Austerity ahead for MENA's 'Mad Men': Advertising agencies expect budget cuts

Austerity ahead for MENA's 'Mad Men': Advertising agencies expect budget cuts
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Published December 16th, 2015 - 05:21 GMT via SyndiGate.info

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Marketers anticipate lower consumer demand in 2016 in the wake of weak oil prices. (Dubai Airports Connect)
Marketers anticipate lower consumer demand in 2016 in the wake of weak oil prices. (Dubai Airports Connect)
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The year-end partying will not last long at advertising and media buying agencies in the Gulf and the wider region. In fact, the New Year will dawn with new realities — almost all of them unpleasant — for the industry.

In fact, some of the projections of what’s in store make for dire reading. The latest one from ZenithOptimedia reckons that there will be a steep 6.8 per cent decline in 2016.

And that comes on top of an 11.1 per cent across the Middle East and North Africa (Mena) territory this year. (These ZenithOptimedia findings are based on “actual” spending levels as against the ad tariffs put out on “official” media rate cards.)

The lower spending has all to do with marketers anticipating that consumer demand will be slow in economies where the weak oil prices have cast a long shadow.

It could be 2017 before some sense of normality on ad and marketing budget spends are likely to be witnessed. “We predict a slow recovery with 1.5 per cent growth in 2017 and 4.3 per cent in 2018, averaging a 0.4 per cent decline a year from 2015 to 2018,” said the report.

The industry will need some adjusting to do. While comparisons are usually drawn to the situation that existed in 2009-10 after the financial crisis, industry sources believe 2016 will not be that bad. And that the 2009 environment was more once-in-a-generation sort of thing.

This time out, while everyone agrees that ad budgets will be cut — in some cases appreciably — ad agencies hope that some sectors could help out by doing more. An early test will be the Dubai Shopping Festival 2016, when government agencies and allied entities go into marketing overdrive.

If enough happens during that 30-day stretch, it could help tide over a difficult operating environment for the first quarter of 2016, at the very least.

If the ZenithOptimedia numbers do bear out, the Mena territory will be the exception to what could otherwise be a steady to stable year for the ad industry in other regions.

It forecasts global ad expenditure to grow 4.7 per cent in 2016, to $579 billion and a 0.8 percentage point gain on this year.

The impetus will come from the US, where the presidential elections will play out in earnest via TV commercials and social media placements. The candidates need to be in the face of likely voters, and that’s always a good time for advertisers.

Plus, 2016 will host the Summer Olympics in Rio de Janeiro. ‘The global ad market has enjoyed stable growth since 2011, with growth rates ranging between 4-5 per cent a year, and we expect it to maintain this pace for the rest of the forecast period,’ the report adds.

While the Mena territory could see a 6.8 per cent deceleration in ad spend in 2016, some of the fast-track Asian markets can touch a 9 per cent growth, while Latin America and Western and Central European markets could see gains by 4.8 per cent and 4.1 per cent respectively.

The US is in line for a year-on-year growth of 3.8 per cent.

Key points

• The US remains the dominant advertising market, taking up $182.6 billion this year and well above the likes of China ($74.3 billion) and Japan ($42.2 billion), according to ZenithOptimedia’s number crunching. By 2018, the US would account for $202.4 billion and China’s at $92.2 billion.

• Between 2015-18, the global ad industry could swell by an additional $77 billion, with the US accounting for $19.8 billion of the new spend.

By Manoj Nair

 

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