Online advertising: Cautious Optimism

I’ve always wondered where the gazillions in online advertising revenue went. If the pundits and their skyward-pointing graphs were to be believed, I doubt very much I’d still be working, but filing this column from Mauritius.

Of course then it was de rigueur to foam at the mouth over the projected revenue of the reckless dot.boom era. It was all part of the hype: that internet-is-going-to take-over-the-world-and-kill-newspapers mumbo jumbo we all know so well.

Well the net paid for its sins. Dot.bomb sobered everyone up. The philosophers and hype-mongers retreated into the woodwork, leaving the hard workers behind to pick up the pieces and make this thing work.

That’s why – ever so softly, softly and in the most understated, non-sensational manner possible – I want to carefully proclaim that online advertising appears to be on the comeback trail. Things are looking good again, both here and abroad.

There is an audible buzz among online publishers and agencies about the renewed interest in the medium these days. And, to back it up, the figures appear to be looking healthy. Although online advertising in South Africa still has the smallest share of the total advertising pie, it is showing impressive growth.

Figures released by Nielsen Media Research show that online advertising for the period January to August 2004 was one of the top performers together with cinema, posting a staggering 133,2% increase over the same period last year. Although this figure is somewhat inflated as a result of additional sites reporting their numbers, it is still evidence of healthy organic growth. The preceding period for online had shown a nasty decline of 3,36%. That’s quite a turnaround.

It’s a trend that is also echoed globally, with the US – via the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers – showing an increase of 42,7% for the second quarter of 2004 versus the same period in 2003.

But before we break out the bubbly, it must be pointed out that compared to global averages, online advertising in SA is under-performing. Figures by eMarketer.com put the worldwide online share of the advertising pie for 2004 at about 3,5%, above cinema. South Africa’s online advertising share is a rather meagre 0,8%, behind cinema. But after this year’s strong growth, online publishers are confident they can improve their share.

Andrea Mitchell, media director at Acceleration, puts online advertising’s apparent turnaround down to “education, integration, returns and renewed confidence”. She says it is becoming clear that online media is increasingly playing a far greater and more functional role as a day-to-day tool in people’s lives. Add to this a healthier local economy together with more competing brands investing in online ad space, and the overall result is increasing spend.

This strong, worldwide online advertising growth is also being driven by a new kind of advertising from search engines like Google and Yahoo! — called keyword search or contextual advertising. And the trend appears to be happening here too, because figures hot off the web from Nielsen Media Research show that for the period January 2004 to September 2004, Google moved into the list of the top five local online advertisers. Hold on to your browsers.

MEDIA Jan04 – Aug04 SOM %
Print R3 509 381 701 40,60%
TV R3 317 845 161 38,40%
Radio R1 150 822 508 13,30%
Outdoor R392 403 557 4,50%
Cinema R117 997 121 1,40%
Direct mail R75 830 463 0,90%
Online R70 856 533 0,80%
Nielsen Media Research – AIS/AdEx Jan/04 – Aug/04

MEDIA GROWTH
Online 133,20%
Cinema 132,58%
TV 28%
Outdoor 22%
Print 20%
Radio 15%
Direct mail -1,28%
Nielsen Media Research – AIS/AdEx Jan/04 – Aug/04