South African Internet advertising revenue will grow at a compound annual growth rate (CAGR) of 25.4% in the next five years. This is according to PwC's latest South African entertainment and media outlook, which shows SA's Internet advertising market is growing at nearly twice the global rate.
According to the report, total local Internet advertising spend reached R1.2 billion in 2012, up from R507 million in 2008. This is estimated to grow to R3.7 billion in 2017.
"The market will continue to see impressive double-digit yearly growth, although this growth is anticipated to drop a little in 2017. But 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," says the report.
PwC attributes this forecasted growth to wider broadband penetration in the country, declining broadband prices, a shift from public to private Internet use, increased consumption and more devices being available.
Search still top
Despite rapid mobile growth, search advertising will remain the largest online advertising format in SA throughout the forecast period, predicts PwC. "Search is forecast to grow to R1.5 billion in 2017 from R514 million in 2012, at a CAGR of 23.9%." Search benefits from all of the same factors that have driven the overall online advertising market, but also continues to grow because it remains one of the most measurable and accountable advertising media.
Google continues to dominate the search market globally and is the primary search engine in SA with 94% of the market. Other international search engines noticeably present in the country include Bing, Yahoo, AOL and Ask.
Mobile advertising, which includes all spending on mobile phones and tablets, will see its share of Internet advertising increase from 16% in 2012 (R189 million) to 26% in 2017 (R938 million). "It has been suggested there are more mobile phones in SA than there are people, and it is for this reason that projected growth in mobile advertising is so steep," says the report.
The report notes that an important contributing factor in the rise of mobile advertising revenue has been the ability of social media to monetise content. Facebook saw its global profit increase by 58% on the previous year in the first quarter of 2013, and the company reported that mobile advertising accounted for 30% of total advertising revenue during this period.
Video advertising is still in a nascent form in SA, says PwC, and is only expected to reach R8 million in 2017. "A key reason for video advertising's limited growth is the relatively low fixed broadband penetration rate in the country (13% in 2012), which is forecast to remain low."
Finally, online classifieds will still constitute the slowest-growing segment. Its percentage of total Internet advertising will fall from 9% in 2012 to 6% in 2017 as a result of the more rapid growth elsewhere, says the report.
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