Online advertising to boom in SA: PwC - TechCentral

Online advertising to boom in SA: PwC


South Africa’s online advertising industry can look forward to substantial growth in coming years thanks in part to cheaper smartphones and data.

This is according to PwC’s latest annual “South African Entertainment and Media Outlook” report.

Unsurprisingly, the report found that most people who access the Internet in South Africa do so using a mobile device, and as smartphones become more affordable, more people are getting them.

According to the report, at the end of last year, South Africa had 10,8m mobile Internet subscribers, who accounted for more than 90% of the country’s total broadband connections. PwC expects the number of mobile Internet subscribers to grow at a compound annual rate (CAGR) of 25,4% in the next five years, reaching approximately R32,3m in 2017.

Meanwhile, consumer spending on Internet access in South Africa will reach almost R60bn by 2017, up from R19,8bn in 2012. This amounts to a CAGR of 24,7%, and the bulk of this growth is expected to come from mobile. The 2012 total comprised R3,7bn from the fixed segment and R16bn from mobile.

At the same time, the South African Internet advertising market is forecast to generate revenues of R3,7bn in 2017, up from R1,2bn in 2012, a CAGR of 25,4%.

Mobile advertising is expected to enjoy the fastest growth between now and 2017, with a CAGR of 37,8%. PwC says the growth will be driven by the “increased penetration of LTE-compatible smartphones and more affordable feature phones that provide access to the Internet”. Mobile advertising spend is expected to increase from R189m in 2012 to R938m in 2017.

Though search is set to remain the primary online advertising format in South Africa during the forecast period, online display advertising is expected to grow substantially, driven by the ever-increasing number of Internet users, especially Facebook users, in the country.

Despite the fact that mobile advertising is expected to cut into display’s share of the pie, PwC says display will “remain the second-largest Internet advertising segment throughout the forecast period”, and is expected to reach R1bn in 2017.

Online classifieds will grow from R112m in 2012 to an estimated R209m in 2017, the slowest-growing online advertising format over the forecast period. PwC attributes this to “some consumers’ loyalty to more traditional print formats”.

However, despite the expected growth, PwC warns that “the Internet access market will change dramatically in a variety of ways over the next five years and survival will depend on scale, which will require operators to collaborate more”.

The company says that it will also be important for businesses offering Internet connectivity to work with government, regulators and content providers and that “those that succeed stand to gain a slice of a very large business indeed”.

Online advertising “will continue to see impressive double-digit growth, although this growth is anticipated to drop a little in 2017”, the report says, adding that “Internet advertising has proved itself, if not immune, then at least resilient to the overall economic conditions of the market, whereas advertising revenues from many other media have slowed in growth or even declined”.

The anticipated CAGR for Internet advertising revenues for South Africa is 25,4%, more than twice the average of 11,2% predicted for Europe, the Middle East and Africa, and nearly twice the global CAGR of 13,1%.

As a result of this growth, Internet advertising’s share of the overall South African advertising market is expected to reach more than 8% by 2017, more than double its share in 2012.  — (c) 2013 NewsCentral Media

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