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WORDS FROM THE WISE

SAMIR AYOUB, CEO, MINDSHARE MENA

How did 2011 fare?
2011 was an exceptional and unpredictable year given the revolution that took place in many countries in the Arab world. Before the year started, we would never have expected to witness the change of some Arab regimes and its impact on the business.
We estimate that the ad spend across the Mena region dropped by 22-25 percent in 2011 vs 2010, though toward the end of 2010 we were expecting at least a 10 percent growth in 2011.

What do you expect for 2012?
Two main factors will have a major impact on the 2012 performance: the effect of the Eurozone crisis on our region, and the stability in the Arab world. The indications so far are that 2012 will be a tough year, if not tougher than 2011. Yet, because of the reasons stated above, no one can have a proper reading of the coming year. We would rather wait for the end of the first quarter to have a better indication on the remaining part of the year.
I see three possible scenarios for the advertising industry in 2012: a drop of 7-10 percent vs last year (worst-case scenario); similar to last year; better than last year by 3-5 percent. We have built our plan and strategy for 2012 keeping these options in mind.
All companies will look at different ways to reduce costs. Some companies may also lay off people; we’ve never done it and will always endeavor to avoid that option to protect our employees during a crisis.
We’ll operate in a volatile market for the coming three to four years, so we need to be prepared and react to any market changes or requirements. We will see consolidation and acquisitions to cut costs and capitalize on economies of scale.
This is not the first year that we have had to face a crisis, and we have got used to handling them. While 2012 will be tough, we also expect to have fun. Dealing with challenging matters takes everybody out of their comfort zone. We have in place best practices based on previous years and other overseas markets. That said, we will walk into 2012 with a positive spirit and mindset, aiming for a better performance and results.

What is your advice to the industry for 2012?
Be optimistic.

ELIE KHOURI, CEO, OMG MENA

How did 2011 fare?
At the start of the year we had high expectations coming out of the 2009-2010 recession. But this recession is in fact not over yet, and [additionally] we were suddenly faced with the Arab Spring, which had a major impact on the business, particularly in Egypt where investments shrunk by 20-30 percent.
Egypt, KSA and UAE are the main components of the regional market: they represent 70 percent of the Mena region (Levant represents around 8 percent of the regional market, so I’m not concerned about it; it’s a non-issue).
[In Egypt], business started to pick up after April; all our clients there are multinationals that started investing again pretty quickly, and we were lucky to also pick up big businesses such as Vodafone. All this allowed us to recover our losses for the four months that had been lost.
The Bahrain uncertainty had a certain impact on Saudi Arabia, especially because of the traders who delayed investment, but it was never dramatic.
The UAE, particularly Abu Dhabi where the government decided to cut all budgets in communication by half, suffered in 2011. Dubai is still in crisis mode, the few clients who usually invest – outside of real estate – are still modest.
Overall, while we had forecast 15 percent growth in 2011 year on year, the overall market shrank by 5 percent, which I consider fantastic given what has happened. And as a group, we finished the year with single-digit growth, which I’m very happy about.

What do you expect for 2012?
We don’t see the Arab Spring to be a major driver of change in 2012. Its impact is now behind us. But I think that 2012 will be the year when fundamentals outside the region will impact the region. The panic in Europe is starting to affect big decision makers globally, and there are talks of a minor recession in the US. There are also talks of a real estate bubble in China, which will have a major impact on [China’s] growth, possibly bringing it down from the expected 9 percent to 7 percent or lower. Events such as the Olympics and the Euro Cup that usually boost investment, will not compensate the potential damage.
So for us, 2012 will be the year when up equals flat. Flat will be good. We’re preparing for a flat momentum and we’re cautious. We’re going to focus on the fundamentals, improve our efficiencies, see how to do things an even better way, how to draw some savings. Secondly, we’ll keep investing in training, with new programs that will be put in place next year. Last, we will invest more in data analytics, in order to harness data and use it to drive better business results.

What is your advice to the industry for 2012?
Don’t panic, continue doing what you’re doing irrespective of the crisis, and focus on the principles of the business. The dynamics of the business are changing by the day, so we need to adapt. But keep investing in talent, never let go of that. Think long term on what will impact our business in the future.

AKRAM MIKNAS, CHAIRMAN, MCN

How did 2011 fare?
2011 turned out worse than expected. Many of us expected to see Egypt settling down faster [than it did], and Egypt being a significant market in the Arab world, has left its burden on our industry. Egypt was our second largest market. We have been [there] for over 30 years and never witnessed any period so difficult. All the economic fundamentals in Egypt have basically changed. Also, it left confused neighbors all around it, unable to predict what will happen [next]. Then came the overall world recession which has put even more pressure on our industry; indeed, [2011 was] worse than I had thought.

