Each time the editorial calendar calls for coverage of the advertising industry, the same question pushes itself to my frontal lobe; it is not who, what, where, when, or even how that pains the mind but rather why journalists detest writing stories about advertising so instinctively and harbor such an intense dislike of the industry. It is a fundamental challenge. Whenever I access the finest international business publications I am dissatisfied with the quality of pieces on the advertising agencies, as if an undercurrent of derision runs invisibly through editorial departments. 

The first barrier against a professional treatment of the industry may be the fact that our profession can never quite shed the notion of its unhappy dependency. Ever since the income stream and economic viability of print journals shifted to advertising over readership, writers have worked under the bane that their job security is but a function of advertising sales. Worse, this perception of fiscal servitude can drive one to think that even top quality journalism is worth less than a nod from the ad department.

The best codes of journalistic conduct until now call for an impenetrable wall between the newsroom and the sales department to protect editorial freedom and objectivity. But even if that wall existed it would not solve the larger issue of economic dependency. On the other side, commercial media agencies need journalistic coverage, but often fail to appreciate where journalists do not see the story from the agency’s point of view.  

Against this background of unwelcome co-dependencies, it appears that hardnosed journalists and hardboiled ad people have another major barrier in, of all things, communications. The fuddle begins with overlapping words and concepts. When advertising leaders, or journalists, speak of media as their respective professional environments, they are talking about two very different things. They don’t often realize they are conversing about different fields using the same terms: miscommunication is inevitably the result. 

As advertising and marketing communications developed over the decades, public relations agencies have adopted the practice of producing texts that appear print ready for journalistic use — otherwise know as ‘press releases’. This almost naturally helped to proliferate the gutter press — the laziest of all professionals — with bottom-feeding journalists repeating these ready-made statements unquestioned. Advertising professionals, public relations practitioners and journalists all vie for attention of audiences using the same instruments of communication. All communications crafts seek to convey information and stir emotions. But journalists are prone to think that commercial media are driven by vulgar financial motives whereas we see journalism (other than the gutter variety) as being all about the noble hunt for hidden truths. Be that as it may, as commercial communicators and journalists are trying to occupy the same space in human minds using the same techniques, their ambitions and perceptions clash. 

At this point, a check of perceptions is in order. Ad industry leaders tell you that creativity is the backbone of what they do and that they like doing more meaningful things than selling soap. 

Public relations experts will tout that they don’t want to churn out press releases, explaining that the soul of their business is long-term conversations and strategic thinking. Journalists strive to get to the bottom of things, want to be concise and clear, to be relevant, impartial and independent. After meeting the same people every year for more than a decade, advertising professionals keep making soap commercials, PR agencies are still blasting useless product announcements into my inbox and I still fail to be as concise as I want to be. 

The communications profession is still an uncomfortable ménage a trois where everyone can stand in everybody’s way, or benefit the others. In my view, the future of quality journalism will be written with the approach of an honest stakeholder. If we are worth our salt as ad and PR people and journalists, it will be clear to us that we are all on the same wagon; a wagon we ought to begin steering from mutual deception toward constructive interdependence. Executive is committed to this approach in communicating our stories on the advertising industry.

A starving artist is a good artist. That romantic but ludicrous notion has been retired in the last century, but the view that harsh times bring more creativity in business may still ring true. The Middle East advertising industry, which has experienced a range of economic challenges since 2008, has started 2012 on quite humble footing. 

In February 2011, regional advertising leaders told Executive that they were expecting a growth year in 2011 despite sharing their uncertainty over how the Egyptian uprising would play out, yet the voices this year are very solemn when it comes to business performance.

Hard knocks in 2011  

“Some of us hate to admit it but the reality is that the business is facing challenges. Our memories tend to be short but the reality is that the Middle East advertising industry went through one exodus after the other,” said Ramzi Raad, chairman and chief executive of TBWA/Raad, an affiliate of New York-based Omnicom Group, which in 2011 reported almost $14 billion in global revenue, one of  highest turnovers in the world of marketing communications conglomerates. “In 2011, the [so called] Arab Spring brought a new reality to the Arab world which people tend to underplay but whenever the brand product was affected, so was the business.” 

