Magna Predicts MEA Ad Spends To Grow By 11% In 2017

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In its latest report on the Global Advertising Market, released December 5, 2016, IPG Mediabrands’ Magna has predicted strongest growth since 2010, as advertising sales reach USD 493 billion in 2016 globally. Magna has shown growth in the Middle East & Africa (MEA) region as well.

Overall Magna puts the growth for MEA at 9.5 percent, and has predicted a growth of 11 percent in 2017.

The six GCC markets (Gulf countries: Saudi Arabia, Qatar, Kuwait, Bahrain, Oman, UAE) experienced a combined growth of 7.4 percent in 2016, and are expected to collectively grow by 9.1 percent in 2017. Saudi Arabia, which accounts for 41 percent of GCC ad spend, grew by 9 percent in 2016 and is forecasted to grow by 9.5 percent in 2017.

Advertising sales in the broader region of Middle East and North Africa (the six GCC markets plus Egypt, Lebanon, Morocco) increased by 11 percent to USD 11.5 billion in 2016 and are expected to grow by a 13 percent in 2017.

Egypt Among Highest Growth Markets In MEA
The highest growth came from Egypt (17 percent), which has the largest market in the region, accounting for 33 percent of ad sales. TV, which accounts for over 85 percent of ad sales, saw double digit growth driven by high spend during Ramadan. In 2017, the market will grow by 20 percent, which is higher than the initial expectations of 15 percent. This will be largely driven by an increasing CPI inflation which, according to the IMF, is expected to reach 18 percent.

TV remains the leading media category in the region. In both Egypt and Lebanon, TV is ultra-dominant, holding the largest market share across any markets globally. In Morocco, on the other hand, TV accounts for only 25 percent of total ad spend and radio is still the primary media accounting for 27 percent of total spend and having a stable growth.

Advertising growth is largely driven by Pan Arab television channels, which are broadcast by satellite over the region. It grew by 9 percent in 2016 and accounted for 25 percent of total ad spend in MENA. Meanwhile ‘Free TV’ (local broadcast stations) ad sales grew by 12 percent in MENA, with Egypt TV up by 15.6 percent, but GCC ad sales as a whole down by 9.6 percent.

The Big Picture
Globally, media owners advertising revenues grew by 5.7 percent in 2016, to USD 493 billion. This is in line with our previous forecast (June 2016: 5.4 percent). The biggest contributors to growth were the US (6.9 percent), China (7.2 percent), Australia (7.4 percent) and the UK (5.2 percent). 2016’s cyclical events (US General Elections, UEFA Football tournament, Olympic Games, Copa America) boosted ad sales despite lower-than-expected ratings.

MAGNA forecasts global ad growth to slow to 3.6 percent in 2017, due to economic and political uncertainty and the lack of cyclical events. That would be the lowest growth rate recorded in 15 years outside of the great recession in 2008-2009.

Linear television advertising sales was resilient in 2016, growing by nearly 4 percent to USD 186 billion, helped by cyclical events, as pricing inflation (CPM 8 percent) offset a decrease in ratings (7 percent in the US, more moderate elsewhere). Advertising growth will, however, come to a halt in 2017 (0.1 percent).

Digital advertising sales (display, video, search, social) grew by 17 percent to USD 178 billion while offline media sales (linear TV and radio, print, out-of-home) were flat (0.3 percent) at USD 315 billion. Without the even-year booster than benefited TV, traditional media would have been down by 2 percent.

Digital-based ad sales will become the no.1 media category in 2017, reaching a market share of 40 percent (USD 202 billion), compared to linear TV ad sales (USD 186 billion, 36 percent). From there, digital will grow to capture 50 percent of the market by 2021 (USD 299 billion) while linear TV will plateau at USD 195 billion (33 percent).

The global advertising market is currently growing faster than what should be expected in the current economic environment. MAGNA believes that this is due to social and search being fueled by untapped “below-the-line” marketing budgets, and not just taken away from traditional media budgets.

“Advertising sales were strong overall in 2016 and North America was the most dynamic region. The resurgence of television (+4%) did not come at the expense of digital (+17%). Both grew strongly this year because advertisers are funding social spend (+46%) and search spend (+17%) by reallocating below-the-line offline marketing budgets more than traditional branding mass media. At the same time, they had to face significant cost increases in television to maintain their share of voice and reach,” said Vincent Létang, EVP, Global Market Intelligence at Magna and author of the report.

Top Global Takeaways
• Of the 70 markets analyzed by Magna this year, 63 experienced advertising growth this year and only seven (most notably Thailand) saw a decrease.
• The highest growth rate was recorded in Egypt and the Philippines (both 17 percent). Among the top 20 markets, the fastest-growing country remains India (14 percent) followed this year by a recovering Russia (8.8 percent).
• The 17 percent growth in digital ad sales are entirely driven by mobile advertising (47 percent), while desktop-based ad sales stagnated (0%) in 2016 and actually shrank in many markets. Mobile advertising accounts for 45 percent of total digital ads by the end of 2016 and will account for 52 percent by the end of 2017.
• Digital growth was driven by video formats (35 percent) and social formats (43 percent) while search remains the largest digital media format (14 percent to 17.5 billion – 45 percent of total digital advertising) and banner ad sales declined (-5 percent).

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