by Lara Sinclair, The Australian - Business

INTERNET advertising grew by an astonishing 59.4 per cent to $778 million in the year to June, as advertisers reported "disillusionment" with traditional media.

At current growth rates, internet advertising will overtake the $978 million magazine advertising industry by December, according to internet research firm Frost & Sullivan.

General display advertising on the internet, including banner and video advertising, was the fastest-growing sector online in the June quarter, with ad sales rising 32.2 per cent to $76 million.

That still trails the search and directories sector dominated by Sensis and Google, which was up 9.9 per cent to $83 million.

Classified advertising increased by 8.1 per cent to $67 million.

Search and directories was the strongest sector over the 12-month period, up 74.2 per cent to $287.5 million, while display, which grew 60.7 per cent to $247.5 million, overtook classifieds (up 43.8 per cent to $243 million).

Lee Stephens, chief executive of agency Emitch, said online publishers such as Ninemsn, Yahoo7, Fairfax Digital and News Interactive were increasingly focused on video advertising.

Online display advertising would continue to grow strongly as more homes took up broadband internet access, he said.

"There's still strong growth to come, particularly in broad-based advertising such as top-and-tailing video downloads with television-style commercials," Mr Stephens said.

Most publishers, including Ninemsn, Yahoo7, Google - and even the ABC - have foreshadowed online video advertising initiatives in the past month.

Mr Stephens said those initiatives allowed advertisers to book-end downloadable video content with commercials in a similar way to traditional television media buys.

However, he said the jury was "still out" on search engine Google's global click-to-play video advertising offer, announced last month, which allows advertising to be targeted to specific sites or placed on Google's content network.

Finance, communications and computers, automotive and travel continue to dominate online advertising, but Mr Stephens said entertainment and leisure was also showing strong growth.

Meanwhile, the internet is benefitting from "disillusionment" among advertisers with other media this year, according to Paul Fisher, national advertising sales director of News Interactive.

"Clients are not generating significantly additional budgets (to spend online) so the money's got to come from somewhere," Mr Fisher said.

The free-to-air television market shrank by 0.08 per cent in the six months to June, according to figures from industry body Free TV.