Digital advertising is catching up with Dubai's mobile internet penetration rates

With many of the region’s top agencies, publications, broadcasters, online outfits, and film and TV production companies based in the emirate, Dubai has a reputation as a lynchpin of the Arab and Middle Eastern media and advertising industry. Increasingly international in outlook and reach, the sector also benefits from a sophisticated local market, familiar with the latest digital platforms and genres, if not a little saturated by them.

Increasing competition, technological advances and platform fragmentation are, however, setting new challenges, as is the drive to create more winning and innovative content. This is happening within a sometimes-turbulent region, too, which has impacted the sector in the emirate both positively and negatively.

In addition, with Dubai having had to pick itself up from the impact of the global financial crisis, there is some remaining caution and uncertainty among market players, with a consequent impact on advertising expenditure (adex). Nonetheless, with its eyes also firmly on a region that still displays levels of adex below international averages – both as a percentage of GDP and per capita – there is plenty of upside for Dubai’s media and advertising outfits to tap into, while also developing their local business.

Media Platforms

The sector’s evolution in Dubai began in earnest in the 1980s and 1990s, when the emirate began to take off as a regional centre for multinational corporations (MNCs). This process was largely a result of the far-sighted policies of Sheikh Rashid Al Maktoum, then his sons Sheikh Maktoum Al Maktoum, and since 2006, Sheikh Mohammed Al Maktoum, who have presided over consistent expansion of the emirate’s economy and its global status. An emphasis on non-hydrocarbons drivers and diversification for this expansion also led to a multiplicity of businesses setting up in Dubai, with trade, finance and real estate at the heart of development. Media and advertising were thus natural outgrowths from this evolution.

To encourage this development further, Dubai Holding established TECOM Investments, which in turn set up Dubai Media City (DMC) in 2001 – an industrial park and free zone dedicated to the sector. This was then enlarged to a full media cluster, with the addition of the Dubai International Media Production Zone ( DIMPZ) in 2003 and the Dubai Studio City (DSC).

TECOM has also launched an Internet City, including an outsourcing zone, with this increasingly overlapping with DMC, as the media and advertising sector migrates online and digital technologies become essential to the success of every type of media.

The Dubai Technology and Media Free Zone Authority, also established in 2000, is the sole regulator for these parks, as well as the associated education and science free zones. The DMC, DIMPZ and DSC all offer free zone benefits to companies located there, including 100% tax free licences, the possibility of 100% foreign ownership, no restrictions on the repatriation of profit and no Customs duties, trade barriers or quotas.

Oversight

In 2006 the UAE launched the National Media Council, a federal body responsible for overseeing and regulating the sector and implementing relevant laws. More recent times have also seen the launch of the Dubai Film and TV Commission (DFTC), which since 2012 has been responsible for promoting film and TV, as well as for issuing licences to shoot in the emirate.

According to the DFTC, there are now more than 2000 major media companies operating in Dubai, including 120 TV channels and broadcasters, and 180 production houses. Around 20,000 media workers from more than 120 countries are located in the emirate.

Figures specifically for Dubai are hard to gather, however, as the emirate is usually placed along with neighbouring emirates. The most recent figures from the DMC show 2013 as a strong year for the media cluster, though, with some 233 new businesses locating there that year, including 33 production companies and 23 new media outfits. In addition, 45 freelancers joined the cluster, while its printing consumables and animation segments recorded the strongest growth – up 233% and 57%, respectively. DMC remains home to many global media organisations, such as Thomson Reuters, CNN, Dow Jones, the BBC and CNBC, while in publishing, ITP, McGraw Hill and Forbes all have operations there. Sony Pictures, Endemol and Mediapro are also resident on the production side, while media and marketing agencies include Publicis, Rotana, Aegis Media, WPP, Interpublic and ZenithOptimedia.

Local media agencies in the UAE include the state-owned, federal Abu Dhabi-based Emirates News Agency, which provides services in Arabic and English, while Dubai Media Inc. (DMI) is a major Dubai government-owned operator in the emirate. DMI has several TV channels, including Dubai TV, Dubai One, Sama Dubai and Dubai Sports. It also owns two radio stations – Dubai Radio and Noor Dubai – and two newspapers, Al Bayan and Emarat Al Youm.

Given its multinational population, English-language newspapers and magazines are widely available. Amongst the former based in Dubai are Gulf News and Khaleej Times. Recent years have seen several such publications transition to online-only formats, such as the business paper, Emirates 24/7. Indeed, publishers are increasingly a major online force, with other digital media including MSN Arabia, ITP, Souq.com, Bayt, CPI Media Group, Al Arabiya News, Manorama Online, Dubizzle, and AME info. Newsgroup Holding is a good example of more specialist online media based in Dubai, offering media analysis and data monitoring services.

