Advertising expenditure on the rise in Egypt

As the economy recovers and consumer confidence picks up, so does advertising expenditure. However, it is also an industry undergoing a transformation. Spurred on by the revolution, the high-income young demographic in the country is beginning to consume media in new ways, migrating online and towards social networks. As such, advertisers are looking to new mediums to promote their products.

Taking A Hit

The revolution had a major impact on the country’s economy, with advertising one of the hardest-hit sectors. According to eMarketer, media spending fell by 40% in 2011 to $314m. The sector has been slow to recover from this precipitous decline. Two years later in 2013, seven of the 10 largest advertisers in the market were forced to cut their advertising spending by at least 10%, according to Ad Age. This included fast-moving consumer goods firms Pepsi and Coca-Cola, mobile telecoms operator Vodafone and South Korean electronics giant Samsung Electronics. Indeed, only one of the country’s biggest advertisers was able to increase spending in 2013.

According to Riham El Sawy, managing director of local advertising agency Mindshare, greater confidence in political stability is driving up advertising spend. Real estate companies and banks are taking the lead and are the most active players in the market. “In 2014 we had two active banks, while in 2015 we have nine active banks in the advertising market,” El Sawy told OBG. Advertising is finally showing signs of bouncing back after struggling in the post-revolutionary turmoil. Current spending is now well above pre-2011 levels, according to El Sawy.

Small Screen

Television remains the priciest medium for advertising, and with an audience that equates to 95% of the population on a weekly basis, it is easy to understand why. Net advertising spend in the TV sector has been estimated at LE2.7bn ($368m) for 2015, according to Mindshare. This represents a 12.5% rise over 2014. Rates for TV slots are up by as much as 15% in 2015, according to El Sawy. A 60-second primetime slot will now set an advertiser back anywhere between LE10,000 ($1360) and LE60,000 ($8180), depending on the channel. For example, on MBC Masr, the popular Saudi-owned free-to-air TV channel, a primetime commercial will cost LE40, 000-60,000 ($5450-8180) per minute. An advert on staterun TV, meanwhile, will cost from LE5000 ($681) to LE10,000 ($1360) per minute.

As well as illustrating the respective strengths of private and public broadcasting, these figures show the particular pull of television for advertisers. Much of the expenditure is centred on drama series, reality shows and talk shows. In the immediate aftermath of the revolution, talk shows took up to 30% of total advertising spend, although they have now been surpassed by soap operas.

Concentrated Spend

A substantial amount of annual advertising spend is concentrated on the holy month of Ramadan, a time when most of the premium television content for the year is scheduled. Companies that choose to advertise during Ramadan spend an average of 30% of their budget during this period, according to an article in Business Monthly, a publication of the American Chamber of Commerce in Egypt. In 2015 there was a 17% jump in advertising spend during Ramadan, according to El Sawy. Mindshare estimated that Ramadan spending will account for almost 30% of total net advertising spend for 2015.

One feature of the 2015 Ramadan programming season was the density of advertising during peak viewing hours. “In the US, you have regulation limiting slots to three minutes for five timeslots per broadcast hour. Here, for soap operas that last 30 minutes, you have adverts for one hour,” Hussein Amin, professor at the Department of Journalism and Mass Communication at the American University in Cairo, told OBG.

Tipping Point

The ratio of adverts to programming on leading networks during Ramadan has led viewers to turn to YouTube or wait for re-runs of the series later in the year. YouTube is also set for another record year in views in 2015, according to El Sawy.

The overscheduling of commercials on satellite networks is symptomatic of the challenges facing the industry. As Amin said, in a mature market this would be regulated. However, Egypt does not have an independent regulator, and legal issues relating to advertising come under the purview of different bodies, such as the Egyptian Radio and Television Union, which manages and operates government-owned TV and radio stations, and the High Council of the Press. As such, there is no clear regulatory structure or framework for the market and regulation is light.

Second, commercials scheduling also illustrates the difficulties for companies in assessing the worth of their ad campaigns. One of the challenges in Egypt is the opaque nature of the media environment. Even basic metrics, such as viewing figures and readership numbers, are not readily available. This makes it difficult for firms to measure the efficacy of their advertising campaigns. “Companies like Danone follow defined metrics that are just not available [in the Egyptian market]. These companies cannot track the value of their expenditures, so some of them simply cut their spend,” El Sawy told OBG. Other companies are beginning to spend more on additional marketing research.

Online Advertising

This is one of the advantages of online advertising: easily accessible and targetable information on usage, hits and views. The segment is becoming increasingly important in Egypt as trends in the market shift. “There are two reasons for the growth of online advertising. One is youth. The other is the diminishing value of print. This is accentuated in Egypt. Now there is no advertising spend on magazines and digital is growing,” El Sawy told OBG.

Around half of Egypt’s population of 90m is under the age of 29, which means a massive market of technologically literate consumers. Furthermore, mobile internet usage increased substantially in the last 12 months, and by May 2015 the number of users had reached 25.24% of mobile subscriptions, a 6.34 percentage point rise on the same month in 2014, according to the Ministry of Communications and Information Technology. In Q1 2015 alone, mobile internet subscriptions increased by 35% year-on-year.

Spend on internet advertising doubled over the year, Natalie Youssef, CEO of Enova Digital Marketing and Advisory, told Daily News Egypt in March 2015. The value of digital advertising in the market has reached around LE500m ($68.1m), or 7% of total advertising expenditure. This is expected to increase to 10% by the end of 2015, with an annual growth rate of 50%. While impressive, this remains far below the global figure of 120% growth per year.

One of the main impediments in the local market is a 20% stamp tax on online advertising, which takes a significant chunk out of companies’ advertising budget. Nonetheless, as internet usage continues to climb, so will advertising spend in the segment.

Mobile

Some locally produced mobile applications have already built strong advertising revenues. “We have been doubling our users and doubling our advertising rates and revenue,” Gamal El Din Sadek, co-founder of mobile traffic application Bey2ollak, told OBG. A few years ago the company charged around LE1m ($136,000) for its main sponsorship deal for a period of 12 months. However, El Din Sadek still believes the online advertising market is immature. “Advertisers are beginning to benefit from mobile features, but they are still constrained by the website mentality. They just want a banner,” he told OBG.

Although the sector is now beginning to shift, traditional markets and revenue streams are likely to persist for some time to come. Consequently, the strong performance of the TV market during Ramadan bodes well for the industry. Expenditure is also bouncing back to pre-revolution levels, and the future is beginning to look much more robust and stable.