Executive Magazine

‘Not everybody can be an entrepreneur’

by Joe Dyke March 12, 2013

written by Joe Dyke

Omar Christidis is the founder and chief executive officer of ArabNet, the leading space for debating digital growth in the Middle East. The organization’s annual Beirut conference on 20-22 March is expected to be the largest gathering of digital professionals in the region, with over 1,200 expected attendees. Christidis spoke to Executive about Lebanon’s answer to Silicon Valley, Windows 8 and why there may be too many digital entrepreneurs.

What should we look out for at ArabNet 2013?

The event this year is more focused on the digital creative sectors and on Lebanon and the Levant more broadly as hubs for production in the digital sector. What I mean by production is development, design and creation — this is where we have a tremendous amount of talent and relatively affordable labor. [The Levant] is where we see a lot of companies are locating their production hub — whether it is advertising agencies, mobile development hubs, or even content portals that are targeting Saudi Arabia — they have their staff in Lebanon, Egypt or Jordan.

So we are focusing more on production of creative talent. We have held development days focused purely on technical workshops — this year we have expanded that. We are bringing in designers as well to do workshops focused on building better mobile products ranging from really specific design-focused workshops on branding and typography… to building computer games.

There seems to be a heavy focus on Windows 8 at the conference. What is your assessment of it and how might it change the market?

What we want to give people is both technical sessions about building better products and more functional sessions about user interface. When we were talking with Microsoft they wanted more of a technical session around building for their platform.

Right now this is a big problem for them. Today the main platforms that you see people building for are certainly [Apple’s[ i0S and [Google’s] Android. Windows, with Nokia, are trying to push their platform as a way to grab a bigger share of the market.

The end game is not clear yet. They are up against tough competition but they have done some interesting things with constituency across multiple screens and that is really important in terms of being able to develop. People today expect to be able to use their computer, their tablet and their phone and have seamless web experiences.

In the past two years we have seen really encouraging signs in the development of the digital sector in Lebanon, with the creation of the Beirut Digital District (BDD) and Cloud 5 providing space for developers. Are we beginning to see a ‘Lebanese Silicon Valley?’

I don’t like the phrase but certainly there is a boom and the boom is driven by the big players that are moving online and stimulating the growth of the digital sector. I think that both Cloud 5 and BDD moving into the sector aggressively is an indication of a commitment by big companies toward the sector. Also it gives options to entrepreneurs and options to companies and that is always good. So if we have two competing places that are looking to foster digital and providing infrastructure and giving good indications of growth then it is a strong sign for the sector in Lebanon.

The Minister of Telecommunications Nicolas Sehnaoui is seen to have helped push through some improvements in infrastructure in the past two years. What further steps are necessary for the development of the sector?

I am a big fan of Sehnaoui. I have to say that he has won over a lot of people in the digital sector and part of it is his personal commitment to actually engaging in grass roots events, which is something that you don’t often see from a minister… So from that respect I highly commend him.

What do we still need now? I think Lebanon’s problem has always been and will continue to be its stability. It is very difficult to build a hub of activity and be able to attract clients and investors to a market where there is instability.

Infrastructure is certainly still a problem. I pay an absurd amount of money for internet connectivity; I could hire a full-time staff member for the amount of money that I pay and I don’t even have great internet. We recently ran an event in Riyadh, we came back and wanted to upload our content. Some of our partners also shot videos and all of their content was up before we could even upload our first couple of videos! I appreciate efforts have been made but I think there is still a lot of room for improvement.

Also [I would like to see] tax breaks for entrepreneurs and for digital companies. This is something they have been cooking for a long time and I would like to see this happen. But I don’t think the biggest problems are policy-related.

You left Lebanon at 17 to go to America and returned a decade later. One of the biggest issues facing the sector is that many talented Lebanese in digital leave the country young. With the positive signs in the sector, can we keep people in Lebanon?

Everybody today wants to be an entrepreneur and nobody today wants to work for anybody. It is almost like we have created too much hype around entrepreneurship and maybe there is need for a bit of realism around what it takes to not just build a product but run a business. The kind of experience in hiring and firing and building organizational structure and selling to clients and developing your growth strategy — all of these things that are really challenging for someone with little experience to do. There needs to be a dose of realism.

