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Frost & Sullivan: Online search advertising outperforms all - surpassing online general, directories and classifieds advertising

- Online search grew 29% in 2012 and a CAGR of 18% is expected till 2017

SYDNEY, Nov. 12, 2012 /PRNewswire/ -- Online search advertising remains the strongest performing main segment of the online advertising industry, growing 29% in 2012 and outperforming online general advertising (online banner, sponsorships, integrated site content, advertorials, EDM / e-newsletters), online directories and online classifieds advertising.

Proven reliability and cost effectiveness of search appeals to advertisers and agencies, especially in recent challenging economic times in many developed global economies.

According to Frost & Sullivan's new report, Australian Online Search and Directories Market 2012, a significant proportion of Australian consumers are using smartphones to search the internet and access local information. Directions businesses, restaurants or retail stores are common queries on mobile devices.

Phil Harpur, Senior Research Manager, Australia & New Zealand ICT Practice, Frost & Sullivan says Google and Bing are investing significant resources in improving mobile search functionality as search query volumes though handheld devices increases rapidly.

Yahoo! Search Marketing's alliance with ninemsn's Bing saw strong revenue growth during FY2012. "By leveraging the strength of both players – Yahoo! Search Marketing's strength in media and sales relationships and Bing's strength based on Microsoft's technology expertise, Yahoo! Search Marketing is positioning itself in the market as an alternate provider with strong performance, efficiency and good value for money" says Harpur.

He adds, "AdLux, an Australian owned and run independent search network, has now successfully established itself as a real alternative to Google and Yahoo! Search Marketing/Bing".

Google continues to dominate the Australian search advertising market with an 86% revenue market share in 2011-12. Search advertising will continue to dominate Google's revenues for the at least the next five years. Although Google's biggest opportunities are coming from new segments of its business, none yet account for a significant proportion of Google's revenue stream. The largest threat to Google's core search business is the expanding social network footprint, especially from Facebook, which offers a substitute to search for consumers, as well as for advertisers, as it is closed off to Google's core search business.

Online Directories

Structural changes to the online directories market in Australia have accelerated over the past year, in a market that Sensis still dominates locally. The free online directories model is threatened and the directories market transition from a print to online environment has opened up competition on various fronts.

"As boundaries between online search and online directories blur, pressure is intensified by the search market as well as the social media market. The local economic downturn exacerbated structural changes to the online and print market, and accelerated the shift from print to the cheaper and more affordable online market. However, the online directories market is still a viable business model as it is still the most effective way to maintain an up-to-date and comprehensive listing of companies, though the market size is predicted to shrink over time" Harpur explains.

In a contracted market, only two or three will remain, and smaller players with less comprehensive listings will be forced out. Players have already exited the market in the last 12 to 24 months and smaller and nimble players with sufficient resources to provide comprehensive up-to-date listings are more likely to be successful. Online directories with higher operating cost structures will find it increasingly difficult to maintain profitability without significant re-alignment of business models.

Social media models are increasingly used in online directories. Social media functionality gained more importance after Google's move to modify the indexing of its search results to give higher weighting to online directories that have a search ratings review section.

Handheld devices such as smartphones and mobile tablet devices offer tremendous opportunity for the search and online directories market as it is much more convenient, more convenient and has the benefit of mobility.

The sum of it all

Frost & Sullivan's report forecasts that the online search market will continue to outpace the online directories market over the next five years growing at a Compound Annual Growth Rate (CAGR) of 18% between 2012 and 2017, whilst the online directories market is expected to shrink with a CAGR of -2%. The proportion of the total online search and directories market accounted for by search is predicted to increase from 81% in 2012 to 92% in 2017.

Frost & Sullivan's report, Australian Online Search and Directories Market 2012, forms a part of the Frost & Sullivan Digital Media Research program. All research services included in this subscription provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants. For media queries and more information please send an e-mail with your contact details to Donna Jeremiah, Corporate Communications, at [email protected].

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants.

Our "Growth Partnership" supports clients by addressing these opportunities and incorporating two key elements driving visionary innovation: The Integrated Value Proposition and The Partnership Infrastructure.

  • The Integrated Value Proposition provides support to our clients throughout all phases of their journey to visionary innovation including: research, analysis, strategy, vision, innovation and implementation.
  • The Partnership Infrastructure is entirely unique as it constructs the foundation upon which visionary innovation becomes possible. This includes our 360 degree research, comprehensive industry coverage, career best practices as well as our global footprint of more than 40 offices.

For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies?

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