On display: Television’s ad spend is growing the fastest, while newspapers remain steady and magazines fall slightly

A large media market in its own right, the Egyptian advertising industry is bouncing back from the events of 2011 and 2013. The country’s media has experienced a flowering as some restrictions on freedom of expression have loosened considerably, and several new media outlets, both broadcast and print, have been launched, winning market share across the Arab world. Although the country is not the largest advertising market in the region, it remains one of the most dynamic.

NUMBERS: Around 80% of total advertising spend goes to television, according to the global market research company Ipsos. In 2012 Ipsos numbers put total advertising spend in Egypt at LE54.5bn ($7.8bn), compared to LE27.6bn ($3.9bn) in 2011, although these figures are based on ratecards and do not necessarily reflect discounts or deals offered within the industry. According to figures from the Pan Arab Research Centre (PARC), which is a Dubai-based media monitoring organisation, in 2012 total advertising spend in Egypt totalled $1.13bn, which was up 17% on $962m in 2011.

However, the largest single media market, according to the PARC study, was the pan-Arab media, worth $10.52bn in 2012, up 29% on $8.13bn in 2011. Many pan-Arab channels are broadcast from Egypt, and the country is a major producer of content. In terms of individual country rankings, Egypt ranked as the third most valuable advertising market in 2012, after the UAE and Saudi Arabia. This reflects their status as major oil-producing nations with relatively small, but affluent populations. Egypt, on the other hand, has a population of almost 90m consumers, half of whom are under the age of 25.

It also boasts one of the Arab world’s largest middle classes – according to World Bank figures, the top 20% of the population took around 40% of national income in 2008, which translates into roughly 16m fairly high-income consumers. Therefore, the long-term market fundamentals appear quite promising.

ON THE SMALL SCREEN: In 2012 the leading advertising medium by spend was television, for which expenditure was $507m compared to $366m in 2011, representing 45% of total ad spend in 2012. This was followed by newspapers, which took 37% of total 2012 ad spend, or some $412m, more or less flat on $406m in 2011. Magazine ad spend was down in both absolute and relative terms, from $34m (roughly 3% of total ad spend) in 2011 to $27m (about 2%) of total expenditure in 2012. Other media, mostly outdoor and radio, was worth a total of $182m in 2012, compared to $157m in 2011 or some 16% of the 2012 total. Meanwhile, the fastest-growing medium was television, which saw its ad sales rise by 38% year-on-year (y-o-y) between 2011 and 2012, according to figures from PARC.

SEGMENT BY SEGMENT: In terms of advertisers, the largest single segment was communications and public utilities, with 29%, followed by government organisations, with 15% of total ad spend. This is a reflection of the presidential election in June 2012, and the referendum on the constitution in December 2012, which required both partisan and public awareness campaign expenditure.

All segments recorded growth except food, beverages and tobacco, for which expenditure fell 29% y-o-y; entertainment, which fell 6%; construction equipment, which fell 7%; and toiletries and household goods, for which expenditure fell 55%.

According to PARC, the top advertising spenders in the television segment were Doustourak, the presidential election campaign and Watan Nazeef, all of which were political/public service campaigns. In radio, the top three spenders overall were Etisalat, Vodafone and Pepsi. In the newspaper segment, the top three were Etisalat, Mobinil and the National Bank of Egypt. In the magazine segment, the leading spenders were Egyptair, Al Nassagoun and Kiriazi, while in the outdoor segment the top three spenders were Vodafone, Mobinil and Al Salab.

PLAYERS: Al Ahram Advertising Agency is part of the Al Ahram Foundation, which is a state-owned press, publishing, distribution and media holding organisation. Other leading advertising agencies in the country include Saatchi, JWT, DDB Worldwide, Aspect, Adline, and Young & Rubicam.

TARGETING: One drag on the further growth and sophistication of the advertising industry is that there is still no detailed monitoring of circulation and audience figures. Google Analytics gives some idea of web hits, and Ipsos produces figures based on ratecards, but the lack of a proper survey makes it harder to plan or apportion the right value to a given slot.

Another factor is that the media remains relatively undifferentiated in terms of target market, a legacy of a long history of state involvement. For instance, while the three largest papers in Egypt, Al Ahram, Al Masry Al Youm and Al Akhbar, do offer different content, all are broadsheets with a focus on politics but none take a clear political stance or appeal to a certain social background in order to differentiate themselves from their competitors. This, in turn, means that target audiences can be less specific than advertisers would prefer, and thus revenues can be lower than they might be otherwise.