Joe Ghossoub, the chairman and chief executive of Menacom Group, which is affiliated with WPP, agreed. “This thing [the Arab uprisings] has not settled yet and my prediction for 2012 is that there will also be extra pressures on revenues and at the same time on performance.” 

Others take a graver view of the year to come. “There was no growth in 2011 — if we take the MENA region as a whole, drops were more acute in some markets than in others but there was an overall drop,” said Raja Trad, chief executive for Leo Burnett’s MENA branch. “All the projections for 2012 also suggest that there will be no growth,” he added, citing reports by regional firm Pan Arab Research Center (PARC) and by Zenith Optimedia, an international reference on advertising industry performance and projection. Leo Burnett and Zenith Optimedia are both members of Paris-based Publicis Group, the world’s third largest advertising conglomerate by 2011 turnover, reported at $7.6 billion.

The tenor of the regional industry leaders carries over at DDB Gulf, an agency formed in February 2011 in Dubai with a lot of fanfare in an internal consolidation under the DDB network, which is also part of Omnicom. Business wise, the agency’s road last year was “financially very challenging” even as the internal integration of the merged units was smooth, conceded DDB’s chief executive Ajay Shrikhande. Pointing to regional factors, he said, “2011 was challenging for all in the industry and the events of the [so called] Arab Spring impacted marketing budgets and marketing expenditures.”

A different Dubai

Dubai, of course, is not quite what it used to be a few years ago for the regional advertising industry. In a few gold rush years from about 2005 to 2008, business growth for marketing communications groups in the Gulf Cooperation Council, and especially in Dubai, was so heated that headcounts grew much faster than what was good for quality. 

That expansion stopped cold when marketing budgets of property developers were hit by the implosion of the United Arab Emirates real estate bubble. In 2009-10, signs stood on regrouping, weeding out the overgrown departments, and building new enthusiasm. Then came 2011 and new business woes, mixing regional and international uncertainties into a year where, according to Trad, advertising companies “are still living in turbulence and need to pass through the difficult times… to see how things are going to settle.”

However, industry leaders express enthusiastic remarks rather than grave concerns when it comes to describing the quality of their industry’s labors in 2011. And they are even more hopeful for 2012, as they show praise for creative teams instead of looking bleakly on the dark projections for this year. 

Speaking on the sidelines of the MENA Cristal advertising awards, Tarek Miknas, chief executive of Promoseven Group, which is affiliated with the fourth-largest global advertising conglomerate by turnover, Interpublic, said: “Year after year, the work coming from our region is getting better. And that’s great for all of us in the industry.” 

Christian Crappe, chief executive of the Cristal Festival Network and organizer of the MENA Cristal, concurred. “Over the last years,  creativity has been improving every year. If you review the last five years, you can be sure that the creativity has improved a lot,” he said. 

Menacom Chairman Ghossoub argued that the economic pressures, as much as they press down on the industry, are good for discerning the most creative people. “Definitely the pressure is on the ‘creatives’ today to deliver immediate or short-term results. This is where you can pick out the good creatives, because from my point of view a creative has to be able to work in any environment,” he said. 

Commercial Darwinism 

The crisis could thus facilitate more positive growth in the region’s advertising and communication industry, creating something more impressive than ever. According to what advertising leaders told Executive, the rise in quality is going to continue on the strength of two factors. 

The first is that the Arab uprisings, while accounting for a big part of the industry’s economic worries in 2011 and 2012, has liberated creative flows, and the second is the growth of digital advertising, the use of online space that has finally started happening in the MENA region.  

The latter expectation has been voiced at every advertising conference in the past few years, only to be followed until now by embarrassingly low actual allocations of advertising budgets to digital in each of the past five years. While online marketing options were compelling, for example, in Europe, they accounted still for less than five percent of budgets in MENA last year.