What do you expect for 2012?
I think 2012 will continue to be as difficult [as 2011] and as much of an enigma. None of the Mena markets that have gone through changes give me confidence that the worst is behind us. Realistically, the expectation for 2012 can only be worse than 2011, the worst-case scenario being if the demand for consumer goods weakens – a lot of the multinationals are still investing money to continue to stimulate demand and to stay at par, if not achieve small growth.
I believe that this crisis will bring tremendous change to our industry. We have to become much more focused and take a sniper approach to every target, avoiding the machine-gun approach and waste. Both creative and media managers will have to think outside the box to reach their destinations. Digital media and social media will now play an even greater role.

What is your advice to the industry for 2012?
The only thing we can do is to support our existing clients in understanding their markets and their needs better, and try to grow their businesses and ours.
People who work in our industry are by nature optimists who always see the glass half full. In my opinion, a healthy psychological attitude can give us more energy to find new forests [in which] to hunt. My advice to the industry is to be cautious and realistic but to never forget that the sun will shine tomorrow.

EDMOND MOUTRAN, CHAIRMAN AND CEO, MEMAC OGILVY

How did 2011 fare?
2011 was as expected from the beginning of the year, as we witnessed major changes in the region’s political scene. Along with these changes we have seen the emergence of social media and digital becoming important tools to communicate with today’s consumer. Change is healthy for the industry and it has helped it to grow over the past decade; one of the major changes [to come] will be the “digital tsunami” of which we need to take full advantage.

What do you expect for 2012?
The biggest challenge for 2012 is post-2011. We see more challenges in 2012 given what is happening in our region and in the Eurozone. We will be approaching 2012 with cautious optimism. The best-case scenario [would be] to see more stability in the market and to start building growth for 2013. The worse-case scenario [would be] to repeat our experience of 2008.

What is your advice to the industry for 2012?
[Offer] diversity of our services to clients, i.e., social media and digital.

RAMZI RAAD, CHAIRMAN AND CEO, TBWA\RAAD

How did 2011 fare?
We approached 2011 with great expectations. Our business plans reflected a conviction that it was going to be the best year ever for the entire ad industry. But, as often before, the politics of the region derailed the industry’s plans. 2011 was certainly worse than anyone expected.
However, despite the dramatic changes (the Arab Spring and its impact, the economic downturn in Europe, the continuing monetary crisis in the US), ad spend in the Middle East and GCC region increased by around 3.5 percent up until November 2011, compared to the same period last year, according to Ipsos Stat.
The uncertainty in the region created an atmosphere of hesitation among companies, and their willingness to spend decreased. This explains why the growth was less than the inflation rates.

What do you expect for 2012?
My outlook for 2012 largely depends on the speed at which the region regains its political and economic balance, and this is a fact that neither I nor the most informed observers can determine. It’s important to be realistic in our forecasts as we know that the GCC is going to see a slow overall growth, but still on the positive side (average GDP growth in 2012 is expected to be at 4.18 percent). The IMF positions the region in a repair/recovery phase so, as we recover from the aftermath of the Arab Spring and all the other slowing factors, the phase of rebuilding will start. This will demand a boost in government spending, and contributions from the private sector leading to growth in the communication sector also.
The best-case scenario is that the countries of Mena realize the projected growth and stability takes precedence over conflict, leading to more consumer spending and eventually marketing spending.
The worst-case scenario is that political and security unrest continues, [which would] lead to a stalling in growth and spending as well as another big downturn in revenues for clients and agencies alike. If the crisis continues unabated, agencies will have to downsize and lower their overheads to accommodate the lower spending by clients.
The constant squeeze will lead to more consolidation of business on the part of clients to achieve economies of scale, and smaller agencies will have to merge with bigger ones or face extinction.

