By Neil Halligan
If you’re not advertising online these days, you’re not advertising. The internet has already caused an industry revolution, but there is plenty more to come
It is the perennial question plaguing advertisers: how best to monetise digital media content?
Some established media brands have found success in paywalls, but the majority of media outlets are relying on online advertising to generate income.
While slow to start, the region’s largest media markets — Saudi Arabia and the UAE — are finally starting to show some significant growth in online advertising, described by analysts as “explosive”. The figures are certainly there to back up such claims.
According to PwC’s Global Entertainment and Media Outlook 2016-2020 report, spend on internet advertising in the UAE increased from $77m in 2011 to $215m in 2015 — a 179 percent increase — making it the second-largest advertising medium in terms of revenue, after newspapers.
The report says internet advertising in the country will grow even further in the coming years, reaching $517m by 2020, rising at a 19.2 percent compound annual growth rate (CAGR).
In Saudi Arabia, where the growth is described as being “solid” over the past five years, total internet advertising revenue grew from $49m in 2011 to $208m in 2015 — up 324 percent.
PwC says the Saudi market will continue to see strong growth, with total internet advertising revenue rising to $595m in 2020, at a 23.4 percent CAGR.
EY’s digital and innovation leader for the Middle East and North Africa (MENA), Ross Maclean, says the region is experiencing “phenomenal growth” around online advertising, “although it’s still pretty low when you compare it to other markets”.
GCC companies are, though, increasingly valuing the importance of digital advertising.
Abdul Kader Al Kamli, research consultant at Orient Planet Research says:
“Organisations are slowly realising the importance of cultivating their online presence, which is no longer a luxury, but a necessity in today’s increasingly more technological society.
“The shift towards a more knowledge-based society has also driven growth in the market, and the rise of innovative programs has shown organisations how their company can greatly benefit from using online advertising to promote their products and services.
“The Middle East has been experiencing exponential growth in online advertising spend, over the past few years, which is set to continue in the next few years.
“This is largely a result of the increased internet penetration in the Arab World, with recent studies noting that the number of internet users in the Arab region is expected to increase to about 197 million by 2017.”
Emaar Properties, the region’s largest real estate company, has shifted its focus completely from print to digital.
In an interview with CNN in June, chairman Mohamed Alabbar said the company had entirely moved its marketing and advertising spend onto digital platforms.
“I think that’s where value is and that’s where the eyeballs are and that’s where we’re going. We’re going totally digital in doing business,” he said. “I think there’s an 80 percent shift in how we do business and we did it all in one night. We took the risk and the reward is really huge.
“You spend two-and-a-half hours on your iPhone or your Samsung; we want to be talking to you. We’re not going to be interested in the 200,000 prints of a newspaper anymore, and it [is] costing so much. We don’t even know if you’ve looked at us or not. This way we are really in touch with you.”
Maclean says the move to digital has varied depending on the type of business and how it wants to connect with its audience. “They’ve [Emaar] done a great job of plastering their name over everything they do physically, so they probably don’t need to do any print advertising, because they have got a lot of above the line stuff anyway with all of the communities that they have,” he says.
“What you are seeing in the region is that trend where people are trying to connect with their audiences through the most relevant channels. The truth is, people have got a mobile phone in their pocket and it’s something they look at more than they do their own family.”
The biggest growth trend in the region is in mobile advertising.
The PwC report says mobile internet advertising in the UAE is growing at twice the pace of paid searches and four times the rate of other display advertising. By 2016, revenue from mobile will be larger than any other single desktop internet advertising sub-component, with the majority of mobile advertising channelled into display.
By 2020 mobile will account for nearly half of internet advertising revenue in the UAE. The explosion in mobile advertising is rooted in the sharp rise in mobile internet subscribers in the UAE. By 2020, 64.3 percent of the UAE’s population will be able to access mobile internet, an increase of 2.4 million subscribers between 2015 and 2020.
Similarly in Saudi Arabia, the PwC report says total spend on mobile internet advertising revenue reached $73m in 2015, which is expected to hit $356m in 2020 — a 387 percent increase — by which stage it is expected to account for 20.2 percent of mobile display internet advertising revenue.
“Given the huge footprint of smartphones in the region, you’re seeing that social video is really becoming the de-facto mechanism that people are using for digital advertising. And it’s gone nuts, frankly,” Maclean says.
The high mobile penetration in the region gives advertisers a large viewership pool, particularly on media websites, according to Jayant Bhargava, a partner with Strategy&, the strategy consulting subsidiary of PwC.
“If you look at the news component, and if you talk about mobile viewership, I think mobile dominates the [consumer] time being spent on news, especially in the UAE and Saudi Arabia where the smartphone penetration is pretty high,” Bhargava says.
“The majority of the population is connected through 4G and in Saudi’s case, it’s the young population. The monetisation, however, has not kept pace and that’s because of issues related to advertisers [not] adopting that platform, ‘viewability’ being the largest reason. There are many challenges embedded in there.”
‘Viewability’ is an online metric that aims to track advertising impressions, which can also be seen by users. An advertisement closer to the bottom of a webpage would not be deemed ‘viewable’, because some users may not scroll that far down the page.