A lot of Lebanese talents are not here — they are gone, they leave very quickly, and the ones that are here want to start their own gig after five or six years. The problem is hiring that middle management to be able to take your company and grow it.

I did a session with a bunch of established Lebanese [digital] entrepreneurs … and everyone was moaning about the fact that there are no developers. The first tranche of developers get sucked up by the Googles and the Microsofts of the world, the second tranche get sucked up by Murex and what’s left is slim pickings. I can say the same about business people – the first tranche are sucked up by Booz and Co. etcetera so as a company here you are not only competing for local talent, [but also] agencies in Dubai are coming to source talent here.

One of the unique features of Lebanon is as a talent hub. We are doing a lot of activities to try to promote Lebanese talent but it is a challenge as a lot of Lebanese talent is quickly whisked away by bigger companies offering Gulf wages; which are very difficult to compete with within the Lebanese framework. So you end up searching a lot, interviewing a lot of people, finding someone who is disillusioned with life in the Gulf or doesn’t want to leave here or working with fresh graduates.

With regards to Arabic language online, what are the trends and how fast is growth?

Good question. How do we even measure this 1 percent of Internet content that is in Arabic? There is huge variation between the numbers that people give out — no two statistics agree on anything — whether it is online ad spend in the MENA or the percentage of Arabic content online.

But it is not Lebanon or Dubai that is going to grow Arabic content online; it is going to be driven by countries like Egypt and Saudi Arabia. They have the biggest suppliers of Arabic content and demand for Arabic content.

What I see is a move to video. We are moving away from the text web to the picture and video web. One of the biggest media for online consumption in Saudi Arabia is video, that is the hot thing. It is among the top countries globally in terms of Youtube consumption per capita. You have these amazing comedy shows that are created by young Saudis. These guys are commenting on everything from arranged marriages to driving. They are young Saudi celebrities, they are huge media hits and their videos get over a million views.

March 12, 2013 0 comments

Finance

Lebanon’s banking sector still well-fueled

by Maya Sioufi March 12, 2013

written by Maya Sioufi

The country’s engine is still running. Despite all the pressures that the Lebanese banking sector faced last year, they still managed to grow their deposit and asset base and extend their lending arm to the country’s private and public sectors. Their profits are not as rosy though.

Lebanon’s domestic bank assets recorded annual growth of 8 percent last year to $152 billion, about three and a half times the size of the economy. The growth is slightly below the 9 percent registered in 2011 and falls short of the 14 percent average growth of the past five years, but given the issues that the sector is dealing with — upheaval in neighboring Syria, instability at home and increased international scrutiny, to name a few — this asset growth is welcome news. Deposits flowing into bank coffers also rose 8 percent — in line with the Central Bank Governor Riad Salameh’s expectations — to stand at $125 billion, 82 percent of the sector’s assets. This growth is commensurate with that of 2011 and down from a five-year average of 14 percent. “Banks are still attracting deposits because the interest rates offered are higher than the ones in Europe and the United States,” says Marwan Mikhael, head of research at Blom Bank. “The good thing is that this increase was enough for the banks to finance the government and the private sector at the same time without a crowding out [effect],” he adds.

More loans, less profits

Outpacing deposit growth was lending with a 10 percent increase; this is down from 13 percent in 2011 and the 18 percent average growth of the past five years. However, given the country’s dire economic conditions, this growth is still encouraging. The vast majority of these loans, 89 percent, went to the residents. “It was just more of the same: tepid deposit growth, margins stable, interest income growing [by] mid-single digits, fees flat to down and revenue generation offset by provisions,” says Nadim Kabbara, head of research at FFA Private Bank.

Pursuant to the conservative nature of the sector and to hedge against the adverse impact of instability at home and in neighboring countries, mainly Syria and Egypt, banks continued on taking provisions last year with the ratio of provisions to doubtful debt reaching 79 percent. “They have taken quite a bit of provisions for Syria and I don’t think it will be that material going forward. The fact that the language [of management at local banks] changed from ‘we don’t know what is happening in Syria’ to ‘we want to be ready for when Syria comes back’ is a bit more positive,” adds Kabbara. Another indication of the resistant quality of the sector’s balance sheet is the ratio of non-performing loans to total loans, which stood at 3.3 percent last year, down from 6.8 percent in 2011.

