The latest Interactive Advertising Bureau (IAB) Online Advertising Expenditure Report suggests online advertising in Australia could exceed $2 billion this financial year.

The report, compiled by PricewaterhouseCoopers (PWC), found the online advertising market hit $1.87 billion for calendar year 2009. In the final six months of 2009, the market reached $978.75 million. Looking closer, the final three months accounted for $513 million of that – the largest fourth quarter recorded, $50.5 million or 10.9% up on Q4 2008.

Display advertising grew 7.2%, accounting for 26.6% of total expenditure. Search and directories grew 17.1%, accounting for 50.5% of the total. Classified advertising fell 2.3% and making up 22.9% of expenditure.

Within the general display email based advertising comprised $9.3 million of advertising expenditure – up from $7.9 million in the previous quarter.  Video based advertising increased its share of advertising expenditure from $4.7m to $5.3million for the same period.

Pricing methods allegedly changed little year-on-year, 26% was priced as direct response (pay per click, pay per sale, pay per action or pay per lead) and 74% was CPM (cost per mille/cost per thousand impressions)

“In 2010, advanced standards and guidelines for online advertising, local research, and standardized online audience measurement will further accelerate investment in online advertising to surpass $2 billion this financial year and calendar year, increasing its share of the advertising market,” said Paul Fisher, CEO of IAB Australia.