Online advances

Can online advertising spend in the Middle East ultimately eclipse TV?
Fouad Bedran, Co-managing director of online ad monitoring service, Out-n-out Online Xperts (OOX).
Fouad Bedran, Co-managing director of online ad monitoring service, Out-n-out Online Xperts (OOX).
Nick Grande, Managing director, Channel Sculptor.
Nick Grande, Managing director, Channel Sculptor.
Jaideep Merh, Account director, Venture Communications.
Jaideep Merh, Account director, Venture Communications.

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Internet ad spend has surpassed TV in the UK and Sweden with a number of other Western markets set to follow. Digital Broadcast asks whether the same could happen in the Middle East.

Fouad Bedran
Co-managing director of online ad monitoring service, Out-n-out Online Xperts (OOX).

I was surprised to see online advertising overtake TV so soon in any market, but when I had a look at the figures for the UK in 2007 the gap had already been closed quite significantly. As far as this region is concerned, anything can happen but in reality, I don’t think online will be able to catch TV anytime soon.

Television has been used in the region for decades and the advertisers are very experienced with the medium and there is certainly a strong case in favour of TV advertising.

TV also has very strong content. In many cases, there is a lot of investment from government-owned channels in high-quality programme offered on free-to-air channels. The result is that for the cost of a TV and a receiver, you can access hundreds of channels showing top-quality programming.

Meanwhile, a mid-range broadband connection will cost in the region of US $55 a month. So the cost of entry for TV is far cheaper.

Also, in the UK and Sweden, a much larger share of society is middle to upper class. This is far lower in the Middle East with some of the Gulf states being the exception.

Online advertising will not be able to challenge TV until this situation changes for the better.

I wouldn’t say there is a shortage of high-quality Arabic websites. There has been an investment in online content already.

For example ADMC has launched super.ae, goalarabia.ae and the adtv.ae catch-up service and the online version of Zahrat Al Khaleej, which is the second most popular women’s magazine in the region. Maktoob, Jeeran and MBC have also been boosting their respective online content.

The growth of online ad spend has been sparked by the lack of inventory.

They need to see a growth of traffic from places like KSA and Egypt. If they can grow the traffic [and page impressions] they can keep the price low, which will allow them to be viewed as cost effective. If traffic goes down, the price will increase to compensate.

The prices are quite low at the moment. It is possible to run an entire online campaign with a few hundred dollars if you wish.

There has been a steady growth in the number of online campaigns. There are several reasons for this.

The low cost of entry is one. Also, there has been a realisation by advertisers of the potential of online campaigns. They can’t ignore the number of users moving to online media and the ad spend will follow the eyeballs. Online campaigns also offer more options for creativity, user interaction and so on.

ROOM FOR BOTH
Nick Grande
Managing director, Channel Sculptor.

This change will undoubtedly happen globally, including in the Middle East. Online penetration already exceeds pay-TV penetration in the region, but it’s going to take several more years before online ad spend passes FTA ad spend.

The interesting question for me is whether we will actually be able to tell the difference between online and TV media by the time this shift happens.

In developed markets, there is a huge move away from linear towards on-demand programming.

On-demand usually involves a computer of some kind – even if it’s just a set top box with a hard disk – so the line between TV and online is already blurring.

Online penetration is, of course, a big factor, but the biggest factors are inertia. Agencies (and therefore clients) remain more comfortable with conventional print, outdoor and TV buys. Secondly, the lack of credible market research to effect a change in this status quo is also responsible.

Keep in mind that the Middle East is a ‘me too’ market, so changes happen quickly once critical mass is reached. Just look at the explosion of satellite TV stations over the past five years, or the sudden merger mania in the broadcast sector over the past six months.

Once a few major household brands go heavily into the online space, the rest of the market will follow.

Leaving aside market manipulation by the agencies and sales houses, TV ad spend is ultimately driven by channel viewership.

The most important thing any TV channel can do to protect its ratings is to understand and serve its audience. Channel loyalty comes from consistently giving viewers what they actually want, not what you think they want.

The growth of online penetration is inevitably going to erode TV viewing hours, and therefore advertising share.

Having said this, there is still huge growth potential for TV spot rates and sponsorship compared with international markets. If satellite broadcasters simply concentrate on making their core offering attractive, there should be plenty of upside for everyone.

RAISE VOLUME, RAISE PRICE
Jaideep Merh
Account director, Venture Communications.

Online ad rates are much lower than a 20-second spot on any one of the satellite channels, so in terms of spending, it cannot overtake TV.

As it is considered a fairly new medium in the Middle East, it is still low priced. It needs to increase its rates to compare itself with the spends on TV but this can only happen if more advertisers come on board for online ads.

TV spend would be higher because 90 percent of the households in the Middle East have TV sets compared to an average penetration rate of 34.3 percent for the internet.

I suspect it will take time to overtake TV but it can certainly give TV a run for its money, partly because of its accountability as a media vehicle. Advertisers can quantify its success.

In short, it will be considered a serious option, which currently it is not especially in the mass category like soap, shampoo and so on, where TV spend typically represents 70 percent of the budget allocated.

A few things need to change. The day the internet becomes widely available and is priced rationally, it [online advertising] will explode.

Another issue pertains to language. Web content is largely English, and we know audiences are typically small for any programme or communication in English.

In other languages such as Arabic, reach grows exponentially – and that is true of online ads.

Advertisers are definitely keen, but it’s still a “nice-to-have” initiative rather than a “must-have” initiative.

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