One could argue that the word media is a misnomer. Media, whether on the side of advertising or content production, functions not so much as a channel for communication, or medium, between two parties but as a vexing mirror of society. The images that we receive in all media are a reflection of who we are. And what we consider to be products by creative talent could just be modifications of the images we emanate.
Seeing themselves in this mirror and through the advertising lens is important for journalists and content creators, because from the advertising industry’s experience, audience engagement and demand can be measured and understood in ways that editors and program directors have only very little access to.
To understand how the media industry, the ongoing print media crisis, and the advertising and media forecasts for 2017 look from the professional advertising angle, Executive sat down with George Jabbour, president of the Lebanese Advertising Association (AA) and chief executive officer, Lebanon, of regional communications group Middle East Communications Network (MCN), an affiliate of global marketing communications conglomerate, Interpublic.
In analyzing the performance of advertising, Jabbour says one must look at every media sector separately
Adjusting to change
The first thing to note about the Lebanese marketing communications industry in 2016 is the existence of opposing trends, whereby falling revenues of local communications companies are juxtaposed with stable expenditures by advertising clients. The clients targeting the Lebanese consumer may not have spent substantially less money on advertising this year than they did in 2015, although the advertising industry in Lebanon has been talking about 2016 as a year of falling revenues. Jabbour says: “Something is not really clear when you talk about the advertising industry or market and advertising investments. This is because you have two layers, one layer being what the advertiser is spending and the other layer consisting of what the media gets.
“My opinion, based on my position as president of the Advertising Association and in terms of a communications group, is that advertising investments in Lebanon are not going down. Nobody [in the advertising industry] today has the interest to admit to this, but so many alternatives in advertising have been created throughout the past five years. The advertiser today has many alternatives to going through an agency, the media rep or the classical media. It is no longer a closed market where a Lebanese advertiser should go through a Lebanese agency and a Lebanese media rep to Lebanese media,” Jabbour continues.
In his assessment, the fact that the advertising game may in one scenario involve several intermediaries and in another scenario see direct interaction between advertising clients and media means huge margins of error in estimates of advertising investments. “We are talking that the market in Lebanon is between $150 and $200 million [per year]; this margin is very high and it cannot be considered as [normal] error margin,” he says.
The industry’s performance numbers are not yet available for this year (and advertising numbers in Lebanon are not generally considered to be reliable), but Jabbour estimates that out of the total market of $150 to $200 million, digital platforms such as Google and Facebook account for possibly as much as $20 to $25 million dollars in 2016, and at the very least $15 million. This digital slice is taken out of local advertising investments mainly by the two foreign online heavyweights and their subsidiaries, like YouTube, with only the small change going to Lebanese websites. Moreover, while digital represents a form of advertising expenditure that is fairly recent in Lebanon when compared with first-world markets, it is now growing rapidly – at a rate of 30 to 40 percent from 2015 to 2016 alone, says Jabbour.
The thing is that these amounts are spent by local advertisers but directed to outside markets. “While these expenditures are coming out of the pockets of advertising budgets [in or for the Lebanese market], they are not being tracked in Lebanon. So if we take the situation from the side of the Lebanese media, [revenues] are dropping, but if we take it from the advertisers’ side, the budgets are not dropping. The trend [of migration to external media] is dangerous from the perspective of Lebanese media but something that cannot be changed,” Jabbour explains, adding that globalization of the media does not only apply to digital media, but also to local television stations that have to compete with international ones in their programming and shows.
In analyzing the performance of advertising, Jabbour says one must look at every media sector separately. In television, which is still the main conduit through which to attract advertising investment, he sees the market as today divided between three stations: LBC, MTV and Al Jadeed. In earlier times, the distribution of TV advertising income was mostly oriented toward one station or at most two. With three stations that more or less successfully compete and each get a slice in the TV advertising pie, Jabbour says he cannot see how this sector could have gone down overall: “Maybe yes, LBC lost part of their market share but TV as a whole stopped going down,” he says.
Also in the second largest segment, outdoor advertising, he sees indications of a healthy sector. Given that the number of providers seems to be rising ad infinitum, investments in LED advertising screens are increasing, and municipality incomes from establishment of Unipoles and LED screens are going up, he says that the outdoor advertising industry is not in a crisis, but, on the contrary, is estimated to account for $40 to $50 million in ad spending.
