Dubai: Here’s the bad news first — the UAE’s advertising sector is not going to see any silver linings immediately.
“None of the short or long term indications have showed any positive signs towards stabilisation of the decline in ad spend,” said Amer Al Hajj, Publicis Media’s Chief Investment Officer for the MENA territory. “We still believe we will have another dip in media budgets in the coming two years, given all the local, regional and global factors affecting our markets.
“(There’s) political instability in the region, oil prices and economical changes are affecting advertisers’ spending (and) local clients’ budget is suffering. Globally, (there are) economic pressures, currency exchange variations (and) political heat maps are growing. All in all, multinational clients are under more pressure from their global HQs.
“Add to all of that, 2018’s new VAT will put additional pressure on the region’s budgets until markets adapt to the new trend and adjust their financial books.”
The global media heavyweight Zenith has just issued an update on 2017 global ad spend patterns, and where it forecasts regional ad buys will see an 18.6 per cent drop this year and follows a 10 per cent decline in 2016. “The region’s decline should moderate over time ... but we predict no recovery during our forecast period,” Zenith states. “We expect ad spend to shrink 6.3 per cent in 2018 and 0.7 per cent in 2019.”
According to Al Hajj, “The coming two years are critical for our industry — advertisers should be smart (in) investing their budgets wisely. In 2016, we predicted the 2017 media budget to drop by 18 per cent. It was an optimistic forecast in the first-half of the year — the market dipped at least 22 per cent versus the first half of 2016.”
And here comes a bit of good news, something that the ad industry here has been starved off for some time. “We are positively foreseeing the fourth quarter of 2017 to be similar to the fourth quarter of 2016 and hence the entire year would be at 18 per cent lower than the year before as predicted,” said Al Hajj.
When ad spend is taking declines and each quarter over the past two years has brought in fresh tidings of lower growth patterns, a quarter where spending remains flat should constitute a bit of gain.
Plus, “Digital budgets are still growing, but again, they are growing at a much slower pace than previous years,” said Al Hajj. “Ten to 12 per cent is the growth of this touchpoint this year, while outdoor advertising is obviously losing grip for the past couple of years.”
“As an agency, we always knew marketing budgets are the first and easiest to reduce when advertisers are faced with economical pressure. “But as I always say, there are major future implications when reducing marketing budgets. Brand equity and market share are not easily maintained and captured after an advertising freeze. Advertisers will have to spend the same budget three times to go back to their position pre the budget cuts, and even if they do so, competition might have taken their place.
“We have actual cases where big advertisers dropped their budgets to ensure their bottom-lines remain healthy, but the year after, their market position was lost, and they were struggling for years to regain that.”
Outside of the Arab world, there are signs of more markets recording gradual increases, and helped by economies that are sending out stronger signals of economic recovery. Worldwide, Zenith predicts global ad expenditure to grow 4 per cent in 2017, reaching $558 billion. Yet, “Our forecast for 2017 is 0.2 percentage points below the forecast we made in June, with marginal downgrades for Western Europe, Asia-Pacific and Latin America, compensated for by upgrades in North America and Central and Eastern Europe.”
One of the better performing ad markets in the early part of the decade — the UK — has been blowing less hot these days, with the Brexit atmosphere throwing a pall over marketing spends. As a partial consequence, “North America started outperforming Western and Central Europe again in 2017, and Canada’s healthy economy boosted its ad market,” the report states. “We expect North American ad spend to grow 3.6 per cent this year, and forecast an average of 3.4 per cent growth a year to 2019.”
Between 2016-19, global advertising expenditure should increase by $69 billion in total, with the contribute 29 per cent of the additional ad expenditure and China — currently number two in the global ad rankings — contribute 22 per cent.
The year when online finally won it over traditional
* By end 2017, internet advertising will have overtaken television-based advertising to be the world’s biggest advertising medium, according to Zenith forecasts. The former would then have 37.2 per cent of total ad expenditure. “As internet advertising matures, its growth is slowing down, but it remains the fastest growing medium by some distance,” the report states. “We estimate that internet ad spend grew 18 per cent year-on-year in 2016, and we forecast an average growth rate of 12 per cent a year between 2016-2019. By 2019 we expect internet advertising to account for 42.2 per cent of global ad spend.”
