Following the global economic crisis, the Arab uprisings of last year have been felt like a body-shot combination in the solar plexus for the advertising industry in the Middle East and North Africa (MENA). Though winded by the beating, the industry is still on its feet, and is exploring new opportunities the turmoil has created to get moving again.
Take Egypt for example, the regions’s fifth largest market, where ad spending fell 37 percent in 2011; that belies an impressive recovery in the second half of the year after declines of more than 50 percent year-on-year in the first and second quarter, according to Neilsen Global Adview Pulse data and the Pan Arab Research Center respectively.
“The problem is this [‘Arab Spring’] came in the wake of the remnants of financial struggle,” said Roy Haddad, chairman of JWT Mena. “The environment is not conducive to a high level of investments. Clients are maintaining their strategies rather than implementing aggressive ones.”
Although most mediums of ad space in countries hit by civil unrest experienced a fall in revenues, the bright spot is that advertisers found a new pool of energetic customers to target — internet users, many of whom are seeking fresh information regarding their countries’ vulnerable conditions. Rayan Karaky, managing director at Vivaki Digital, confirmed that there was an enormous drop in spending in countries like Egypt, but that recovery has been quick, partly due to robust ad budgets of some of its larger clients like Samsung and Coca Cola, while Procter & Gamble have increased their budgets.
Thanks to Egypt’s development of its internet infrastructure, which had progressed in the lead up to the civil unrest, capacity was able to expand greatly when the revolution encouraged many first-time users to log on. By the end of 2011, Internet penetration grew to 25 percent, according to the Egyptian arm of the global research firm TNS. The Internet remains the second most-used media source in Egypt after television, where about 15 new TV stations popped up last year, creating more ad space.
“Usage exploded in Egypt and we have seen an increase in advertising related to that,” said Ari Kesisoglu, regional director for Google in the MENA, who added that the online advertising market in the region has grown to some $170 million, exhibiting 40 percent growth year-on-year, a rate he expects to continue. According to Ipsos Stat, a regional research firm, $70 million of that online spending was funneled into Google’s online ad platform AdWords.
Google searches increased by roughly 30 percent and advertising revenues shot up by 118 percent in 2011, according to Carlo D’Asaro Biondo, Google’s president for Southern and Eastern Europe as well as the MENA, who made the remarks at a November 23 press conference. Hussein Freijeh, commercial director at Yahoo Middle East, says long-term prospects for ad revenue are good, given Egypt’s rapidly increasing usage. “Over the first three to nine months, of course, there was a freeze of spending in Egypt and some of the pan regional spending because the consumption of media was focused on news and not sports and entertainment.” But in the long term, its users increased, and its news destination experienced double the traffic, mainly in markets where there was unrest like Egypt, he said. As nearly 36 million people visit Yahoo’s homepage in Arabic, that makes it the third most visited of all 22 Yahoo homepages after the US and Taiwan.
Tourism took the hardest fall in countries like Tunisia and Egypt, with the latter’s visitors down by roughly a third and thus ad spending for related sectors almost vanished, with other industries also blindsided by the after effects of the Arab uprisings.
“Real estate has disappeared in Egypt, the banking sector has reduced its spending, and Syria has stopped spending,” said Haddad. JWT Cairo’s country client officer, Mohammed Sabry, added that spending also decreased in the automotive sector but is stable in the telecommunications industry as more Arab countries open their markets to private competitors.
The United Arab Emirates has received a lot of the tourism that these countries have lost, where some airlines created new routing destinations and budget airlines also increased their ad spending.
“Egypt’s tourism board stopped spending as much, but Etihad and Gulf airlines have increased online ad spending, as did the Abu Dhabi Tourism Board and Qatar Airways,” said Yahoo’s Freijeh, who pointed out that they had all increased their ad spending on Yahoo by 100 percent.
While in times of crisis it is common to have a growth in promotions rather than traditional brand-building, according to Haddad, some big name brands took the risk and used revolution-inspired images to redefine their brand.
Vodaphone, Mobinil and Coca Cola are among those that began using ads that incorporated emotional attachment to patriotism.
Still costs to incur
Since revenue predictions still have a ways to go in terms of recovery, the smaller income pool means competition between agencies and media companies is more fierce. Therefore, executives affirmed that talent, training, and research would play a larger role in their internal strategies.
“Things that add a real added value to our clients, like reinvestment in research to know how effective the advertisement is, or like training budget, we don’t touch,” said Haddad, adding, “We look at savings in other areas.” Media sites like Yahoo and Google are also sharpening their products and expanding their MENA staff, to serve both their consumers and their advertising clients alike.
“We are hiring at a significant pace — last year we more than doubled our headcount for MENA operations, including people working outside the region,” said Kesisoglu. In regards to Yahoo, which currently has 97 people on its ad team, Freijeh said, “This year, the big investment is 47 open headcounts in Yahoo in the Middle East. Egypt will be a big focus for us.”
To kick start ad revenue five months after the crisis while implementing a long-term approach, Yahoo created a market development team in November that works with agencies and major clients to try to help them understand the gaps in their strategy.
Still, Haddad points out that in this tough environment, the only way forward is to diversify. “We are more and more telling our clients that one channel is not enough to access your consumer. Look at multiple channel approach and be more effective.”
2012 will likely be a recovery year for Egypt, assuming things stay stable, according to the experts Executive spoke to. The hope is that a booming digital market will carry things forward and Vivaci’s Karaky thinks Egypt’s market will grow in the double digits, albeit out of the doldrums of 2011. He’s also betting that the fastest growing markets in MENA will be Iraq and Kuwait, where telecoms are the biggest advertisers and will fight for media space as the private market opens up.
Yahoo’s Hussein predicts a 25 percent year-on-year growth in 2012 in terms of ad spending online, while forecasting a 5 percent growth in spending in the overall advertising industry, of which the online share is 2 to 4 percent.
Thus, the future will undoubtedly see companies continue to expand their marketing and imaging campaigns through digital and social media. “The Vodafone/Facebook page has just under 1.2 million likes. Nokia Egypt has almost 900,000 likes on its Facebook page and integrates changes based on the comments,” JWT’s Sabry says. “More and more clients want that.”