In a region where business and arguably life in general revolves around the price of an oil barrel – which in 2015 slumped to below $30 – it should come as no surprise that ad spend in the Middle East and North Africa (MENA) region fell by 11% in 2015 and is predicted to decline by a further 6.8% in 2016 (Source: ZenithOptimedia). Besides oil prices, which forced advertisers to make budget cuts in anticipation of lowered consumer demand, political uncertainty in several Middle Eastern countries has also disturbed economic stability and investor confidence. Therefore with the MENA region on, what Campaign Middle East described as “the brink of another recession,” Aurora set out to examine the impact of reduced ad spend on the media and advertising business.

First a few caveats. Although ad spend came under more stringent review, especially in terms of real estate projects and financial institutions, FMCGs have not lowered their marketing investment. In fact, FMCG and retail (offshoots of which include hotels and the luxury businesses) are still spending significantly on advertising. Similarly, leisure and entertainment is continuing to gain momentum as MENA and Dubai in particular try to lure in more tourists to jumpstart a flailing economy. Additionally, the government is investing in health tourism by trying to attract the best medical professionals from around the world. However, by and large, experts predict that 2016 will be a challenging year for client spending and the overall forecast is that advertisers will either spend the same as they did in 2015 or less and no one will be ramping up ad spend.

Before examining the impact of these developments, it is essential to understand that although Dubai is the hub of advertising in MENA as most media and creative agencies have their base there, in terms of population it is probably the least significant market in the region (according to a 2013 census, the population is a mere 2.459 million, of which 85% are expats). KSA (Kingdom of Saudi Arabia) is the most important market with a population of 28.83 million (2013) of which over 18 million are indigenous Saudis.

As Antoine Challita, Regional Business Director, Universal Media (UM) says, “marketing investment in ME is driven by being able to target and market in KSA. It is a strong volume driver for many companies in terms of consumption.”

Therefore, while companies tailor their marketing strategies and campaigns to the needs of various countries in the region, it is safe to say that there is a trickledown effect from KSA. Nowhere is this more obvious than in the case of the media. Due to the lack of entertainment options in KSA, TV is a big part of consumers’ lives and according to a TNS survey from 2014 an overwhelming 91% of Saudis watch TV every single day compared to the world average of 75%.

Privacy issues and lack of tracking data (MENA has yet to launch a comprehensive Peoplemeters system), make it difficult to ascertain how many hours of TV is being watched per day, although some surveys put the number at seven hours. However, what can be said with certainty is that it is the free to air channels (such as MBC) which garner the bulk of the audience and about 90% of TV ad spend, with pay TV (platforms such as OSN and BEin) accounting for the rest.

With the rapid influx of mobile devices (according to a September 2015 report by eMarketer.com, MENA is one of the largest mobile markets in the world, with the number of mobile phones expected to surpass 789 million by 2019), TV viewing is now coupled with digital activities. TNS reports that 64% of consumers in KSA and 50% in the UAE are engaged in digital activities along with TV viewing – and these figures are higher than the world average. In KSA, many of these activities revolve around online video and the country is, as Reuters reported in 2013, the “the biggest user of YouTube per capita in the world.”

This, in effect, means that much of what advertisers do in MENA happens on TV and digital media. Of course print, outdoor, brand activations and sales promotions have their place in the media mix, but the bulk of spend is going to two media. Although TV remains the medium of choice in many markets, the move towards digital as the second most important media (in place of print) is hardly surprising as this is the trend in most of the world. However, this move has been far more rapid in MENA compared to the South Asian and even South East Asian markets.

As cost cutting compels advertisers to seek out media that offer transparency and accountability, it is only natural that investment on digital will see an increase.

Luca Allam, GM, PHD says that five years ago digital accounted for four to five percent of the overall ad spend and “we had to really fight and lobby with our clients for digital spend versus any traditional media. However in 2015, advertising investment on TV has dropped for the first time and digital has arguably overtaken print as the second media, accounting for 10 to 15% of ad spend in MENA; and if you look at GCC the investment would be about 20%.”

As cost cutting compels advertisers to seek out media that offer transparency and accountability, it is only natural that investment on digital will see an increase. Zeeshan Merchant, Planning Director, OMD, explains the impact of this on media plans saying that TV planning now is video or screen neutral and includes YouTube, Facebook Video and internet TV as well as platforms such as OSN Play and MBC Shahid.

Additionally, the big buzzword in MENA media circles with regard to digital from 2014 onwards has been ‘programmatic buying’ (the ability of buy online audiences in real time using an automated bidding system).

Allam says that “programmatic is one way of building more accountability into digital. What clients like is that it is in real time and automated and you can buy media and audiences more efficiently and if you give them an offer where you can buy technology at a lower cost it becomes a really competitive offering.”

Such is the lure of programmatic that according to Merchant, there has been a 40% surge in programmatic spending year on year.

Yet, despite the strides in digital and mobile (which is widely predicted to be the major driver of ad spend between 2015 and 2018), consumers are becoming increasingly hostile towards advertising on digital channels. One of the hot topics of debate in MENA in 2015 revolved around ad blocking software which is being launched even by major tech firms, such as Google and Apple, the use of which is growing at triple the rate of the growth of mobile.

Allam believes that the need for ad blocking arises because “people don’t want to be told by advertisers, they want to be involved.” This is forcing both media and creative agencies to focus on “content creation and influencer marketing.”

Furthermore, as advertisers tighten their belts, media and creative agency structures are also undergoing a paradigm shift.

Challita says that media agencies like UM are now transforming themselves from “large agencies to big boutiques so that we can still bring in the volumes but at the same time accommodate all the requirements of our clients.”

To this Allam adds that unlike five years ago where there was a “digital department and everything else, digital is now the future of the agency and planners have to plan online and offline seamlessly, which means having a core communications team that understand and are comfortable with the entire media mix.”

Creative agencies are also thinking differently, especially in terms of team structure. Tarek Shawki, Business Director, MEMAC Ogilvy Dubai says, “the traditional copywriter-art director team has gone out the window. Those people still exist but we are hiring social experts, conversation experts and multidisciplinary people like digital art directors for example.”

As they restructure, agencies are grappling with the specialisation versus integration dilemma, and Shawki believes that it will be a rocky year for creative agencies and they will be “pushing out crazy digital content. The hunger to win awards has always been there and we will try and find opportunities to do that for clients with online content. TVCs will probably decline.”

Media agencies on the other hand are quick to point out that they are not struggling, especially not (as Merchant says), “the big ones that are capable of investing in data and digital technologies.”

Allam agrees with this and explains that despite the drop in ad spend, PHD grew last year and is likely to do the same in 2016. He also offers a final word on media investments in the region in 2016.

“TV will potentially drop further, as will print. Outdoor will stay flat, digital will continue its growth and we should close the year at 25% of ad spend in terms of digital investment. I also think there will be a lot more opportunities for programmatic this year compared to last year. It’s been a bit of a buzzword so far but hopefully things like accountability on digital will start coming to the fore. So generally there will be some positives to take away from that difficult year.”

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