The internet's share of advertising expenditure in the Arab world is expected to rise fourfold in the next four years, a new report says. The surge is expected because of a doubling of broadband penetration in the region, which means more people using faster internet connections to view more online content.
The Arab Media Outlook, produced by the Dubai Press Club and Value Partners, a management consultancy based in Milan, was bullish on the prospects for online advertising, projecting that the sector's share of total advertising expenditure in the region would rise from 1 per cent to 4.2 per cent by 2013. "The online platform today accounts for advertising revenues of about 1 per cent, on a pan-regional level," said Santino Saguto, the managing director for Value Partners in the MENA region. "Because of broadband penetration, we expect a very significant growth, going up to at least 4 per cent, probably higher."
As of last year, 12 per cent of households in the region had broadband internet access, but by 2013, that figure will rise to 29 per cent, said the report, which was released yesterday. The study looked at data from 15 countries and territories in the Middle East and North Africa: Bahrain, Egypt, Jordan, Lebanon, Kuwait, Morocco, Oman, the Palestinian Territories, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, the UAE and Yemen.
Qatar, the UAE and Bahrain have so far been the clear leaders in broadband adoption, with 84, 69 and 68 per cent of their respective households having access to the technology last year, the report said. By 2013, Saudi Arabia will have caught up to these near-western levels of penetration, with 71 per cent of Saudi households expected to have broadband by then. As of last year, just 37 per cent of Saudi households had broadband.
This rapidly improving infrastructure will attract more money to the media sector and increase the amount of locally produced, Arabic-language content, said Maryam bin Fahad, the executive director of the Dubai Press Club. "It is all based on the broadband increase in this region," she said. "Once that is available in this region, we think that major development will happen in terms of media industry and the availability of content, which will affect advertising revenue." However, an increasingly robust internet brings with it the challenges that have been radically reshaping the media sector in the West.
Although the report's projections suggested that daily newspaper circulation would continue to rise in the region, the 5.5 per cent annual growth enjoyed between 2007 and last year will drop to a more modest 2.3 per cent through to 2013, the report said. The internet is already having an impact on the print industry. Forty per cent of the news readers surveyed said they accessed news online last year.
Overall, the report presented a picture of cautious optimism for the region's advertising industry. The report noted that although the Arab region's media sector was among the hardest hit in the world last year, seeing a 13 per cent drop in advertising revenue compared with 2008, it was also among those poised to bounce back the fastest. The report said that while regional advertising spending would only just clear US$5 billion (Dh18.36bn) this year - still shy of the nearly $5.3bn spent in 2008 - by next year it would bounce back up to $5.6bn.
Regional media companies have already begun to adapt to the growing importance of digital distribution. More than 80 per cent of the media company executives surveyed said they believed the region's readers should turn to websites as a source of news, not simply newspapers. "The online and mobile sector is still not to be compared with the TV industry or the print industry, but companies are gradually building their capabilities," Ms bin Fahad said.