Digital advertising still growing, but at a slower pace

(Photo credit: Getty Images)

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Written by Federico de Nardis, GroupM Sub Saharan Africa CEO

Internet-related advertising is now unambiguously the most important medium globally, with $326 billion in ad revenue during 2020, up from $294 billion in 2019.

Accounting for 52% of global advertising tracked during 2020, digital is taking share of advertising in almost every country in 2019 and should do so in all of them in 2020, as forecasted by GroupM global.

Global digital advertising should continue to grow, by high-single digits in subsequent years, following growth of 11% in 2020 and 15% in 2019.

In South Africa the total advertising market will grow with 2% in 2020 to $1,3 billion, after declining with 1,6% in 2019, according to GroupM's worldwide media forecasts report This Year, Next Year .

Digital is expected to grow, albeit at a slower pace in comparison with the last decade, where growth was frequently in the high teens or more. The local digital advertising market is expected to grow with 4% in 2020 to $469,3 million (a share of 36,6%). In 2021 it is expected to grow with 4,2% and have a share of 37,2% of the local market.

Digital-first brands have driven much of the sector's growth

Much of the growth in spending on digital advertising in recent years has been driven by digital-first brands, whose own business growth rates should necessarily slow as they mature and see their growth rates converge with the rest of the economy.

However, most large brands will continue to rely on digital media to supplement brand-building activities that are often centred on TV or other offline activities, focusing on the use of digital media to drive deeper engagement with consumers who may already have a view on what a brand means to them.

Digital media has the capacity to build brands, subject to an appropriate creative strategy, but ongoing challenges remain around digital media for brands. This includes the increasingly toxic environments of platforms that do not curate content or other advertisers, with the widespread availability of inauthentic content (including fake ads) and other polarizing or extreme content.

Measurement remains another problem, as fragmented, incomplete and often low-quality sources of data make it difficult to assess the metrics that brand-focused marketers want to rely upon in order to manage their budgets well in digital environments.

As brands increasingly invest in digital business strategies, including direct-to-consumer concepts, sales via third-party e-commerce channels, and focus on driving consumers to digital experiences (including websites or branded content), more growth in spending on digital media will occur. Most brands currently generate only a small percentage of their revenues from e-commerce, but there are some brands pushing toward half or more of their revenues from non-traditional environments, demonstrating possibilities yet to emerge.

What are the implications for marketers?

One's view on the pace and potential scale of business transformation in a given country should inform one's view on the future growth rate of digital advertising. If business transformation will be slow - whether because of friction in a country's labour laws, lack of competition among companies in key sectors, or limited broadband access - digital advertising growth will be relatively slow. If business transformation is more rapid, growth in digital advertising will be more rapid. Arguably, business models might emerge because faster and cheaper mobile broadband services will contribute to rapid digital media brand interactions.

Where this is true, marketers will benefit from identifying preferred long-term media owner partners likely to have high-quality digital media inventory over a multiyear time period, as the most premium inventory will become scarcer as time progresses. On the other hand, in markets where business transformation is only going to move gradually - and where digital advertising growth is slower - investment decisions will remain more tactical.

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LINK:	https://www.screenafrica.com/2020/02/24/marketing/marketing-business/d...
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