The less cheery picture comes from the profitability of the banks. While the consolidated figure of the total banking sector was not yet available as Executive went to print, the results of the five listed banks, including the country’s three largest banks, show a contraction in profits. Pressured by the regional and domestic instability, which compelled the sector to prudently take specific and general provisions, the consolidated profits at Lebanon’s five listed banks — Bank Audi, Blom Bank, Byblos Bank, Bank of Beirut and BEMO Bank — registered a 2 percent drop last year to stand at $966 million, down from a growth of 2 percent the previous year. These profits exclude the $44.5 million extraordinary gain that Bank Audi booked from selling 81 percent of LIA insurance; including the sale, net profits were up by 2.4 percent to $1 billion. Assuming these five banks reflect the performance of banking overall, 2012 would be the second year of contraction for profits of the banking sector. Net earnings dropped 5 percent in 2011, the first drop in nine years.

Future forecast

For 2013, Mikhael doesn’t expect provisions to hit profits, as “there are not much left to be taken,” he says. As regional instability persists and as the country’s economic growth remains subdued — with the International Monetary Fund expecting the economy to grow by 2.5 percent this year following a 2 percent growth last year — the banks are set for another challenging year. Crisis management seems to be the name of the game. “If you can try to forecast what provisions could look like, you can have an idea as to what profits should be. At the end of the day, banks don’t want to show declining profits; confidence in the banking sector is paramount,” says Kabbara.

“The main challenge for banks now is to continue on growing internally and to expand regionally by finding the main places where banks can diversify their sources of income,” adds Mikhael.

Be it Turkey, a country that Bank Audi and BankMed have taken a bet on; Australia where Bank of Beirut is venturing; Iraq where Byblos is advancing, or any other country with lucrative growth prospects, banks are going to have to act fast and diversify their sources of revenues in order to overcome what looks to be another testing year for the country’s economy.

March 12, 2013 0 comments

The Buzz

Morning briefing:12 Mar 2013

by Executive Staff March 12, 2013

written by Executive Staff

Economics and policy

Israeli restrictions and closures coupled with the worsening fiscal situation of the Palestinian Authority is causing "lasting damage" to the competitiveness of the Palestinian economy, the World Bank warned on Tuesday.

More from Reuters

Toppled president Hosni Mubarak, awaiting trial over his role in the deaths of protesters, believes Egyptians should rally around his Islamist successor and end violent protests, his lawyer said yesterday.

More from AFP

For the first time since 2006, Lebanon recorded a primary deficit after the Cabinet of Prime Minister Najib Mikati raised the salaries of civil servants and military personnel at the beginning of 2012.

More from Reuters

Companies and business

The GCC banking sector continues to remain robust, with assets increasing by 11 per cent in 2012 to $1.47 trillion, according to a report.

Striving for real Middle Eastern journalism

by Philippe Skaff March 12, 2013

written by Philippe Skaff

It is no secret that newspapers and magazines are losing their economic viability. Advertising budgets have been slashed due to numerous factors, from consumer skepticism toward conventional advertising to the new and innovative, tech-oriented channels and the recent trend in experiential marketing where consumers interact with products. Traditional ink on paper is living its last days, and it is becoming increasingly difficult to maintain the large staff required for quality news gathering.

Part of the decline is due to the resistance of the modern consumer toward top-down messages. Eventually, newspapers and magazines will become elitist, intellectual tools for the select, information-rich few, leaving the masses and the middle class in front of their screens — mainly their television screens. This is where the values of democracy are most at risk: the more people watch TV and the more they become mass media-rich, the less information they actually get.

On the face of the matter, all TV models draw from the American model. Around the world, we see the same Hollywood (or Hollywood-style) films, the same soap operas, the same comedy shows, the same sexy announcers with emphasis on youth and beauty, the same sporting events, etcetera, and therefore we come under the illusion that globalization is at work, right down to the very core of journalism.

