MENA's advertising industry: $1B wiped off spending in 2016

Published January 3rd, 2017 - 09:00 GMT
Print media advertising is suffering the most, TV advertising is stagnating and digital advertising is increasing, but the net result is an overall 10 percent drop. (AFP/Karim Sahib)
Print media advertising is suffering the most, TV advertising is stagnating and digital advertising is increasing, but the net result is an overall 10 percent drop. (AFP/Karim Sahib)

Not even advertisers can sell 2016 as a good year — and their commercial outlook for the next 12 months is similarly bleak.

With the conflicts, a string of celebrity deaths, and widespread political upheaval, many see last year as a gloomy one.

The regional advertising industry does too — and was partly influenced by these geopolitical events, according to one top industry executive.

Total investments in Middle East and North Africa (MENA) advertising were down by 10 percent in 2016, and a similar drop is expected this year, according to Elie Khouri, chief executive of the Omnicom Media Group in MENA.

“It was not a good year for the industry,” Khouri told Arab News.

Omnicom and its related companies control a hefty chunk of the region’s advertising spend, buying time over the TV and radio airwaves and glossy space in magazines.

The industry as a whole has been hit by lower spending on advertising across the board, Khouri said.

“Why is this happening? One is the strain of the politics, the strain of the war, everybody is tightening their belts, the reduction of subsidies across the board, currency problems in Egypt…” he said.

“All of these have an impact on our industry, or have an impact on the economy. A high dollar is not good for the United Arab Emirates (UAE) because of tourism, investment and real estate — so naturally this will have an impact on the economy.”

$1 billion wiped out

Advertising spending in the entire MENA region once topped $5 billion, but Khouri forecasts it will stand at around just $4.1 billion in 2017.

Some types of media have been more affected than others, the executive said.

“The guys that are suffering the most are the print media. The print is going down at a high double-digit, it is about 20 percent on average,” he said.

“TV is stagnating, or even slightly dropping (in 2016) by about 5 percent. And digital (advertising) is going up. But the net result of all of this is the 10 percent drop.”

But there is light at the end of the tunnel for the ad industry, Khouri said.

He forecasts that it will start to recover in the last quarter of this year, bringing much-needed increased investments from major advertisers ahead of a “very healthy” 2018.

Bottom of the cycle

Total spending on advertising in the region could hit $4.5 billion in 2018, the executive said.

“We are at the bottom of the cycle. And I think from the $4.1 billion mark we will start to grow again,” Khouri said.

“On average we are looking at a market reduction of about 10 percent (in 2017), unfortunately. But… things will start to brighten up in the last quarter.”

Austyn Allison, the editor of Campaign Middle East, a Dubai-based magazine covering the advertising industry, said Khouri’s outlook is shared by others in the industry such as the media agency Zenith.

“10 percent is a fairly gloomy outlook, but Zenith seems to agree. It is predicting a 7.3 percent decline in 2017, after 11.8 percent in 2016.

A year ago, it had predicted a 6.8 percent decline in 2016, so that was worse than expected,” Allison said.

“The MENA region is in trouble… I have heard anecdotally that print (media advertising income) was down 30-40 percent in 2016, and the fate of print publishers has echoed that.”

Allison pointed to the closure of titles such as the Dubai-based newspaper 7DAYS, which ceased publishing in December, and job cuts at other UAE publishers.

“Hopefully that means that print will not decline as much next year, since there’s not so much to kill off,” he said.

“But there will be blood, certainly. (Advertising) clients are going more short-term, due to insecurity about ongoing wars, still-depressed oil and general economic malaise.”

“And when they are spending, they are being more canny. Some clients have started demanding payment by results. Even from creative agencies, as well as media buyers. And this can only increase. This means the whole industry is becoming more accountable.”

Another change that Allison sees in the industry is more competition among media agencies to offer additional services to clients — such as data-crunching or even doing creative work — alongside their regular work.

“Media agencies say they are looking to up-sell. They are careful not to use that exact word, as it makes them sound greedy. But they will be trying to get clients to buy more of their services, often at the expense of winning new business,” he said.

Omnicom Media Group, said its regional boss Khouri, is still growing in the MENA region despite the spending cuts by advertising clients that have hit the wider industry.

“Our market share is growing,” he said.

The company plans to keep its regional headquarters in Dubai, but plans on growing another base in Lebanon, as well as expanding its media-buying network PHD into Egypt, Lebanon and Saudi Arabia.
“We operate in the long-term in this part of the world,” said Khouri. “We have been here for 30 years, we have seen ups and downs in the economies, and these are all temporary measures. I think we will outgrow them and overcome them.”

By Ben Flanagan

Copyright: Arab News © 2021 All rights reserved.

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