Kenya’s Media Ad Spend Took An Unexpected Bottom Dive In 2019 – Here’s Why

By  |  January 10, 2020

Kenyan brands know the taste of fruits that ripen on the tree of digital advertising. Relatively more than any other African country, the nation’s play to reach consumers through ads lies in the path of reaching sustained growth of commerce.

While advertising expenditure remains the major source of revenue for the media, there appears to be a dip in the spend curve of the last two years. 

Steady Decline?

As of 2018, the total amount of cash splashed on advertising within Kenya’s media space stood at KES 91.5 Bn (USD 900,939,378). It may look like a significant spend, but reality begs to differ, as the number shows a decline from the previous year’s (2017) KES 108 Bn (over USD 1 Mn) total.

The 2017 sum was attributed to the prolonged electioneering period, when political parties in the East African nation invested in campaign ads. 

The interesting bit of the narrative is that Kenya’s media ad spend had been rising historically for every year before 2014. Its internet advertising market was worth USD 120 Mn in 2016, compared to USD 65 Mn in Nigeria. 

The mobile revenue accounted for 94 percent of the total. It is no longer news that the internet has overtaken newspapers as the main source of advertising revenue. Nevertheless, it will rank third behind radio and TV, per a survey by PwC

Internet advertising is also set to double in the five years leading to 2021 with revenues from the industry generally going up by 14 percent. But the pain to the promising move is brought on by a recent clampdown on gambling ads in the country. 

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Christopher Madison: Isobar

While that’s a story for later, marketers are shifting because of what Christopher Madison, CEO of Dentsu Aegis Network Kenya, explains as a shift in the Kenyan economy between periods of growth and recession. 

In an interview with WeeTracker, Madison says: “During downturns, like the one many marketers are facing now, strategies have shifted towards short-term sales and cost cutting, which will have a negative impact on long-term brand building. If one company decreases media spends in order to cut costs during a downturn, a competitor should boost media spending to grab customers and grow its market share”. 

The Economy

In 2019, analysts predicted that Kenya’s external earnings would run into billions of dollars annually to be affected by the slowdown in the global economy. The International Monetary Fund (IMF) blames the slowdown on a weakening financial market sentiment, trade policy uncertainty and concerns about China’s outlook.

The IMF has also revised downwards the growth of sub-Saharan Africa, Kenya’s biggest export market, by 0.3 percentage points to 3.5 per cent this year and 3.6 per cent in 2020.

A new World Bank report titled January 2020 Economic Prospects says that Kenya would record 6 percent growth for three consecutive years covering 2020, 2021 and 2023. The prediction which says Nigeria’s will grow at 2.1 percent for the same period, puts global economic growth at 2.5 percent. 

In countries where consumer spending highly influences the future of the economy, advertising is the get-up-and-go for people to spend more. Advertising, through motivating more buying, promotes productivity growth to help meet increased demand. It also enables each consumer to have more to spend. 

In such type of uncertain economy, Madison’s view is that all agencies in Kenya to prove return on investment of media budgets. He says: “When the competition is afraid, be brave!

Dentsu Aegis Kenya spent a lot of effort proving to clients that media budgets represent a profit center and not a cost center, so they trusted us when we said to keep spending. Taking clients through this analysis was critical in 2019”. 

Gamble Scramble

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Source: Caseyweeklyberwick

Another strong factor reducing confidence in the industry is the clampdown on betting ads in the country. In 2019, the Kenyan government introduced new gambling regulations, which included the banning of outdoor and social media advertising. The country’s Ministry of Interiors highlighted that gambling had become a major problem for the Kenyan young and poor. 

The Minister, Fred Mitiangi, said the growth of the gaming industry to USD 1.98 Bn had become a problem in Kenya. The sector, which although employs 5,000 people, seems to put many young and less-privileged Kenyans at risk. More so, in a debt trap.

According to him, 54 percent of Kenyans involved in betting are low-income earners and 76 percent of Kenyans are bettors – the highest figure in Africa. Half a million of these people have been blacklisted because they failed to return borrowed money which they used to place failed bets. 

On average, the Kenyan users looks at his/her smartphone more than 200 times a day. This comprises time spent checking social media feeds, emails, and WhatsApp, not just betting sites. It means that 23 million Kenyans are almost always online, which is a whopping 57 percent of the country’s entire population. 

The dispute between the gambling sector and the Kenyan government got off to a flying start about 7 months ago. On July 1, the country’s gambling regulator, the Betting Control and Licensing Board (BCLB), declined to renew license applications of SportPesa and 26 other firms due to unpaid taxes. The watchdog claimed that Kenya’s Gambling Bill requires operators to pay a 20 percent tax, not just on profit, but on the bettor’s original stake.

Effects On Ads Spend

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A Safaricom Ad

The 20 percent tax was the nail in the coffin that almost sent SportPesa – a prominent betting operator in East Africa – six feet below. The operator closed its operations in Kenya, laying off 453 employees.

A quick revival, however, may still be on the cards. In mid-November, Kenyan Tax Appeals Tribunal ruled that the winnings tax does not refer to stakes, which Sportpesa chief executive Ronald Karauri, called the move a “significant development”.

A 2019 survey jointly carried out by Ipsos and GeoPoll reveals that the Kenyan media industry is looking at an KES 14 Bn (USD 137,848,648) loss in advertising revenue, representing 10 percent of the media’s advertisement earnings.

“As a result of the suspension, media stations airing major football tournaments could expect to reach close to 20 percent fewer audiences, than originally planned,” a part of the report dubbed Unpacking Betting in Kenya read.

Dentsu Aegis Kenya, an arm of the global Dentsu Aegis Network, believes that the growth in Kenya’s betting industry’s ad spend was tightly correlated to massive consumer acquisitions (signups) and conversions (debts). 

Madison offers: “The media budgets hadn’t hit diminishing returns so betting companies kept increasing spends every quarter. This has changed very quickly. The subsequent regulatory changes in the Kenya betting industry has changed this media spend trajectory as profit potential decreases”.

Dentsu Aegis’ principal services are communications strategy through digital creative execution, media planning and buying, sports marketing and content creation, brand tracking and marketing analytics. 

The dogged moderation of sports betting firms in Kenya could lead to economic costs. Estimates are that the closure of SportPesa and Betin could result in the loss of 2,500 direct jobs. 

This includes employees and commission-earning agents who enable the businesses’ strong retail network across Kenya. But apart from unemployment, subservient effects could stem due to how involved betting firm are in the local economy. They have large advertising budgets and sponsorship. 

Featured Image: Daily Mail.

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