SA Web ads start making money

Johannesburg, 19 Apr 2006

South African online advertising is "coming of age" by becoming profitable, according to a new study by World Wide Worx.

The study, "Online Media in South Africa 2005", was conducted with the cooperation of the Online Publishers` Association (OPA), which represents the country`s 25 major online publishers. World Wide Worx MD Arthur Goldstuck says the results indicate the industry is "shaking off the slump of the early 2000s".

Goldstuck notes that online advertising is growing faster than all other media in SA, without making a dent in traditional ad spend. "Rather, it is growing the pie on the one hand, and all boats are lifted with the rising tide of growing ad spend on the other." This, he points out, is a natural consequence of the Internet being a new medium.

The report says online advertising revenue in SA is expected to reach R183 million in 2006, and to pass the R200 million mark in 2007.

It took the online publishing industry nine years, from 1994 to 2003, to grow to the R60 million revenue mark, yet it is set to treble that amount in the subsequent three years, says the report.

Shirley Singer, head of Insightss Research, which collaborated with World Wide Worx on the research, says 2004 was the first breakeven year for the industry, after an overall loss of R18 million for 2003.

"The industry only moved into clear profitability in 2006," says Singer.

"The online advertising industry in SA is growing rapidly and can now claim to be tracking global growth trends," says OPA chairman Russell Hanly.

Web ad trends

Goldstuck says one of the most dramatic findings in terms of type of advertising is the decline of the conventional static banner ad - from around two-thirds of all online revenue in 2003 to 49% in 2005. This trend is likely to continue in 2006.

Rich media banners - advertisements that allow Web users to interact with them - increased from 7% in 2003 to 15% in 2005, while sponsorship and subscription content maintained a consistent proportion, around 7% to 10% each, of online revenue for the past three years.

New technology developments that allow for sophisticated content syndication (such as RSS feeds) and development of community-driven content are seen as some of the key future money-makers.

Goldstuck adds that the South African picture in terms of the types of sites generating the most ad spend is different to dominant trends. "The US market is led by search marketing and the search portals, Google, Yahoo and MSN, while the South African market is dominated by more traditional media sites," he says.

The report notes that South African Internet penetration remains below 10% - at around 3.5 million users. It concludes: "Online advertising is a highly credible offering, but is hampered by two completely disparate factors: the lack of growth in Internet usage in SA in general, and the lack of appreciation of the benefits of online advertising within the advertising industry in particular."