Conceding that the next media category, radio, has seen some income shift as outright advertising revenue from spots may have dropped, he says that stations could compensate for this. Radio has succeeded in tapping into other sources of advertising, such as income from collecting money from singers for featuring and promoting their songs. “There are more and more radio stations and when you see that something is increasing in numbers, one can conclude that this sector is making money,” he explains.
Cinemas, he adds, which represent another category in terms of advertising, are not only challenged on the side of getting advertising but also when it comes to attracting paying visitors, as movie watchers have increasing options for home viewing. As a way forward, cinemas can reposition themselves as destinations for dinners or outings, and they are currently working on this process.
According to Jabbour, that leaves print media. He agrees that print media is facing problems today, but magazines are faring better than daily newspapers. “I believe there is a drop in the advertising revenue made from magazines, but not in business magazines. Business magazines are the last advertising vehicle to be dropped, according to worldwide trends. Women’s and lifestyle magazines are a Lebanese tradition that will not fade easily; they are there and also have other sources of income [like income from covering social events for the initiators or hosts]. The drop in income is in political newspapers and magazines,” he observes.
Political newspapers by his explanation cannot compete in the provision of fresh news and already have a disadvantage in the Lebanese market versus audiovisual channels, as the Lebanese prefer to watch news more than read the papers. Furthermore, Jabbour alleges, Lebanese dailies were resting too much on their laurels and did not pay enough attention to drops in their advertising.
“We saw the storm coming and talked about the drop of print across the world, but papers in Lebanon behaved as if they were vaccinated against this development. When the storm reached them, they were only asking for help to avoid closure, so that ministers at one point said they would initiate legislation to back up the press. This is like protectionism and not the right solution,” Jabbour says.
In his perspective, freedom of speech – which he agrees is vital to a democratic society – is not tied to print media. As evidence, he cites the appearances of print editors on TV shows and their postings on social media. At the same time, he considers advertising and a free press to be mutually dependent on one another, arguing that advertisers need media which is in line with standards for a free press and that such media cannot be sustained without advertising revenue. “The issue is not about freedom of media but about having the right media in order to invest in this media venture. We are in a very scientific business where you need to get your return on investment. It is as simple as can be,” he opines.
“We saw the storm coming and talked about the drop of print across the world, but papers in Lebanon behaved as if they were vaccinated against this development”
Tentative steps forward
As far as the advertising outlook for the full year in 2016 and going forward into 2017, Jabbour regards prospects cautiously and cites that advertising is always the first industry to feel an economic downturn and the last industry to feel the impact of an economic upswing. He agrees that the election of a president was a positive signal and potentially a kickoff for the whole economy, but notes that activation still has to be achieved across the government, cabinet and all political institutions after the country had been in a virtual coma for several years.
Taking into account that summer 2016 was dry for the advertising industry, he expects the Christmas and year-end holiday season to perhaps improve the full-year picture on advertising revenues but not exactly turn 2016 into a year of great performance and success. “We can feel that people are feeling positive about the year to come. If the last two months in 2016 are very positive, they will adjust the number of bookings [for this year] a little bit, because we are evaluating the whole year and this summer was very bad,” Jabbour says.
For 2017, he expects that revenue and performance improvements of ad agencies and communications groups will be driven by campaigns related to parliamentary elections. He points out that previous election years – such as 2009 with parliamentary elections and 2010 with municipal races – were “golden years” for the advertising industry in Lebanon.
In another advertising industry-specific development, the AA should generate a running cash flow from a three percent levy on media bookings. This syndicate fee is, according to Jabbour, a global first in the advertising industry and will be collected from the start of January 2017 and is expected to begin filling the AA coffers from mid-year. After having been successfully established, revenues from this cash flow will be directed into studies of different media with the aim of creating media reports that will be done in conjunction with international auditors and enhance the advertising industry’s transparency. This will be a ‘big project,” most likely to start toward the end of 2017. Jabbour concludes: “Transparency cannot come without credibility and what we are trying to start implementing is this type of credibility in order to achieve the greatest possible transparency in our industry.”