Elie Khouri, CEO, Omnicom Media Group, MENA, speaks to Mariam Ali Baig on why media agencies are best placed to assume brand leadership.
MARIAM ALI BAIG: Let’s start with the economy. You were quoted in Campaign Middle East recently as saying that the economic slowdown in the region is likely to persist beyond 2016. What is your prognosis?
ELIE KHOURI: I have been accused of being too pessimistic, but it is a no brainer. We are talking about economies where 85% of the GDP is oil based – and the price of oil has gone from $100 down to $30 a barrel. For the past so many years, governments in the region have been investing heavily in infrastructure projects, in defence and in feeding their people. There are high levels of poverty in Saudi Arabia and petrol, water, electricity and housing have been subsidised for a long time. Now with oil prices down, they are drawing on their reserves and tightening their belts – more importantly they are trying to diversify out of oil, although this is a longer term measure. So, clients are spending less because there is less money going into the economy and sales are not growing to the extent they were before. Forty percent of all marketing investments in the Arab world are government related. In 2015, the market saw a drop of eight to 10%. We will see the same this year and in 2017 the drop will be about five percent. The market may start to pick up by 2018, although this will depend on the price of oil. Economically you need political security. There are two main issues, the price of oil and the political situation; hopefully by 2018, one or both will improve and we will start to bounce back.
MAB: Do you think oil prices will go back to the level they were before?
EK: No, but $40 or $50 is healthier than $30. These governments are in deficit today because their budgets were pegged at oil prices being between $40 to $45; anything above $50 is good.
MAB: Is TV still the predominant media platform for brands?
EK: Yes, although for the first time last year we started to see a softening in the investment on TV, and in line with global developments, a shift towards YouTube, Facebook, Twitter and Instagram. TV is still the most dominant media but by 2020 digital will take over from TV and account for 55% of the investments and TV will go from where it is at 45% to roughly 30%.
MAB: What about other media?
EK: The bulk of the spending goes to TV, digital and print in this order and then outdoor, radio and cinema.
MAB: How strong is print in this region?
EK: Quite strong in the UAE, Saudi Arabia and Kuwait, but it is weakening by the day – the millennials are consuming less print and newspapers will completely disappear within the next 10 to 15 years. The digital newspaper will always exist because people still want to consume a brand and the content it provides. The issue is that the advertising dollars print used to command is not shifting to the digital platforms in the same volume, which is why many are struggling and why they will need to re-evaluate their business models. The online publishing world is big; anyone can write anything online and there is an abundance of technologies and content that competes with traditional print titles. Some of them will not make it in the long run and you will see a lot of changes in that space.
"UAE is cosmopolitan in nature because of the hub nature of the region and the fact that the work is disseminated across the MENA region, although much of it is mainly aimed at the Saudi consumer – when you speak of the GCC countries, you are mainly speaking about Saudi Arabia, which constitutes 65 to 70% of the GCC."
MAB: In terms of content creation and creativity generally, is there such a thing as an Arab creative sensibility given the size and diversity of the MENA region?
EK: The creative talent in the UAE is cosmopolitan in nature because of the hub nature of the region and the fact that the work is disseminated across the MENA region, although much of it is mainly aimed at the Saudi consumer – when you speak of the GCC countries, you are mainly speaking about Saudi Arabia, which constitutes 65 to 70% of the GCC. However, Saudi talent is becoming more expressive and there has been a renaissance in Saudi creativity in the past five years. Egypt is another story because it is a market in its own right and the country has always been creative because of their film industry and TV production and content there is the biggest in the Arab world. Lebanon is a very small market and although it is not strategic from a marketing perspective, it is from a talent one. Lebanon has always been avant guardiste; the people are westernised, they have been exposed to French and European culture and Lebanon was the birthplace of marketing communications in the Arab world. That is where it all started and then due to the war in the early 70s, the Lebanese spread creativity in communication when they moved to Saudi Arabia, Kuwait, Egypt or Dubai to set up business. In North Africa, the biggest markets are Algeria and Morocco, although they are constrained in terms of censorship and things you can do openly. Basically the creative talent is now in Saudi Arabia, Egypt and the UAE.
MAB: Does this mean that the multinational agencies are now hiring Saudi talent for their operations in Saudi Arabia?
EK: More and more multinational agencies are hiring Saudis to produce creative for their market. This is the way to go. This is a market that is opening up. This is a highly connected population; Saudi Arabia has the highest per capita usage of Facebook and YouTube in the world. Today a lot of Saudis are saying they want to play a role in their economy – not like before when they accepted that people came and did stuff for them. They believe they can do it their way.
MAB: This is a big and positive change?
