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Gulf ad budgets cut

News, 06 January 2016

DUBAI: The outlook for the advertising industry in the Gulf region is gloomy as big-spending categories and brands are expected to reduce their budgets for the year ahead, according to local observers.

"Advertisers are not optimistic in 2016 and are reluctant to increase their budgets," said Amer Al Haj, executive vice president and group trading and commercial managing director/Mena at Starcom Mediavest Group.

"We are foreseeing slow spending in Q1 and Q2, and if the market remains unchanged, advertisers' budgets will face a cut similar to that of 2015," he told Gulf News.

Starcom estimates suggest the advertising market will be 5% down in 2016, and Al Haj highlighted "a billing shortfall in local media, especially press and outdoor".

There are a number of factors at work, including a falling oil price – down from $115 a barrel to just over $30 in the course of 18 months – and an increasingly unstable regional political situation.

"Brand owners in the GCC markets – and the advertising industry at large – are taking a cautious stand with regard to their ad spend growth projections in 2016," said Antonio Boulous, regional vice president/operations at media agency BPN.

"This conservative approach mirrors a trend that started in Q2 2015," he added.

The effect is being felt across categories: spending on advertising for household appliances was down 20% in 2015, according to Boulous, while that on "upkeep products" such as detergents, antiseptics and sanitary products was down 21%.

Automotive was down 5% while the telecoms sector cut spending by 2%.

But amid the gloom some sectors were spending more, including furniture and decorations (+9%) and clothing and accessories (+6%).

And Al Haj offered a positive spin on the future, saying that "all advertisers will be on air, but the difference between one and another is the level of spending vs. the year earlier and the channels they will opt for in 2016".

He argued that both multinational and local clients were equally affected and would show the same pattern of budget drop.

"Slowing down their advertising means less share of voice," he pointed out. "In order to gain their previous position, they need to spend more than expected to maintain their market share."

Data sourced from Gulf News; additional content by Warc staff