Like most sectors of the Lebanese economy, the advertising industry is stagnating. Real advertising expenditures dropped 10 to 15 percent in 2012, according to a survey conducted by the International Advertising Association, a lobbying group comprised of representatives from advertising agencies, their business clients and media outlets, following a 16.6-percent drop in 2011.
With consumer confidence near record lows, projected real gross domestic product growth only expected to reach 2 percent in 2013 and the inflation rate forecast at 6.7 percent, the 51-year-old Lebanese branch of the IAA is facing a rocky road ahead. It has been made all the more difficult to navigate by the macro-shifts in technology that have undermined the business models of traditional media outlets and their advertisers across the globe.
The Daily Star sat down with two IAA board members and the organization’s new president – group manager of Impact BBDO, Joe Ayache – to discuss the future of Lebanon’s advertising industry and the IAA’s role in a shifting media landscape rife with uncertainty.
One of Ayache’s main priorities as IAA president is to expand the volume of Lebanon’s advertising market, which he estimates is currently worth between $160 million and $170 million, and “continue pushing growth in a nongrowing market.”
“The IAA has done a lot of work in the past to convince people to continue advertising during a recession period because they will be the first brand on peoples’ mind when the situation improves,” he told The Daily Star.
“An example is real estate. Real estate is a stagnant market right now. During the period of unrest there is a contraction in the market. During period of rest people will be instigated to make real-estate investments. Who do you call first? The one you remember most. The one that you’ve seen lately, which tells you [to] make some form of communication on a permanent mode.”
Since an estimated 80 to 90 percent of the client base of both domestic and multinational advertising agencies in Lebanon are local companies, Ayache estimated, the second pillar of the IAA’s strategy is to help offset the $10 million to $12 million in losses from the ban on cigarette advertising by opening markets that have traditionally been off-limits.
The IAA began lobbying against a 1994 law that banned advertising over-the-counter pharmaceutical products under the tenure of the previous president and Memac Ogilvy Managing Director, Naji Boulos, and plans to continue fighting against it in the future. Allowing Lebanese agencies to advertise for over-the-counter medications would bring at least $10 million to the economy – Boulos estimates it could be worth as much as $15 million.
“While over-the-counter medications like Panadol are advertised on satellite TV, in Lebanon they are not allowed to advertise. We plan to lobby to open it up for the advertising community. We lost a market that was worth about as much when they banned tobacco and none of the advertising agencies complained. Agencies had to find alternative markets and they did not burn any tires or block any roads,” Ayache said.
Boulos also believes that the IAA should continue to focus its efforts on fighting the pharmaceutical advertising ban and other government attempts to regulate the industry to safeguard not only the economic health of the agencies, but also the freedom of Lebanon’s press.
“It’s very important that the media can live from advertising revenues, not political sponsorship,” he said. “The challenge is how to double the advertising market in the next five years.”
So far, the agencies appear to have adapted to technological and cultural shifts that challenge traditional business models better than media outlets. Annual advertising expenditures peaked at $135 million in 1998 and have rarely fluctuated by more than 10 percent per year since, Boulos said. Advertising spending in Lebanon is now around $35 per capita, compared to $100 per capita globally. But while media outlets experienced a 10-12 percent drop in ad sales in 2012, revenue was flat for advertising agencies, he said.
“Why is this? Because agencies are diversifying their portfolio by offering new services, like PR, activation, social media,” he said. “The revenue for advertising agencies does not come from classic media anymore. TV is flat, outdoor is going down, magazines are going down, newspapers are flat.
“I’m not going to tell you that things are booming now. The classic media is having trouble. Last year it was luxury products and this year banks are suspending campaigns. Clients are moving to more activation below the line, more consumer engagement.”
PR is becoming increasingly central to most large agencies in Lebanon, Boulos said. Of the 35 or 40 midlevel to large advertising firms in the country, he estimated that at least 10 agencies in Lebanon have their own PR teams in-house.
“In the 1990s there were not that many agencies doing PR. People wrote releases but it was not a specialized skill. I think the number of PR teams at local agencies will keep increasing as more companies focus on CSR [Corporate Social Responsibility] campaigns.”
Other members of the IAA old guard believe the way for Lebanon’s advertising industry to survive amid mounting economic uncertainty is to cling more staunchly to tradition.
Walid Azzi, the publisher and editor-in-chief of ArabAd magazine and two-time president of IAA Lebanon Chapter, believes that the IAA “doesn’t have anything to do with the problems” facing media and advertisers in Lebanon, nor does he have much faith in the organization’s ability to solve them.
He joined the IAA in 1971 when he was general manager of The Daily Star, then owned by Al-Hayat group, and ushered the branch through the golden age of Lebanese advertising in the 1990s. Though there were fewer print media outlets competing for advertising back then, media representatives respected rate cards – the list prices per centimeter column in newspaper, per pages in magazines, and per spot on TV.
“The media reps at the time were very tough with the advertising agencies and the clients. A price is a price and a rate card is a rate card. Nobody is respecting it due to the economic problems the country and the whole region is facing and due to the proliferation of medias. They are selling by the kilo. Who buys first gets the best price.”
Since the IAA has no executive power, they cannot force members to honor their rate cards, which Azzi believes would boost the industry’s prospects. Azzi also believes that the executive leadership of the IAA in New York is increasingly out of touch with the issues confronting Middle Eastern advertisers.
Azzi and some other IAA “old-timers” are working on launching an Arab Advertising Association in the fall of 2013 that would have a similar objective and bylaws as the IAA international, but would also have the power to enforce the rate card and the commissions earned by advertising agencies.
“I’m trying to create an organization that has something to do with the Arab world,” Azzi explained. “Our problems today are here in the area and not on the international level. The international [office]today don’t give a damn about what’s going on in the Middle East.”
Ayache and Boulos argue that it would be a mistake to close Lebanon and the region off from the international advertising industry, especially in the wake of the Arab Spring.
“I do not believe the issues they will have in Bahrain, Abu Dhabi or in Saudi Arabia will be similar to the issues we have here,” Ayache said of whether he supports the creation of an Arab Advertising Association.
“The power of the IAA is to be able to do things well within its own chapter. At the heyday of the IAA what did New York do for Lebanon? Not much. If I have a problem with censorship in Lebanon the IAA New York cannot do anything for me. If I want to change it, I have to lobby locally.
“If we want to see how they’ve solved similar problems elsewhere in the world they will help you. It’s a worldwide network at your disposal.”
