Ad industry will ride out slump

Dubai: "For the first time, I could lift Gulf News by one hand when the advertisement market reached its bottom in January this year," Joseph Ghossoub, chairman and chief executive of Menacom, the largest media conglomerate in the Gulf, said while explaining the situation in his area of business.

"It happened after a long, long time. In fact I don't remember when the last time was — prior to this year — I had lifted Gulf News with one hand…

"The industry is going through the most critical time in its history — at least in the last 30 years that I have been in business. I haven't seen anything like this. However, it will rebound, if not next year, in 2011 definitely."

As perhaps no one knows the advertising industry better, Ghossoub's views are read and followed by industry observers. In an interview he gave a low-down of the industry's current status.

Known in the industry as Joe, Ghossoub, 55, started his career in advertising 30 years ago in Beirut, Lebanon, in the middle of the 15-year civil war. He arrived in the UAE in the mid-1980s to look for opportunities and like many successful entrepreneurs, struck gold.

"We were fortunate enough to have the best growth in the world for the last five years," he said. "It was perhaps the best time and the best place for businesses — having double-digit growth year on year for more than five years — thanks to the government's vision and leadership."

Ghossoub said the market went through many challenges over the last 30 years.

"We have seen the economies of the region facing some serious problems over the last three decades — Gulf wars, Sars, war on terror, invasion of Iraq, among others. The economies suffered from those. However, we have not experienced anything to this extent," he said.

"Initially when this crisis started, everyone was in a denial mode… no one could believe that the industry here could be hit and so hard. By February-March, the smoke cleared and then people started to realise the gravity of the situation and began to panic.

"However, when they fully understood and began to take stock of the situation — by summer it was too late."

Menacom, the rebranded version of the Holding Group, is an umbrella organisation of 11 media companies, including Young and Rubicam, Mediaedge:cia, Asdaa Public Relations, Polaris Public Relations, Intermarkets, Partnership Advertising, Burson-Marsteller, Raee PR, Wunderman and Tattno.

With 1,200 employees, the company operates from 57 locations in 17 countries in the Middle East. The company was 60 per cent acquired by global advertising giant WPP a few years ago — making it part of a global entity.

The advertisement market in the UAE was estimated to be $1.2 billion (Dh4.4 billion) in 2008.

"This year, we estimate it declined to $750 million," he said.

"Next year, I see the advertisement market remain flat or at best grow at 3.5 to 5 per cent."

Development

In the 1980s, Dubai was a relatively small trading hub feeding the neighbouring countries. The advertising, mostly outdoor, market was in its early stage of development. However, he prepared himself by creating a dynamic organisation for the media boom that started in the 1990s and continued till 2008.

In those days the media was restricted to print and TV and was very few in number. In the 1990s, Dubai witnessed a massive retail and re-export boom, thanks to the collapse of the Soviet Union and liberation of Eastern European states. This prompted many newly rich Russian families to use Dubai as a major source market for electronics and white goods. They filled Russian-made Antonov and Tupolev aircraft with electronics and household goods to feed the growing markets in the Commonwealth of Independent States (CIS).

In 1996, Dubai launched the Dubai Shopping Festival (DSF) that worked well amid the retail boom. The DSF provided advertisers with a very good platform to promote retail and tourism products and gave the advertising industry a major boost.

However, the launch of the Dubai Media City in 1999-2000 as a free zone could be marked as a major turning point for the media and advertisement industry. Not only did it help with the emergence of media organisations, it also helped investors bring in new technology and took the media sector a few steps ahead.

This, along with the real estate boom from 2002-2008 helped the industry move ahead.

Ghossoub's media organisations continued to feed the publications and electronic media with information through his public relations companies — mainly Asdaa and Polaris — while his creative and media buying units thrived along with the boom.

His organisation, in this process, has become the largest underwriter of salaries paid to most media professionals in the UAE — indirectly as they provide a major chunk of the publication's revenues.

The impact of the global financial crisis first hit the UAE's real estate sector in September-October last year, which soon affected the media services sector — since the industry was thriving on property advertisements — both above-the-line (print, TV and mass media) and below-the-line (outdoor).

During the 2003-2008 boom time, various media platforms such as advertisement agencies, media planners, creative agencies, electronic media and publications mushroomed, mostly cashing in on real estate advertisements.

Clients were releasing advertisements to publications without doing a thorough background check. As a result, small-time media had quickly become money-making machines.

Collapse

However, following the Lehman Brothers collapse in September 2008, a massive capital outflow had quickly eliminated the speculators or "cowboys" from the market.

"It's like you are sitting in a room and suddenly someone had switched off the power. Or someone pushed you from the top of a ladder," Ghossoub said.

"Between 2007 and 2008, more than 35 per cent of growth in the advertisement industry was coming from the real estate sector. That just vanished overnight."

Soon, companies launched cost-cutting measures that resulted in payment freeze, backlog of dues, job losses, bounced cheques, lowered salaries and litigation.

Despite the downturn, Dubai remains the main market for advertisements. The market in Abu Dhabi has been hit as well. "However, the Dubai market still remains strong and it will come back in time," he said.

The response to the situation was a typical Arab reaction to any negative development, he said.

"In the Arab world, we were in a denial mode. We are used to that... we usually do not like to admit mistakes. In fact, we're all right and wrong together," he said.

"We became greedy and complacent. We were after more business, more clients and more profits. In fact, we had created more than we needed — from magazines, publications, and electronic media. In this way, everyone hired more people and budgeted for growth, thinking that 2009 will produce similar growth as 2008 or the previous years.

"The possibility of slowdown, recession or downturn did not occur in our minds as we took growth for granted for too long." He said this has to change going forward. Businesses will have to possess a realistic view.

"People will have to think in cyclical mode. No crisis lasts forever, as no boom lasts forever," he said.

"The correction is only natural. The clean-up has to happen.

"I personally hate to see anyone go out of business. But the fact of life is that some might have to close shutters."

Advertisement market in UAE

• $1.2b revenue generated by UAE ad industry in 2008
• $750m expected ad revenue in 2009 in UAE
• 35% decline in ad revenue driven by real estate
• 3-5% expected growth in sector in 2010

Media must make room for good news too, Ghossoub says

Joseph Ghossoub, chairman and chief executive of Menacom, feels print and electronic media tend to place more importance on negative news.

"There will be bad and good news. I would like to see the media also pick up good news — among the bad ones," he said.

"It's like everyone was focusing only on the bad news. Why don't you dig out at least one good news [item] among three bad news [items] — so at least we have something to look forward to," he said.

"When the whole world was looking for some hope, the media has been highlighting only the bad ones. Come on, there must be good and positive things happening somewhere in the world."

Meanwhile, Ghossoub has a message for those who may have written off Dubai. The emirate will rebound, he said. "The fundamentals of Dubai remain strong and you cannot take what has been achieved in this city," he said.

"Dubai has become an important player in the global economy. It is part of the globe. It has got its strengths and attractions — no one can take it.

"It is still the most connected city with the best infrastructure and that's good for business.

"I've been fortunate to be in this city, be part of this economy and be proud to be part of its society."

Retirement

At 55, Ghossoub is full of strength and works full time. The financial slowdown has not demoralised him.

"Retirement? I'm too young to retire. But I also feel I should start delegating to younger ones," he said.

"But I will never retire. I want to die working, whenever, wherever."