Here are some spoilers from us coming up. African Tech Startup Funding Report (Coming soon!) – Marketing tech had a great year in 2022 from an investment perspective. That fact may be overshadowed by bigger headlines, but the future looks bright for a field that’s growing in importance.
Last year, 12 marketing tech startups raised capital, up 20% from 2021, and these startups raised US$34,725,000. This corresponds to 1% of Africa as a whole and increased by 242% in 2021. Within the marketing space, we are maintaining strong growth in this regard, with a 281.5% increase in 2021 compared to 2020.
So why do we hear so little about space? First, it’s still in its infancy, and marketing in Africa is still largely analog, with television taking up huge budgets.
Chibuike Goodnews is a co-founder of a Nigerian company. conductor chase, a cross-channel digital advertising platform for emerging markets. The platform enables businesses and advertising agencies to leverage data, technology and AI to reach their target audience. Businesses use Dochase to raise awareness, engage customers, and increase online sales and app installs.
Goodnews says the focus on television is because its main spender is a traditional business where awareness is the primary goal. He says the space has been ripe for chaos for some time now.
“Disruption needs to be a massive technology solution with the ability to assemble a first-party audience, leverage deep targeting technology, and perform better. There are huge capital requirements and visionary entrepreneurs here,” he said. “Martech is a hugely capital-intensive space and there are currently no African giants in the space due to high technical requirements and lack of funding. But the market is huge and promising.”
Another challenge beyond funding is Internet penetration. With more than 60% of the African population still offline, it makes sense for businesses to focus primarily on offline channels such as direct-to-consumer marketing, flyers, radio and television to reach customers. Digital alternatives were also thin on the floor. However, Goodnews says that understanding has increased since the pandemic, a period in which, as we have seen, funding has also increased.
“As people can no longer be outdoors, digital technology solutions for marketing have gone mainstream,” he said. “Many people who have explored digital technology solutions have continued to use them ever since. They realized that they could reach more people, measure performance, get creative, and access features that are often not available offline.”
Digital solutions like Dochase tell you the source and cost of every single user acquired.
Goodnews said, “Our target audience has moved online and all existing and prospective customers can be reached through our website, apps, social media and mobile phones.” “So companies that want to reach them need to go digital with technology solutions. Technology will continue to grow in marketing wallets as more companies hire younger people, demand performance for every dollar spent, and capitalize on the growth of the Internet in Africa.”
The main advantage of online marketing is cost. This means that startups in particular are more likely to adopt a digital-first approach to marketing. Demand is therefore growing, and while investor interest is still in its infancy, there have been notable rounds over the past few years, such as Adzily, Terragon, and Wowzi.
“Local investors don’t understand martech, so we need to be cautious. With limited funds, most investment attention shifts to fintech and other less complex sectors,” said Goodnews.
Africa’s overall advertising market is around $5 billion, which isn’t big enough to tempt most VC firms. However, there are signs of progress, and Goodnews has positive hopes for the future.
“Investor interest in marketing technology will change as more investors see success stories. You will also realize that non-advertising giants such as Jumia, Amazon, Netflix, and Opera have all become giant advertising companies.” “With 70% of the African mobile phone market, Transsion has become a giant advertising company. Amazon has generated over $6 billion in ad revenue in just three years. We see more global digital companies having their own advertising revenues that will power the free internet in the future.”
He says the space needs visionary founders and investors.
“Despite the enormous opportunity, there is a huge funding gap for marketing skills. However, as investors look at the success stories, they will look into more details. Digital martech thrives on basic direct-to-user or first-party solutions such as search, news aggregation, e-commerce, social media, data, or mobile hardware.”
If African startups can build more of these solutions than they already have, it’s a sign that customers and investors will follow.