Online advertising expenditure is forecast to grow to $4.3 billion and command a greater share of the advertising dollar than newspaper or TV by 2015, says the Interactive Advertising Bureau (IAB), but government spend remains embarrassingly low.

In its ‘Online Advertising Expenditure Report’ (OAER), the IAB reports an ad spend of $2.66 billion in Australia for 2011, representing double digit year-on-year growth of 17% for the industry.

Conducted by PricewaterhouseCoopers (PwC), the report forecasts that online advertising will comprise 29% of advertising expenditure in 2015, up from 21% last year, while newspapers and free TV are expected to comprise 26% each.

According to the CEO of IAB Australia, Paul Fisher, the results mirror the strong growth being experienced by online advertising in the US, UK and other international markets.

“With the current challenging financial climate predicted to continue, we believe advertisers and their agencies will increasingly turn their attention and budgets to the branding and direct response opportunities that can only be found online,” Fisher says.

Overall market growth was powered by the search and directories category which now comprises 53% of the total spend, valued at over $1.4 billion in 2011. General display advertising accounted for 24% of the total spend, while classifieds advertising accounted for 23% of the total spend.

The general display category achieved just 4% year-on-year growth in 2011, but grew strongly in the second half of the year, up 17% on the same period in 2010. Within the category, video advertising performed well with 31% year-on-year growth.

The FMCG and retail sectors started to show higher adoption of online advertising over the year, while the motor vehicle category recorded the highest growth of any industry sector at 13%.

Fisher comments that government spend for the year remained embarrassingly low.

“In the current political climate, with the impending state election in Queensland a federal election in the next two years, I would expect to see a strong surge in the advertising expenditure online by all state and federal political parties,” he says.