Dubai: A safety-first approach is starting to pay incremental dividends for the local advertising industry and help push the bitter memories of 2009 in the background.
The upbeat sentiments coincide with a noticeable improvement in ad spend in key sectors such as consumer durables and retail and, more recently, in telecoms.
"Advertising activity during the recent Dubai Shopping Festival met, and in many instances exceeded, everyone's expectations and helped build momentum during the first quarter [and] carry it into the second," Tanvir Kanji, who heads Inca Tanvir, said.
"There is no doubt [that] the advertising sector is very much on the road to recovery, and I believe the spend will shortly see proportional gains in some of the other sectors."
While these slivers of a turnaround are being sighted, the agencies themselves are reworking their approach when it comes to taking on new clients and, more pertinently, on how they are billed. Some even demand a percentage of the fees upfront from clients, which would have been unthinkable in the past.
"Already a factor of commerce elsewhere, today it is becoming a fixture here as well, including in the advertising industry as sums can be quite large," the head of a top agency with a regional footprint said.
Monitoring payments
"Payment and credit terms are also being reviewed and monitored closely as a result."
Other agencies in their dealings with prospective clients would seek post-dated cheques as a guarantee. Not only that, new clients would have to come with the right referrals if they are to even elicit serious interest from the leading players. Quite a change of scene from what was happening until late 2008.
Advertising billings soared to Dh2 billion in 2008 on the back of a turbo-charged economy, then got hit with a 30 to 40 per cent drop last year. As if that was not enough, many of the agencies were mortified to see even long-standing clients defaulting on payments.
Most of the non- or delayed payments were related to the real estate sector, and agencies with large exposures to property clients or who had a big chunk of their revenues dependent on it were hit the worst.
"Agencies were running after billings," Kanji said. "They believed having big name clients on their books would be a guarantor of payments. We all know now that's been proved wrong."
But Kamil Najjar, CEO of Fortune Promoseven UAE, believes payment terms are governed more by a horses for courses policy.
"We haven't changed payment terms or structures, our clients are usually very good at timely payments," he said. "Smaller agencies have had to streamline some payment structures and are asking for either payment on delivery (for completed projects) or insisting on 30 days. That's fair for the game.
Price tussle
"There's always been a price tussle — but that's usually a media war. A lot of media accounts are won — or lost — based on rates and discounts and rebates.
"For a creative or ad agency, rates or retainers are based on value delivered, and those depend on quality of service, the creative, team strength and, of course, how much work needs to be done through the year."
Indeed, going forward the scope and scale of an agency's operations may well have a decisive say in a client deciding to park his business with it.
This is, some industry observers insist, certainly the case in a marketplace still in recovery mode.
The bigger the agency, the wider will be its portfolio of services. And if such an agency can assure the client a regional reach through its network, this, in theory, creates a situation where the whole is bigger than the parts.
More than anything else, clients would value the predictability the bigger agencies provide, more so when the economy is not all that hot.
All of this could work to the detriment of the small agency which may be exceptionally skilled in one or more of the facets, but not necessarily so in the others.
A slew of such agencies created during the boom years could have their moment of reckoning now.
Najjar, however, is unwilling to go that far. "Boutique agencies will always have their place, because quite often they cater to a different need from a larger mainstream agency that delivers a 360° solution all-year round," he said.
Alternatives
"Clients stick to the tried and tested if they see value. If they don't, they'll naturally try alternatives, and sometimes boutiques deliver compelling creative work that works for a particular need."
Agencies, irrespective of their size, can take a lot of heart from Najjar's sentiments. They would feel a lot better if their clients started to loosen their purse strings just a little more.
By all accounts, the advertising industry finds itself in a much better state than last year. "Our colleagues in the industry agree for the most part that this year may end flat again, and an upward swing will happen in 2011," Najjar said.
"We'll have to wait and see. Once consumer confidence returns, our industry will reflect that confidence, as will clients' budgets and spends."
Standard tariff rates aid advertising spend
Dubai : The nascent recovery in advertising spend in the UAE owes a lot to the various media vehicles preferring to hold the line on raising their tariffs for 2010. But that is not to say this is the rule.
"Media rates have loosened up, but not necessarily across all media," Kamil Najjar of Fortune Promoseven UAE, said. "We actually know of some media entities who are holding ground or even increasing existing rates, because some rates have been low for a while."
Also, clients who can afford it are not necessarily always looking for the lowest cost options.
"A lot of our clients are shifting some of their budgets to digital, and that's not because digital is perceived as cheap but because digital reach and effectiveness is getting better in our region by the day," Najjar said.
But there is now a lot more of give-and-take in agency-media relationships.
Stakeholders realise it would do neither of them any good to stick to positions that were tenable before the downturn.
"Informally media owners and agencies can negotiate on any position," a media buyer with an international agency said.
"This is the spirit of accommodation made possible by the recession. All of us hope it will continue."
