Africa may well be trailing behind the rest of the world in some aspects but not with regard to online classified advertising, which is on the rise throught the continent. The combined value of online ad spend in Africa and the Middle East is expected to reach US$2.8 billion this year, as internet and mobile penetration soars.

Advertising in general is increasing across the world. Publicis Groupe’s ZenithOptimedia predicts ad spend will increase by 4.7% this year, 4.3% in 2017 and 4.2% in 2018. However, online is rapidly becoming the main hub.

Figures on Africa are lacking but there is evidence of serious growth, especially in the area of classified adverts, or classads as they
are more commonly known. Saltside Technologies says it has seen growth of 300% on its Ghanaian classified-listing site Tonaton.com.

Reporting 24% year-on-year revenue growth recently, South African media conglomerate Naspers says this was partly spurred by the 36% growth it had seen in its classifieds segment.

With growth such as this, it is no surprise that investment has also increased. Naspers has pumped US$100 million into mobile classifieds platform Letgo, while OLX has expanded into Tanzania and is looking at other sub-Saharan African markets. Malaysia-head-quartered digital investment firm Frontier Digital Ventures is also betting big on African classifieds, spending money on the likes of Propertymaputo.com, Tanzania’s Kupatana.com and Ghana’s Meqasa.com.

Country manager for Gumtree South Africa Johan Nel says that this is an exciting time to be in the classifieds sector. The market in general is seeing year-on-year growth, with listings on Gumtree growing by double-digit figures. ‘There has been expansion into new services – the advent of vertical specialisation and precision targeting for advertisers, to name but a few interesting local developments,’ he says.

The combined value of online ad spend in Africa and the Middle East is expected to reach US$2.8 billion in 2016, as internet and mobile penetration soars

Cristobal Alonso, CEO and co-founder of Nigeria-based online classifieds platform Mobofree.com, says Africa is following the same trend as seen elsewhere in the world, where listings are now increasingly moving online with a shift away from newspaper print. Mobofree is the largest Nigerian site of its kind, and saw more than 1 000% increase in listings in 2015.

‘The reach of online classifieds is much larger online as today everyone has a phone with an internet connection – even if not a smartphone – and you can also ensure a proper targeting of your goods,’ he says.

The growth of online classifieds is synonymous with the growth of the internet in Africa. Even though there is a shortfall of figures for Africa as a whole, South Africa offers a microcosm of what is happening across the entire continent. According to the Audit Bureau of Circulations, total press circulation is decreasing 1.7% quarter-on-quarter, with weekly newspapers dropping 6.6% and local newspapers 5.8%.

It is a trend that is only set to continue, prompting greater investment in the sector and the launch of new sites. It is also not country-specific, with the likes of OLX’s launch in Tanzania and Frontier Digital Ventures’ interest in Rwanda and Burundi suggesting there is a rush to get to market in order to make the most of the rich opportunities occasioned by the move of both users and advertisers online.

The sector is experiencing such growth that, last September, South African David Kaplan launched Value Forest, a site that aggregates the content on classifieds platforms to save users time and money. He believes the sector is set to only get busier. ‘As smartphone adoption in Africa keeps growing – which appears to be at quite a fast rate – more experiences become available via apps and the mobile web – eliminating the need to read classifieds in a newspaper. A small portion of print classifieds may remain but the vast majority will be online, I believe,’ he says.

This explains the rush of firms to establish themselves as dominant players in certain markets, with Nel saying such a position offers major opportunities to generate revenue.

‘Aside from features, where users pay to have their ads stand out, there are also opportunities to monetise and professionalise popular verticals for professional users – such as estate agents, recruiters and car dealerships.

‘Masses of traffic also attract premium advertisers who want to pursue certain verticals. A classifieds portal combines all three through self-generating, audience-driven content, which would account for the volumes of traffic they receive. If used correctly, this can be a powerful platform for any discerning advertiser.’

The growth of online classifieds is synonymous with the growth of the internet in Africa. South Africa offers a microcosm of what is happening across the entire continent

Kaplan believes that once a company has got its model right, it can be mirrored in multiple countries. ‘Other than marketing costs, it’s not a very capital-intensive business to start. Because classifieds are targeted at such a large market – especially in growing economies in Africa – this gives advertisers a good platform to reach users, and that is the primary potential return. But we may see other revenue angles in future,’ he says.

That’s not to say running a classifieds business in Africa is not without its challenges. Nel says converting individuals who have never used such platforms before has been problematic, particularly in the South African context where the internet is only now opening up to a new generation of users who did not grow up with e-commerce as part and parcel of their shopping experience.

‘Technology is not a barrier. There are numerous new mobile-only players entering the market. But it is extremely difficult to build a classified site from scratch at this point – which is why mergers and acquisitions are commonplace,’ says Nel. Some online platforms – such as the sites Propertymaputo.com and Meqasa.com – have chosen to focus on one vertical but Nel and Alonso believe that general classified platforms for all sorts of products are the way of the future.

‘We find that a general site does extremely well, with certain verticals standing out as “stars”. Gumtree, for example, receives 1.4 million visits to its automotive section, which is a larger amount of traffic than its competitors that focus purely on automotive buying and selling,’ says Nel.

‘Similarly, Gumtree is not a niched property site, but receives more than 30 000 property visits to the section every day. We are also the largest site for rental properties in the country.

‘Most of the traffic was gained organically. We find that users “mature” through the site – buying their first couch or car, then graduating to buying their first home or furniture for their nursery, which is why being a general site has been to our advantage.’ Nel feels that as long as a site’s user experience is seamless, classified platforms can be ‘jack-of-all-trades’ while remaining masters in their key verticals.

Alonso says he could see the arguments for niche platforms in verticals such as cars, jobs and real estate but believes that in Africa, it is too early for more specific niches such as clothing and sports goods.

‘We see that in Nigeria – even when working with a general classifieds model – huge investment is needed for educating and teaching people how to trade online and, finally, proving to them that trading online can be safe and effective. Therefore traditional classifieds sites are coming first and niche sites will follow later.’

In a competitive environment where major players such as Naspers are throwing money around in order to get ahead of the game, Nel says innovation is key to success in the space. ‘We’ve already gained an edge in the property and automotive market by formalising and monetising the verticals, providing a dashboard for professional sellers with real-time analytics and improvement ad and customer management capabilities,’ he says.

Nevertheless, it may take a while for such companies to reach true profitability, with Alonso estimating that this could take up to seven years.

‘In Africa, the opportunity is as big, if not bigger, due to lower GDP per capita. Second-hand goods may even be more relevant for many Africans that cannot yet access first-hand goods in many areas.’

By Tom Jackson
Image: Andreas Eiselen/HSMimages