‘Disruption is in our DNA’
Ramzi Raad, Chairman and CEO, TBWA\RAAD talks about the impact of global economic slowdown on the advertising industry and his agency's partnership with the ZEENAH Group in an exclusive conversation with Akshay Bhatnagar

How far has the global economic slowdown affected the advertising industry?
There has been a lot of speculation since the beginning of the year about the recession in the advertising industry. Some of the leading industry magazines have predicted that there will be a drop of 16 per cent in global advertising this year. The Middle East ad market has given evidence in the first quarter of 2009 that it will not suffer at the same level.

Omnicom, the parent company to TBWA, continuously reminds all its companies around the world of the need to follow up collection of receivables without giving any special favour to any client. Another important measure that has been taken is to go for credit insurance. In this part of the world it is an expensive proposition but we are going for it.

What exactly is credit insurance and how does it works?
If any client defaults in its payment then the insurance company will chase him to ensure that the agency dues are collected. If the client goes bankrupt, then the insurance company compensates the agency as per the contract.

Is the client sharing the premium or is it solely paid by the agency?
The agency pays for it and mind you it is a very high premium.

How has your performance been viz-a-viz other offices of TBWA?
Globally, in general, advertising agencies are suffering. However, our MENA Network continued to show signs of increased billings throughout the past five months. At TBWA Worldwide, senior management reviews the performance of the different agencies at the end of every quarter. In the first quarter of this year, our Worldwide CFO told me he is quite happy with our performance and projections. He also added that apart from China and India, they have high hopes from the Middle East in 2009.

What about the crisis in the GCC advertising market?
The crisis in the GCC has been blown out of the proportion. A lot of people have made comments such as we are approaching doomsday and so on. Such comments affected the markets in different scales. Dubai suffered dramatically because of the negative media hype. The negative coverage was not just restricted to the regional press but it was hyped in the international media as well. But the reality is quite different. The advertising market in the region started from a very low base in the mid 1960s… we started gaining momentum in the last eight years only and it was growing at a very high rate.

Why did the advertising market start on a low base in the Middle East?
We all have to be blamed for that – media, advertising agencies and advertisers. We didn’t have big local advertisers in the first place. No market can grow without the strong support of big local brands. Earlier the GCC ad market was dominated by purely global brands operating in the region. Throughout the 70s and 80s, Japanese brands were at the forefront. Other issues included intense competition in the media, political uncertainty in the Middle East region and low literacy rates. But the rise in oil prices and rapid economic growth as a result of windfall revenues catapulted the Middle East & North Africa (MENA) region at the centre stage. In 2006, the top 10 fastest growing ad markets in the world included five from the region – Egypt, Saudi Arabia, UAE, Qatar and Kuwait. As a result, top advertising networks started focusing on the region. In 2008, the advertising market in the MENA region went up by 22 per cent over the previous year. The UAE grew by 40 per cent, it was phenomenal.

How have the sentiments been in 2009?
At the beginning, the advertising market was beset with worries but people have realised that there is no need to panic as the ME region is a growing market at a time when most of the other markets are in recession. The oil prices are moving up again.

But what about sectors such as real estate which have been major contributors to the advertising market and have now taken a beating?
The real estate sector contributed just 18 per cent of the entire ME advertising in 2008. Even if we presume that real estate’s contribution will be zero this year, the market which grew by 22 per cent in 2008 will not suffer from negative growth with the battering of one sector. There has been a drop in many markets in the first quarter of this year. Unfortunately Dubai, which has suffered a major drop, is seen as the reflection of the health of the entire ME market, but that is not true. Many media companies and advertisers are based in Dubai but their products are mostly consumed in other parts of the region. Saudi Arabia is a very large market in the region. In Q1 this year, many markets have witnessed dramatic growths on year-on-year basis – Qatar (28 per cent), Kuwait (26 per cent) and Oman (12 per cent). The negative growth is in markets including UAE (-17 per cent), Bahrain (-14 per cent), and Egypt (-8 per cent).

Generally, the first two quarters of the year are not as robust as purchasing in the market goes up in the third and fourth quarters due to the festive season on account of Ramadan, Christmas, and the back-to-school season. This year it will be tough as Ramadan period is coming right after the summer holidays.

How do you look at the Oman market and your relationship with the ZEENAH Group?
Oman's advertising and wider communications market is very promising. If we go back to 2003, the market was pegged at $54mn. In 2008, it had grown substantially to $131mn. We tied-up with ZEENAH in 2007 and the agency became TBWA\ZEENAH. The agency has the same passion and the ethos which are the hallmarks of TBWA. ZEENAH has grown by leaps and bounds due to their investment in building a world class servicing structure which is unique in the Sultanate and most recently, has broadened to cover not only advertising, but specialist companies for events, public relations and media as well. They also went aggressively after local new business. In the coming years, we would like to support ZEENAH with business coming from TBWA global clients also.

TBWA Worldwide is known for its ‘Disruption’ strategy. How is it relevant for the Omani market?
Disruption is in the DNA of the agency. Disruption is about finding the strategic idea that breaks and overturns convention in the marketplace, and then makes it possible to reach a new vision and secure a larger share of the future for the client. Wherever we are present, we challenge the myth that local markets are not mature enough. Wherever we go we share the results of how disruption has worked for our clients in other markets. Disruption is as relevant for Oman as any other market in the world.

A strong marketing communication based on disruptive strategy devised by the agency may not always be accompanied by a change in the brand experience for the customers. Why does it happen?
The change cannot happen overnight. The transition takes place over a period of time. Disruption has to be embraced by the company, incorporated in its processes and adopted by the mindsets involved to make it optimally effective in its application. Our success with clients including Mars, Etihad, Visa and Jumeirah as well as many other global and regional brands is a testimony of our agency’s strong credentials.

You now have over four decades in the industry, what’s next for you?
In Oman, we want to strengthen our relationship with ZEENAH. We want the TBWA\RAAD MENA Network to become the international agency of the year, the first one from the Middle East region, in 2012.

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