What is your advice to the industry for 2012?
The Arab ad industry needs to play an active role in speeding up the recovery and should not continue sitting on the fence, waiting for miracles to happen.
I have heard of an initiative that has been on Tecom’s drawing board to bring together advertisers, media and ad agencies active in Egypt to work out a plan that will allow the ad industry to take the lead on helping the wheels of the Egyptian economy spin once again. We all need to support such an initiative.
Furthermore, we are all aware of and appreciative of the role that the GCC governments have been playing in recent years toward driving the growth of the regional ad market. Our industry owes it to our host countries to help in educating their young national marketing executives on the importance of brand building. This will certainly help us all in moving the decision making away from procurement officers into the hands of these budding marketing executives.
Agencies need to rebuild their service offerings based on the new market realities and keep their costs under check while working smartly on providing added value to clients through new communication developments.
[The industry should] plan with flexibility in mind. In previous years, we used to plan quarterly; now agencies have to review their plans on a monthly basis, use better tracking in terms of time, spends, overheads and head count. They would also have to look for additional revenue sources and integrated services.

DANI RICHA, CHAIRMAN AND CEO MENA, IMPACT BBDO

How did 2011 fare?
The year 2011 was a challenging one, to say the least. As it comes to an end, we can gladly look back and say that we pulled through, achieving growth despite the ongoing regional turmoil and the global economic crisis.
Along with our great pool of talent and enviable list of blue chip clients, we were able to grow into a stronger agency. By strengthening our capabilities and resources, we provided our clients with great creativity that yielded greater effectiveness results.
BBDO on a global level has been on a roll this year with its new business success. Today, BBDO is recognized as both the world’s most creative and effective agency network. For the past five years, BBDO has been Network of the Year at Cannes as well as the world’s most awarded agency network in The Gunn Report.
Just recently, the agency was named Global Advertising Agency Network of the Year by Adweek and Advertising Network of the Year by Campaign magazine. Closer to home, the Mena is no exception with our fair share of awards, our latest wins being two Silver Epica Awards and one Gold and one Silver at the Effies.
Most important are the tens of cases around the region of campaigns that achieved phenomenal business results. As we celebrated our 40th anniversary earlier this year, we grew more and more resilient to the region’s challenges.

What do you expect for 2012?
Let me begin by telling you that Andrew Robertson, BBDO’s worldwide CEO, said that “No one at BBDO should start a conversation by saying how difficult 2012 is going to be. It’s a matter of how good can we be.” And this is the exact state of mind that we are taking on 2012 with. There are some things that we can’t control, but then again, there are a lot of things that we can.
We are starting the year on very solid grounds, especially with the great team we have in place across our offices and the new business wins that we captured throughout 2011.
We are optimistic because, along with our clients, we have a responsibility as key industry players to continue driving the economy and to build on this positive momentum in the Arab world. Having said that, the only way is up and the only way is a best-case scenario.

ALEX SABER, CHAIRMAN, VIVAKI MENA

How did 2011 fare?
Many media commentators would describe 2011 as an “epic fail” – a year they would be happy to forget, that brought more than its fair share of trouble and turbulence. While this is true, 2011 was also a period of success if we measure it according to our ability to adapt to change.
Our operations were continuously stress-tested and our business plans were being constantly rewritten. As a result, 2011 will be remembered with a sense of achievement and pride, and as a period of great commitment and personal sacrifice, where our people truly pushed themselves to the limit on behalf of the agency and its clients. Client relationships were either reinforced or reborn as we navigated together through uncharted waters to find and discover entirely new solutions rather than simply revisit old ones.
While 2011 will go down in world history as the year of the Arab Spring, in which the political landscape changed the face of the region, it will go down in media history as a year in which only the fittest could survive but, as a direct result, the strong became stronger.

What do you expect for 2012?
Big, cataclysmic events have been predicted for 2012, especially by followers of the Mayan calendar. However, should the world fail to end as predicted, the media outlook for next year unfortunately looks much as it did for the latter part of 2011: gloomy, and underpinned by a climate of economic and political instability and general uncertainty.
The irony is that 2012 should have been a record year for global media. The US elections, the Olympics and the European Football Cup all fall in the same year, which in the past would have created a bumper harvest for global advertisers and media suppliers. Unfortunately, these three giant global media opportunities will be outpunched by three equally gigantic global media threats: the US slide in consumer confidence, the ongoing impact of the Arab Spring, and the Eurozone crisis.
Multinational clients in the Middle East remain under pressure from their US and European counterparts to grow the bottom line in order to help soften the blow from the global downturn. This has resulted in clients being overly cautious about the way they invest their money and clinging to what they perceive as “safe” channels. Many have prioritized TV spending and are unwilling to venture into risky formats as their marketing budgets come under increasingly close scrutiny.
[My best-case scenario would be] world peace and economic stability. But, in the absence of a miracle-worker, a year of minimal growth vs 2011. [My worst-case scenario would be] another turbulent year with a drop of 10 percent or more.

