Marketing tech set for accelerated growth in Africa as internet penetration, funding grows

Here’s a little spoiler from our upcoming episode Funding Report for African Technology Startups (released very soon!) – marketing technology had a big year for investment in 2022. While that fact may have been buried in a lot of headlines, the future looks bright for a growing sector in importance.

Twelve marketing technology startups raised capital last year, a 20 percent increase over 2021, and those startups banked US$34,725,000 between them. That was one percent of Africa’s total, and represented an increase of 242 percent on 2021. It maintains strong growth in this respect within the marketing space, with an increase of 281.5 percent on 2020 in 2021 .

Why, then, do we hear so little about space? For one, it’s very early days, and marketing in Africa is still largely analogue, with TV taking up a large chunk of the budget.

Chibuike Goodnews is the co-founder of a Nigerian company Documents, a cross-channel digital advertising platform for emerging markets. The platform enables businesses and advertising agencies to reach target audiences by leveraging data, technology and AI. Businesses use Docase to create awareness, connect with customers, and increase online sales and app installs.

Goodnews says the focus is on TV because the major consumers are traditional businesses whose primary objective is awareness. The space, he says, is ripe for disruption for some time.

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“The disruption must be a massive technology solution with the ability to aggregate first-party audiences, leverage deep targeting technologies, and produce better performance. These have huge capital requirements and visionary entrepreneurs,” he said. “Martech is a huge capital intensive space, and currently there is no African giant in the space mainly due to the high technical requirements and funding gaps. But the market is huge and promising.”

Another challenge other than funding is internet penetration. With over 60 percent of the African population still offline, it makes sense for businesses to focus primarily on offline channels such as direct-to-customer marketing, flyers, radio and television to reach customers. Digital options are also thin on the ground. However, Goodnews says that the number of people accepting it has increased since the pandemic, a period in which, as we have seen, funding has also increased.

“Digital technology solutions for marketing became mainstream when people could no longer go outside,” he said. “Many who explored digital technology solutions have since continued to use them. They often realized that they can reach more people, measure performance, be creative, and access features they can’t see offline.”

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Digital solutions like Docase will tell you the source and cost of every single user you’ve acquired.

“The target audience has moved online, all current and potential customers can be reached on websites, apps, social media and mobile,” said Goodnews. “So the companies that want to reach them have to go digital with a technology solution. Tech will continue to grow in the share of the marketing wallet as more companies hire young people, demand performance for every dollar spent, and contribute to the growth of the internet in Africa.”

A major advantage of online marketing is the cost, which means that start-ups in particular are more likely to take a digital-first approach to marketing. The demand is increasing, therefore, and although investor interest is still growing, there have been significant rounds for the likes of Adzily, Terragon and Wowzi in the last few years.

“Local investors don’t understand marketing so they take careful steps. With limited funding, most investment interests move to fintech and other less sophisticated sectors,” said Goodnews.

The total advertising market for Africa is around US$5 billion, not a big enough figure to attract most VC firms. But there are signs of development, and Goodnews is optimistic about the future.

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“Investor interest in marketing technology will change as more investors see success stories. They will also realize that big non-advertising firms like Jumia, Amazon, Netflix and Opera are giant advertising companies,” he said. “Transsion, which has 70 percent of the mobile phone market in Africa, is now a huge advertising company; Amazon has made over US$6 billion in advertising in just three years. The future is clearly that global digital businesses will have their own advertising revenue to power the free internet.”

He says the space needs visionary founders and investors.

“There is a huge funding gap for marketing technologies despite the huge opportunities. But when investors see success stories, they will scrutinize more data. Digital marketing thrives in addition to direct end-user or first-party solutions such as search, news aggregation, e-commerce, social media, data or mobile hardware.”

If African startups can build these solutions, more than they already have, it seems likely that customers – and investors – will follow.

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