Complex Made Simple

How is the advertising industry dealing with budget issues

On November 15 at the Armani/Pavilion in Downtown Dubai, the MENA Effie Award winners will be decided to celebrate success in the advertising sector in the region, in a show themed “The Great Gatsby.”

The ninth edition of the MENA Effie Awards (Effies) has announced its shortlist in the run-up to its highly anticipated awards ceremony, which is expected to attract 2,000 attendees.

An expert panel of judges will assess a total of 293 shortlisted entries across 24 categories.

Alexandre Hawari, Co-CEO of Mediaquest – Organiser of the MENA Effie Awards – commented: “We are delighted with the high calibre of entries this year, which have demonstrated the exceptional level of innovation and creativity that we look for in our award-winners.”

Read:Coming soon: the Oscars of the advertising industry

Read: Global online ad spend set for nearly double digit growth until 2021

Hawari also added that the year 2017 turned out to be challenging in many ways for marketers in the region, especially in terms of tighter budgets. However, he added, the entries demonstrate that marketing professionals have faced this challenge successfully by rebalancing their media mix.”

Jihad Al Houwayek, Head of Marketing at Damas UAE, said: “In 2017, companies needed to ensure their marketing budgets were in sync with the ever-increasing pressure on revenue. This forced them to optimise every dollar spent by focusing on the core audiences. To do so and be as targeted as possible, companies had to be more data-driven in identifying and reaching their niche target audience.”

But why were marketing budgets tighter in the region this year?

 Economic slowdown

Zenith ROI Agency reveals in a report released in 2017 that the drop in oil prices in 2014 had a severe effect on the economies in MENA and prompted advertisers to cut back their budgets in anticipation of lower consumer demand.

Political turmoil and conflict have worsened, further shaking advertisers’ confidence in the region.

“We forecast an 18.6 per cent drop in ad spending in MENA this year, following a ten per cent decline 2016. The region’s decline should moderate over time, but we predict no recovery during our forecast period. We expect ad spend to shrink 6.3 per cent in 2018 and 0.7 per cent in 2019,” it said.

Read: MENA Effie Awards back in Dubai for ninth edition

Elie Khouri, Chief Executive of the Omnicom Media Group in MENA was quoted by the media as saying that the industry as a whole was hit by lower spending on advertising across the board.

It is worth noting that Omnicom and its related companies control a hefty chunk of the region’s advertising spend, buying time over the TV and radio airwaves and glossy space in magazines.

Khouri said: “A high dollar is not good for the UAE because of tourism, investment and real estate — so naturally this will have an impact on the economy,” he said.

Khouri added that the advertising channel suffering the most was print, whereas TV was stagnating and digital ads were going up.

What the research says

Statista, a portal for statistics, reflects a different mood in the ad industry. The portal said that ad expenditure in the Middle East and Africa would amount to $24.25 billion in 2017, up from $23 bn a year earlier, which would constitute a growth rate of five per cent. It is a small, but an upward movement.

It estimates advertising spending to stand at $25.35bn in 2018 and $26.44bn in 2019.

But what is driving this growth in advertising spend?

A digital shift

According to a study released in 2017 by LinkedIn, digital ad spending market will continue to grow in 2017, with a huge opportunity to catch up with global market rates in the coming years.

“Clients have started demanding payment by results (ROI & Return on ad spend ROAS) as well as enhanced consumer insights and analytics. Even from creative agencies, as well as media buyers. This means the whole industry will shift into digital and sophisticated programmatic advertising which is more accountable,” it said.

Statista reveals that digital advertising expenditure in 2017 stands at $3.8bn, while it is projected to increase to $4.63bn in 2018, $5.56bn in 2019 and $6.51bn in 2020.

Communicate, a trade magazine, cites a new research from WARC and the Mobile Marketing Association saying that as much as 83 per cent of marketers in EMEA will increase their budget over the next 12 months and that in five years’ time, 40 per cent expect more than a quarter of their budget to be dedicated to mobile.