What is your advice to the industry for 2012?
2012 will be another challenging year. Agencies need to streamline and ensure they are structured around what is important to their clients. Here at Vivaki, we will continue investing in our people, product and diversification. We cannot unplug the investments to the key pillars of our group. We need to be ready and in full swing when the economy rebounds. A leader has to act like a leader even when times are tough. The world is changing faster than ever before. What’s important is sensing the direction those changes are taking. Our New Year’s resolution is to help our clients weather this storm. It is during these troubled times that we can really make a difference.

RAJA TRAD, CEO, LEO BURNETT MENA

How did 2011 fare?
At the start of the year, we were very worried; for the first time in 15 years, due to the lasting pressure of the global crisis, we had to plan with a lot of unknowns, of guessing, and some unidentified revenues. Then came January and the whole region fell in turmoil, adding salt to injury.
But 2011 ended up better than we had expected; we met our objectives, which were stretched, and we had single-digit growth, which to me is an achievement. We had decided to go aggressive, and pitch like never before. We looked proactively at new businesses and potential in the marketplace, new industries that we could bring in, and we also decided not to contain ourselves geographically so we pitched in Qatar, Oman, Iraq, despite the fact that we didn’t have offices there. We won around 75 percent of the total of pitches we participated in, included major ones like Qtel in Qatar, which materialized into revenues. In Egypt, we were lucky most of our clients are in FMCG, and were far less affected than others such as real estate or government assignments. This allowed us to take the blow and deliver a fairly good year, considering the situation.

What do you expect for 2012?
2012 is more challenging than 2011, because we already know that not only is the global crisis not over, but we also have to face regional challenges, and we need to see how things will turn out in Egypt, which used to deliver very healthy growth year on year, in Syria, where things are put on hold up to a high percentage and which has unidentified implications for Lebanon, which is a primary market to us.
What will also happen in Jordan, from where we service the Iraqi market? What if we are to again have major interruptions of business, for three or four months? As a result, we need to revisit our figures on a monthly basis: we normally do two reviews a year, but in 2012 we plan to do 12. And we are not investing in new businesses before we have secured the revenues.

What is your advice to the industry for 2012?
It’s important not to panic, but in 2012 we’ll have to be more practical than during the previous years and take some decisions as we move. We all have to improve our efficiencies as much as we can, cutting costs that are not strategic. We have to make the clients understand the pressure that we are under by making our partnerships very transparent, because it cannot go on with “We want more for less.” We need a fair remuneration in order to survive and service their business. Not all clients are aware of this reality and some agencies are ready to settle down for anything, which will haunt us in the future. And do not compare 2011 and 2012 with the golden days. Anybody able to show growth in 2012 should be very happy.

INSIGHTS FROM THE NEXT GENERATION

MOUNIR HARFOUCHE, CEO, LOWE MENA

How did 2011 fare?
2011 was a torture test. It was the most difficult year since the [start of the] recession. By mid-2011, every single client decided to do a pitch and challenge their agencies, even though they didn’t have an issue with them; just to renegotiate. By then, and after what we had done to survive in 2009/2010, some agencies couldn’t invest anymore, some lost businesses, some had to pass a test by being the incumbent. A lot of agencies had to relook at their offering, their efficiencies. It was very challenging, the whole mood being about surviving.
But the panic of agencies, and for some their lack of confidence, didn’t help. Everybody went chasing every opportunity, and some played the game of cheap prices, which kills me. It has taken us years to build recognition and get the respect of clients, and to reach certain quality standards, but what is happening now is taking us backwards on all fronts.

What do you expect for 2012?
2012 should be a bit more stable than 2011 because most of the major pitches have already been held and major clients have already challenged their existing agencies: Etisalat, Etihad Airlines, du, General Motors, Emirates Airlines… Big brands that had a strong partnership with big agencies have put their business back on the market. This is over.
And there’s hope, the regional change away from dictatorships is positive. [For example,] Unilever expects to double its business in the region within five years! Our region has a great population, a lot of money and somehow still is a virgin territory, so let’s not overdramatize.
Any solid agency should know if any of its pillar clients are going to leave them in six months’ time or not. There’s a minimum guaranteed. The same goes for markets: the GCC are doing it right politically and have a very solid economy; Saudi Arabia is good and stable, its potentials are huge, it cannot but grow. Qatar is very promising as well, with many projects that haven’t materialized yet. I do believe in Dubai and Abu Dhabi, they are very solid; yes, we were hit, but what we had gotten used to [before the recession] was insane as well. We were drunk on growth; we took everything for granted. Today, we’re more realistic. The challenge is to adapt and manage the transition phase. We cannot afford to manage by default anymore. Add to the mix the rise of digital, and how the fundamentals of the industry are changing – you need to change mindsets as well. How to maximize the efficiencies of your offering, and challenge your model based on the new financial limitations? In a few years, we’ll look back at how the recession changed the rules of the game, at how managerial skills helped businesses, and at who built a beautiful story throughout all this. We are meant to pass the test; let the good ones win.