Western journalism is, and traditionally has been, at a distance from politics because it emanates from societies that fervently value the separation of journalism from political interests. While total independence is hardly ever achieved, the problem is significantly less acute than in the Arab world, where, behind every TV station, newspaper and magazine, there is a man of immense political and/or financial power and influence, or even a whole country with a heavy political agenda. In such climates there cannot be independent journalism. In most Arab countries, the typical citizen has gone straight from a lack of information (from state-generated and operated media) to what he or she now sees as freedom of information. In fact, what we are seeing is nothing more than diversity of manipulation.

Make news, not war

The presence of multiple agendas, even contradictory ones, is no guarantee of truth. They all serve to maintain an illusion of transparency and freedom of speech. In fact, TV stations have replaced the party system in the Arab world, and, to some extent, sects and religions as well. We are still waiting for real investigative journalism.

Traditionally, they say wars make TV stations: the Gulf War made CNN, the second invasion of Iraq made Al Jazeera. But look around: we have reached a stage where our stations are making the wars, not the other way around. And in today’s terms, that makes them a smiling, young, sexy Big Brother.

Things are a little different on the Internet, which has spawned a distinctive form of journalism, or rather anti-journalism, through the form of blogs. These do-it-yourself statements usually state unchecked facts that generate unfounded opinions, cluttering the air — and our minds — with rubbish. The Internet steadily undermines journalism and its values, encouraging the spreading of rumors without any investigation. It can at times serve as a voice of the people, but if people are already contaminated or even brainwashed by Big Brother in a society where journalism is still captive, corrupt and/or clouded by bias, it is merely a reflection of mediocrity.

If democracy is to put down lasting roots in our region, we have to start by separating political and confessional interests from journalism as much as we can. The job of the news media is to hold public figures to account, not to promote certain ones and/or tear down certain others. Real journalism cannot be part of either the government or the opposition; it has to be impartial and independent — or it ceases to be journalism. And without journalism, there can be no genuine democracy.

Philippe Skaff is the chief executive of OB-3 and former CEO of Grey Group MENA

March 12, 2013 0 comments

Economics & Policy Lebanese in advertising

Media International Service’s Marwan Kai

by Thomas Schellen March 11, 2013

written by Thomas Schellen

Established as an independent media agency in 1981 and preparing to celebrate its 20th anniversary of operating from Dubai this year, Media International Services (MIS) has cultivated market niches where it could sustain its stance in the face of bigger players sweeping the regional advertising game. Executive sat down with Marwan Kai, chief executive of MIS.

The top advertising agencies in the Middle East ranked

How do you evaluate 2012 and what do you expect from 2013?

The year 2013 looks to me quite similar to 2012 in terms of volumes and trends and the way the business is evolving. The industry continues to be affected by the political situation in the Arab world, and growth is becoming very challenging to achieve for everybody.

In terms of geography, where do you see things going?

Many people, including MIS, had a lot of hope in the Egyptian market, and that market has been badly affected. The Levant area is facing lots of uncertainties and the investment there has gone down rather than up. We are all aggressively searching for somewhere in the region where proper growth can happen.

That does not sound like a walk in the park for an independent media agency…

It is becoming more challenging year after year. Companies have to be quite focused on their offerings, and at the same time, diversify their offerings. More importantly, they need to offer clients and advertisers a properly integrated solution across different platforms. That is the way we are moving forward as far as MIS is concerned.

What were the most important contributions that you see yourself having made, as a Lebanese media player to regional advertising?

Of two important milestones that MIS has contributed to achieving in this business, the first is working for international media, and I was lucky to be one of the first players to enter that arena. We started representing CNN 14 years ago at a time when the level of business for international media was very small. We have put international media business very much on the map with clients and agencies and institutions here. The second milestone that MIS has contributed to was the growth of cinema advertising.

In this context of institutions and countries advertising in international media, how do you assess projects like Dubai’s campaign to win Expo 2020?

Expo 2020 is a very smart move and will contribute to further growth. International media like CNN can only stand to benefit from such initiatives coming out of this region. With European economies struggling as they are, it is only logical that places like Dubai and Abu Dhabi are able to attract events like the Expo and Formula One.

Events like Expo or the World Cup will require more than a run-of-the-mill advertising strategy. Will the regional media industry be up to the task?

