After a difficult 2013, the sector looks forward to a rebound in ad spend

With a population of more than 80m people and strong levels of household spending in the upper two quintiles of the income spectrum, Egypt has a vast consumer market. Given its wide range of competitive industries – including fast-moving consumer goods (FMCG), financial services and telecoms – provided by both multinational and established local brands, the country’s advertising sector benefits from strong, long-term fundamentals.

However, the political turbulence of the past three years in Egypt has been challenging for households and firms across the board, and the advertising industry is no exception. With broader uncertainty over growth and consumption, as well as higher overhead costs for distribution and production, several large domestic brands reduced spending. Spending by political campaigns, also a sizable source of revenue during election years, fell year-on-year (y-o-y) in the wake of the 2012 presidential elections after a spike in expenditures for billboards, hoardings, and television and radio slots. The short-term unrest in June 2013 that led to the end of the administration of Mohammed Morsi also coincided with Ramadan, which is traditionally when advertising spend jumps as families tune in to evening broadcasts during the communal fast-breaking meals. However, with a new presidential administration in place and greater stability in the broader economic environment, the sector could see a rebound in the coming months as firms begin to increase spending once again.

Numbers

According to the Pan Arab Research Centre (PARC), a Dubai-based media-monitoring organisation, Egypt’s advertising industry saw declines across all sectors and segments in 2013, with an overall fall in advertising spend of 34% to $747m, down from $1.13bn in 2012, and 50% lower than the $1.5bn spent in 2010. Television advertising was the hardest hit in 2013, down 47% on 2012, falling from $505m to $270, which put it in second place behind newspapers, where revenues were down 30% from $420m in 2012 to $294m in 2013. Even the relatively small magazine sector saw a 23% fall in advertising revenues, from $28m in 2012 to $21m in 2013. According to PARC, there was a 12% y-o-y fall for “other” advertising sectors, which includes radio and outdoor, from $183m to $162m. By sector, newspaper advertising sales accounted for 39%, television was 36%, magazines at 3% and others were 22%.

Segments

Among the top advertisers, household names in the mobile phone, soft drinks and automotive industries cut advertising spend by between 16% and 57%. Telecoms and technology firms made up four of the top six spenders, which are (in order): Ebdaa be Nefsak, Etisalat Egypt, Mobinil, Banque Misr, Vodafone and Samsung. However, between 2011 and 2012, Etisalat, Mobinil, Vodafone and Samsung cut advertising spending by 43%, 44%, 42% and 18%, respectively. Etisalat was down from $18.75m to $10.6m; Mobinil from $16.5m to $9.3m; Vodafone dropped from $12.95m to $7.5m; and Samsung fell from $8.65m to $7.1m. The highest-spending FMCG firms, Coca-Cola and Pepsi, were ranked 9th and 11th in terms of overall spending, but cut their outlay by 39% and 16%, respectively. Coca-Cola dropped from $8.97m to $5.52m, while Pepsi shaved $1m off its ad spending from $6.32m to $5.32m. Finally, the highest-spending automobile manufacturer, Chevrolet, cut its advertising budget by 57% from $5.8m in 2011 to $2.5m in 2012. Bucking this trend and spending more than other advertisers was Ebda Benafsak, a government-funded social awareness campaign that aired on state-owned terrestrial and satellite channels during the second quarter of 2013.

Spend By Outlet

French-headquartered media audit and research firm Ipsos combined the figures for the UAE, Saudi Arabia, Lebanon and Egypt for 2011 to compare the media segments where advertisers were spending money. According to the firm’s calculations, within the MENA region 71% of advertising spend went to television, while some 21% of advertising expenditure went to newspapers. Radio, online and mobile received just 1%, 2% and 0% of advertiser spend, respectively. The difference in numbers is not surprising and mirrors most emerging markets, where television, radio and newspaper consume the majority of firms’ advertising budgets. This is in large part due to the greater visibility of those segments, as well as comparatively higher illiteracy rates and the lower penetration rates for online activity. Perception of credibility is also an issue. “In Egypt there is still credibility attached to print media,” Serena Hylton, managing director of TRACCS Egypt Public Relations, told OBG “If it is not in print, it might not be real. Online outfits are not helping because there is a lot of confusion online and people need to see it appear in traditional media.”

Digital

Nevertheless, while online spending may be comparatively low, the sector offers greater transparency for advertisers looking to measure impact, and with digital consumption rates rising in Egypt, the scope is sizable for future growth. In June 2014, for example, there were 12.8m Facebook accounts belonging to male users and 7.2m female users in Egypt, according to Facebook, and adjustments to target settings provide more detail on the demographic profile of the country’s 20m Facebook users.

Ipsos has produced additional information about online activity in Egypt, with a focus on urban users, and compared the findings with other countries in the Middle East in a number of reports in 2013 and 2014. It found that 89% of internet users in Egypt were actively using social media in 2013, compared to 81% in Saudi Arabia, 95% in Jordan and 87% each in the UAE, Lebanon and Kuwait. Among social media users in Egypt, 99% have Facebook accounts, according to Ipsos. Though the world’s most popular hashtag in 2011 was #Egypt, according to Twitter, Ipsos suggests only 35% of online users in Egypt were using the platform in 2013, though this represented a 84% increase y-o-y in Twitter users.

The Ipsos figures also show that Egypt lags behind more affluent MENA states in the move from desktop computers to tablets and smartphones. In 2013 Ipsos reported a smartphone penetration rate of 6% in Egypt, compared to Lebanon at 63%, Kuwait (69%), the UAE (72%) and Saudi Arabia (79%). Egypt also had the smallest proportion of smartphone users downloading apps at 42%, compared to Bahrain’s 89%. As for e-commerce, which includes online shopping and transactions, just 8% of Egyptian internet users told Ipsos they engage in e-commerce, and only 5% bought goods online. While figures for e-commerce and smartphone usage were modest in Egypt, there is significant potential for greater use of these channels in the future, especially by younger, more affluent segments of the population.

Traffic App

The potential for increased – and more selective – digital advertising can be seen with Bey2ollak, a local traffic app start-up. The app’s developers initially eschewed advertising, although they eventually agreed on a deal to work with CocaCola wherein Bey2ollak would create an advertising platform that would minimise intrusion on users’ experience while looking good on smartphone devices. “We definitely did not want to reinvent the wheel with advertising, but we just did not find a wheel that suited us. There wasn’t enough customisation and initially advertisers were just trying to offer us website banners to put on the app that would have looked terrible on people’s phones,” explained Bey2ollak co-founder Gamal El Din Sadek.

Down The Road

Given Egypt’s large consumer market, the presence of heavy-spending brands in competitive sectors and the availability of multiple outlets – from outdoor signage to terrestrial television to smartphone apps – Egypt’s advertising sector remains fairly robust and competitive, and has attracted a number of multinationals as well as domestic players. The past few years have been challenging, and as year-end results indicate, 2013 was no exception. However, now that the presidential elections are over and there is a greater sense of stability, the potential for a rebound is significant.