BRANDING: Brand awareness remains rather patchy in Egypt. The country’s fairly high poverty rate (the bottom 20% of the population took home just 9.2% of national income in 2008, according to the World Bank), combined with the pressing economic situation, means that for a large proportion of the population, being able to choose a brand is a luxury, and instead they must focus on obtaining necessities at the cheapest price possible.

On the other hand, there remains a segment of the population that, while narrow in relative terms, is significant in absolute terms, and enjoys fairly high disposable incomes, especially in Cairo. This segment is both familiar with international brands and moves in the circles in which being able to afford the right-branded goods denotes a high level of cachet. The middle market segment is relatively weak, although in certain sectors, such as clothing, high street type brands, such as Zara and Mango, have been growing rapidly over the past few years.

However, the majority of well-established, prestigious brands in Egypt are international companies. This is partly because in the 1950s and 1960s, many Egyptian companies were either nationalised or founded as state companies, and there were fewer incentives to establish strong brands as part of a drive to reap profits. Also, Egyptian companies do not always have the cash to spend on marketing or the awareness of the importance of establishing a company’s brand on the market. Nonetheless, even quite poor Egyptians recognise and distinguish among different brands in basic items, such as soft drinks and mobile carriers, which are among the leading advertising spenders in the country.

The high level of illiteracy in Egypt, which runs at around 28%, according to the World Bank, impedes brand development and advertising to a certain extent, especially with regard to written slogans. However, symbols and logos play an important role in marketing, and television, which is accessible even to the illiterate, remains the most important medium in the country, with almost every household, even the poorest, owning a TV set.

TV: While TV finds a ready audience throughout the year, Ramadan, the Muslim month of fasting, is traditionally the peak of the TV year, as family and friends come together to break their fast after nightfall and the Arab world’s broadcasters show soap operas designed to while away the postprandial slump. Eid Al Fitr, which marks the end of Ramadan, is a time for buying gifts for family and friends, meaning that companies are keen to spend on advertising in the run-up to Eid. In 2012 total Ramadan advertising spend was $2.4bn, out of the total $17.2bn spent that year, according to PARC figures. This constituted a rise on 10% on 2011, and television accounted for almost all the Ramadan advertising spending, at just under $2bn.

RADIO: Radio, while less important than television, is nonetheless significant, especially in Cairo, where the long hours spent in traffic means there is a ready audience for radio, which tends to focus on music, chat shows and religious programming. There is a variety of private stations, such as Nile FM and Nogoum FM, in addition to channels run by the Egyptian Radio and Television Union (ERTU), but in the absence of audience surveys, no listener figures are available. PARC figures indicate that in 2012, 40% of food and beverages advertising expenditure was in the radio segment, as was 35% of toiletries and household goods spend. Given that these two segments have recorded sharp falls in advertising expenditure in 2012 compared to 2011, it is possible that total radio advertising revenue may have flatlined or even fallen in 2012, but at the time of writing, no figures were available to establish this.

OUTDOOR: Outdoor advertising is considered more effective in Egypt than in a number of more developed markets. This is partly due to long hours spent in traffic, and consequently greater exposure to billboards and more time to read them than is the case elsewhere and partly to the relatively low literacy rate. While not many people read a daily paper, almost everybody in a city will see a billboard, and even if they cannot read the slogan, they will likely recognise the logo of the product advertised. Perhaps for this reason, the segment is dominated by goods like food and beverages and toiletries, which are basics that every citizen needs. Some 28% of food and beverage advertising was conducted by this method, as was 25% of toiletries advertising expenditure.

PRESS: Although total newspaper circulation in Egypt is relatively small – most estimates range from around 2m-3m copies a day, but no firm figures are available – press readership tends to be concentrated among the higher classes, and therefore the print media command a greater share of higher value advertisers. For instance, according to PARC figures, some 47% of advertising expenditure from the clothing and jewellery segment, 73% of retail outlet and shopping mall spending, and 68% of vehicle advertising was in newspapers.

Just 10% of communications expenditure and 24% of government advertising was through newspapers, reflecting the relatively well-educated consumer base, compared to other media. Magazines have an even more select readership, but circulation remains small, partly due to low literacy rates, partly due to the expense of specialist publications and partly because many who buy magazines and journals can read them in English or French and often prefer to do so. By segment, the biggest advertiser in relative terms was clothing and jewellery, which spent 14% of its budget in the magazines sector in 2012, followed by toiletries at 13%.

