Online advertising for the MENA region is increasing rapidly and a report shows that strong growth will continue.
The sector has thrived in the global downturn, growing 40 per cent last year compared with a drop of 15 per cent for advertising in traditional media.
And the research, released exclusively to The National by the consultancy Booz & Company, shows internet marketing is expected to more than triple its share of the market, from 4 per cent last year to 13.4 per cent by 2014.
"What the recession did, in our view, was hit the traditional media very strongly," said Jayant Bhargava, a principal in the media and entertainment sector at Booz & Company. "Meanwhile, it didn't really affect online. The recession acted as a catalyst for online, which grew 40 per cent."
The study presents the most bullish outlook so far for the region's digital media sector, which until recently was widely estimated to take up less than 1 per cent of total advertising spending.
The Arab Media Outlook, released in January by the Dubai Press Club and the consultancy Value Partners, based in Milan, also estimated that online advertising spending would more than triple in the five years to 2013 but at a much lower rate, making up only 4.2 per cent of the market.
The main difference in methods used for compiling the two reports, Mr Bhargava said, was that Booz accounted for greater discounts to the published rate cards for television advertising.
Discounting is a common practice in the industry that is not accounted for by the primary media research firms Ipsos and the Pan Arab Research Centre. Booz backs its estimates up by interviewing media buyers and owners.
The result is that the ad spending market is smaller than often estimated, and online's share of it is larger - US$65 million (Dh238.74m) in 2008, which grew to $90m last year, according to the Booz research.
The main reason behind this expansion is the growth of the MENA region's emerging economies, which are cumulatively expected to increase 9 per cent between last year and 2014, compared with just 5 per cent in the US.
But also important is the region's rapidly rising broadband penetration, which is expected to grow by 89 per cent between last year and 2013 to make up 2.3 per cent of the world's user base.
At the moment, most of the money made on digital content in the region comes not through advertising, but services delivered by telecommunications companies, such as downloaded ringtones and SMS alerts.
"Traditionally, pay-TV did not really succeed in the Middle East, so people weren't used to paying for content," Mr Bhargava said. "But for new media such as mobile it has been a success. People pay for it through their mobile bills."
Now the region is set for the next stage in the development of its digital media sector, in which advertising plays a larger role than direct fees collected by the telecoms companies, Mr Bhargava said.
One of the main factors behind this growth will be online media's ability to address the MENA region as a single market, something no media apart from pan-Arab satellite television is doing at the moment.
"Procter & Gamble, Pepsi, Coke - they want to reach the entire pan-Arab community at the same time, because they operate in the Middle East as one market," Mr Bhargava said. "So they go to satellite TV, but in TV there is a clear division between the GCC and Egypt. Online is one medium where they can go out and reach all their customers."
Mr Bhargava said the consistent ranking of local sites such as Maktoob and Kooora in the 10 most visited sites in the Arab world was evidence of this.
International players have already begun to take notice of this phenomenon. Last August, in one of the strongest votes of confidence to date in the regional online market, Yahoo bought Maktoob.
But although the Yahoo deal shows how much room there is to grow in advertising, content is still lagging, he noted.
"The biggest bottleneck for the Arabic internet to grow is the quality content and the abilities in ad sales," Mr Bhargava said. "But those gaps are now being filled and are expected to be filled more in the next few years."
By Keach Hagey
© The National 2010
