Saudi Arabia
One of the most digitally engaged societies in the world, Saudi Arabia is undergoing change as it weathers economic fallout from the low price of oil
There is a tsunami of change tearing through Saudi Arabia, says Georges Barsoum chief executive for Y&R GCC. The trends phase is in the past, and while the change is slow, “the wave is travelling in the right direction”.
About time too really is the thought of many. The Gulf oil giant faces one of the most troubled periods in its modern history. As the world’s biggest oil exporter, the 18-month plummet in prices from $115 per barrel to less than $30 per barrel in January this year has undeniably taken its toll. Last December, the kingdom reported its budget deficit had hit $ 98 billion. In its April forecast, the International Monetary Fund predicted the Saudi economy would grow by just 1.2 per cent in 2016 – the lowest in seven years. Added to this are military conflicts on two fronts: the fight against Islamic State (IS) and against Houthi rebels in Yemen. Military action in the latter alone is said to be costing the kingdom around $6 billion a month ( Al Monitor). Throwing a spanner in the works of all this is an intensifying rivalry with an emerging Iran, which has backed the Houthi rebel forces and is ready to become a major player on the competitive international oil market, where Saudi Arabia still rules the roost.
Amid this economic turmoil are a stream of reports of construction projects being halted, workers unpaid and laid off in their masses, while subsidy cuts have driven up the price of water, electricity and petrol. And now brands, which before the crisis only devoted roughly 7 per cent of their budgets on advertising, have had to cut back. Zenith Optimedia figures show that ad spend fell by 14 per cent in 2015 and is expected to drop by another 20 per cent this year to $451 million. “The main driver of the industry as always in the economy,” says Jamal Hamadeh, managing director of MediaCom KSA. “With the political situation as it is and the drastic drop in oil prices, the effect is leaving a big dent in investments including advertising. The industry in Saudi Arabia suffers mainly from fierce competition over a stagnant or shrinking market. Monitored figures show a slight growth in the first quarter of 2016 over the same period of 2015, but still not yet a total recovery. However, the usual dynamic movement of the market and the horizontal and vertical growths are still not back to normal.”
Yet fresh hope for the kingdom’s future has emerged in the form of Saudi’s Deputy Crown Prince Mohammed bin Salman. Aged just 30, the son of ruler King Salman has stepped into the limelight to unveil the country’s Vision 2030, which aims to curtail the kingdom’s “addiction to oil” over 15 years. His reimagining of the Saudi economy has provoked criticism and derision considering the country relies on oil and gas for 90 per cent of its export earnings. However, though ambitious, the prince’s status as a young,
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tech-savvy millennial has struck a chord with a population aged mostly under 25.
“Saudi Arabia is one of the most digitally engaged societies in the world,” says Barsoum. “And rather than being passive about it, the Saudi youth are actively engaged in content creation in comedy, short films, the arts, cooking, fashion and more. This is changing how the society at large is consuming communication and engagement. Creative work is rapidly moving from oneway communication to total engagement through content that is fully created by agencies or co-created with young Saudi celebrities.”
This image of a youthful, technology-savvy millennial generation of Saudis has dominated advertising speak on the kingdom for some time now. Years of heavy investment in the telecommunications industry has resulted in a highly digitally active population, with broadband penetration reaching 66 per cent and that of smartphones as high as 76 per cent – according to media agency UM. Its figures also point to a very socially active population, with around 8.5 million Facebook users, 10 million on Instagram and around 12 million on Twitter. Roughly 9 per cent of its internet population is on Snapchat (UM) and, accord- ing to figures from Google, Saudi Arabia has the highest YouTube watch time per capita in the entire world. On paper, the kingdom has every indication of being a digital marketer’s dreamland.
Yet despite the rapid shift towards social and digital channels, Zenith Optimedia’s ad spend breakdown suggests that outdoor advertising accounts for the bulk of expenditure at $314 million, followed by newspapers at $69 million, while television merely accounting for $10 million. However, like the United Arab Emirates, this figure does not take pan-Arab television into account.
Meanwhile, the former two channels appear to be suffering more than television, with newspaper and outdoor e x penditure expected to fall by a third and 20 per cent in 2016 respectively, while television spend is predicted to drop by a relatively tame 16 per cent. Yet it was print and outdoor that garnered Saudi Arabia two of its three awards at this year’s Dubai Lynx, a gold for Memac Ogilvy’s ‘Ikea Special Offers’ and a bronze in the Young Lynx category for J. Walter Thompson Riyadh for ‘Hidradenitis suppurativa’. Though the kingdom regularly performs poorly compared to the UAE and Lebanon at award shows, this year’s Lynx marked a