These are very sophisticated global events and they require sophisticated media support. I think the business of publishing, of media and advertising, is evolving in the Gulf, and the gap that existed in the past is getting smaller and smaller. I have no doubt that the region will have the expertise to cope and manage these global events very well.

What do you expect will be the future of Lebanese advertising players in the regional industry?

We all recognize that international companies are today the ultimate decision makers, and so we all look at the future with a question mark of how large the role of the Lebanese will stay in this industry. Ad agencies have all been bought up by multinationals; on the media owners, media agencies and media reps side, we are still in a very strong position.

In your view, can Lebanon learn from the successes of the Lebanese players in the regional media?

The Lebanese government and Lebanese private sector have a lot to learn from what we can deliver because we have delivered outside of Lebanon. Our ultimate frustration as Lebanese expats living abroad is that we have contributed in building the whole Gulf Cooperation Council… but are not allowed to contribute and give back to our country to make it what it should be. I am obviously not saying that we are physically not allowed but the current political structure is put in a way where they do not want you to come back and contribute or do anything for the country. It is sad, very sad.

Do you see any chance to remedy that situation?

Not in the foreseeable future.

March 11, 2013 0 comments

Economics & Policy Lebanese in advertising

Omnicom’s Dani Richa talks Lebanese dominance

by Maya Sioufi March 11, 2013

written by Maya Sioufi

With 25 years of experience at Impact BBDO, a leading regional advertising agency, Dani Richa has assumed different roles within the company, including chief creative officer. Chairman and chief executive of the Omnicom subsidiary since 2009, he is one of the most influential ad executives in the region. Executive sat with Richa in his Beirut office to discuss Lebanon’s prominence in the ad industry and the main changes in the market in recent years.

How did the Lebanese become so dominant in the region’s advertising industry?

It was triggered by the [Lebanese] Civil War [which started in 1975]. You had clusters of regional clients and agencies that moved to Cyprus and started operating out of there. We were all offshore [in Cyprus] and covering the Middle East from there. Then Dubai started becoming what it is today and in the late 1980s and early 1990s, companies started moving their head offices to Dubai. This is how the Lebanese took the industry from Lebanon to the region.

Why did Lebanese agencies partner with multinational advertising companies?

A lot saw the need of partnering with multinationals to be able to attract multinational clients that tend to work globally with agencies. The trend was to sell a part or to affiliate with an American or multinational agency and from the 2000s onward, as the region gained importance, those international groups became majority shareholders. In our case, three years ago Omnicom became majority shareholder of Impact BBDO.

Why are multinationals in the region still run by Lebanese CEOs?

At first, it was because they started the industry. Now, we are still running the show because we developed it, were very successful at it and we have an equal intellect to our Western counterparts with a language and cultural advantage. Also, on average, we have 25 to 30 years of relationships in the region with key clients. They trust us because we helped them build their brand. For the foreseeable future, I think you will continue to see Lebanese leadership in advertising.

What are the main changes that the industry has witnessed in the past couple of years?

We went through a phase where brands were talking at people through ads on TV, in newspapers, in magazines and on the radio and then it evolved and we started having a two-way dialogue through direct marketing and direct response. Now, it’s not just brands talking to people and people talking to brands, it’s people talking to people about brands. The brand has to work three times as hard to be there and be talked about in a good way. The successful brands, the ones people are talking about, are the ones that have a positive [impact] on people’s lives.

In 2007 and 2008 in particular, allegations surfaced of serious corruption in the advertising and media industry. Has the advertising industry cleaned itself up?

Corruption was part of the world back then, it was everywhere. It’s not relevant today. There is a much greater focus on compliance, with absolutely no room for gray area. You are operating by American laws and they are strict. I would say that in this region there were cases [of corruption] but in recent history I think the industry has become more professional in that regard.

How has the industry performed in recent years and what is your expectation for 2013?

The big hit was in 2009 and 2010. Lots of agencies had to restructure; it was survival of the fittest. In 2011, recovery started and in 2012, there was a small growth. The year 2013 is a big question mark because of the change that happened in the region. We are yet to see the result of this change. I am optimistic; we have adjusted to a new reality. We are almost continuously in crisis management mode and we work accordingly. The only way you can do it is by saying, ‘I can’t change the economy or the regional turmoil but what I affect is my business.’ I see 2013 as a good year looking forward.

