African advertising spend set to grow but broadcast will need to fight hard to retain its share

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Free-to-air broadcasting in Africa is supported by advertising and this provides the majority of television revenues on the continent. Balancing Act has just published a report (Advertising in Africa – Retaining a share of the pie) Russell Southwood looks at how advertising has shaped the sector and its future growth prospects.

Despite reasonably good prospects for advertising growth over the next five years, many parts of the African television industry have been under a lot of pressure over the last three years. Three factors have caused this pressure:

  1. Wherever advertising spend is tracked in Africa, the mobile industry is always in the Top 5 spenders. But it has in many countries (in voice terms) reached the edges of its addressable markets. Furthermore in some of the very competitive markets, no amount of marketing and advertising strategies has moved the dial on the players’ individual market share. As a result, some of the players have scaled back or held steady their spend. In some countries like Kenya and Uganda, consolidation has removed one of the players and as a result, their spend has gone from the overall pool of annual advertising spend.

One bright spot in this otherwise gloomy picture? Mobile operators now need to encourage their customers to use data. But this is not all good news as the mobile operators are among the larger spenders on digital advertising.

  1. The process of transition to digital broadcasting has not been kind to free-to-air broadcasters. For example, both in Kenya and Tanzania the regulator and Government chose to implement a “hard stop” in the process. In other words, they switched off the analogue signal before everyone had bought a set-top box or digital TV. The result has been a loss of TV audience in some years. In Tanzania, the regulator published its estimates of how many people had set-top boxes that indicated the levels of audience loss from TV.

Again there have been some positive countervailing factors in some of the main markets. In Kenya, the rural electrification programme has meant an increase in the numbers of people able to run a TV. Local Kenyan company Kopa Kopa which started with selling solar lamps is now selling solar powered digital TVs to its customers. This overcomes the lack of power issue for many rural areas and maybe has much promise in countries outside of Kenya.

  1. The other “collateral damage” from the digital transition process has been the increase in the number of TV channels in all the main broadcast markets. To remain competitive, existing broadcasters have had to add new channels that in the short-term have undoubtedly diluted their ad revenues. Furthermore, digital broadcast platforms have made the cost of entry to market seem much lower. Tens of channels and sometimes over a hundred channels have made it a buyers’ market for advertising. Even in good times, the level of discounting against rate card has been high but with so many channels it has never been higher.

The key factor for the future will be how many of these channels survive. This is not always strictly a business consideration in some African countries. Key channels are often propped up financially by friends in Government or subventions from “friends close to politicians.” Nevertheless, there will be a thinning out of the number of channels as some of them fail to gain enough audience to interest advertisers.

These factors are all short to medium term and the longer term issue is not will advertising grow but whether free to air broadcasters can retain their share of it. Experts we’ve talked to believe that Africa’s advertising market will grow by 3 to 6%/year up to 2020. This compares to an increase of around 4.5% globally from 2015 to 2016. The forecasters believe that consumer spending in Sub-Saharan Africa will increase significantly up to 2020.

However, the advertising that accompanies consumer spending will not be evenly spread. The largest proportion of spend will be made in Africa’s “fast lane” countries. The inevitable rebound in the oil price will contribute to this growth pattern.

Besides, Africa’s television landscape is undergoing the most seismic shift, as television is no longer simply a living room device with scheduled, broadcast programming, but a form of media available in countless interactive, glowing screens that connect to the Internet. A 2016 Mediametrie survey of Cote d’Ivoire’s capital and second city, Abdijan and Bouake, showed that 18.4% of respondents owned a tablet. In South Africa 44% of a survey’s respondents listened to radio on their mobile phone.

Africa’s broadcasters cannot afford to be complacent about their revenues. Internet use is growing and with it, digital advertising is becoming an established and growing category of spend, particularly for international brands. I’m not arguing that the Internet will take over TV advertising revenues but along with competitive discounts it will eat away at its share.

Therefore broadcasters need to look at how they ensure that their content is available across multiple platforms so that they too can participate in the growth of digital revenues.

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

Ad in Africa Report 





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