DUBAI: In January 2020, Tarek Daouk, CEO of media and advertising group Dentsu MENA, sat with his leadership team discussing what they believed was a generally optimistic year ahead for business. Fast-forward six weeks later and the whole world was in crisis.
“There was no way to predict what was going to happen, and how fast and how bad this was going to affect people and businesses across the world,” he said, recalling the widespread uncertainty at the time.
Although Daouk hopes COVID-19 vaccines will help the world get back on its feet, “the unpredictability of how we plan and make the business flexible enough to react to things that we cannot predict will always be there.”
The key challenges that businesses faced in 2020 — and will continue to face as the economy improves — are supply and demand, and cost infrastructure.
Daouk said that many clients faced logistical challenges due to restrictions on supply from outside the region, resulting in a delay in business activities.
“Obviously, this is easiest to sort out as things go back to normal,” he said.
However, the bigger issue is that of demand. Due to lack of job stability and an economic downturn, consumers became wary and even as the supply chain returns to normal, it will be a while before consumer confidence bounces back.
“That’s also the role of businesses, especially marketing and advertising, to restore people’s confidence in investment,” he added.
The second challenge is that of cost infrastructure across cities and sectors in the region where the cost of doing business was already high. Rents, especially, play a major role, with businesses forced to close their offices still paying high rents.
However, Daouk sees a silver lining largely on the back of Dubai and Saudi Arabia’s potential. It is an ideal time for Dubai to play a role as a hub beyond the MENA region.
Due to its location, Dubai is a strategic spot for businesses operating across Europe, Asia and the MENA region, which is critical at a time when Europe is still relatively locked down.
“I have met a few companies that are headquartered in Europe and many are considering relocating their headquarters to Dubai,” he said.
Moreover, as company structures change, there is room for a more mobile headquarters, which can be moved from one country to another depending on the business’ focus market at a given time.
Saudi Arabia is Dentsu’s largest and most significant market in the region with the highest per capita gross domestic product. Vision 2030 has opened up new avenues of doing business in the Kingdom that are already attracting investment, with the Kingdom’s investment in tourism and local entertainment giving the country a big push and strong potential to bounce back, Daouk said.
With investments in digital advertising climbing well over 50 percent of the total ad spend in 2020, it is clear that businesses are seeing the benefits and reaping the rewards of their investments.
Daouk highlights the move toward digitization for business transformation, with companies investing in moving data to the cloud through products such as Microsoft Azure, and using the data to model business and advertising decisions.
“It allows you to put a layer of analytics on top of the data to help these businesses in their decision making, which will transform to a better, smarter, more personal experience for the consumers,” he said.
Lack of advertising measurement
Dentsu MENA has helped a retail client move its data to the cloud with a predictive modelling exercise to help the sales team by collecting data from all touchpoints — from the store to an online ad.
The businesses data is much more robust than the advertising data. For instance, digital media consumption data is provided by the digital platforms without any third-party auditing. Similarly, measurability for offline media consumption remains a challenge.
Daouk said that there are initiatives in the pipeline to improve measurability, with plans to launch people meters to measure TV in Saudi Arabia. But for now, he said, “we are getting faster, bigger, more accurate data — marketing data — much faster than what we get on media consumption.”
Decline in advertising spend
The global decline in ad spend in 2020 is forecasted to be around 9 percent, but in the MENA region it has fallen by up to 25 percent.
The obvious reason behind the decline is the pandemic. However, there are other factors at play. The increase in the digitization of business transformation, for instance, has taken budgets away from advertising.
However, according to Daouk, the disparity in the decline of ad spends in the region compared with the global figure began in 2016. Most ad budgets for the MENA region are decided globally and he has noticed a decline over the years in budgets allocated to the region. This could be attributed to a softness in the market that began in 2016, coupled with reduced consumer spending and a high cost of doing business.
Moreover, as other markets such as Asia began growing, they also commanded a higher share of the global ad budget.
“This is why there might be an opportunity for the region now. The role of the region is changing, but we need to bring trust, and trust can only be brought through measurability, governance and data,” he said.