The Australian online advertising market hit $3.74 billion in 2013, representing a growth of 16 per cent, according to analyst firm, Frost and Sullivan.

The firm claims the industry segment accounted for 27 per cent of total advertising expenditure in 2013, which finished the year at $13.9bn with only 1.4 per cent growth during the same period.

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The figures indicate that advertising revenue continues to shift from traditional media to Internet and mobile channels, with print, television, outdoor and radio advertising dropping further although at a lesser rate than a decade ago.

"Online advertising expenditure is forecast to significantly outperform the more mature offline advertising channels over the next five years, with a compound annual growth rate (CAGR) of 12 per cent, increasing to $6.59bn, its proportion accounting for 41 per cent of the total advertising market in 2018," Frost Australia and New Zealand (A/NZ) ICT practice senior research manager, Phil Harpur, said.

"Strong increases in spending intentions for 2014 are predicted by advertisers across all online general advertising products, in particular for online display and email campaigns."

Harpur said that of the main segments of the online sector, search advertising grew by 23 per cent in 2013, online advertising by 12 per cent, online classifieds by 11 per cent, and online directories by four per cent.

"From 2013 to 2018, the search market is expected to continue to outperform the other three major segments, growing at a CAGR of 16 per cent, its proportion of the total online search and directories market increasing from 83 per cent in 2013, to 91 per cent in 2018," he said.

The fastest growing segments in the local online advertising market are mobile and online video, both of which are expected to significantly outperform the rest of the segment over the next five years. Frost forecasts mobile will grow at a CAGR of 31 per cent between 2013 and 2018, with video set to grow at a CAGR of 31 per cent in the same period.