By Chadi Farhat, managing partner and director, Talon MENA
Economically, 2022 has not been one of the best years to remember for businesses and markets with inflation at its highest level in 40 years, global equities down almost 20 per cent, bonds’ negative performance due to restrictive monetary policy and central banks raising interest rates for the first time since mid 2000’s. To top it all, we have a surge in commodity prices, devaluation of currencies against the dollar, supply shortages from the pandemic, geopolitical tension and the recent meltdown in the cryptocurrency world.
Inevitably, all these had profound implications on global businesses. Regionally however, these issues were dampened by the increase in oil prices, which led to budget surpluses in the key GCC markets – a stronger tourism sector with 23.7m arrivals in 2022, real estate developments primarily in KSA and UAE that are in line with their 50-year vision and the Qatar World Cup 2022 which was the last mile stimulus for the year. Add to it the strong influx of many wealthy families, businesses and companies that recently moved to the region as well as the global economic challenges. Many have made the UAE, predominantly Dubai, their new home. Consequently, there was an abundance of liquidity in the market which ultimately boosted many businesses and industries performance. The media and advertising industry is surely one of them. If the market size in 2021 was estimated at north of $6bn in the region, then 2022 would have closed at $7bn, mostly driven by online advertising and out-of-home (OOH) channels.
2023 has just started. I’m sure there will be more surprises in store. Wall Street analysts estimate the risk of a recession at over 50 per cent while the Fed is forecasting a soft landing – barely missing a recession. Only time will tell.
Many companies are at risk of defaulting on their debts as long as the interest rates are high –estimates put it at 5.1 per cent. One thing for sure; inflationary costs will have caught up with companies’ bottom-line causing their earnings for 2023 to theoretically decrease. So, what does this mean? Both globally and regionally, the global brands will face a major slowdown in investments this year.
However, every cloud has a silver lining. The GCC region promises a more positive outlook. The Middle East is the place to be as rightly stated by The Economist. Saudi Arabia ‘s economy remains on track to be the fastest growing G-20 economy, Dubai has recently unveiled an $8.7tn economic plan for the next decade. Several initiatives have been taken in the region to boost the economy, which are both flattering and reassuring.
Despite the global business slowdown, many local and regional businesses and startups will emerge stronger. This will yield even further positive results in the media and advertising industry.
Online advertising will surely hold the fort, but the major growth will take place mainly in the OOH business. Here are some of the reasons why 2023 is such a promising year for OOH in the GCC:
- As the region continues to experience an influx of people, OOH is becoming more popular and is expected to expand further.
- A growing number of marketers are skewing back to OOH to grow their brand metrics.
- OOH ‘creative’ is becoming more sophisticated given the recent technology of anamorphic, immersive, 3D, interactive, etc.
- Data and tech are playing a vital role in improving the OOH efficiencies.
- Analytics and data are moving on from using surveys to gauge digital metrics. Campaign impressions can be measured, and attribution is now possible.
- While most of the inventory is still static, digital screens are providing better optimisations leading to higher demand from marketers.
- The cities’ landscapes encourage big formats hence better visibility and impact.
- In the world of stricter data privacy and the eventual erosion of third-party data, OOH is becoming the better solution. It is brand safe, accurate and abides by the GDPR rules.
- More cost-efficient and flexible with the programmatic buys.
The OOH industry in the GCC is expecting a stellar year in 2023. Clients are seeking more understanding of OOH, given the increase in demand. Many initiatives will be rolled out by the media agencies to further educate the marketers on the efficiencies and accuracies of OOH. Marketers should mandate these educational programs to enable them to make wiser business decisions and to better integrate OOH within their channel mix.
This year, the OOH market size is expected to close with 10 per cent growth at $1.2bn, yet the infrastructure will not unfortunately except for few vendors that are riding the OOH transformation wave. In KSA, which represents 50 per cent of the OOH size, both big players that lead the market see the value of DOOH- many of their assets have been already transformed. In the UAE however, the scene is still dominated by static assets; few vendors have already prepped their business for the future. Unless we witness major mergers and acquisitions, the scene will remain the same, and the market growth will be limited. M&As are the only solution to grow and correct the market while limiting the number of players on the basis that the buyers are forward thinkers and have the capabilities to transform the business.
Here’s to a very exciting 2023.