Bhargava says the first challenge for creating a mobile site is to ensure advertising will be viewed by all users of that page.
“An online site converted to mobile is not going to serve the purpose of advertisers. So you need to have mobile-first sites in the region,” he says.
“Second issue is to educate the advertisers [that they] need on the MBU [media buying unit — a measurement used by advertisement space sellers] side a certain amount of capabilities who can draw the metrics and show them the performance when it relates to mobile.”
Despite the strong predictions of growth and the high level of smartphone penetration in the region, Bhargava says there are still some hurdles that need to be crossed before mobile advertising can be adopted.
“From a potential perspective, the viewers are already there, so there’s a lot of catch-up on mobile on advertising. If you take a five-year view, mobile is going to be big and the growth is going to be big. Is it going to happen in 2016-17? It’s a question that’s difficult to answer, but the pressure on publishers is already there.”
The biggest drivers of traffic online for news sites, on any platform, remain the dominant duo of Facebook and Google. And if mobile is the most significant trend in digital advertising, the next biggest is video.
Facebook vice president for EMEA Nicola Mendelsohn said last month that within five years, advertising on Facebook could be all video, without text.
“Those guys are seeing 100 million hours of video a day just on Facebook’s platform alone,” Maclean says of Facebook. “So a lot of advertisers are looking to video as being a way of creating more relevant and authentic content that can connect with people. That’s where there has been a massive explosion of digital advertising.
“What happened in the first few years of digital advertising was that organisations just used it the same way they would buy billboards across roads and just plastered stuff across the platform. Now you’re seeing it being used in a much more tailored way. So the platforms themselves are trying to encourage some of the advertisers to do that in a more meaningful fashion.”
The growth of video content in other regions, where the industry is more developed, has spawned an industry of its own. Content aggregators are creating a mobile social platform that aggregates and sends out data to companies who sign up for the service, Maclean says.
“That’s everything from seeing the goals from the last Euro match directly onto Twitter and Facebook, and to live news feeds,” Maclean says. “They restricted the videos to ten seconds and now you’re seeing that even [Facebook-owned] Instagram has extended that, and now you’re seeing 90 seconds because they’re seeing the overwhelming power of it.”
He says 71 percent of people never move from Facebook’s news feed itself, which challenges advertising organisations to come up with avenues to engage with their audience.
“People even don’t turn up the sound, so you’re now just seeing loads and loads of subtitles on the videos because people actually don’t want to listen to the
video, they just want to watch video,” Maclean says.
“That’s one of the big trends and some of the more progressive organisations in MENA are being quite good at leveraging that to create more relevant and authentic content for their target audiences.”
Advertisers have been particularly using YouTube, which runs adverts at the beginning of most of the videos on its site, to experiment with more innovative methods, such as product placement.
“This is a region where there are some great organisations in the media production field who are doing great stuff around branded content,” Maclean says.
“Organisations are effectively sponsoring authentic, new branded content. For example, a golf tournament that has a sponsor put together something fun with some of the celebrities and have their brand associated with that, you’re starting to see investment in that.”
In Saudi Arabia — where there’s clear market differentiation to what’s happening in the UAE — creating relevant, authentic content for an Arab market becomes even more important, particularly in the area of video.
Advertising spend on display, including video and other display, reached $80m in 2015. YouTube is the second most-visited page, according to web analytics firm Alexa.
PwC says online video advertising is becoming an important part of advertisers’ brand-building strategies, which is contributing to video internet advertising revenue growing at a much faster rate than other display types, at a CAGR of 28.8 percent, and is expected to represent 48.5 percent of total display internet advertising in 2020.
“In Saudi itself, you’ve got the highest volume of YouTube uploads of anywhere in the world. The city that has got the tenth-highest usage of Twitter in the world is Riyadh,” Maclean says. “This a country that has embraced the digital platforms, probably even more than anywhere else in the GCC in terms of growth. They haven’t even touched the size in terms of the opportunity that they have to really embrace that aspect.
“They are pushing hard to create things that are a bit more relevant for that market. You’re seeing one of the big banks and big retailers are creating very interesting customised Arab content for Saudi Arabia.”
While video is in its heyday right now, there’s a new technology that looks set to revolutionise the digital industry — virtual reality (VR).
Consultancy firm Deloitte, in a report published earlier this year, predicts that revenues in the MENA region from VR devices and services — largely driven from video games — will grow threefold from its current $1.5bn by 2020, with the majority of that in the GCC region.
The report says GCC countries have already witnessed companies beginning to sell commercial enterprise VR solutions and corporates incorporating VR solutions to help sell their products and services.
Although currently at a low base, and very much in its infancy, the GCC VR market is expected to grow at a rapid rate, driven as much by the corporate sector as by the growing popularity of gaming.
It likely will not be long before products are promoted via a virtual reality medium.
Picture it: in the lead-up to the 2020 launch of The Tower at Dubai Creek — Emaar’s 1,200 hectare development, which will include a tower taller than the Burj Khalifa — potential customers may be able to walk around the site, view the shops and various amenities purely through an advertising campaign.
The next exciting step for digital advertising is not too far away.