Whether in his home or his office, Elie Khouri is known for his passion for art. He discusses one piece in particular with us – the latest addition to his collection – a huge canvas with the words “blah blah blah” in textured colors sprawled across multiple times. The piece is kind of like the industry, explains Khouri: “There’s a lot of blah, blah, blah; but at the end of the day, we make it look beautiful.” So this month, Communicate sits down with the man with a flair for art to discuss geopolitics, economics, and why – finally – media agencies are getting a seat at the CEO table.
There are rumors of Dubai heading for another recession. With this in mind, can we learn a lesson from what happened last year?
I don’t want to be gloomy but I have to be pragmatic. Well, the first half of 2014 was good but the second half was tougher. The last quarter, especially, wasn’t fine for big multinational companies (MNCs) because they started feeling the pinch in KSA. The ISIS threat was a big deal. Introducing nationalization in KSA had a big impact on MNCs as their distribution networks were affected and consumers were driven out. Literally, 2.5 million people – which make up the markets of Qatar and Bahrain put together – were kicked out. The softening of the economy in Europe influenced MNCs to save rather than invest and even though Egypt is regaining stability now, it was an issue through 2014. At the end of year, we concluded 2014 flat compared with 2013, which is very good considering all that happened in the region.
How did different media channels fare in the last year?
TV managed to maintain itself. This is the first year in a decade that TV did not grow and it is marking a shift in how budgets are being spent. TV was growing at a rate of five to ten percent over the last five to six years on the back of good quality content, which built a momentum for TV growth in the region, even though TV – especially cable TV – was struggling everywhere else in the world. However, 2014 witnessed the beginning of the slowdown of TV. Print continued to shrink at a rate of ten to 12 percent year on year and outdoor is maintaining. The only medium that is really growing is digital and mobile combined. I’d say TV is the big thing to look for in 2015, in terms of what’s going to happen to it, because it’s going to continue flattening and we might even see a negative growth of approximately five percent.
Why do you think 2015 will be tough?
The euro and the eurocrisis are not helping. On one hand is Greece with its $170 billion debts that its new government wants written off, which nobody in Europe – especially not the Germans – will agree to. On the other hand, Ukraine is a major problem. Right now, there’s a cold war in Europe between its two biggest players: Germany and Russia. For the first time, we are talking about deflation in Europe. All the European companies that are investing in this part of the world are put- ting more pressure on us as a region to save more and invest less. I have concrete emails and calls to our headquarters saying we want to spend less and save more, but how do we do it?
When there’s a crisis in one market, you try to get revenues from another, which means investing. Is that not the case?
Conventional wisdom would suggest so, but when it comes to marketing, you try and squeeze more. So they’re going to squeeze more and put more pressure on us to deliver more for less and “more for less” is an adage that has always been used but we are really going to feel it in 2015. The euro is not helping because the exchange rate of euro to dollar has come down by 15 percent, so there’s less money coming in as we are a dollar economy.
Isn’t tourism helping Dubai?
Tourism here is particularly related to Russia. Because of the sanctions against Russia, the ruble is down 47 percent, halving the purchasing power of Russians. This is bad news for Dubai because whether it’s real estate, tourists or buyers of luxury goods; the biggest source is Russians. This is not compensated for by the Chinese either because there’s a softening of growth in China; it used to be nine percent, but now it has dropped to six to seven percent. China is becoming more rigorous; there’s a real estate bubble and campaigns against fraud there, so everyone’s being more cautious, resulting in less money going in or out. Although Chinese tourism is a growth area for Dubai potentially in the long term, it is not something that will give results in the coming years.
What about other countries in the region?
In the region, KSA is the biggest economy followed by [the UAE] and then Egypt. In the UAE, other than the Russia situation, the price of oil is a problem. It has gone from $100 to $45-50, and some economists are saying it will drop to $40 before coming up to $70 by the end of the year. This will impact the morale and the money flow from governments. Abu Dhabi is a big oil exporter so everything will get affected – investments, stock market and real estate… It will all go down.
And last but not least, the continuous pressure from ISIS is still there – not so much in Dubai, but in KSA. Unfortunately, we’re hearing that there are a lot of ISIS sympathizers in KSA and there are reports of shooting of Americans as well as non-Americans and even Europeans. Now, there’s a new king who is gifting $30 billion, and Mercedes cars to workers here and there, but overall, the level of confidence, investment, MNC dynamics of being there and staying there will see a setback.
The big investment and infrastructure projects will be put on the back burner due to the price of oil so naturally the environment is one of uncertainty and lack of investment in KSA.
Egypt is the only positive thing on the horizon this year. Economically, the best story to come out in 2015 will be from Egypt. It has been see- ing sustained growth. 2014 was the best year for Egypt since the Mubarak days. Not only was the stock market up by 30 percent, but also it was the best performing stock market in the world. Saudis, Emiratis and Kuwaitis are supporting the Egypt government by pumping money in the economy – there’s even a fund created for $10 billion. This is the only market that will see growth by 12 to 15 percent. When it comes to Levant, that’s a catastrophe in itself. Though it is a $300 million market, it is a small component.
How do you plan to deal with all of this?
We will continuously fight for market share and our clients and we are smart and resourceful enough to grow. Digital continues to grow by 30 percent as it has been for the last five years. Moreover, just a five percent shrink in TV gives you more than 30 percent in digital. Within that, naturally, we want to continue investing in mobile. Every year we say it’s the ‘Year of Mobile’, but it’s becoming more of a reality in 2015 and it will see definite growth. Programmatic buying is becoming the norm because it’s delivering amazing, tangible results. We’re comparing what we do now with programmatic to what we did five years ago and it’s like comparing night and day.
As an industry, we are investing in data. It’s more complex today because you have social media, search, content; all of which is generating data and the question is what do we do with all of this data. Our job is to make sense of all this chaos and this is what is giving us a stronger role with our clients. If you don’t keep investing in tech, data and proprietary tools and systems, you won’t be able to make it.
Does this mean it’s more fun for media agencies today?
It’s more fun for media agencies now because we have a say in what’s happening, and have a seat at the CEO table. We used to have MBUs (media buying units), media buying agencies, media agencies, communication agencies, marketing groups and now we are marketing.
Our motto is that we don’t do media. We’re marketing experts. I know we are not there 100 percent because we are coming from a media background, but we do less of media buying, and more of everything else. Ultimately, our growth will come not from the growth of the market, but instead, from growing our market share within the same community.
