Mena advertising agencies feel a drag on their market

Consumer spending is declining in the Mena region because of the oil price, which is causing advertising companies to head to greener pastures outside the region.
Money spent on advertising is projected to dip lower over the next two years as weak oil prices weigh in on consumer spending. Tom Dulat / Getty Images
Money spent on advertising is projected to dip lower over the next two years as weak oil prices weigh in on consumer spending. Tom Dulat / Getty Images

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, the media services network owned by Publicis Media, said it reduced its Mena spending by 6.3 per cent from June, adding that there will be an 11.8 per cent fall this year in overall advertising spending.

Money spent on advertising is projected to dip 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 the 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 up to 20 per cent over this year and next.

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

In Mena, the digital market only makes up about 10 per cent of advertising spending compared with 30-35 per cent spent on print.

“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.”

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

lgraves@thenational.ae

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Published: September 13, 2016 04:00 AM

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