Multinational Audience

With a total population of some 2.24m in the emirate in Q1 2014, according to the Dubai Statistics Centre, and somewhere between 85-90% of this figure being expatriates, the local market is both multinational and relatively small. Incomes also vary widely between most of the emirate’s inhabitants, who are mainly male, semi-skilled and low-skilled workers from the Asian subcontinent who send a large part of their income back home, and extremely wealthy individuals from a wide variety of countries, including the UAE itself. Likewise, the majority of companies in the emirate are small and medium-sized enterprises, mainly operating in trade and manufacturing, with limited advertising and media budgets. The large MNCs are thus the big spenders, along with the government and government-owned corporations.

The expatriate population is also transitory, with many leaving on the completion of their work contracts – a factor that influences their consumption patterns in favour of short-term goods and away from big-ticket items. The age profile is also a predominantly young one – 73% of the population was within the 20-44-year-old age group in 2013, with the 25-34-year-old age group alone accounting for 39%. This makes the market a particularly dynamic and techsavvy one, with a mobile penetration rate of 192.9% for the entire UAE in 2013, according to the federal Telecommunications Regulatory Authority.

This profile is also visible in the number of Facebook users in the emirate – 2.3m in Dubai, out of 3.6m in the UAE, according to stats.ae data published in late October 2014. At that time, Dubai also had some 258,000 out of the UAE’s total 363,000 active Twitter users.

Recent surveys of consumer confidence also indicate that the mood amongst the population is increasingly positive, with Nielsen’s UAE consumer confidence index rising to its highest level in Q1 2014, since Q3 2012. During the latter quarter the index reached 114, up from 108 in Q1 2013 and just 89 in 2009.

Ad Spend

Figures for adex in Dubai are also usually bundled with those of the other emirates into a UAE total. The most recent complete figures – for 2012 – from the Pan Arab Research Centre (PARC) show that for the UAE as a whole there was $1.58bn in adex for that year, up from $1.45bn the year before. The largest slice of that total came from government and organisation advertising, with $371m, followed by shopping malls and retail stores, with $213m. Hotel, travel and tourism were at $136m; vehicles, accessories and supplies at $111m; and entertainment at $103m.

PARC figures for the first half of 2013, based on official media rate cards only, show a total of $782m in adex in the UAE for that six-month period, with this reportedly spiking in the second half of that year on the back of adex around the World Expo 2022 campaign. PARC figures for Q1 2014 reported in the local press – and again, based on official rate cards only – show $398m spent during those three months, as opposed to $381m in Q1 2013. Some 20% of the Q1 2014 adex was from government and government-owned enterprises, with the Union Defence Force unusually prominent – at $3.88m in adex over the three months, the highest recorded individual spend.

In terms of platforms, the overall media split shown by the PARC figures is one of great stability during the 2010-12 period. Newspapers maintained the first position throughout, with $887m of adex in 2012, followed by magazines at $240m, and then TV at $156m. The newspaper adex was broken down further into $499m in English-language papers, with the remainder in Arabic language. Outdoor advertising (or out of home advertising, OOH) also recorded $220m of adex in 2012, showing its continued strength in the UAE.

The PARC Q1 2014 figures showed this distribution largely unchanged, too, with newspapers coming first, pulling in $227m – 57% of the total – over the three months, although OOH, at $59m, just beat magazines, at $58m, followed by TV, which took $31m, or 8%. This illustrates an upward trend in OOH, which continues to be popular throughout the region and with both local and MNC advertisers. New developments include 3D ads on Sheikh Zayed Road, large-format digital billboards, mobile ad trucks and taxi ads, all of which have proven valuable in retail, fast-moving consumer goods (FMCGs), and real estate promotion in particular.

In terms of individual companies, telcos came top in 2012. Etisalat was first, with $23.4m of adex, followed by its rival Du, with $183m. Competition has been fierce, particularly given saturation rates in the mobile phone market now widely reckoned to be over 200%. Following the telcos was retail, with the Dubai Shopping Festival in third place for the whole UAE, at $17.3m. FMCG, and food and beverage in particular, scored highly too, with McDonalds and Carrefour in third and fourth place at $13.6m and $13.3m, respectively. Electronic goods came next, with Samsung at $9.2m, then automotives, with Toyota spending $9.1m.

The PARC figures for Q1 2014 confirmed the above, with retail, services and FMCG as the top segments, according to press reports. Meanwhile, real estate companies have also increased their spend significantly in recent times, according to ad agency insiders who spoke to OBG. The real estate, properties and insurance segment came in ninth in 2012, at $76m, but indications from sector professionals in late 2014, however, were that this segment has shown very strong growth in 2013/14, on the back of Dubai winning the Expo 2022 exhibition and renewed confidence in the real estate sector. Indeed, PARC figures for Q1 2014 showed real estate-specific advertising up 88% year-on-year, to a total $32m during those first three months.

Moving Online

The PARC figures quoted above do not include digital adex, which has been a growing factor in the market in recent years. Increasingly too, this is focusing on mobile digital, with a 2014 Ipsos report stating that smartphone penetration in the UAE as a whole had risen from 61% in 2012 to 72% in 2013 – second only to Saudi Arabia in the MENA region. With feature phones and tablets added, mobile internet access in the UAE stood at 83% in 2013, supporting the growth of online advertising. “2015 is the year that digital interactive advertising will become more dominant over other more traditional platforms in Dubai," Sami Al Mufleh, CEO of Hills Advertising, told OBG.

