The new data-driven telco business model - Why digital advertising matters

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Balancing Act has recently published a market report on Advertising in Africa . Five years ago the level of digital advertising was tiny. Now it has begun to grow and its growth is intertwined with the fortunes of digital content and services on mobile phones. Russell Southwood looks at why understanding advertising revenues is essential for anyone involved in the evolving telecoms market.

The transition to data in Africa poses a number of severe challenges to operators. Voice revenues are down and will continue to go down as Africa’s price conscious customers switch communicating to new platforms like WhatsApp and Viber.

The key data providers in Africa – the mobile operators – need to invest more in data networks and the returns are much less good. Prices need to be kept as low as possible to ensure that the market begins to grow.

So how does advertising play a role in what the mobile operators might do? Increasingly African content that was once found in newspapers or poorly circulated magazines is finding a considerable online audience. Anyone familiar with African online habits will be familiar with the scale of uniques attracted by online publications like Ghafla, Bella Naija and the African edition of Goal.com.

On a more serious level, a good example is the Ringier-owned online news platform Pulse.ng. In a recent article in Digital Content Africa Rich Tanksley, Head of Pulse.ng Pulse.ng said it 3 million uniques per month and 12 million page views:”It’s significantly bigger than print newspapers and some of its online peers.” The print newspapers all have their own online sites but he thinks they struggle to make sense of online:”It’s like taking a typewriter and making it into a computer. We’re putting up stories as the event is going on.”

Pulse says it will go cash flow positive this year. Whether it’s online content or services, it’s advertising that will in the next five years pay for the business models of those businesses that demonstrate that they can attract users.

Five years ago, online advertising was under 5% of total budgets. SMS advertising was significantly more but was impossible to count. Currently the leaders in the advertising field are spending 7-10% of their budgets on digital advertising. Mobile operators have access to large numbers of people and if handled properly, they can be sold as a media channel.

In another Digital Content Africa article in March 2015 Mike Laws of Integrat which signed deals with several mobile operators to sell advertising on their various services projected revenues of US$100 million a year by 2018.

It’s not going to replace charging for voice and data but like SMS VAS services, it’s nice additional revenue. I was speaking this week to a pan-continental company whose roots are in VAS services. Currently it gets 75% of its revenues from SMS and voice based activities and 25% from services that are data driven. It estimates that in 3-5 years time its revenues will be 60% data driven and only 40% derived from voice and SMS.

However, the more radical are already beginning to think through how advertising might deliver data in a completely different way. Corbyn Munnik’s Sliide is a Flipboard for Africa. In exchange for the user agreeing to let it take over their lock-screen, the user gets access to free content and gets paid a proportion of the advertising revenues raised by Sliide. It doesn’t need too much of a leap of the imagination to see mobile operators offer a low-end, free data package based on a similar formula.

Globally advertising spend will grow by about 4.5% this year compared to last and that growth will be reflected in the more consumer-active economies of Africa. Havas Horizons/Institut Choiseul, in its 2015 report provides the Top 5 most promising countries in terms of spend will be: Nigeria, Kenya, Ivory Coast, Ethiopia and Mozambique. According to Euromonitor, Sub-Saharan African consumer spending will grow from US$600 billion in 2010 to US$1 billion in 2020.

Advertising spend follows consumer spend. Mobile operators know this all too well as the leading operators are always in the top 5 spenders on advertising in those countries where ad spend is tracked.

Advertising matters for anyone involved in data markets in Africa and you can get both data and key insights from our new report Advertising in Africa: Click here


Digital Content Africa: Balancing Act’s web TV channel Smart Monkey TV has an e-letter called Digital Content Africa. On a fortnightly basis, it covers online film, music, media, social media, publishing and services and applications. We have already produced 69 issues and these can be viewed on this link:
Digital Content Africa - Past Issues

Essential reading for those in mobile VAS to anyone just interested in what African and relevant international content they can now get online. If you would like to subscribe, just send an email to info@balancingact-africa.com with Digital Content Africa in the title line. Look at the full list of past issues here:

Videos interviews to watch:

Juliet Ehimuan, Google Nigeria on why the Internet of Things matters for Africa and how to use it

Kofi Dadzie, Rancard Solutions on how its Social Graph Rendezvous provides engagement marketing

Goodnews Chibuike on how his start-up Dochase helps advertisers reach their online customers

Binta Coudy De, JJiguene on how it helps women street sellers go online to sell food products

Karl Kathuria, Psiphon on how Africans can beat social media and What's App banning


Catherine Luckhoff, NicheStreem on bringing Afrikaans music and Nigerian gospel online

Chika Nwobi, L5 Labs on the lessons of seed investing in Nigerian start-ups

Jennifer Chizua on launching Startpreneurs, Abuja's first start-up accelerator

Kemo Toure on his start-up jobs platform Wutiko.com aimed at Francophone Africa and the diaspora

Benedict Olumhense on the barriers to success in the Nigerian games sector

CcHub's Bosun Tijani on its new edtech incubator and research centre re:learn

Tech Cabal's Bankole Oluwafemi on making Lagos a Playable City - The Mirror that talks back to you


Corbyn Munnik on start-up Sliide, an African mobile Flipboard with free data, launched in Nigeria

Papa Cire Kane, Byfilling on start-up digital agency Byfilling and the online landscape in Senegal

Babacar Birane, Concree on wanting to be Africa's first virtual incubator & its successful start-ups