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Digital advertising still growing, but at a slower pace

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Written by Federico de Nardis, GroupM Sub Saharan Africa CEO

Internet-related advertising is now unambiguously the most important medium globally, with $326 billion in ad revenue during 2020, up from $294 billion in 2019.

Accounting for 52% of global advertising tracked during 2020, digital is taking share of advertising in almost every country in 2019 and should do so in all of them in 2020, as forecasted by GroupM global.

Global digital advertising should continue to grow, by high-single digits in subsequent years, following growth of 11% in 2020 and 15% in 2019.

In South Africa the total advertising market will grow with 2% in 2020 to $1,3 billion, after declining with 1,6% in 2019, according to GroupM’s worldwide media forecasts report “This Year, Next Year”.

Digital is expected to grow, albeit at a slower pace in comparison with the last decade, where growth was frequently in the high teens or more. The local digital advertising market is expected to grow with 4% in 2020 to $469,3 million (a share of 36,6%). In 2021 it is expected to grow with 4,2% and have a share of 37,2% of the local market.

Digital-first brands have driven much of the sector’s growth

Much of the growth in spending on digital advertising in recent years has been driven by digital-first brands, whose own business growth rates should necessarily slow as they mature and see their growth rates converge with the rest of the economy.

However, most large brands will continue to rely on digital media to supplement brand-building activities that are often centred on TV or other offline activities, focusing on the use of digital media to drive deeper engagement with consumers who may already have a view on what a brand means to them.

Digital media has the capacity to build brands, subject to an appropriate creative strategy, but ongoing challenges remain around digital media for brands. This includes the increasingly “toxic” environments of platforms that do not curate content or other advertisers, with the widespread availability of inauthentic content (including fake ads) and other polarizing or extreme content.

Measurement remains another problem, as fragmented, incomplete and often low-quality sources of data make it difficult to assess the metrics that brand-focused marketers want to rely upon in order to manage their budgets well in digital environments.

As brands increasingly invest in digital business strategies, including direct-to-consumer concepts, sales via third-party e-commerce channels, and focus on driving consumers to digital experiences (including websites or branded content), more growth in spending on digital media will occur. Most brands currently generate only a small percentage of their revenues from e-commerce, but there are some brands pushing toward half or more of their revenues from non-traditional environments, demonstrating possibilities yet to emerge.

What are the implications for marketers?

One’s view on the pace and potential scale of business transformation in a given country should inform one’s view on the future growth rate of digital advertising. If business transformation will be slow – whether because of friction in a country’s labour laws, lack of competition among companies in key sectors, or limited broadband access – digital advertising growth will be relatively slow. If business transformation is more rapid, growth in digital advertising will be more rapid. Arguably, business models might emerge because faster and cheaper mobile broadband services will contribute to rapid digital media brand interactions.

Where this is true, marketers will benefit from identifying preferred long-term media owner partners likely to have high-quality digital media inventory over a multiyear time period, as the most premium inventory will become scarcer as time progresses. On the other hand, in markets where business transformation is only going to move gradually – and where digital advertising growth is slower – investment decisions will remain more tactical.

GroupM launches the Africa Media Index

GroupM, WPP’s world-leading global media investment group, launched the ‘Africa Media Index’, its inaugural study on the media landscape in Africa, on 23 May in Sunninghill, Johannesburg. The study aims to provide insights on trends and knowledge of the media sector and how it affects investment, governance, local business and economies.

This study comprises data from 14 African countries, namely: Ivory Coast; Ghana; Nigeria; Kenya; South Africa; Uganda; Zambia; Namibia; Zimbabwe; Tanzania; Mozambique; Botswana; Angola and Ethiopia. It identifies trends that are relevant to industry investors looking to increase their footprint and reach multiple audiences in a meaningful way across Africa. The report focuses on five key categories which are Economy & Business; Media Landscape; Media Consumers; Technology; as well as Governance & Legislation.

