Mena advertising agencies feel a drag on their market

Regional advertising agencies are expected to miss out on a recovery in spending this year as a weak oil price weighs on consumer spending.

Zenith, a media services network owned by Publicis Media, said it reduced its Mena figures by 6.3 per cent from June, adding that there will be an 11.8 per cent fall this year in advertising spending as the two-year lull in oil prices continues to batter the region.

Money spent on advertising is projected to dip lower over the next two years, averaging about a 7.8 per cent decline annually, with regional political instability also acting as a drag on the market.


The IMF expects the weak oil price to hit government spending, with the UAE economy expected to grow by 2.3 per cent this year, down from 4 per cent growth last year.

As businesses cut costs, consumers are also spending less.

The slowdown in the regional advertising industry was expected by some agencies. Elie Khouri, the regional chief executive of Omnicom Media Group, told The National in December that he expected advertising spending to decline by as much as 20 per cent over this year and next.

The advertising market for Mena is worth about US$5.5 billion in net revenues, according to a report released by Northwestern University in Qatar. The industry has had a compound annual growth rate of 2 per cent over the past five years, representing only modest growth.

The region’s emerging digital market remains widely untapped. Zenith said that mobile advertising spending will grow by $81.3bn over the next couple of years, seven times more than the combined growth of traditional markets such as television, radio and cinema.

Yet in Mena, the digital market only makes up about 10 per cent of advertising spending compared with 30-35 per cent spent on print. “Collectively, Mena countries trail other regions in innovation and adoption of new technologies,” said the Northwestern University report. “Many of the opportunities of digital advertising have yet to be realised despite high levels of digital consumption in the region.”

WPP, the world’s largest ad agency, recognised that this market was a weak point for the company, based in London. “There was revenue weakness in China and the Middle East in the first half,” said Paul Richardson, WPP’s group finance director.

Despite the weak outlook for the Mena region, ad spending is on the rise globally. Zenith revised its global advertising expenditure forecasts to $539bn this year, a 7.3 per cent rise on June’s projections.

“The global ad market has strengthened over the past few months, thanks mainly to the resilient US consumer,” said Jonathan Barnard, the head of forecasting at Zenith.

With the rising strength of the dollar, Americans are spending more and advertisers are running to gain a larger share of the growing market.

Conventional advertising, such as television, has grown strongly as a result of pharmaceutical and consumer packaged goods, while social media will lead with new formats as markets transition to further mobile internet consumption, Mr Barnard said.

lgraves@thenational.ae

0

Share This Post