How badly has the advertising industry been hit in the Middle East?

To start with, let me first outline the situation of the advertising industry in the Middle East. It is shaping up but we are far from reaching the level of expenditures on par with the value of the markets. In the last 10 years, we witnessed substantial growth, a major evolution of the media scene and the development of marketing services necessary for total communication programs and research tools. The emergence and serious involvement of the multinational groups in the area stimulated a dynamic trend to upgrade the quality service and to prompt the proper professional competition. Competition can only be healthy in a free market economy if properly and ethically applied.

More sophisticated tools to measure the effectiveness of advertising reach were introduced. But we are still at a much lower level than the market size as, unfortunately, we have not yet reached the level of per capita spend that our region deserves. We need to be at the level of the lowest per capita spend in Europe.

This means that our industry could be several times larger than it is today. The potential is there, and all of us need to move towards that goal. Healthy

parameters and practices must be set to achieve that goal and stop the damaging cutthroat competition that leads to the freezing of expenditures. We must create the proper environment of trust, confidence and respect between advertisers, agencies and the media. Advertising, specialized marketing services, including below the line, public relations, digital, Internet, media buying and planning events are key components to the total communication program. Only then we will see the expected and deserved growth. We in the Middle East should not be complacent, and must react.

Is the regional situation worse than the global scenario?

Of course, the advertising industry has been affected all over the world. But because we are in an underspending market, the effect of the crises of the last few years is less noticeable. On the world market, a decrease translates into a bigger amount than the total expenditures in the Middle East. From that perspective, I would say that we have been less hard hit in the Middle East.

What impact will the war in Iraq have on the ad industry in the region?

If there is a war in Iraq, I am afraid it will be very difficult to estimate the level of damage. Of course, it will seriously affect all businesses, especially ours as our industry is the barometer of business health. Having been in such situations time and again – and provided the war, which hopefully will not happen, does not last long – I am convinced that the advertising industry will rebound and will drive with it businesses from across all sectors. The advertising industry is one of the first to get affected in time of war and one of the first to rebound.

What is the current value of the entire advertising market in the region and what is the annual growth rate?

The total 2002 Middle East market is estimated – at rate card rate – at $3.5 billion. Yet it is worth pointing out that the above number excludes all non-monitored ATL media, BTL, e-media and other unconventional forms of advertising. If you add them all up, then the figure may well exceed $5 billion.

When do you think the regional ad industry will pick up?

Reaching the level expected for our region is in our hands. First and foremost, we need to strengthen the basic values of the advertising industry, its role and its importance. We must fully realize the concept of freedom of commercial speech, advocate the importance of self-regulation and a code of conduct, and continue nurturing educational programs. As a matter of fact, we can be proud of the human resources available in our area, of the tremendous assets of their multicultural experience and of their dynamism. In our region – mainly in Lebanon – we are lucky to have high-level courses in many major universities. With all modesty, the Lebanese are known for having the service industry in their blood, and for being highly creative and dynamic.

The potential for the regional advertising industry to pick up is there, and the challenge is once again for us to make it happen as soon as possible. I hope that within the next three years, we’ll be able to say that we have reached the per capita spend of any European country and at that time, I believe that expenditures will be several times larger than today.

How is Publicis Graphics coping with tough times? How badly have you been hit?

We experienced very tough times in the early 1990s because of the Gulf War, of client alignment, of budget cuts and because we were like everybody else: unprepared for the consequences of the Gulf War. We adopted one policy that is paying off today: to believe in our vision, adapt to situations, maintain our employees’ motivation and dedication, and keep the positive momentum of business as usual. We have weathered the storms.

Today, we are in a much healthier situation. We consolidated and our clients are satisfied. Despite 9/11, we have achieved our forecast for 2001 and have surpassed our forecast in 2002. As for 2003 – without taking into consideration a possible war in Iraq – we are witnessing growth and the future looks brighter.

What strategies do advertising companies adopt in difficult times?

I believe that all of them have their strategies to keep going and adapt.

Which markets have been hit the hardest and which are still swimming along?

If we look at the early 1990s up to now, Kuwait was badly hit. Kuwait used to be the biggest market in the Middle East. It’s picking up slowly, but we must recognize that Kuwait is in a
very difficult environment. Bahrain, another market that used to play an important regional Gulf role, was affected by the boom in the biggest market, Saudi Arabia, and the emergence of Dubai as a major hub. As you know Dubai is today an advertising hub because multinational clients have set up their headquarters in Jebel Ali; services and facilities are of highest standard. Lebanon used to be a gateway. The expenditures are not big today but Lebanon was a pool
of human resources in the Arab world prior to the civil war. Other markets are not swimming but growing too slowly.

Are you looking at further acquisitions in the region?

Our company growth is based on internal business growth and not on acquisitions. Therefore, we never acquired agencies in the region. To cope with globalization, we took the strategic decision to go into partnership with Publicis, and we are extremely pleased with this move. Today, we realize that four or five groups control the worldwide communication business. As you know, the Publicis Group is the fourth largest advertising group in the world and the largest media group in the world. We are proud to be part of it.

Are you competing mainly with your global rivals or are there some independent local giants?

Our main competitors are the global groups, and that makes the business more challenging and fun. The excitement is tremendous and pushes all of us to reach excellence in this domain. Of course, there are still some independent and professional agencies that focus on their local markets.

The Arab media market is increasingly fragmented. How do you see the future of the advertising industry in this new kind of market?

This increase in media opportunities led to the fragmentation of media consumption since people have the same amount of time in which to consume media but now have a much greater choice in terms of what to watch or read. Simultaneous, multiple media consumption has increased as well, necessitating a better integration of communication tools to capture audience share from all points of contact – or what is known as the holistic approach.

All that results in higher cost to achieve mass coverage since it requires much greater spending to be in many media simultaneously in order to build the desired reach. However, niche targeting certainly becomes easier with the introduction of more specialized media.

Consumers became more sophisticated and picky since now they are able to choose. This means that there is an increased need for the media and agencies to better understand consumer behavior, likes and dislikes – and requires better research tools and techniques in order to optimize marketing and media budgets. Therefore, the main driver for the future is enhancing the research available in the region to help clients, agencies and the media better achieve set advertising objectives and thus grow the ad market and increase per capita advertising spend, which remains very low compared to other areas in the world.