Federico De Nardis, CEO at GroupM Sub-Saharan Africa (SSA), says, “Many companies – both those already on the continent and those wishing to reach consumers and businesses across Africa – often struggle to find consistent and reliable information which gives a clear understanding of the media landscape. The intention of the Africa Media Index is to bridge that gap.”

Africa’s media landscape is a whirlwind of change and growth in activity, and its power can be harnessed by knowledgeable investors. Sub-Saharan Africa hosts 17% of the world population today, but only represents 2% of world GDP, and even less when we look at advertising investment, which is USD 2.6 billion or 0.47% of global investments. However, due to mobile and Internet expansion, strong urbanisation and a booming middle class, the next 30 years should tell a very different story.

The media consumers and media landscape

While the African middle class population is growing impressively, so is their access to technology and media consumption. This is demonstrated through the rising sales of televisions, which now replace radio as a preferred purchase option in places where electricity supply is increasingly available.

Access to the internet also accounts for a large growth in the media landscape, however, internet use is restricted by high data prices in various regions. More than 83% of respondents believe online media is growing significantly, while 75% of them think radio, through internet broadcasting is on a high trajectory. However, the same respondents are also bullish on television, with nearly 62% of positive growth.

In addition, print media is experiencing positive growth, contrary to what is happening in the rest of the world. For example, in Kenya newspaper consumption has grown by 14% in 2018 versus the previous year and 12% in Nigeria according to ‘This Year Next Year’ report, by GroupM Global.

Governance and legislation

Media growth in Africa is beneficial and a contributing factor to deepening democratic processes. In recent years, political uncertainty dominated the business headlines where heightened political tensions saw a military coup in Zimbabwe, a widely disputed election in Kenya, and highly contested elections in South Africa and Nigeria. These might appear as isolated events but they are an amalgam of events that increased media interest in Africa.

Of the surveyed respondents, 49% of East Africans and over 36% Southern Africans think media corruption is “highly prevalent”, while 41% West Africans say the media is hopelessly corrupt. Corrupt state media, bribe taking journalists and self-censorship by the independent press were cited as examples of corruption.

As a result, the risk impact of changes in legislation and regulation has increased considerably as many African governments continue to implement laws governing information and ethical operations of businesses.

Economy and business

When investors seek media investment opportunities, a holistic knowledge of the investment environment is required, including the relevant forces at play in governance, local business and economies that affect the media sector. The sector is influenced by the society it services, and in turn the media influences the societies that hear, read and see its output.

Investment indicators, as opposed to business confidence, for Southern Africa are good overall. Leading in this is South Africa with an overall score of 65.97, which takes three of the top five positions in overall Economy and Business rankings. However Ghana (51.65), and Kenya (47.67), being in the top five, reflects a mixed regional picture. Meanwhile at the lowest of the spectrum on the continent is Mozambique, whose overall score is 34.89.

Technology advancements

One of the biggest challenges for African governments and media houses will be to close the media access gap between urban and rural areas. If this is left unattended, there is an increased risk of widening inequality between those who have access to a plethora of innovative and rich media options (TV and video in all forms: Linear, VOD, SVOD, OTT and all online platforms) and those who are not exposed to it.

Electricity is a necessity for new media expansion for all regions, and West Africa is seen prioritising urbanisation more than others. Southern Africa is viewed as prioritising fibre lines according to 17.66% of respondents, particularly with the South Atlantic Cable System arriving in the region. These respondents have however reported the highest data prices, with three quarters classifying prices as expensive and 33% say data is somewhat expensive, however 40% of them say it is very expensive.

“The 21st century new media wave has been driven by the African people as they are choosing preferred mediums and content. Investors in Africa’s media industries can be assured that African media consumers are the same as media consumers in other markets who are perpetually craving better media services that are interactive and advertising that is created to each market’s unique nuances,” concludes De Nardis.

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