Australian firms have been unable to translate one of the highest Internet penetration rates in the world into advertising and e-commerce revenue, according to Jupiter Research.
Analysts say the shortfall is a symptom of Australia's limited size and underdeveloped online market.
"The status of online advertising and commerce is typical of the Australian market, where reluctance on the part of consumers and businesses has dampened the revenue potential that such high online penetration offers," said Jupiter Media Metrix's new Jx Intelligence report on Australia.
"Combined with the limited scale of the market and the flight of Internet traffic to US sites, online players in Australia face a tremendous barrier to reaching profitability."
Jupiter says the online advertising market will reach A$70 million (about US$36.3 million) this year, but will represent only 0.5 per cent of total advertising spending. By comparison, Canada, with online penetration of 42 per cent, has 1.7 per cent of the advertising market online - three times that of Australia.
Online commerce activity faces similar challenges with only 12 per cent of Australian users to make an online purchase this year, compared with 40 per cent in the United States and 25 per cent in Canada.
Jupiter analysts say the Australian market's lack of attention to online consumers appears to be a result of the relatively low amount of time people are spending online. The average user in Australia spends less than 10 hours online in August, compared with 15 hours for the average American.
Jupiter warns that with the Internet market involved in so much turmoil, online ventures must act now to fight for more revenue.
"It's not about mirroring US success, but changing the market's perception of what the medium can offer," said the Jupiter Media Metrix report.
"They [online ventures] must refocus on business models that sell the value of the medium, including using site research to justify marketing online, selling the quality of audience, and working with advertisers to ensure the most appropriate placement. As for commerce companies, success hinges on broadening the consumer value proposition, by personalising service and extending the relationship beyond a single transaction."
Jupiter unveiled this research on the Australian market at the company's inaugural Internet Commerce Forum-Australia.