This time, the industry members talk as if they are convinced that digital growth is happening, especially if they say, as Shrikhande did, that the shift to online will not necessarily increase industry revenues. “I expect that the initial part of the shift into digital media will be reducing the total marketing expenditure,” he told Executive.  

According to Trad, Ghossoub, Miknas, and Raad, the combined experiences of economic hardship and the outpouring of the Arab uprisings are guarantors of a more creative future in the region’s advertising industry. 

In Raad’s view, the creativity is now in the hands of a new generation of advertisers and what is needed most at this time is for decision makers and their clients, the advertisers, to catch the new spirit. As creativity has been liberated, he said, “Nothing is going to stop it except the disappointments when you develop great campaigns and clients do not buy them.”

Public relations and advertising seem to have similar aims. As a result, there is a perception in the market that they compete with or replace one another — that one is better than the other or, worse, that they are somehow the same — that PR is advertising in sheep’s clothing or a cheap form of promotion. This misperception persists, particularly in underdeveloped markets. In the developed world the practice of public relations was given a place at the adults’ table some time ago, to a large extent on the strength of its evolution into a diverse and sophisticated set of practices – public policy communications, social impact campaigns, lobbying, government relations, crisis and issues management and now social media. 

In the Middle East and much of the developing world these misperceptions are entrenched because PR emerged from advertising. One of the early pioneers of the Middle East PR industry confessed to a colleague, “When we started up in the 1970s we honestly didn’t know the difference between public relations and advertising. We thought advertising was the same as PR. It took us a while to understand the difference.” Twenty years ago, advertising companies would leverage ad spending to get free editorial placement to please existing clients, with editorials written by advertising copywriters. The first PR agencies in the region were corridor companies of advertising groups.

As late as the 1990s obsequious articles celebrating a CEO’s latest trip to Europe or America or “press releases” extolling the wonders of some product or other, garnished with ad copy hyperbole, passed for PR editorial in much of the Middle Eastern media. Thankfully, those days are fading but the image of PR as a poor relation of advertising has persisted with both clients and the media and is reinforced by advertising and PR agencies and clients. 

The benefits of PR

Advertising groups try bundling PR services into “integrated communications” packages, and it is no surprise they tend to be skewed toward advertising where the big bucks are. Back in the ‘90s one of our managing directors served as COO in one of these Middle East advertising-cum-PR groups and would sit by helplessly at a pitch for PR and watch the CEO spend the whole presentation trying to convince the client to advertise. Even today there are still one or two advertising groups that win business by providing free or heavily discounted “PR services” as part of the overall advertising and media placement offering. Needless to say, the “PR services” they offer are inherently limited. This situation exists because many clients remain clueless as to what the practice of public relations actually is and to a very great extent this is the fault of the PR industry.

Too many PR agencies become reactive press release factories with event management on the side, living up to the old stereotypes. Instead of educating clients as to what public relations is actually about and what the practice can do best (if they even know), these companies fall right into the reactive trap of churning out a stream of product placement and promotional releases on demand without any kind of sustainable strategy or coherent planning. Many clients insist their agencies distribute stories that have absolutely no news value. This has led to the idea that a good agency is one that can get anything into the media through personal relations. This is bad practice, which alienates media already inundated with press releases.

Clients, ad men and PR agencies all need to understand what PR can do. PR can build a brand by telling a story — we are storytellers. We develop key messages that define an organization and drive awareness. We can address complex issues and handle crises. We invest communications with credibility through genuine business news and can cover multiple aspects of an organization cost-effectively. We can influence public policy and advocate social change. 

Public relations and advertising are both essential elements in the communications mix but they are entirely distinct disciplines that need to be separated at the hip in order to function effectively. Once separated, the two disciplines at their best can build and sustain brand awareness for the organizations they serve.