What campaign are you most proud of so far?

It is “Cheyef Halak” [‘look at yourself’ in Arabic] as it was all about purpose. [Cheyef Halak is a social awareness campaign created by Impact BBDO and endorsed by LBCI].

March 11, 2013 0 comments

Economics & Policy Lebanese in advertising

MCN Group’s Tarek Miknas discusses a changing industry

by Thomas Schellen March 11, 2013

written by Thomas Schellen

The MCN Group is a partnership of New York-based communications conglomerate Interpublic and the Miknas family holding. The Group gathers media, creative, public relations and corporate entities under one roof — and does so in the literal sense since the turn of the year. Executive visited Tarek Miknas, chief executive of the group’s flagship FP7 agency and board member of MCN, in the brand new corporate hive in Dubai’s Tecom district.

The top advertising agencies in the Middle East ranked

The look of your space here seems a bit in-between, as if you wanted to emphasize the creative side…

Yes, and I can take you to the different offices [of group companies] on different floors… each has its expression of its personality, values and what it is all about. Normally you move into an office space and make this space yours. Here, we have the whole building of 14 floors. It is still a work in progress — even the car park is full of people carpentering and this sort of thing. As we get settled in, we will do a lot more meetings and we will use the space on the ground floor and make it come alive.

We met before for a conversation at the 2011 MENA Cristal, about one year after you took on your role at FP7. What has changed in the agency in the past two years?

When you start a company, you are involved in each process and bring in the people you feel comfortable with from scratch. Moving into a company that has already been established and all this, it felt like there were pockets of people and people talking about people, and this clearly takes a lot of focus away from what people should be doing, which is advertising. Today, we don’t have those conversations anymore. It is now about ‘do you know this client? I am sure we can do this, this, this and this and improve their business.’

Was that a simple migration?

It takes a lot of effort to get there. First of all, you have to let go of all the “bad elements”, whether or not they are good in what they are doing. If they are creating a negative culture, you waste so much time.

Can you give us some information on the size and structure of MCN Group and the performance evolution of FP7?

MCN is our holding company, 51 percent owned by IPG [Interpublic Group] and the rest of it is private. Under that holding, there are diverse communications companies, most of which represent the big IPG companies that work together around the world. The biggest two companies are FP7 and UM, and total employment in the group is about 1,400 people. As FP7, we started out as a network, and, two years ago, we were actually in the red. So our focus was to build a solid, sound financial base that would allow the required growth plans to be initiated. After 2008, we’ve experienced a dip of about 10 percent in our top line; however, we have now steadily built ourselves back up to those top line levels, but with 200 percent growth in our profits. During this time, we’ve put a lot of focus on upgrading our talents and bringing in a lot of new, young energy into the organization, which has proved to be a successful strategy.

What is the greatest achievement of Lebanese media personality Tarek Miknas?

Me specifically? I thought this is about the Lebanese in general. I am so new at this.

Will Lebanon be able to maintain, or perhaps grow, its role in regional advertising?

Lebanon is a source of talent for this industry no matter where in the region. It makes sense economically to have a place in Lebanon; people have their homes there and there are no relocation issues, those kinds of things. Will Lebanon continue to expand and take on more geographies? I am not sure. One thing that troubles me is that even in my generation, people emphasize divided communal identities. I thought that people were over all of this [but it seems] there will always be this kind of conflict, and it will always keep Lebanon one step behind. I don’t know how this is going to be solved in Lebanon. I don’t see a new leadership that is trying to be more inclusive and will say, ‘guys, let’s forget about all this and start to act with economic thinking, not sect-based’.

March 11, 2013 0 comments

Economics & Policy Lebanese in advertising

WPP’s Roy Haddad talks Middle Eastern advertising

by Maya Sioufi March 11, 2013

written by Maya Sioufi

Appointed in July 2012 as Middle East and North Africa’s director for WPP, the London-based multinational advertising agency with a $20 billion market capitalization, Roy Haddad is among the most prominent names in the region’s ad industry. Formerly MENA chief executive of American ad agency JWT, Haddad is now responsible for a network that covers around 4,000 executives in the region and has under its umbrella several networks including JWT, Grey, Young and Rubicam, Ogilvy Group and many others. Executive sat with Haddad to discuss his new role, his thoughts on the region’s advertising market and the prominence of Lebanese in this industry.