ONLINE: Online advertising has massive potential in Egypt, which has arguably only just begun to be tapped. While most publications have websites, the main potential for growth comes from advertisers making much greater use of social media. Since 2011 the number of Egyptians on Facebook has grown massively and currently stands at around 30m. The extremely large youth segment, who have a much higher education level than their parents and are increasingly computer savvy, represent a big market, and have taken to social media and peer-to-peer technologies in a big way. Mobile penetration in Egypt is already over 100% and the rising take-up of smartphones means that growth is likely to continue. As such, it is increasingly easy for advertisers to reach the young and to create brand awareness. While social media strategies remain in their infancy in the Egyptian advertising industry, according to Tarek Atia, CEO of the Egypt Media Development Programme, social media offers the opportunity to bypass the mainstream press and TV.

“Papers do have an online presence, but they are not so up-to-date with how quickly the market is changing. There is a danger that brands will reach a point where they can bypass the media immediately,” Atia told OBG. “This is especially true because mobile penetration is over 100% in Egypt, and already approximately a third have smartphones. In about two years, this will be 100%, and how will you control access to information then?”

However, while local advertisers have yet to fully absorb and adapt to the growth of online media, both the advertising industry as well as the public voice positive sentiments about the segment. For instance, a 2012 pan-Arab media survey by the Dubai Press Club found that of all correspondents surveyed, only 16% claimed not to use social media as a news source at all, while 60% used it moderately. Questioned as to which platform had had the most instrumental role in forming opinions during the Arab Spring, 54% answered online media, compared to 43% for television and just 3% for print media, although only a quarter expressed the view that the print media would come to an end any time soon. Some 55% of those surveyed felt that the quality of Arabic journalism had improved over the previous two years.

FRESH OPPORTUNITIES: In the wake of the revolution, in which social media played a significant role in mobilisation efforts, online and mobile technology companies are exploring opportunities for growth. One such company is OTV entures, a subsidiary of holding company Orascom Telecom Media and Technology. OTV entures spans online advertising, content provision, e-commerce, online share trading, hosting and software development. In November 2012 Twitter chose the company’s online advertising arm, Connect Ads, as its sales representative in the Middle East and North Africa. Another company under OTV entures, Linkdotnet, has had a partnership with Microsoft for over a decade.

REMAINING ISSUES: While quality remains haphazard, the Egyptian advertising industry has slowly been growing in sophistication. While technical standards remain more or less on par with more developed markets, creative standards remain hit or miss. A number of industry experts told OBG that creativity in the industry is on the rise, in line with the new climate of freedom of expression in the country, but it remains too early to say how this will feed through into the general quality of advertisements in Egypt. Another issue is that there is no regulator to impose standards in terms of public taste or misleading material. Prior to the revolution, there were some moves in a number of governorates, including Cairo, to remove certain billboards and invasive outdoor advertising on the grounds of protecting heritage areas and historic buildings in the city centre, but since the 2011 revolution, the authorities have had other priorities to deal with.

However, perhaps the biggest risk for the sector in commercial terms is the uncertain political climate, and with it, the unsure outlook for the media. Given the rapidly changing nature of the country, and the accelerated frequency of newsworthy events, television – and to an extent, radio – schedules have been subject to rapid change, cutting scheduled programming to broadcast direct bulletins from news hotspots, which means that advertisers have to be flexible in terms of having a product ready to be shown at any time, and in terms of very changeable audience figures. Cairenes, for instance, are more likely to tune into the radio or the television if some event is going on that means they might have to take an alternative route home.

Over the medium term, the advertising sector also faces unpredictability in that the country’s largest TV stations (all commercial), may no longer exist, or exist in a much different form, if proposed media reform laws go ahead. Alternatively, state broadcaster ERTU may be broken up and privatised, but in any case, the media landscape is likely to look quite different in five years’ time, which makes it difficult to undertake long-term planning.

OUTLOOK: The Egyptian advertising business continues to suffer from the effects of an unpredictable political climate, but in spite of this has managed to adapt and even prosper in some cases. Television will continue to dominate the spending, but other media, particularly radio and outdoor ads, could see strong growth. In terms of segments, luxury products will continue to constitute a significant factor in advertising spend, although not in overall consumption, and local brands appear unlikely to cement their positions without greater stability. Nevertheless, the sector looks set to see further recovery in 2013, and the rapidly changing media environment is likely to bring forward as many opportunities as challenges.

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The Report: Egypt 2013

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