Rizkgroup, a Beirut-based communications and advertising holding, has played a high stakes game in recent years that few other firms have dared follow. Since 2007, the Rizkgroup has expanded in four markets: First, they opened in Damascus; then they plotted a course to Sanaa in 2008, and from there leapt into Khartoum the next year. To top off their lineup of new territories, they ventured in 2010 into Kabul. From 2010 onward, Rizkgroup has also launched a new group company, Rizk Public Relations (RPR) and this year, engaged into a corporate match-to-be-married with Havas, the French communications conglomerate that carries the name of the world’s oldest news agency and has major international interests in advertising, digital, and corporate communications services.    

Afghanistan, Sudan, Yemen, and Syria are among the most risky places a company can get into in this period of history. But while Syria’s implosion in 2011 was an unexpected setback for Rizkgroup’s business, the group achieved five-fold growth of its turnover in venturing into the peripheral markets on the advertising globe.   

“The higher the risk, the higher the reward,” said Alain Rizk, chief executive of the group which was founded by his father, Andre, in 1965. 

Rizkgroup declined to provide Executive with figures that would substantiate the growth claim, volunteering only that turnover increased from “a few million [dollars] to many millions.”

According to Mark Daou, chief operating officer for the group’s overseas business units, the company took a long-term view when it began international expansion in 2007 to transform itself from a mid-sized Lebanese agency into a global network. “In 2008 when everyone was locking down, we invested in emerging markets and we gained size and ability because of that,” he said. 

As Rizk explained it, the group’s base of clients in the Lebanese market is comprised of about 60 percent domestic companies, reflecting its corporate view that advertising has to be local. “The more local clients an agency has, the more sustainable it is.”

A number of these local clients, however, have far-flung market interests in the Arab world and Africa, and this was a factor in setting the direction of Rizkgroup’s path of territorial expansion.

“The reason why we go to Africa, or other ‘dangerous’ territories, is that our clients take us there,” Rizk said, adding that networking in these markets worked in favor of growth more than the Lebanese connection that opened the door. “One thing leads to another. The Lebanese connection perhaps gets you there and then you meet local clients and this is how you network.”

Changing dance partners

The regional expansion and shifting ambitions of the venture resulted in Rizkgroup reassessing its regional affiliation whereby it represented the global clients of the TBWA network in the Lebanese market — TBWA being an agency owned by the US-based Omnicom Group which in 2011 was the world’s second largest advertising conglomerate by turnover and profits. The affiliation also allowed Rizkgroup to access some of TBWA’s global resources such as training and client contacts. 

The Beirut partnership between TBWA and Rizkgroup had been in place from 2001 until the end of last year. As Rizkgroup managers implied in their conversations with Executive, synergies decreased during the latter part of the relationship and divergences of interest grew. The group and TBWA terminated the partnership on “fairly amicable terms” after Rizkgroup explored new affiliation opportunities and found what they were looking for in the Havas Group. Havas, which has been in expansion mode since 2011, is in the second size tier of global communications conglomerates, one notch down from the quartet of mega groups WPP, Omnicom, Publicis and Interpublic which all commanded annual revenues above $7 billion in 2011, whereas the second tier raked in a mere $1.7 billion to $3.8 billion. 

Rizk said the fit of client typologies and locations with Havas is to its advantage. The current affiliation was devised to sell an equity stake of no more than 51 percent to Havas if both sides are satisfied with the development of the relationship in the coming two years. For the time being, the affiliation, which involves fees and profit sharing aspects that Rizk did not want to explain in any detail, gives Rizkgroup access to offices and creative teams of Havas and spans markets in central Asia, the Middle East, and North and East Africa. 

According to Rizk, the affiliation with Havas will allow the Lebanese group to service its clients in Qatar via the offices of its new partner. On this trajectory, Rizkgroup could become more active in places where TBWA’s presence excluded expansion under the previous partnership. This could also mean that Rizkgroup may find itself competing against TBWA in Gulf and Levant markets. 

Although Havas did not publish a statement to news media on its rationale and target of the affiliation with Rizkgroup, growth in emerging markets and in digital communications seems to be the fit that makes the Lebanese group interesting to the French conglomerate. 

