The Future Belongs to Internet Advertising

Advertising in SA and other major markets on the African continent, which were hit hard by the pandemic, have experienced a significant rebound. So says the “PwC Africa Entertainment & Media (E&M) Outlook 2022-2026”,  which came out this week.

SA’s overall E&M market exceeded pre-Covid levels (2019) in 2021, with a total industry spend of R163bn (15.4% annual growth). The study also says the internet advertising segment will show the largest gains in revenue terms across the five-year forecast period. This is a trend across SA, Nigeria and Kenya as well as at a global level.

Almost 80% of E&M revenue gained in SA through to 2026 will come from internet advertising and internet access as consumers and advertisers prioritise digital.

The pandemic accelerated the uptake of e-commerce. Advertising spend followed, and by 2026 internet advertising will become the second-largest segment in the overall SA market.

The PwC report says last year SA, Nigeria and Kenya recorded robust growth in entertainment & media revenue.

Industries that were more severely affected in 2020, such as cinema, live music and business-to-business trade shows, made strong comebacks, though revenues remained below pre-pandemic levels.

Segments such as video games and OTT (streaming TV) video rose to new heights after thriving under lockdown conditions, while other sectors proved to be largely “pandemic-proof”, with podcast advertising, albeit off a low base, showing resilient revenue growth of 30.4% in 2020 in SA, and 41.8% in Nigeria.

Alinah Motaung, of PwC Africa E&M, says the pandemic accelerated changes in consumer behaviour and digital adoption in ways that will affect future growth trajectories.

“Some of the sectors that made immense gains during Covid might not be able to sustain that growth, while others are set to continue to build from their higher bases. Some formerly niche sectors, such as gaming, will barrel their way into prominence, while the positions of other formerly dominant sectors, such as traditional TV, newspapers and consumer magazines, are at risk of eroding,” she says.

The report also highlights the continued rapid growth of data consumption globally. African markets are no exception, with SA and Nigeria growing faster in 2021 than the global average.

Mobile phones are the most popular format worldwide and across Africa for data consumption, ahead of the “portable devices” category, which includes laptops and tablets, and the “other devices” category, which counts data consumed via devices such as smart TVs and games consoles.

The study says cinema’s post-Covid recovery is well underway, with box office revenue in SA set to surpass 2019 levels in 2023, when it will hit R1.3bn.

OTT video streaming revenue is set to rise rapidly over the next five years. Revenue growth to 2026 is expected to outpace increases in TV subscription revenue across all three markets. But this is from a small base, which means that revenue will remain comparatively low.

Looking ahead, PwC says it expects future E&M growth to be in the development of the metaverse and the use of non-fungible tokens.

Meta, formerly Facebook, has stated that the metaverse could contribute about $40bn to the economies of Sub-Saharan markets like Nigeria and Kenya. In SA, more than 16% of consumers have participated in a “virtual world” in the past 12 months. Africarare’s Ubuntuland, Africa’s first metaverse, launched in 2021.

Motaung says the E&M industry will strive to maintain its balance in a landscape riven by fault lines and fractures. “Despite this, the overall growth path is both clear and strong. The vast E&M complex is expanding more rapidly than the global economy, and with each passing year, more people are spending more of their time, attention and money on the complex and increasingly immersive E&M experiences that are available to them.

“The industry is becoming more digital, more mobile and more pitched at media that attract the young. It is also becoming more evenly distributed around the globe and more dependent on advertising in all its forms,” Motaung says.

This piece originally appeared in the Financial Mail.