A report from Frost & Sullivan’s annual examination into the state of the local online advertising industry indicates online classifieds experienced a 26% growth in 2008 – a rate that has since dropped in 2009.

Despite finishing 2008 valued at $498 million, February 2009 has seen the market feel the impact of the economic downturn and, according to Frost & Sullivan, the continued slowdown is likely to result in a much smaller growth rate of 18% for both 2009 and 2010.

“Although online growth is slowing, its a much more resilient sector than print or television. Advertising buyers are likely to gravitate towards online given the increasing pressure to maximise returns on their investments – in fact, the economic downturn could actually accelerate the migration of print to online in some industries,” said Phil Harpur, ANZ senior research manager, Frost & Sullivan.

The fastest growing online classifieds sector in 2008 was real estate, experiencing 38% growth.

Employment, which accounted for 47% of total online classifieds revenue in 2007, dropped back to 45% in 2008.

During 2009/11, the Frost & Sullivan analysis predicts the classifieds sector will expand with the emergence of rural market classifieds, but there will be a slower growth of the online classifieds advertising market for 2009/10 compared to previous years.

According to the report, a significant potential restraint on growth in the shape of industry-owned websites, such as homehound.com.au, which now commands the third highest audience in property sites.