While, according to Havas’ March 1 announcement of 2011 results, more than 50 percent of the group’s 1.65 billion euros in revenue ($2.2 billion) were from Europe and only about 16 percent from emerging markets, growth last year was weakest in France and other European markets and strongest in emerging markets, led by Latin America. Highlights of 2011 in terms of newly established units, network takeovers and acquisition of new clients by Havas did not mention the Middle East and Africa regions. 

“We are still true to our original position that we are a local company but we are bringing in an international company. When I say local it means we work our clients locally in every country we are in.” Rizk said, adding: “When you own 49 percent of the company you still care for profits, you still wake up early every day and work for your clients.”

Daou, who is one of two non-family shareholders in Rizkgroup, expects business logic and ambitions of expansion to determine the details of any equity sale and shareholding agreement. 

He said that the company’s business doubled in Lebanon in the past five years but all other growth originated from its international operations. He also said that the advertising market in Lebanon is unlikely to expand in the near future and that growth prospects lie abroad, including long-term growth of the client base in Syria. 

In Yemen, the group is maintaining and servicing its clients while anticipating new business to emerge possibly from next year on. Advertising markets in Sudan are poised for growth in the nearer term and Rizkgroup is looking at setting up a presence in the young Republic of South Sudan, along with mulling expansions into North African markets in Egypt, Libya or other countries. 

Another geography on which the group has set its risk-friendly sights is the Horn of Africa. This region entails the countries of Ethiopia, Djibouti, Eritrea, and Somalia. Apart from this, Rizkgroup is pursuing diversification of its capabilities in the rising public relations side of the regional communications industry by investing in and expanding the PR offerings to all offices in the network.  

“In the public relations work, the growth rate is especially excellent and we are forecasting 80 to 90 percent growth,” said Daou. “We are looking at transferring the PR service properly to our entire network, developing new revenue streams in all those offices.”

Thus, for the moment the Rizkgroup seems to have no intention pulling out of the highs stakes game — whether the payoffs continues will likely depends on how well they can keep track of the wild cards.

Digital has dominated the discussion in the world’s advertising industry recently, but in the Middle East, the economic adoption of cyber marketing has occured haltingly: spending on electronic advertising in 2011 still thrashed about in low percentages of marketing budgets.  However, this did not void the region entirely of success stories in the digital marketing sphere. The acquisition of a Dubai-based specialist digital communications agency, Flip Media, by French communications company Publicis, shows that digital marketing in the Middle East could finally be catching fire.

Flipping through crisis

Although it does not give out financial performance numbers, Flip boasts clear indicators of success: after some eight years of operation, the company numbers more than 100 employees in the United Arab Emirates and India, and its UAE client base includes some of the biggest local brands. “We have worked with big UAE real estate brands such as Dubai Properties, Emaar, Nakheel, and Sorouh,”  CEO Yousef Tuqan told Executive. The Abu Dhabi-based media zone ‘Twofour54’ was another high-profile account and Emirates Air was the company’s largest client for three years. Moreover, a substantial total number of projects testified to Flip’s broad appeal in the market. “I believe we worked with 109 individual clients last year,” Tuqan said.  

The fact that Flip, despite depending on real estate developers for a very significant portion of its business, survived the 2009 crash of UAE real estate advertising budgets with only moderate downsizing — which Tuqan said was a reduction from 160 to about 150 employees — also speaks for the company’s acumen. An even weightier indicator of Flip’s potential is the process by which the regional leadership of Leo Burnett, core advertising agency in Publicis, developed an interest in the company.

