SA online advertising revenue now worth more than R1.5-billion

If you’re in the digital advertising space, the latest IAB SA Internet Advertising Revenue Report comes with some seriously good news. According to the report, online advertising in South Africa grew 15% between 2013 and 2014 and is now worth more than R1.5-billion. And while online news and media outlets remain the most popular outlets for online advertising, online classifieds are on the rise.

The annual report, which is compiled for the IAB by PwC, shows that the bulk of online advertising revenue still comes from search, which accounted for R865-million in internet advertising revenue in 2014, up from R680-million. Online advertising revenues meanwhile rose from R452 million to R566 million.

While the report does note a decline in mobile revenue (from R172 million to R64 million), it says that this is largely down the exclusion of search revenues, ad spend moving offshore (and therefore not reported by the local sell-side) and general low levels of participation from mobile advertising market participants (both buy-side and sell-side). Mobile Search revenues are estimated to comprise around 60% of total mobile advertising revenues and raising this bracket to an estimated R448-million, according to PwC’s Entertainment and Media Outlook.

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“This situation provides an ongoing challenge for advertisers, especially in the light of the steep rise in mobile Internet penetration in the country,” says Gustav Goosen, head of the IAB’s Research Council. “Fueled by factors such as greater availability of mobile data services and increasingly affordable smartphones, mobile internet subscribers are estimated to increase from 36.6% to 69.1% of the country’s population in the next five years. Already, 61% of South Africa’s web traffic is generated by mobile devices.

“While it goes without saying that advertisers will increasingly target consumers on their mobile devices, the challenge will be to communicate a unified message over a multitude of devices and platforms. This will lead to challenges in the measurement of the value of mobile advertising, when the lines between devices and platforms become blurred.”

Where SA’s online advertisers spend

According to the report, online news and media platforms remain the most popular digital publishing type, raking in close to 80% of advertising spend for both 2013 and 2014. Social media saw a decline from 16% to nine percent (that’s likely down to the mobile challenges mentioned above, at least in part), while classified ads leapt from 2% to 10%.

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“According to the PwC report, around 60% of social media spending occurs on Facebook, followed by 18% on Twitter,” says Goosen. “The popularity of these US-based players is a mixed blessing for the SA ad industry. These brands are leading the push towards substantial investments into online advertising, but the money is not going to local publishers, who are hard-pressed to compete”.

Looking forward

Despite the strong revenue growth seen by the local online advertising space, it seems that South African advertisers are still fairly conservative. Take video ads for instance. While they’re undoubtedly more difficult to ignore than static ads, they account for just two percent of display revenue in South Africa.

The effectiveness and growth of these ads, the IAB cautions, is entirely dependent on the reliability of connectivity, and the investment that advertisers are willing to make towards this medium.

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Another area where South Africa lags behind the rest of the world is in programmatic buying. IAB Europe announced that the total programmatic buying market increased by 70.5% from 2013 and 2014, while high increases were also reported for North America. This is not yet the case in South Africa, where site direct trading still accounted for 92% of digital ad spend in 2014.

While the report doesn’t include any figures for native advertising, it does note that its growth is unlikely to slow down any time soon. It also points out that while native advertising often requires more work and consideration from advertisers, but research shows that these ads are more likely to be shared and engaged with than banner ads.