Growth of Digital Advertising Spend

Love it or hate it, the world has a fascination with the United States of America. Whether things are going well or not, all eyes are focussed on the people, politics and business of the Star Spangled Banner.

At the moment, the economy of the USA is going through some tough times. The war in Iraq, oil prices, and most of all, the entire crisis in the housing market, seems to be playing havoc there. The dollar is weakening and doomsayers are even predicting an economic recession over the next few years.

This sentiment has filtered down and affected most businesses – including the advertising industry. A quick look at recent figures sees a decline in “traditional advertising spend”.

Major USA television networks have reported a 6% decline in year-on-year adspend. In a “stable” inflationary environment this represents massive numbers in anyone’s book. Radio is down 1% and Newspapers 3%. When you are talking about a multi-billion dollar industry this is more than just a little pinch!

Does this mean that the ad industry in the USA is headed for the toilet? As they say in Texas, “HELL NO!”

These numbers have less to do with a decline in spend than with a move in spend. Marketers are realising the amazing opportunities in digital media and buying up the space as quickly as the developers can develop it.

Advertising on search engines alone will account for just under $9bn by mid 2008! This massive figure is up 29% on 2007. The trend is pushed by more searches per person and better monetization. The dot.com community seems to have learnt a huge lesson from the ‘bubble burst’ of the late nineties. Modern websites get consumers to pay the website to give them (the consumer) a platform to voice their opinion! With the growth in Consumer Generated Content, the websites are doing less and less and making more and more! Good business if you can do it.

Similarly, advertising on Mobile Media has also amazing triple digit growth. Locally, operators are gearing themselves to perfecting the mobile advertising model. After all – in South Africa - there are twice as many of people with cellphones than people working full or part time. What a market!

One of the big challenges to the mobile market is rights issues. Who owns the content? How do you licence mobile television viewing?

A major ongoing challenge is the rapid speed of change. Who knows, with convergence and the rate of development, those cellphones we rely on today might soon be obsolete. They will soon be replaced by your own, handheld, Personal Life Device and handle the chores of the cellphone, laptop, blow-up doll and coffee maker all in one. This foresees that the current model is thrown out of the window.

The South African digital market is poorly measured, extremely so, as only Internet advertising is being measured. Furthermore, not all websites report online advertising activity. Mobile advertising, small as it may be, is unmeasured. Even so, the numbers are looking good – granted off a low base. According to Adex, adspend on Internet has grown from R135m in 2004/5 to R254m in 2007. A growth of 90%!

 There seems to be a definite move towards digital advertising, at the expense of some of the traditional media types. The battle is red hot in the US and UK. Look out South Africa, it’s only just begun. By: Chris Botha, Media Strategist: The MediaShop