Product development and a focus on yield growth have seen Classified Advertising emerge as the highest growth category according to the latest Interactive Advertising Bureau (IAB) Online Advertising Expenditure Report for the quarter ending 30 September, 2014.

Total online advertising expenditure for the quarter was $1.2 billion, a 16% year-on-year growth.

Classified advertising expenditure during the quarter was $238 million, an increase of 4.4% on the prior quarter and 22.8% year on year. In comparison to other markets, 20% of the total Australian digital expenditure went toward classifieds during the quarter, as opposed to 14% in the U.K. and 6% in the U.S.

“The growth of classified advertising is a great story for Australia, with our share of digital expenditure for classifieds far exceeding other markets,” said Alice Manners, IAB Australia CEO. “Australia is certainly reaping the benefits from industry innovations in this sector and strong market players including REA and Carsales are delivering world leading results in their verticals. It’s clear that marketers continue to have great confidence in the online advertising market.”

The report, which is compiled by PricewaterhouseCoopers (PwC) and is based on submissions from publishers and estimates of Google and Facebook, indicates strong growth was recorded across all segments compared to the same quarter in 2013, with Search up 10% and General Display recording a 22% increase.

Search and Directories expenditure was $580m during the quarter, representing 49% of online advertising expenditure, while General Display generated $362 million in the quarter and now represents 31% of the digital advertising market, its highest market share since 2006. Retail advertisers made up 10% of the General Display spend, signalling a willingness to continue their investment in digital.

Mobile advertising yet again saw dramatic growth, reaching $205 million for the quarter, up 85% year-on-year to reach 17.4% of the total online advertising market and 26% of general display – up from 22.5% from last quarter. 55% of total mobile advertising expenditure was attributed to search, with 45% spent on general display. Device category shares for general display were 56% for smartphones and 44% for tablets, representing an increase in smartphones’ share of mobile advertising over time.

Video advertising for September Quarter 2014 reached $62.3 million, an increase of 1.4% on the prior quarter and a year-on-year increase of 41.8%. It now accounts for over 17% of general display advertising expenditure during the quarter. FMCG advertisers were again the single biggest investors in online video advertising with 15% of total video revenue coming from this sector. Auto advertisers also increased their video spend to 12.7% making them the second largest advertiser category for video.