IAB Australia’s latest report on the country’s online advertising revenue shows classifieds spending increased by 9.4 per cent compared to the final quarter of 2010 and 16 per cent compared to the same time last year, giving the Australian classifieds industry its highest ever three-month figures.

The report, which IAB Australia puts out with the assistance of PriceWaterhouse Coopers, revealed total advertising expenditure for the March 2010 quarter increased by 17% year-on-year, coming it at A$512.5 million (US$ 463.5 million). Classifieds accounted for A$121 million, or 23.8 per cent, of that amount.

The leading category for classifieds advertising expenditure during the quarter was real estate, which in Australia is dominated by just two main players – Fairfax Media’s Domain and News Ltd-backed realestate.com.au. This was followed by recruitment and automotive listings.

Search and directories advertising continued to take the largest share of total online advertising expenditure, capturing 51.7 per cent of revenue. The report showed that within the search and directories market, search was growing at a faster pace.

The only lowlight was general display advertising, which plummeted 11 percent between December 2009 and March 2010 to A$126 million. However, that figure was still 15 per cent up on the same time last year.

Paul Fisher, CEO of IAB Australia, said the figures showed the continued strong growth of Australia’s online sector.

“Less than two years ago, many advertisers were asking ‘why should I advertise online?’. Today, the question we hear most is ‘how or where should I advertise online?’,” he said. “Driven by increasing consumer engagement with online content and advertising, this fundamental shift across the marketing and advertising industry underpins the continued double digit growth in online advertising expenditure.”

The latest data brings total advertising expenditure in Australian financial year 2010 (which ends June 30) to nearly A$1.5 billion. IAB says the industry is well placed to surpass A$2 billion by the end of June 2010 with all three industry sectors – search and directories, general display and classifieds – growing strongly year-on-year “as finance, automotive, real estate, and recruitment advertisers invested to reach, engage and influence consumers online.”

IAB also revealed that 75 per cent of display advertising revenue was spent through a “cost per thousand” pricing method, while direct response advertising accounted for just 25 per cent.