Gulf advertsing in crisis mood

What's wrong with the advertising industry in the Middle East? Whether you ask an ad executive, brand owner or media seller, the answer is pretty much unanimous: 'plenty.'

The media seller will complain about the decline in spending by major marketers during 2002, while the brand owner will harp on the mounting costs associated with running a campaign in these uncertain times. The ad exec, for his part, will lament that, unlike in the past, he is being held accountable for delivering results on very limited budgets.

The last year has been a mixed one for the industry - there have been some costly campaigns that bombed. The majority of the campaigns, though, have been particularly lackluster, mere rehashes of international campaigns with minor changes made to tailor them to the region. Creativity has been conspicuous by its absence. Only the very brave brand owner, it seems, prefers to add an element of local creativity to his message.

Behind the campaigns, successful or otherwise, the region's sprawling advertising sector is waking up to new realities. 'The advertising industry, which had grown consistently over the last decade, has started to falter, and most definitely after September 11th,' says Sunil John, executive director of Asdaa, affiliated to the Team Y&R network. 'The advertising budgets of companies, especially the multinationals, have been cut considerably and that has had a considerable impact on the advertisers here.'

While budgets have been slashed, the expectations of clients have not. 'Getting more from less' seems to have become their slogan. Not surprisingly, this has led to a considerable degree of friction.

According to some very broad estimates, the advertising budgets of the top 50 marketers in the Middle East - comprising for the most part the top international brand names - have been trimmed 15-20 percent. In certain instances, the drop in ad spending has been even more marked - closer to 30 percent, say market watchers.

Even more alarmingly for the advertising execs, clients are looking at other avenues to spread their marketing spend. Event sponsorships have suddenly become the new game in town. 'We would actively seek to be associated with the right kind of event, which would help us gain a lot more in reaching out to our target consumers than any number of static advertisements would,' said a communications director for a leading automobile manufacturer.

'Event and social sponsorship would be a key part of the message that we will put out in coming years. Obviously, it has to come from our marketing budgets, which includes advertising as well.' This is a sentiment that is being echoed in the boardrooms of other multinationals with increasing regularity. Dedicated public relations is also eating into the advertising budgets.

It is not as if the Middle East's advertising industry is anywhere close to maturity. Per capita advertising expenditure in the region is low. Fouad Bedran, the regional media director for Universal Media Seven, has all the figures.

'For comparison purposes,' he says, 'the ad spend per capita in the United States reached $473 in 2001, $254 in Britain, $150 in France and $65 in the Gulf.' This reflects the poor state of the advertising market in the region despite the impressive gains made by the leading agencies in terms of creative output over the years.

Saudi Arabia - the biggest market in the region - is in recession. The opening of the prestigious Kingdom Centre, which is owned by Prince Walid bin Talal and contains the region's first Saks Fifth Avenue outlet, and other developments have not been able to pull the Saudi ad market out of the doldrums. Kuwait and Lebanon's ad markets are also on a downturn. The UAE is the only market whose ad sector grew last year - but not by much, say industry sources.

The perceived high cost of putting out a campaign is not what's holding back the market. Costs have, more or less, remained static, as the media channels available have multiplied each year. According to Jacques Asnar, the deputy managing director of Mindshare MENA, 'What was interesting last year, and this was started in 2001, was the higher than average increase in the local media, across the GCC markets. Pan-Arab media witnessed slower growth than in previous years.'

Increased competition has kept advertising tariffs in check. Efforts by some media to raise their rate cards have come to naught. Bedran points out that 'it is important that satellite channels rationalize their rate structures to reflect the reality of their market performance.' He adds, 'More and more small-budget advertisers have opted for decent radio and print campaigns rather than thin TV ones.'

Some of the practices that gave the advertising industry a bad name seem to be on their way out. 'Ten years ago,' comments John, 'lots of advertising agencies had practices that were not above board, in terms of billing clients on a fictitious level. That has changed because clients are now studying their media buys much more efficiently. The multinationals now have media buying specialists in-house just to ensure that what they buy is what they get.'

'Certain clients judge media plans based on cost only rather than the number of people reached,' Bedran says. 'This opens the door to the unethical few who lure clients by offering them magnificently discounted rates in media that do not deliver the desired audience. The result? Immediate savings at the expense of long-term business building.'

There is also increasing demand for advertising agencies to follow their clients into whatever markets they venture into. According to a source at Saatchi & Saatchi, 'The days of having an office in Dubai and managing a relationship with the regional managing director of a brand are over. Today, the client insists that its agency should have its people on the ground, wherever the client may be. Budgets are being set on a local and regional basis.'

The next two years could see more changes in the Gulf advertising sector. International advertising agencies, which have already firmed up strategic relationships with regional entities, might well up the ante and ask for outright management control. Bcom3 may prove to have started a trend. It bought out its partners as part of a major makeover of its operations in the Middle East and has now assumed direct control.

Globally, the advertising industry is consolidating, through mergers and outright acquisitions. After French giant Publicis took over Saatchi & Saatchi, it acquired Bcom3. Such changes have been absorbed by the regional operations as well. And there are constant rumors of other international names trying to 'rearrange' the nature of their relationships with regional partners.

But what of the immediate future? Even discounting the war clouds, the industry expects an upturn only in the second half of 2003 - Bedran says a 10 percent increase is expected. However, the Saudi and Lebanese industries may not have recovered in full by then. Such a situation could drag out the recovery period for the region as a whole. So what are advertisers to do in the interim? The marketers have a ready answer: 'Get creative.'

Creativity, however, comes at a price. Recently a mid-sized, locally owned fast-food chain underwent an identity change. The promotional material needed the usual mouthwatering product shots. The agency in question intelligently recommended stock images. But the client balked at the price.

On a limited budget, the agency put together a truly incredible team: an out-of-work industrial photographer, a master chef from a local hotel to do the styling, and a motley collection of props sourced from just about everywhere. The sparks flew when the food stylist met the head chef of the fast-food chain.

They disagreed on everything from basic ingredients to cooking time. Needless to say, the fiasco ended with a very unhappy client. Since print deadlines were fast approaching, the only option left was the image banks. Payment was quickly made via credit card, the images downloaded and the day saved.

Ad budgets in Gulf aren't anything to write home about. Neither is the situation likely to change soon. Adding to the chaos are extremely short timelines: the Gulf advertiser prefers to wait until the last minute and then expects miracles.

Even if you can use a photographer, there's simply no time to plan and execute. Out come the art books, whirr goes the scanner, a pirated copy of Photoshop is booted up and a bleary-eyed designer converts a Western boardroom full of suits and skirts into a local one full of white robes and black cloaks. Copyright? Yeah, right. Relevance and creativity? Stop dreaming.