The chief of one of the region’s biggest media houses expects a sharp drop in advertising spending across the Middle East and North Africa next year amid regional conflict and faltering global growth.
Advertising spending could fall by more than 10 per cent in 2016 or as much as 20 per cent measured over two years, said Elie Khouri, the regional chief executive of Omnicom Media Group.
“The wars we have in Syria, Iraq, Yemen, Libya – this is definitely not a sign of health for our industry,” said Mr Khouri. “The other factor is the lack of growth in Europe and in Asia, which is putting pressure on the multinationals.”
A decline of this scale would be comparable to the aftermath of the 2008 crisis, he said.
The fallout from the conflicts and the weak oil price is taking the shine off a region that has been a bright spot for the advertising industry.
At the same time, the rapid migration of advertising dollars to digital platforms is hurting traditional media such as newspapers, magazines and television.
“Globally, what is happening is that print is going down – be it magazines or newspapers, it’s a free fall,” he said.
“Outdoor is holding. TV is going down – not at the same speed as print, but there is a decay in terms of investment. What is going up is mobile and desktop – that is the only thing that’s going up.”
But the trend is not being felt uniformly across the region.
“It is happening more strongly in some markets than in others. For example, Saudi Arabia is feeling the pinch more than the UAE.
“The UAE is feeling it less than Egypt. Lebanon and the Levant are catastrophic in terms of investments because of Syria and everything that has happened. So it varies by markets.”
Surging smartphone use in the UAE and the wider region is driving the growth of mobile advertising and rapidly redrawing the media landscape of a part of the world that has been a stronghold of traditional advertising media.
Globally, digital spending is expected to account for half of the overall advertising pie in four years, according to the management consultant McKinsey.
Within digital spending, it is mobile phone-based advertising that is expected to outperform – growing at about twice the rate of non-mobile digital advertising through the end of the decade.
Mobile internet subscribers in the Middle East and Africa are expected to increase at a compounded annual growth rate of almost 22 per cent through 2019, according to data published this week from PwC. The expected downturn in advertising spending could also trigger further regional consolidation among smaller players, predicts Mr Khouri.
“Consolidation yes, but not among the big four,” he said, referring to Omnicom, Interpublic, Publicis and WPP. “What is happening in this part of the world is not significant enough to influence mergers and acquisitions among the big players.”
“But the smaller players would be able to merge with bigger shops like us because, if they don’t do that, we will continually look at ways to grow despite the market shrinking.”
scronin@thenational.ae