EK: This is the beginning of the change, and with the recent announcement by their government about diversifying the economy away from oil and encouraging Saudis to become more active in the economy, this trend will accelerate. In Saudi Arabia 35% of the population is unemployed and this is a big issue as unemployment breeds conservatism and terrorism, so it is very important for these governments to push their people to work and be active. In Saudi Arabia 60% of the population is below 25, which is extremely young.
MAB: What are the trends that are driving media and media agencies in this region?
EK: The biggest change in the world is technology and this is affecting media agencies as well. Technology has made everything accessible to everyone within seconds and what this means is that the way we address consumers has become more complex. Social media has changed the way people consume media and the communication has to keep on adapting to meet consumer preferences – and these change by the second. The communication you produce for Facebook, YouTube, Instagram or Twitter has to be different and dynamic. This may be scary for clients, but it is amazing for us because it makes our job more scientific, more technology and data driven. Today we merge our data sources to produce campaigns that are extremely relevant, contextual and flexible. Speed and agility is the name of the game. We are continuously reorganising ourselves. Every year there is a new structure; every year there is a new talent pool; data technologists, data engineers, econometric monitors. We hire people with backgrounds we never dreamt of hiring five years ago.
"Today the custodian of the brand is anyone producing content for a brand; it could be the consumer, the branding agency, the media, PR or the social media company, or Facebook or Google for that matter."
MAB: What kinds of background?
EK: They could be software engineers, econometric modellers, technicians; we had somebody with a PhD in chemical engineering. People with an analytic brain who are able to understand the dynamics of our industry and learn quickly. They are a new breed which we never had before and which have become vital to our business. Many of the people we hire are from the Nordic countries which have been at the forefront of these developments.
MB: For how long have they been at the forefront?
EK: For the last six, seven years.
MAB: That is really not very long at all.
EK: It’s a new industry and you are not going to find people with 20 years experience. We hire people with four to five years experience – even two years is good enough. You hire and develop them. This talent is data driven and tech savvy and understands AI and AR. We used to say that our business was a combination of the arts and science, but today science is taking the predominant role; accountability is the name of the game and science allows you to be accountable. This is where media companies like ours will focus in the coming years. Our job is to understand where the world is going from a technology point of view, which is why you see media companies going to Vegas for the Consumer Electronics Show, because we want to understand where technology is going. When we understand this, we will be able to understand where our business is going. Technology is at the core of what we do. So it is about hiring people who are ahead of the curve, who understand technology and that data is what is going to drive our business in the long term.
MAB: What happens to the creative people in all this?
EK: Creative people are still needed to produce content, but they need to realise that content needs to be more agile, cheaper and faster. Taking six months to produce a 30 second commercial is history; you need to produce ten 15, 20 or 30-second commercials in a week. You see a commercial on Facebook twice and then it goes in the bin. Before you used to run a commercial on TV for six months; now it is about quantity, relevant creative and churned quickly and agencies have to adapt to this.
MAB: The trend seems to be a return to a full service model when it comes to servicing clients; in your opinion is this where media agencies should be heading as well?
EK: Technology has changed the nature of what we do by allowing us to be more data centric. We start with the data first and provide solutions based on that data. Creative is part of the solution because you cannot churn out campaigns programmatically in real time and without adapting the creative in real time, so we need to have creative people as part of the solution but driven by technology – so creative is coming back to media in this way.
MAB: Yet creative agencies believe that it is media which should be going back to them.
EK: It is not a question of who goes back to whom. Creative and media have to be together and who goes to who is irrelevant. In my view, the agency calling the shots is the one that is data centric first. Today it is all about data and technology and if you are data centric first and technology embedded in the way you do things, then you call the shots.
If a creative agency is like that so be it and if a media agency is like that, so be it. The issue is that this is a requirement to survive in our business and creative (or content) has to be plugged into a tube that is continuously churning out stuff.
MAB: Creative agencies believe they are best placed to lead the brand relationship because of their legacy as custodian of the brand.
EK: This is old thinking. Today the custodian of the brand is the consumer and no one can control the consumer. Consumers are influencing and producing content for my brand. My job is to make sure I control my consumers in the best way I can. I cannot stop them. In fact, today the custodian of the brand is anyone producing content for a brand; it could be the consumer, the branding agency, the media, PR or the social media company, or Facebook or Google for that matter. Creative agencies globally are trying to change the model to adapt to changing needs and embed technology and data in their offering.
MAB: Will media companies also change their model?
EK: Media agencies have always been data centric in their offering which is the reason why they are better equipped to manage these changing dynamics. This doesn’t mean that creative agencies cannot shape up and get into that race, but the legacy is more tilted towards media companies gaining that spot in terms of leading the relationship with the client. Clients want people who can connect them to their consumers in the fastest, cheapest and most effective way.
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