- The online advertising space is gaining traction on a global scale, especially with the increased usage of mobile and wireless devices such as tablets and smart phones and its apps. As such, advertisers worldwide are channelling more advertising expenditure into the digital space. The Star reported in September that a study done by Ericsson ConsumerLab shows that smart phone penetration rate in Southeast Asia has increased from 47% in 2012 to 63% this year, while tablet penetration rate increased from 14% to 39%.

- The expansion of the online platform is led by online search engines such as Google and Yahoo which has a wide market reach and high cost efficiency. This is due to technology that allows them to establish patterns of the online users for a more targeted advertisement approach. A research by Pricewaterhouse Coopers illustrates that in the US, internet advertising has a market share of 20% as at 2012, second only to TV advertising with a market share of 36%.

- We also note a structural change in the way entertainment, information, and news are disseminated. This is due to the growing significance of mobile devices, which allow consumers to seek customised content tailored to their needs; this is especially so for the younger generation.

- It was recently reported that Google recorded a 26% jump in volume for its click advertisements despite a decrease in mobile premiums. Moreover, Google Inc is spending more on marketing campaigns to encourage marketers to channel more spending to wireless devices. Google’s recent result revealed that its 3Q net income has risen by 36% YoY.

- Recently, Apple and Microsoft have reportedly offered free updates for their desktop computer operating systems in the face of stiff competition imposed by the popularity of mobile devices. Sales of operating systems software have been the main source of revenue for these technology companies, but they have now shifted their focus on the sales of hardware, devices and value-added services instead.

- In line with this development, Star Publications has recently acquired Ocision – which owns online portals for automotives, properties and accommodations – in order to gain back some classified adex that it has lost out in its print segment. Media Prima also has its entertainment and lifestyle portals - tonton.com.my and gua.com.my- while Astro has a streaming platform (Astro-On-The-Go) for its customers to tap the online segment.

- Although the conventional ways of media dissemination remain relevant at the moment – especially in the rural area – we see the possibility of the online platform posing a potential threat to the traditional sector in the longer-term. We are unable to quantify the impact of internet advertising on the media sector at this juncture, as it is still insignificant in absolute terms. However, we do see the advertising trend in the US as a glimpse of what the future holds for media advertising in Malaysia. 

Source: AmeSecurities