Australia's online advertising market valued at $17.1bn

First-of-its-kind report from the IAB and PwC values the online advertising market's GDP contribution at $17.1bn and claims it will rise to $26.5bn by 2017

Australia’s online advertising market contributes $17.1bn to the nation’s GDP and provides more than 162,000 direct jobs, according to the new Digital Dollars report.

The first-of-its-kind report was commissioned by the Interactive Advertising Bureau (IAB) and completed by PriceWaterhouseCoopers, and is based on the 2011/2012 financial year. Alongside the current economic result, the report also claimed the online advertising will be worth $26.5bn by 2017, reflecting a compound average annual growth rate of 7.5 per cent.

The figure is made up of three main Internet sub-sectors: Core, partial and interdependent. Core sector organisations include online ad creators and placement agencies, staff engaged in commissioning advertising and several content platforms and sites.

Partial sector organisations include those who gain some funds through advertising along with ISPs, the software industry, Internet consultants and hardware and other equipment providers. Interdependent sector organisations are those who benefit directly or indirectly from online advertising and include e-tailers, and content sites in the paid media, entertainment and online education space.

According to PwC, core sectors represent $3.4bn of the total GDP figure, partial sectors contribute $9.7bn, and interdependent sector organisations are worth $4bn. The consulting group also pointed out organisations in the core sector witnessed a six-fold increase in online advertising revenues between 2006 and 2009, and that online advertising attracted 14 per cent of total advertising revenues in 2012. This figure is forecast to hit 33 per cent by 2016.

The Digital Dollars report also claimed the online advertising industry generates $70m in additional welfare benefits to the broader community. The financial figure was derived from a new social welfare framework that estimated incremental value, and is based on the Productivity Commission’s social welfare approach.

IAB acting CEO, Samantha Yorke, claimed the results prove how significant a contribution digital advertising makes to the Australian economy and to job creation.

“It also clearly demonstrates the positive impact of the sustained investment in digital advertising platforms being made by marketers and advertisers, which grew 15 per cent year-on-year to March 2013,” she said.

PwC economist and partner, Jeremy Thorpe, added the economic benefits of online advertising aren’t widely recognised but are being enjoyed by consumers, businesses, government and the wide community.

“Created through a complex, largely unseen value chain, online advertising is an important funding model for the creation and consumption of a diverse range of goods and services,” he said.

The PwC report used national account data to generate estimates of the contribution of the ad-supported ecosystem to GDP and employment, as well as a ‘bottom-up’ income-based method which identified employment in each sector and profit generated by Australian firms and added them up. The methodology is similar to that used in the IAB’s US report, which was conducted by Harvard Business School.

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