A quick recovery: Spend is picking up with a steady growth outlook ahead

With its large market of over 80m consumers, a solid long-term growth trend and relatively low penetration at present, the fundamentals for the advertising sector are good. The large and diverse media market gives advertisers a broad range of outlets, and the emergence of new TV channels and newspapers has brought dynamism to the industry, as well as large buyers.

After a rocky year in 2011, steady growth is expected across the board to the middle of the decade, with the online segment showing particular potential, having more than quadrupled in size from 2009 to 2011.

PICKING UP: Egypt’s media are heavily advertising-driven, as newspaper prices are very low and the TV market is dominated by free-to-air channels. In 2011 the advertising market was worth $505m, making advertising spend per capita $6.30, according to the Arab Media Outlook 2011-15, published by the Dubai Press Club (DPC). The regional average is $15.90, which is low by global standards – the Asia Pacific region has spend per head of $54.40 and Western Europe $262. Still, Egypt’s per head ad spend outstrips many countries in the region, including Libya and Syria.

Despite having the largest population, television audience and newspaper readership in the Arab world, Egypt’s advertising industry ranks third in the region in terms of absolute size, accounting for 11% of the region’s total spend. In 2011 spending fell 30% due to the effects of the revolution. For advertising firms without big accounts, the contraction was tough, as competition rose for a market reduced in size. In response, they cut rates to draw business, squeezing margins.

However, spending started to pick up again in the second half of 2011, once the disruption caused by the revolution abated. For 2012, the organisation forecasts growth of 4.95% to a full-year total of $530m. The DPC expects the sector to pick up more strongly after 2012, increasing at an annual average rate of 7.7% from that year to 2015, when total outlay will reach $662m. The market has recovered fairly quickly partly thanks to spending by major international firms such as Coca-Cola and Proctor & Gamble, which have large budgets, and which have seen their sales of fast-moving consumer goods less affected by the political situation than other sectors, such as real estate. The rise of digital advertising, the only segment which grew in 2011, has also helped keep revenues flowing.

Another positive sign for the industry is that it proved steady during the global economic crisis, whereas elsewhere in the world advertising spend fell considerably. While some clients became more cautious, the big spenders, local and international, maintained business as usual. Once Egypt’s political situation becomes clearer after the 2012 elections, the industry should pick up more speed. “Multinationals know the value of communication, and sustained business through 2011,” Wael Nazeem, the client service director at advertising firm Saatchi & Saatchi Egypt, told OBG. “In 2012, advertisers will be looking for the chance to move on, and we’re already seeing plans rolling out. There’s a market of 85m people and no one denies its potential – give us stability and the sector will flourish.”

SECTOR STRUCTURE: Newspapers are the leading medium in terms of advertising spend, with a forecast 43.8% market share in 2012, followed by television (24.6%), radio (12.8%), outdoor and cinema (7.8%), digital (6.8%) and magazines (4.2%). By 2015 the DPC expects newspapers to still be in a dominant position, but with a slightly lower market share of 41.5%, followed by television (23.5%), radio (13.1%), digital (11%), outdoor and cinema (7.4%), and magazines (3.5%).

According to Aiman El Kaissouni, a media manager at IPSOS, a quarter or more of annual advertising budgets are spent in Ramadan, the Muslim holy month. During Ramadan, media increase rates and advertisers are assiduously seeking timely promotion. The period is important both because of the increased amount of time families spend watching television, and due to the increased expenditure associated with the month.

Several major international advertising agencies are present on the market, including Saatchi, JWT, DDB Worldwide and Young & Rubicam. In addition, there are many local companies, mostly small to medium-sized, not all of which have the capabilities to work with large clients, but which pick up business from Egyptian clients.

PRINT & BROADCAST: The DPC forecasts that newspaper advertising spending will total $231.9m in 2012, and will grow at a compound annual growth rate (CAGR) of 4.4% between 2011 and 2015 to reach $274.8m. Magazine spending is expected to be $22.5m in 2012, rising to $23.2m in 2015 at a CAGR of just 0.5% from 2011. Advertisers are increasingly targeting rising independent newspapers such as Al Masry Al Youm, but state-owned organs like Al Akhbar remain important.

As of mid-2012 a prominent page advertisement in a major newspaper cost around LE180,000 ($30,127), while a 10-cm by 8-cm page-top banner cost LE60,000 ($10,042), Shaheer Farag, the deputy general manager of Universal Media MENA, a communications firm, told OBG. Some of the newer players have lured advertisers with lower fees – for example LE100,000 ($16,737) for the cheapest page in Al Shorouk. Newspapers invariably offer discounted rates for long-term advertisers.

TV advertising spend is expected to total $130.5m in 2012 and grow at a steady CAGR of 5.4% to $155.6m throughout the 2011-15 period, according to the DPC. Radio advertising, meanwhile, should be worth around $68m in 2012 and outstrip overall industry growth at a CAGR of 7.8%, taking it to around $86.9m in 2015.

Prime-time slots on top channels cost around L25,000 ($4184) per minute, while non-prime rates can fall to as little as LE1000 ($167), according to Farag. On radio, prime-time slots are around LE5000 ($837) per minute, again falling to LE1000 ($167) for non-prime.

Mohammed Helmy, a reporter-producer at Dream TV, said that the stellar success of new channels such as Al Hayat and CBC is reshaping the advertising sector, with the top broadcasters able to draw considerably more advertising revenue due to their programming strength and growing audience share. As a result, smaller broadcasters are finding the going tougher.

ONLINE: Rising internet usage, and the associated deepening and broadening of online content, is stimulating growth in online advertising, a relatively new segment in Egypt. The DPC estimates that the digital advertising market will be worth $35.9m in 2012, having expanded rapidly in recent years. It was the only medium to see advertising spend rise in 2011. The DPC forecasts CAGR of 37.5% between 2011 and 2015, taking total spend to $72.9m – higher than that for radio.

Wael Fakharany, the regional manager for North Africa for Google, told OBG that the past five years have seen online advertising go from being a very marginal activity to becoming a key part of many companies’ marketing strategies. Now most of the major ad agencies have digital divisions, and a number of boutique online specialist outfits have also emerged. Telecoms companies, among the first to build an online advertising presence, have been joined by banks, car-makers and real estate developers.

The DPC estimates that the web accounts for only 6.8% of advertising spend, and Fakharany thinks that it is less – around 3.5% to 4%, against 17-18% in some developed countries. With more firms looking to expand marketing in the new media, the online segment is only likely to grow further. One of the advantages of the digital medium is that it is easier to measure how many people have seen an advertisement, through hit count, which is often how space is priced.

OUTDOOR & OUT-OF-HOME: The outdoor and cinema advertising market is expected to be worth $41.2m in 2012, according to the DPC, which forecasts it to grow at a CAGR of 5.3% to $49m in the 2011 to 2015 period. The outdoor segment is dominated by local players, including state-owned organisations such as Al Ahram newspaper and local authorities, as well as private firms such as Al Alameya. The many hours that Cairenes in particular spend on the roads makes billboard advertising an excellent medium.

OUTLOOK: The advertising sector bounced back quickly after the slowdown caused by the 2011 revolution, but such were the losses in key media that it will take some time for the market fully to recover to its 2010 levels. As a result, some smaller companies are finding the market very difficult – but large advertisers have continued to spend, and once the political outlook is clearer, firms of all sizes are likely to increase their ad outlay. The fundamentals for long-term growth remain sound, particularly given the size of the market, and the rise of the digital segment is set to continue.