The top advertising agencies in the Middle East ranked

What do you aim to have achieved within five years?

In China, there is a WPP academy, and we are contemplating launching something similar in the Middle East. It would provide training to executives in the marketing industry. [I also aim to] bring in more transparency to the market: this is the most significant challenge. [Lack of transparency] affects the MENA industry more than other markets and part of the problem is the lack of reliable research. The industry will gain from encouraging better data.

What are your expectations for the advertising industry in 2013?

I think it will be a tough year. Marketing works best in stable markets as it’s long term by definition. With very volatile markets, today becomes more important than tomorrow. Therefore I think we will see more aggressive promotion versus brand building. The other factor is the digital rally. The industry as a whole is in stage of reinventing itself. We are moving from [targeting] sociodemographics to targeting mindsets. When you start targeting mindsets, the whole brand experience lives better in digital than traditional media.

Why is the share of advertising expenditures relative to GDP at low levels in the region?

In the past, it was due to a lack of knowledge and the scarcity of media and distribution. [Today], one of the main reasons is volatility. Stability is key for long-term brand planning. Multinationals don’t invest at the right level here. We are victims of volatility and the lack of data in the region. This is a huge issue.

How is the presence of smaller advertising agencies affecting fees?

I think the lack of growth [in the advertising industry] in 2011 and the oversupply of smaller shops [led to] fees not being at the level they should be. At the heart of that is the doubt of clients’ over how much transparency is being dealt with. Big multinationals have a duty to be more transparent in their dealings with clients.

Would you look to acquire smaller agencies?

Organic growth is becoming harder to come by, so growth is coming from acquisitions. That’s why you see the Omnicoms and WPPs of this world. We are looking at opportunities here and there. There is a weakness in the region, as there are not enough startups. As for Lebanon, we are looking and searching [for acquisition opportunities]. To do an acquisition, it has to bring added value to our current offer and not more of the same.

In your opinion, why are Lebanese prominent in the industry?

Lebanon’s free economic system encouraged entrepreneurial thinking, so the advertising industry developed earlier than everywhere else [in the region]. What helped us is that we are very cosmopolitan. Lebanese executives can fit anywhere in the world because of their multilingual ability and their upbringing in a free economy. Another thing we need to realize is that Lebanese excel abroad because the local market is very small. The largest account in Lebanon is not enough to sustain [the industry] with the fees applicable in this market. The total ad market in billing terms is around $150 million in Lebanon so about $25 million in fees maximum. It is barely enough to sustain three or four decent agencies.

What is your advice to graduates looking to join the industry?

It’s about blood, sweat and tears. You need to have curiosity, as there is a high curiosity level that should go in understanding the consumer. You need to have the culture to be able to synthesize that curiosity into an actionable plan and have the courage to go out and implement it. We are in the business of imagination but in the art of creating conviction.

March 11, 2013 0 comments

The Buzz

Morning briefing:11 March 2012

by Executive Staff March 11, 2013

written by Executive Staff

Economics and Policy

Gold edged up on Monday, off a two-week low hit in the previous session on better-than-expected US jobs data, as the Federal Reserve is expected to continue to prop up the economy through 2013 with monetary stimulus, giving support to gold.

More from Reuters

Lebanese Finance Minister Mohammad Safadi has presented a revised draft budget to cabinet which sees expenditure of $14.08 billion and a deficit of $3.48 billion, the ministry has said.

More from The Daily Star

Iran has agreed to supply 2 million litres of diesel a day to neighbouring Iraq, Iran's oil ministry news service Shana has said.

More from Reuters

Egyptian inflation has leapt as a sliding local currency pushes up food prices, badly hurting the poor who are suffering most during the country's economic, political and security crisis.

More from Reuters

But despite this, Egypt has rejected the idea of a stop-gap fund from the IMF.

More from Reuters

Qatar has discovered a small offshore field containing about 2.5 trillion cubic feet of natural gas, the country's first gas find since 1971.

