The global advertising industry had what public relations writers might call a “stellar year.” Nothing astral or astrophysical was involved, but the industry leaders’ 2010 results broadly outperformed expectations, validating the ad sector’s recovery from the tough year of 2009, which saw global ad spend contract by about $50 billion.
WPP, Omnicom, Publicis and Interpublic, the quartet of holding companies with the leading stakes in advertising both globally and in the Middle East and North Africa, have all gained according to key performance parameters (see results box) as the global advertising market last year increased 4.9 percent to an adspend of $450 billion, according to estimates by media agency ZenithOptimedia.
ZenithOptimedia, which is part of the Publicis Group, predicts in its current Advertising Expenditures Forecast that global advertising will reach $470 billion this year and exceed $520 billion in 2013. A similar research report by WPP-member company, GroupM, predicted in December that measured advertising expenditure worldwide will break the $500 billion mark in 2011. Advertisers in the Middle East confirm that the sector has rebounded across the region from the beating it took following the economic crisis of 2008 — which came at a time when the regional advertising industry was actually at the tail end of an overheating phase of nearly three years, during which expanding client demand had been driving agencies to fill staff positions with minimal considerations of long-term viability.
“When you grow that fast, you tend to stumble a little bit and make a few mistakes,” explained Tarek Miknas, chief executive officer of agency Fortune Promoseven. “You hire very quickly, you fill gaps very quickly, you need to run off to the next big thing.”
Cleansed by the crisis
The pendulum swung the other way in 2009, as the fallout of the economic crisis was reflected in global and regional advertisers’ slashed budgets. adspend took a dive across the Gulf Cooperation Council as things deteriorated to the point of wiping out the spending power of some real estate developers in Dubai. Sources in the industry told Executive that several agencies are still waiting for settlement of their accounts by certain developers.
Agencies had to restructure, said Dani Richa, CEO of Impact BBDO MENA, and agencies shifted staff to offices with growth, making 2009 “the rationalization and restructuring year.” During separate interviews at the MENA Cristal Festival in Lebanon in February, Richa and Miknas both confirmed that the industry saw layoffs and cost-cutting in 2009.
As Miknas described it, rationalization was a positive transformational step for the advertising sector. “You start thinking, how can I stretch my dollar the furthest? What is available for me to exploit and keep my margins healthy?” he said. Hiring decisions are today taken under less pressure, he added, “but we retain our best talent and are constantly trolling for the best you can get. Probably all agencies are.” According to Richa, the turnaround was swift, noting 2010 was a “good year.”
“We have gained new business and Dubai is bouncing back beautifully,” he said.
Dubai-based decision makers in the regional advertising industry share the view that the industry has experienced an important learning curve. Mohan Nambiar, CEO of MEC MENA, told Executive that managerial prudence suffered during the boom years but has returned. “I think we have all learned bitter lessons,” he said. “A lot of checks that were supposed to have been done were not done because we were all busy accumulating volume. There won’t be a repeat performance because we all learned from it.”
According to agency leaders and media rep companies, the rebound of 2010 has shown that advertising in the Middle East has become a resilient industry.
However, the bottom line performance of the ad companies across the region cannot be easily gauged, at least not directly. Any local firm affiliated with one of the global advertising communications groups — and that is almost any firm of regional weight — is firmly committed to a “don’t-ask don’t-tell” approach with the public when it comes to actual advertising spend and industry performance in the region.
Global advertising industry growth projections by ZenithOptimedia say that the adspend in the Middle East over a five-year span will be part of a 24 percent increase across a collection of advertising markets. This respectable total increase, according to the research publication, will outperform increases of adspend in developed markets over the same period by between 14 and 19 percentage points.
Murky figures
One should note, however, that the adspend in the Middle East is based on gross estimates and not adjusted for inflation. Rather than being a Middle East and North Africa projection, the forecasted 24 percent spend increase is, moreover, for a potpourri of markets that include, beyond Arab MENA, Israel and 22 countries as socially diverse and as geographically distant as Luxembourg, Zimbabwe, Iceland and Myanmar.
From a local forecasting perspective for the MENA region, this grouping does not lend itself to what can be considered a meaningful frame of projections.
Regional forecasts for the Middle East — aside from having to be considered in light of economic and security risks related to the region’s latest experiences with popular political demands — are not as strong as ZenithOptimedia’s advertising growth forecasts for Latin America (26 percent), Central and Eastern Europe (31 percent) and Asia (36 percent — excluding Japan). By this projection, all regions other than developed markets are expected to best Middle Eastern growth in the next three years.
But this does not mean the growth in Arab markets will be something to scoff at if companies here make things happen. Philip Jabbour, Starcom MediaVest MENA CEO, told Executive: “We are a service industry. Apart from always trying to invest in improving quality and getting more measurability, if we collectively focus on being able to drive value — offering a service and being remunerated for that — rather than making this a commodities business, then the industry will flourish.”