What is your advice to the industry for 2012?
First, we should focus on our offering instead of blaming the industry and the client; create our own edge and have confidence. All this negativity is not helping. Recession should be the time for clients to invest in advertising and marketing. This is where agencies can play a major role. I encourage and salute clients who invest today to get the right agency that will help them survive as well.

TAREK MIKNAS, CEO, FP7

How did 2011 fare?
On December 31, 2010, we could not have planned for or have predicted anything that was coming our way. We went into 2011 thoroughly excited about changing the world. Instead, the world changed on us, and at supersonic speed. Socially, politically and, as a result, economically, nothing in our part of the world will ever be the same after this year.
Most businesses reacted quickly and cut their losses. Which means they managed their costs vs revenue. And most brands, while keeping a presence, knew better than to splash happy shiny advertising onto crowds whose attention was diverted to more immediate issues on the ground.
But this was my first year running FP7. I had so many plans and ambitions. I had my focus markets set the year prior. My goals. My priorities. My first steps into transforming and evolving our brand. And, of course, some changes were derailed or postponed, and others went on with stubborn persistence. The most important bit is that we took our time to get the right people on board in the right places, based on collective buy-in to a vision and an individual challenge for each market.
I look back at 2011 with absolute positivity. Despite the speed bumps, I’m proud of where we’ve reached in just one year. I’m proud of the type of partners that we are attracting and I’m proud of the talent we have. Together, we have everything it takes to make significant changes in our industry and in our region.

What do you expect for 2012?
Today, I’m proud to say that the right people are in place. People who care passionately about our brand and our partners’ brand to do what it takes to make a difference. That’s the most important bit.
We cannot control the external factors: the Eurozone crisis, the US economy, political uncertainty and so forth. But no matter what happens, we’re prepared. We have the caliber of talent to react quickly and professionally. And it’s not just in management. It’s in creative, finance, planning, growth, operations and every facet of our business.
So, again, we are looking forward to 2012. We’re ready to take on the challenges and grow stronger along the way.

What is your advice to the industry for 2012?
I would say challenge yourself before you get challenged. Look into your structure. Look into your current relationships and product. Look into how you could provide your partners with what they need. Faster, better and with more value for every penny invested.

REDA RAAD, COO, TBWA\RAAD

How did 2011 fare?
It really depends how many multinationals vs locals you have, how important your business in Egypt is, how much of your growth was in the Levant or North Africa…
A year ego, Egypt was the market with highest potential; the ad spend there was outperforming that of the GCC. And now it’s down by probably more than 50 percent. Our Egypt operation was significantly hit because half of our business there was coming from the public sector. We had to adjust, to downsize and weather the storm in order to be ready for the new market reality and for recovery.
But we had had such a fantastic voyage of strong growth year on year for the past 10 years – 2009 was our best year ever when others were losing market share. Therefore what happened in 2011 was an adjustment, a correction.

What do you expect for 2012?
This question is outdated, this industry doesn’t work that way anymore. The only constant is the turbulence. The region is no longer immune, either politically, financially or economically, to what’s happening globally, and you have to juggle all the issues at the same time, managing month by month. The industry is in a huge state of flux and there will be a new “world order,” but we’re uncertain which one. For the industry, it will be based on the results of the many pitches that are occurring right now. Clients are much more cautious; they commit quarter by quarter and many look for the better deal. We’ve never seen such a high number of pitches in December, and I hope it won’t translate into a fees war, even though it’s heading in this direction. We need to understand the intentions behind these pitches and clients need to help us understand.
Still, we think there will be growth in 2012 in countries like Qatar and Saudi Arabia, which, combined with the positive momentum we’re seeing again in Dubai, is good for the region. As a network, we also expect modest growth this year, because we have adjusted and restructured ourselves for that and we’re in a fortunate position, having a balanced, nicely spread portfolio. And on the long term, the future is bright: the fundamentals and opportunities are still there.

What is your advice to the industry for 2012?
The sooner you realize that you have to be quick and nimble, that you have to be absolutely proactive, the more chances you’ll have to succeed.

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