Sector bolstered by renewed activity by the government and growth of the Kingdom’s entertainment and tourism industries Between 2016 and 2018 Saudi Arabia saw the “most severe” drop in advertising spending of all regional countries LONDON: Saudi Arabia’s advertising market is expected to return to growth in 2019, after what one industry leader said was a “drastic” decline in spending over the past few years. The country’s Mad Men — and women — have been forced to endure lean times since the industry was hit by the crash in oil prices and subsidy cuts, leading to an estimated 50 percent drop in domestic spending on ads between 2016 and 2018. But renewed activity by the government and growth of the Kingdom’s entertainment and tourism industries is seen bolstering the sector this year, according to one Riyadh-based ad man. “We have reasons to believe that the worst is behind us. There are many signs of recovery. And the industry is slowly bouncing back,” said Faisal Shams, managing director of OMD Saudi Arabia. “We foresee a low but steady growth of 4-5 percent in forecasted investments across advertisers (in 2019 and) a stronger appetite for long-term deals with media vendors compared to quarter-by-quarter planning.” Saudi Arabia saw the “most severe” drop in advertising spending of all regional countries, due to factors such as the crash in oil prices, the cutting of government subsidies on fuel and utilities, as well as the introduction of new taxes, Shams said. The wider Middle East and North Africa ad industry was also hit hard between 2014 and 2018, with spending falling “back to levels last seen in 2004,” said Shams. “The unpredictable regional geopolitical situation led to low appetite for risk-taking or investing. In extreme cases we have seen some international clients dropping (total ad spends by) 70 percent and 80 percent. Some local clients almost zeroed their spending during these years,” he said. Despite that, an expected increase in spending on advertising by the Saudi government is seen lifting the market this year. “Following a drastic drop in billings — over 50 percent — we believe advertising will finally show some growth compared to last year, driven mainly by government spends,” said Shams. Part of that will relate to Saudi Arabia’s ambitious Vision 2030 reforms drive, and the public-education drive around issues like energy saving and best business practices, Shams said. “While private-sector ad spends are shrinking, government ad investment has registered a growth of 80 percent. We have seen a positive change in the way government utilizes communication to educate citizens and change public opinion,” he said. “The advertising industry has a major role to play in communicating Vision 2030 … breaking it down to what this transformation means to the people of Saudi Arabia.” The growth of Saudi Arabia’s entertainment sector — with cinemas reopening and more live concerts being held — along with the country’s drive to attract more tourists, also pose benefits for the ad industry, Shams said. “Tourism and entertainment are uncharted territories for Saudi Arabia until recently. Knowing that the government plans to invest $64 billion on entertainment in the coming 10 years represents a huge opportunity to the advertising industry — be it in ad spend, or in its challenge to deliver better work and attract better talent,” he said. Other growth areas in the Saudi ad market include e-commerce — which is now among the top-five investment categories — along with outdoor media such as billboards, Shams said. Other industry experts, however, do not have such a rosy view of the Saudi ad industry. The agency Zenith, which tracks and forecasts spending in the industry, expects domestic spending on advertising to decline by 27.6 percent this year, with smaller drops forecast for 2020 and 2021. Jonathan Barnard, head of forecasting at Zenith, said the Kingdom’s advertising market is “unusual” because, aside from the money spent on national media, the majority of ads on pan-regional media such as satellite TV stations are also directed toward Saudi consumers. Pan-Arab advertising spending will drop this year before returning to marginal growth of 0.3 percent in 2021, Zenithforecasts