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“We’re going through what I’m calling the perfect storm in Saudi Arabia,” says Mazen Fakhoury, general manager of Mindshare MENA in Jeddah. “The more we go through the year, the more it seems that some things are accidental. For example, Ramadan was a very bad month for the industry because of fundamental changes in consumer behavior, so everybody was banking on the back-to-school season. On September 25, the government announced it was postponing the opening of schools because of the H1N1 problem. All of this just added on to what was already quite a bad year, and nobody expected Saudi Arabia to be this affected.”

Pradeep Iyengar, general manager of ICOM (a full-fledged Saudi media agency) is more subdued in his reaction to the current state of the Saudi media scene. “There’s no clear panic level, just a slowdown,” he says. “There seems to be a wait and watch policy.” But Choucrallah Abou Samra, managing director of OmnicomMediaGroup in Jeddah, says it’s become very clear that every dollar counts now. “The exuberance of the past, where investments happened to be driven by the need for scale and the sheer availability of cash, has been replaced by a need for efficiency,” explains Abou Samra.

It’s definitely been a rough year on the advertising industry worldwide, and the Middle East is no exception. It may be difficult to gauge the Saudi market due to the lack of research and data available, but what we do know is that of the country’s top five advertising mediums – television, radio, outdoor, print, and digital – only one has registered positive growth.

That’s not to say the advertising industry in Saudi Arabia is a shambles, however. In fact, some would go so far as to say it’s thriving. Planning has now focused on maximizing ROI more than ever, and Saudi media agencies are successfully navigating a changing landscape.

In that landscape, pan-Arab television is more popular than ever, leaving local channels trailing behind. Meanwhile print seems to have taken a hit, outdoor advertising is evolving, radio is set to open up, and digital advertising is nascent.

OLD TRENDS DIE HARD. “It appears that this year has reinforced old trends,” says Abou Samra. “No matter how many new channels or titles enter the media market, the preference for the leading pan-Arab channels only strengthens over time.”

Pan-Arab television channels began spreading through the region in 1991 with the launch of MBC, a Saudi-owned network, followed by ART and Orbit in 1994. They have revolutionized the regional television market.

Amer El Hajj, regional media buying director at Publicis Groupe Media (PGM) in Dubai, says that, while there was a drop in television advertising from October 2008 to January 2009, ad spend picked up again, especially on satellite stations.

“Viewership is moving from local Saudi stations to pan-Arab ones,” says El Hajj. “Satellite stations will have wider coverage, so they are more cost efficient. A newspaper will only reach 600,000 people in Saudi Arabia, but a pan-Arab station will cover Saudi and other countries. So budgets are moving from other mediums towards satellite television stations.”

BREAKING NEWS. Speaking of newspapers, it seems print advertising still retains a stronghold in Saudi Arabia, despite an apparent drop in revenue.
According to the Pan Arab Research Center (PARC), the medium suffered a 3 percent drop in spending over the period January to August 2009 when compared to the same period last year. But El Hajj says that, while print has been affected by the crisis, it hasn’t declined as much as it has in the UAE.

Unfortunately the print industry is not helped by the lack of data and audited titles in Saudi Arabia – this contributes to advertisers moving away from the medium, in favor of a more reliable channel of advertising; namely, digital.

“There is no doubt digital is starting to play a big role,” says Fakhoury. “Everybody wants to start looking at its benefits and how you can use them. The approach is still pretty much centered on banners; we still haven’t gotten into activation.”

Digital’s interactivity is another strong selling point for the medium according to Abou Samra, who says it only adds to its prime benefits -measurability and accountability- at a time when advertisers count every dollar they spend.

RADIO RECEIVER. When you talk of ad spend in the kingdom, radio hardly warrants a mention; that may very soon change. The medium is currently dominated by the MBC group, which broadcasts two channels (MBC FM and Panorama FM), and one local Quran channel (that does not allow advertising).

Unsurprisingly, at present radio is the smallest medium in Saudi Arabia, representing only 2 percent of total ad spend. However, the Saudi Ministry of Information and Culture announced earlier this year it would allow the creation of four additional private FM stations in 2010; it’s a move likely to improve radio’s standing in the marketing mix.

Outdoor, long a favorite medium in the region, has proven to be the sturdiest advertising channel in Saudi Arabia, witnessing a 2 percent increase in ad spend from January to August 2009 compared to 2008.

“Outdoor is going out of control a little bit,” cautions Fakhoury, who believes that outdoor advertising in Saudi Arabia is fragmenting, and despite increasing competition prices are rising. However, he still concedes that, at present, “from an ROI perspective, it’s the medium with the most results.”

POWER HOUSE. Though Saudi Arabia is weathering a storm of numerous changes, it remains the largest consumer market in the GCC whose economy can greatly affect regional advertisers.

“It’s still the biggest market because it has the biggest population, the GDP power is very strong, and so is the purchasing power of consumers,” says El Hajj. But Fakhoury says there is a problem with media buying agencies in Saudi Arabia: They are mainly price-led.

“It works like this: if you give someone a cost X, and someone else gives them cost X minus one, they’ll take the latter,” explains Fakhoury. “But strategic clients are now starting to ask questions.” He says his company’s major challenge now is to figure out how to add value to clients’ businesses; as a consequence it is investing heavily in consumer research and insight.

Inspite of is size and value, Iyengar at ICOM says the Saudi market is still “immature,” though he believes that it is slowly progressing.
“What is missing is accountability in the market,” he says. “It’s missing very clearly from a media perspective, both selling and buying. There is no logic or science in terms of measurement and behavior of the media. It needs to be more accountable and open. It’s about time we had more accountability, and I think in about five years, this market will be as good as any.”

Who’s spending where?
 “Credit-dependent categories like real estate, cars and of course financial services have all been deeply affected by the global financial crunch,” says Choucrallah Abou Samra, managing director of OmnicomMediaGroup in Jeddah. “The severe drop in activity there has allowed the traditional heavyweight of FMCG to regain the crown it had lost some years ago.”

This observation is proven by the likes of Aujan – a Saudi company that counts Rani, Vimto and Barbican as its major brands – which witnessed a 20 percent volume growth in 2008, and is predicting strong end of year results according to Ahmed Shaboury, head of brands at Aujan. “The company is blessed to be operating in a recession-proof industry,” he says.

The same goes for Almarai, another Saudi company specializing in dairy foods, who witnessed a growth of 22 percent in the first half of 2009, according to Hussam Abdul Qader, general manager of marketing at the company. “It has been a very good year for us despite the challenges,” he says.

Both Aujan and Almarai rely heavily on pan-Arab satellite television for their advertising, with Almarai also increasing their print ad spend. Shaboury says Aujan has changed its media strategy this year, and placed a focus on local mediums including outdoor, in-mall mupis and magazines. “Also, our investment in online continues to grow steadily every year,” he says. “This comes as a reflection of the growing consumer interest in online social networking, which has changed consumers’ Web-surfing habits dramatically.”

Telecom providers have also been spending a lot on advertising in Saudi Arabia, with Saudi Telecom and Mobily listed as some of the top advertising spenders with television, radio and newspapers, according to Pan Arab Research Centre (PARC) figures.

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