Level spending of around $4 billion is all the Arab advertising industry can hope for in 2012, says a top media executive.
Middle East ad world is turned upside down
With EU and US stagnation, the Middle East's advertising industry may have to make do with a 'flat' performance this year. But Omnicom's Elie Khouri says the Arab Spring produced more democracy, creating openings for more media and more advertising. Ben Flanagan reports:
The Arab world's advertising industry faces a tough year.
After years of stellar growth followed by a crippling recession, the US$4 billion (Dh14.6bn) industry can only hope for a period of stable spending, warns Elie Khouri, the chief executive of Omnicom Media Group in the Middle East and North Africa (Mena).
"We're using a buzzword now, which is 'the new up is flat'," says Mr Khouri. "I'm happy with flat [zero growth] this year, given what's happening in the world around us. At least we know where we are."
Omnicom owns two of world's biggest media agencies, PHD and OMD. Between them, they control an estimated 15 to 20 per cent of the total advertising spending in the Mena region.
Mr Khouri expects multinational companies to continue spending this year but says they will count every dirham and pick their investments carefully.
"We're working towards a single-digit growth as a company," says Mr Khouri. "But as an industry, I think flat will be the momentum this year. There are lots of economical and political issues that will have an effect."
q So after a tough 2011, what is your outlook for the Arab advertising industry this year?
a In terms of the effects of the Arab Spring, it's now behind us. The factors that will affect the industry this year are more related to the global economy, to the [predicted] recession in Europe, and to the potential of a double-dip recession in the States - all these global factors that are naturally impacting us. Two negatives is that multinational clients are going to be affected by the global recession, and for Abu Dhabi and Dubai clients, we're still suffering from the over-investments that happened between 2005 and 2008.
q Do you forecast any Arab advertising markets to be up this year?
a In Egypt, there will be a minor improvement, because last year was really bad in that we lost a total quarter's [spending]. Saudi is expected to do very well this year, because of the investment in infrastructure and all the money that was plugged into the system by the royal family, to appease what's happening in terms of motivating the population.
q Will 2012 be the year that advertising on digital media finally takes off?
a [Spending on digital media] is still very small. Digital today is still 5 per cent of total advertising investments in this part of the world. But it's growing at 30 to 40 per cent year on year. And it's not stopping. Social media is growing phenomenally. All the clients are looking at Facebook, at Google.
q Y ou say digital advertising is growing about 30 to 40 per cent. Is OMG seeing its digital business growing at the same rate?
a We're a bit more than that. To tell you whether its exactly 40 or 45 is very difficult to predict. But our growth rate over the last three to four years has been faster than the industry's growth rate in the areas of social media, search, digital and display advertising.
q Does Omnicom have plans to bring any other of its group companies to the Middle East?
a I think Omnicom is looking at exploiting other opportunities outside media [including] the areas of data, sports marketing and health care. Omnicom is a huge, huge company. And they will keep looking at opportunities, because this is a region that is still growing for us and will continue to be a strategic region for Omnicom. [With] stagnation in Europe and the States, they look at markets where they can grow, and the Middle East is one of them.
After the Arab Spring, new newspapers and television stations have sprung up in markets such as Tunisia, Egypt and Libya. Is this good news for the advertising industry?
Absolutely. The fact that these countries are becoming democracies is a great positive. Free economies and democracies have the best [potential] for marketers and advertisers, because there are lots of opportunities. For us, it's great because these markets for us were closed markets. We were not allowed to operate in those markets, and there were a lot of restrictions.
q Does OMG plan to open offices in these countries?
a When the time is right, we will. Libya is still not ready politically. In Syria, when it's ready, we'll be going there. In Tunisia we're going already, because the market is politically stable. We see the potential of Iraq. However, it's still very risky in terms of security.
q What is your plan in Tunisia?
a We will set up an office there. We're looking at the end of this year. We're looking at making our relationship more serious with the local affiliate. We're looking at that now.