However, exact figures for the current level of digital adex are hard to establish. In the MENA region, the total was around $300m in 2013, according to a 2014 report by Middle East Communications Network, with $1bn expected by 2017. Mobile digital accounted for $85m of the total, up 58% year-on-year. Yet, as many sector insiders told OBG, the MENA region is vast and encompasses enormous differences in wealth, consumer behaviour and culture. Within this, the UAE is far above the average in terms of internet connectivity and income, which, when combined with its young population, makes it a highly attractive digital market.

According to an OOX monitor report on online advertising in 2013 measuring ad activity (total campaigns multiplied by websites, multiplied by weeks online), automotive was the best performer, with 16.7% of total activity. Banking and finance were second, with 11.5%. Some way below these was telecoms, with 5.4%; leisure and entertainment, with 4.9%; restaurants, bars and airlines, with 4.1%; and real estate and property, at 3%.

The top brands for online activity, meanwhile, were somewhat different. Etisalat was first, at 3%, followed by General Motors, at 2.7%, then Ford, at 2.2%. Motor companies Chrysler and Nissan were also in the top 10, at 1.8% and 1.5%, respectively, but P&G took fourth place, at 2.2%. Johnson & Johnson was 10th, at 1%. Reflecting the UAE’s multinational population, the OOX-monitor report showed 85.4% of all online advertising was in English, with 38.3% in Arabic, indicating a significant number of online ads in both languages.

Two other key parts of the Dubai media cluster are the DIMPZ and the DSC. Both have taken a leading role in recent years in moving the emirate towards developing its own local film and TV production industry, as well as towards establishing it as a centre for movie and TV financing and distribution throughout the region.

In terms of actual production, the DSC has three sound stages, two of which can be combined into a 4645-sq-metre facility. The main emphasis is currently on TV commercial production, with Dubai’s skyscrapers and modern lifestyle the main backdrops, although Dubai has also been used as a location for a number of major international films, such as “Mission Impossible 4”, which used the Khalifa Tower.

Increasingly, however, it is not Hollywood, but Indian and Chinese film and TV companies that are more frequent visitors to the emirate. Indian films provide much of the volume, according to sector insiders who spoke to OBG, although Chinese and Hollywood films provide much larger budgets. While the Indian movies have traditionally tended to shoot fantasy and dream sequences in Dubai, a recent Hindi movie, “Happy New Year”, was shot entirely in the emirate, suggesting a greater future role for Dubai in the subcontinent.

Film Festivals

The emirate also hosts the Dubai International Film Festival (DIFF), which though something of a pioneer in Gulf movie festivals – and certainly having given a major boost to Gulf movie-making in general – has recently been undergoing a rethink. While continuing to assist the local and regional industry, it is likely to have more of a focus on the distribution end from now on, with the Dubai Film Market (DFM), which runs parallel to DIFF, the focal point for bringing productions together with potential distributors.

The vast number of film festivals in the MENA region – Morocco alone has around 40 – has meant fierce competition between festivals for locally produced content, less of which is being made since the Arab Spring and the collapse of film industries in Egypt and Lebanon. Yet, many award-winning local movies, such as “Wadjda” – partly produced in Dubai – and “Omar” – part funded by the DIFF’s Enjaaz fund – still have no regional distribution deals. The DFM hopes to address this issue.

Outlook

With the outlook for Dubai’s economy a generally rosy one – provided efforts to head off any future real estate bubbles remain successful – the media and advertising sector is looking forward to continued growth in adex in the year ahead.

Dubai also has strengths that tend to protect it against global negativity, with regional political instability and conflict often having a positive effect on the economy, as the emirate is seen as a safe haven for those in less stable and secure nations.

Where concerns do exist is around the rapid fragmentation of platforms and mediums with the accelerating shift to digital. These concerns range from those of the media analysis company, struggling to ascertain accurate figures for eyeballs when ads are seen or overlooked on a smartphone screen by a potential customer who is simultaneously in front of a smart TV screen, a laptop and a tablet.

As one example, the Ipsos survey found that when usage of Facebook, WhatsApp and the Facebook App in the UAE were combined, Facebook could reach 100% of the country’s smartphone users, making it a potentially key battleground for adex in a nation with a 72% smartphone penetration rate. Developing targeted ads for these users and content suitable for these platforms is therefore likely to continue to be a challenge for agencies for many years to come.

Meanwhile, migration of traditional media to online looks set to continue, although this may be more likely to affect newspapers than magazines. English looks sure to continue as the main medium, yet at the same time, a major potential market still exists in Arabic content, which has room for expansion.

Despite these challenges, Dubai will likely remain the location of choice for much of the Arabic world’s media and advertising sectors, while also playing a significant role in other markets, such as the subcontinent and Africa. Able to capitalise on its attraction for creative and innovative people throughout the world, the emirate will likely also become much more of a global market place for the buying and selling of content, even if that content itself is produced far from Dubai’s shores.