Media companies are beginning to feel the effects of the UAE's cooling property market, with some reporting a 30 per cent drop in advertising in recent weeks and others nervously eyeing the first quarter of next year. Print and outdoor advertising has been among the hardest hit as the two sectors depend most heavily on revenue from the property market. More than half of the top 10 newspaper advertisers so far this year have been property companies, according to the Pan Arab Research Center (PARC) .
"Currently, we are seeing at least a 30 to 35 per cent drop in advertising," said Mohie Patel, the vice president of advertising at the Khaleej Times. "It's property, it's banking, it's luxury goods. These are segments that have been hit the most." The drop, measured against the daily newspaper's targets for the year, began at the start of November, around the time several major developers announced plans to trim staff and freeze recruitment.
"Nearly 50 per cent of the print market - Gulf News and Khaleej Times primarily - was property-led," he said. "And of course a lot of them have just pulled out all the advertising, especially the big guns. You don't see Nakheel. You don't see Dubai Holding. You see very little property advertising." Dubai Holding - which earlier this month had reportedly suspended or cancelled advertising campaigns by its subsidiaries including Dubai Properties, Dubailand developer Tatweer and the Jumeirah Group of hotels, according to the media blog Ad Nation - acknowledged it was shifting its advertising strategy to respond to the economic climate.
"Dubai Holding, in line with other companies, is reviewing its advertising plans in light of the downturn in the global economy," said Khalid al Shafar, Dubai Holding's marketing director of group marketing. "In 2009 we will take a more integrated approach, using innovative channels rather than traditional media and increasing the use of trackable means of advertising in our media mix." Nakheel has been the third-largest newspaper advertiser in the UAE so far this year, spending US$7.73 million (Dh28.3m) on ads in the first three quarters, according to PARC. It has also been the top spender on outdoor advertising among the country's property companies, spending $598,000 on outdoor ads. Earlier this month, the company said it would be "scaling back" some projects to deal with the economic downturn. When contacted, the company declined to discuss its advertising spending.
The outdoor property advertising boom that Nakheel led has pumped up outdoor prices over the last year, chasing away traditional outdoor advertisers such as Nivea, Nokia and Samsung, said Ahmed Lizzaik, the managing director of Reach International, which controls 400 billboards throughout the UAE. So when developers cut spending, outdoor advertisers felt the pain acutely. "We have seen an 85 per cent drop in the number of clients since mid-October," Mr Lizzaik said. "It has started to become serious. Lately, 90 per cent of our business was real estate."
Advertising agencies are also being hit. Hisham Tammir, the chief operations officer of MediaCom in Dubai, said it was a bit too early to tell what the full extent of the damage would be, but cuts have started. "It feels like some clients are cutting about 15 per cent, and others 30 per cent," Mr Tammir said. "In total, I expect an overall drop in 2009." Nadim Khoury, the general manager of Grey Worldwide Dubai, said his agency has not experienced a downturn in business, but had a hiring freeze imposed by its parent company, WPP, last month.
Leaner times will bring shifts throughout the advertising industry, in both the medium and the message. Mr Khoury expects property advertising to shifts its emphasis away from "dreaming" and more towards consumers' needs. "It's not any more about the biggest or most luxurious," he said. "It's going to be about what's in it for the client." Azhar Siddiqui, the general manager of Magna, the media buying, planning and consulting arm of Middle East Communications Network, expects banks and property companies to demand more tangible results from their advertising spending.
"Thematic or brand-building advertising will be almost negligible in 2009," he said. "Companies will focus more on tactical advertising where ROI (return on investment) can be immediately monitored... You can forget about the lovely brand campaigns and the logo launch campaigns that used to occur in the past." Aspen Aman, the business development manager of BPA Worldwide, a non-profit circulation auditing company, expects to see more advertisers demanding accountability, in the form of independent audits, from media companies.
"I've heard several agencies already say that their clients are telling them that their budgets are going to be tighter," she said. "Our clients are telling us that budgets are going to be smaller, but unfortunately expectations are not going to be smaller, so they are going to have to demonstrate more return on a smaller investment. One way to do that is to have the data." Mr Tammir expects more television advertisers to shift their resources from local to regional media outlets, and for Saudi Arabia to emerge as the main economic engine for the region.
Clients will be more willing to spend on the satellite, because they can cover the whole GCC at once," he said. At least one property developer appears to be thinking along the same lines. Hydra Properties, which was by far the biggest spender on television advertising among the property companies in the first three quarters of this year, is in the process of studying whether it should shift its advertising to international outlets, according to Sulaiman al Fahim, the company's chief executive.
As a young company, Hydra cannot afford to pull back on advertising the way the more established developers have, he said. "Cutting marketing costs doesn't save you money," he said. "I will not reduce my marketing. You have to grab every opportunity." khagey@thenational.ae