

The total internet advertising expenditure in the March quarter was $4.182bn, down from $4.258bn in the final three months of last year, according to the latest report by the Interactive Advertising Bureau report, compiled by PwC.

Spending for the March quarter also is below what it was in the September quarter of 2024, when it was $4.184bn.

However, the report shows that the traditional seasonal decline, from the annual high point of the December quarter into the softer March quarter, was less pronounced this year than in 2024, falling just 1.8 per cent in the three months to March 31, compared to a 4.2 per cent seasonal drop the year before.

Year on year, the sector registered an increased spend of 11.6 per cent on the March quarter of 2024.

IAB Australia chief executive officer Gai Le Roy said the results of the March quarter were largely positive for the sector, notwithstanding the anticipated seasonal decline.

“The Australian digital advertising market again saw double-digit growth year on year in the March quarter, with strong increases in video, search, social and audio,” she said.

“While we are seeing solid top-line growth there is still some nervousness in the market around long-term planning and brand investment, which should be tempered by any future interest rate cuts in coming months.”

Supermarkets, including Woolworths, registered jumps in market share. Picture: Britta Campion/The Australian

The year-on-year investment spike was driven by a surge in video advertising, which was up 23.3 per cent.

That platform now holds a 28 per cent share of the market; its share was 25 per cent in the corresponding period in 2024.

The report also shows advertising revenue across search engines and directories – for example, Google – increased by 10 per cent year on year to reach $1.896bn, and that sector remains the biggest contributor to the overall advertising market.

As is traditionally the case, retail and automotive were the top two display advertiser investment categories, at 17.1 per cent and 12.9 per cent respectively, but their share declined marginally year on year.

The finance, supermarket and insurance categories, however, registered jumps in market share.

The digital audio market was up 18 per cent year on year, attracting $77m in investment, which represents 4.8 per cent of the total spend in the sector. Advertising on podcasts grew faster than audio streaming over the past year.

Despite the relatively flat level of investment in online advertising over the past 12 months, the June quarter of this year is expected to yield a strong result, given the spend on political ads during the federal election campaign, which extended from early April through to early May.

In late March, just prior to the election being called, it was reported that there was a 46 per cent increase in government advertising expenditure in January and February, compared with the same period last year.

The majority of the online advertising spend was outlaid in April, in the first two weeks of the election campaign.