More from Reuters

Companies and business

Sharjah Commerce and Tourism Development Authority, or SCTDA, released the tourism statistics for Year 2012 on the sidelines of the ITB Berlin on Saturday citing tremendous and continuous growth of Sharjah’s tourism sector.

Israel openly pulling America’s strings

by Ahmed Moor March 11, 2013

written by Ahmed Moor

Congressional monitors, members of the media and others have observed that the level of partisan rancor in Washington is as high as it’s ever been in the modern era. Bitter public fights over spending limits, the healthcare bill, economic stimulus packages and the overall legislative agenda have all worked to reinforce that argument. The degree of partisanship has contributed to the politicization of “support for Israel” — formerly an issue that commanded broad support from Democrats and Republicans. The participation of Israel’s prime minister in lobbying on behalf of the Republican presidential candidate strengthened the tendency. And the recent Israel-related fight over the confirmation of Obama’s choice for Secretary of Defense has seen it develop into a deepening cleft.

American presidents typically possess the prerogative of deciding whom to appoint to cabinet-level positions within their administrations. The norm is one real manifestation of the American “checks and balances” system of governance whereby the executive, legislative and judicial branches are co-equal and sometimes adversarial. The subordination of a presidential pick to congressional politicking begins to violate that balance. For that reason, the congressional confirmation process is generally procedural and the president’s choice almost always prevails. Or, as the New York Times explains, “even in the current political environment, a president’s nominee with a Senate pedigree is supposed to have an inside track to confirmation.”

For that reason, the Republican decision to delay a vote on the confirmation of Senator Chuck Hagel — the Department of Defense nominee — is truly extraordinary. While Hagel has since been confirmed, the Republican act of defiance is even more notable because it comes in the service of the Israel lobby which regards Hagel as ‘insufficiently pro-Israel.’

In the past month the former senator from Nebraska has been vilified by members of his own party (he served as a Republican). Unnamed congressional staffers have attempted to portray him as unqualified, when in reality he only suggested that Israel constrain its colonization of the West Bank. The Council of Foreign Relations’ Elliott Abrams even called him “anti-Semitic” on National Public Radio.

The unrestrained and unsubstantiated attacks on Hagel carry implications for the Israel lobby and the US more broadly. The non-political elements of the American government and foreign-policy apparatus — in other words, members of the State Department and Department of Defense — will see their credibility in international forums and bilateral meetings diminished.

The perception that American policy-making and execution are coordinated and efficient began to suffer with the bungled Iraq fiasco, as described by the likes of former US Ambassador to Saudi Arabia Charles Freeman. Now the dignity of executive branch representatives is being similarly assailed and the effectiveness of those representatives will be diminished by it. One consequence of the undignified conduct at the Hagel hearings is that the Israel lobby, which historically thrived through its use of tactics designed to silence critics (a charge once highlighted by Hagel himself) has now been fully understood by a large segment of the American public. Any claim that a coordinated effort does not exist to steer and manage US policy on issues such as settlements and Iran is demonstrably false in light of the Hagel hearings. That the Israel lobby is so powerful, and that it works brazenly to align US policy with the policies of the Israeli government, is now an incontestable fact in Washington.

Another consequence of the public vilification of the former senator from Nebraska is that his tenure at the Department of Defense will likely be marked by a lack of faith in his subordinates. Or, as The Atlantic’s James Fallows notes through a quote attributed to a Republican senator’s former staff member, “It will be more important for a Secretary who will have to impose budget reductions and other policy changes on the services to show he’s not just a nice, thoughtful guy. He’ll need to show people in the Pentagon he can’t be taken advantage of — and also that he’s strong enough to stick up for them should they come under political attack. My sense is that Hagel didn’t clear that bar.”

In other words, Hagel may now be so damaged by the confirmation hearings, that he will struggle to effectively manage the Department of Defense, never mind the Chinese military.

Whether the Israel lobby’s active effort to sabotage the future Secretary of Defense’s effectiveness carries further consequences is an open question. And it remains to be seen whether members of the American foreign policy establishment will openly begin to challenge the Israel lobby’s influence on national security policy — and how their elected officials will react if they do.

Ahmed Moor is a master of public policy candidate at the Harvard University Kennedy School of Government

March 11, 2013 0 comments