As the global downturn puts pressure on advertising budgets, brands in the region are turning to online advertising.
Regional brands turn to online advertising
As the global downturn puts pressure on advertising budgets, brands in the region are increasingly turning to online advertising, where they can keep better track of how their money is being spent, according to regional online advertising experts. Research companies do not yet track the size of online advertising's slice of the region's total advertising spending pie, but professionals working in the industry say its growth mimics the upward trend in the US and European markets.
"Big companies are spending up to 7 per cent of their budgets on online advertising, up from 5 per cent last year, and some are planning to go up to 9 per cent," said Mazen Halawi, the corporate sales manager of Ayna, an Arabic search engine serving the Middle East and North Africa. "I believe that there will continue to be more online advertising, because online is targeted and it's measurable." The company, which started in 1997, claims a ranking just beneath Google as the most used search engine in the region. It officially launched its online mapping service - the first in Arabic and English in the region - at the Media and Marketing Show in Dubai yesterday.
Since it launched in 2000, the pan-Arabic web portal Maktoob.com has seen its usage grow rapidly, according to Hazem Habash, an advertising sales executive at the company. "In 2006, we had 2 million unique users. Now we have 9.6 million unique users. So you can see the trend," he said. "There's been growth of 260 per cent in advertising spending from 2006 to 2008." Internationally, online advertising spending appears to be a lone bright spot in a darkening outlook for the advertising industry as a whole. Internet advertising revenues for the first six months of this year were up 15.2 per cent on the same period last year, to US$11.5 billion (Dh42.24bn), according to an Interactive Advertising Bureau and PricewaterhouseCoopers report released last month. Revenues in the fast-growing search and display-related advertising sector were up almost 24 per cent during the same period, to $5.1bn.
"Due to the unique efficiency and effectiveness of targeted and measurable campaigns, internet advertising has shown strong growth in the first six months of 2008, compared to the same period last year," said David Silverman, a partner in PricewaterhouseCoopers entertainment, media and communications practice division. "This growth has come in spite of an environment that has put significant pressure on the advertising industry in general."
In the UK, the study said the resilience of online advertising turned what would have been a 4.6 per cent year-on-year decline in overall advertising spending in the first half to a slide of only 0.7 per cent. "Online is not immune from the economic downturn, but while other sectors see falls in expenditure, the internet is still experiencing an incredible increase and is propping up the entire advertising market," the report said.
The online advertising market worldwide is expected to increase by 23 per cent to $43.3bn this year, according to the European Information Technology Observatory (EITO). "The world market for online advertising is booming in 2008, despite the economic slowdown in many areas," said Bruno Lamborghini, the chairman of EITO. "Even in the USA, with the damage inflicted by the financial crisis, is still by far the largest market for internet advertising, the EITO forecasts growth will be at 13 per cent. This brings online advertising income in the USA to a total value of ?13.6 billion (Dh63.1bn) for the year 2008."
But the Middle-Eastern region still has a way to go before it can fully realise its potential as a market for online advertising. Husni Khuffash, the UAE country manager for Google, reminded the audience at yesterday's show that the Middle East still lagged about five years behind the US when it came to internet usage. "Today, Arabs on the internet are 5 per cent of users, while Arabic content is less than 1 per cent," he said. "That shows that as a community, we consume more than we produce."