Digital partners

After taking the first initiative to transform Leo Burnett into a digital agency five years ago, Chief Executive Raja Trad sought to progress the agency even further: “I wanted to strengthen this offering even more and so I came to the [Publicis] group and suggested that we would like to buy Flip Media. The group took our recommendation and we have Flip as part of Leo Burnett today. We did it first of all because we believe in digital and secondly we believe in Flip Media.” Trad explained that the group approached Flip “under an initiative of the management of Leo Burnett in the MENA region because we understand the market very well.” The initiative was further based on good experiences with the digital agency’s performance in some assignments which Leo Burnett had farmed out to them. “There are common beliefs between us and them. The culture is there, the chemistry is there,” he said. Flip had geared itself pretty much from inception toward teaming up with a big player. “What we knew very early on when we started our business was that agencies have a trajectory where they grow very quickly in the first few years and then, if they don’t make a significant leap between six and eight years of age, they go stale,” Tuqan said. “We have grown very rapidly in the last few years but we have always known that to take the agency to the next level, we need to be integrated into a larger communications company.”

How that next level will be shaped in operational detail is still “quite an open-ended requirement,” he added. “Right now, there is a lot we need to do in terms of aligning our people and aligning our businesses before we can put a very clear and definite answer on how that is going to go.”

According to Trad, the next steps in hammering out collaboration with Leo Burnett are now being sorted out in intense strategic communications, mainly between Trad and Tuqan, but the new relationship is already economically productive. “Flip is already engaging in serious engagements with clients of ours in Saudi Arabia because we have extended the services of Flip to our clients in Saudi Arabia and to one of our major multinational accounts,” Trad said. 

“We have a very clear strategic thinking planned with Flip,” Trad said, elaborating that this thinking entails learning from each other and progressive integration between the two organizations, with Leo Burnett taking the creative lead.  Trad and Tuqan both emphasized that Flip will remain a standalone digital brand agency for the moment, but Tuqan signaled expectations that this duality of names could last for some period. “I think we got a few years,” said Tuqan. “The thing for us is that the Flip brand is very strong and well known; we worked very hard to build a very good reputation for ourselves over the last eight years. It would be foolish for us to throw that away in order to be swallowed up by another advertising agency.” 

He also pointed out that continued separation would help avoid conflict of client interests.   Dilemmas regarding contradicting client interests are a common factor behind the multiplicity of agencies and units with similar operating profiles in the big communications conglomerates. However, the trend currently seems to point in the general direction of some simplification and streamlining of the convoluted global networks. For example, the Havas Group last month simplified its structure and dropped the Euro RSCG name, with chief executive David Jones giving as a reason that the group wanted to demonstrate that it was better integrated than its larger rivals. In Trad’s description, potential conflicts of client interests in the Leo Burnett-Flip setting are not likely and there is presently only one scenario of competing clients, as Flip works for Sony and Leo Burnett handles Samsung.    

One enticing sideline aspect of Flip’s beginning as a Dubai-based startup is that it did not involve a UAE or Gulf-based financial investor’s eminence in the background. The founders were Indian and German, focused on tech and business, respectively, who hit the market before they were 30. Together with Tuqan, who joined Flip as CEO in 2005, the company builders combined three distinct skill sets and meshed strengths of three diverse cultures, merging successfully into a high-growth venture in the Dubai business laboratory under the economic benefits of the emirate’s Free Zone formula. 

According to Tuqan, the cultural mix of the founding period crucially helped the company in combining Indian tech ingenuity and rigorous German business processes with his market understanding as an Arab, as well as with the company’s uncommon success operating on bi-local terms, with currently 40 employees in the UAE and about 75 in India.

Spreading the business

The founders of the company, included in the new structure as non-executive directors, have already reduced their direct involvement in managing Flip over the past few years. The current core management team, however, has maintained a strong multicultural character and achieved notable gender diversity, with two women in Flip’s five-person management team. 

Neither Tuqan nor Trad would volunteer even the slightest information on the financial side of the acquisition deal, depriving entrepreneurs in the online communications space of another clear benchmark.  

However, as Trad sees it, the addition of the digital agency and investment in Flip by the Publicis Group comes as a winning formula and at a winning time. “In my opinion, there is natural growth [in digital advertising] and I would agree that in two to three years, one third of advertising will be in digital,” he said. If that pans out, the founders of Flip will have realized significant returns in flipping the venture.