No serious company would start a business without thorough due diligence, especially one looking to enter the Middle East's rapidly maturing media industry.
So it is difficult to see how the headline figures for advertising spending in the MENA region could be deemed misleading to any business that has taken the effort to study the market.
The figure of up to US$15.3 billion (Dh56.19bn) is about four times some estimates of the true advertising spending.
A number of heavy-hitting local media organisations are active in the region, while a plethora of international media companies have launched in the Middle East in recent years.
Such companies should have done their research on the local advertising market and are likely to have a more realistic view of it than is gleaned from the headline figure.
Take the Arab Media Outlook 2009-2013, produced by the Dubai Press Club and Value Partners Management Consulting. The study predicted that total ad spending in the Arab world would stand at a more reasonable $5.1bn last year, based on 50 per cent of the gross figures.
As Eddie Moutran, the chief executive of the advertising agency Memac Ogilvy, said of the gross advertising figures: "I doubt if there's anyone who takes those numbers exactly as they are. Nobody in his right mind is going to look at those numbers and build a huge organisation to cater for it."
While the inflated ad spending figures may be misleading on the surface, delve a little deeper and it is not difficult to find a more realistic view of the market.
But if you do delve deeper, you also find another problem endemic in the industry: a severe lack of accountability and transparency.
Very few publications in the MENA region are audited; there are no accurate TV audience figures; and there are virtually no figures on online ad spending and readership.
Only a couple of regional media companies are publicly listed, which means most do not disclose figures for public scrutiny, and the amount of discount advertising offered by individual players is not known.
However, there are signs of hope on the horizon. Publishers are beginning to see the benefits of auditing, which gives advertisers an independent view of readership figures.
The planned TV audience measurement initiative in the UAE will herald a new age of accountability for advertising on television, the dominant medium for advertising spending.
As several media executives have pointed out, greater transparency on audience numbers will eventually lead to less of a scramble to discount advertising and give a more accurate and stable picture of the market as a whole.
If such initiatives are a success, due diligence will soon become a much easier process for those looking to enter the local media industry.
bflanagan@thenational.ae
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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