In an encouraging development, communications, media and technology (CMT) players in the Middle East and North Africa (Mena) region have logged double-digit growth in recent years, according to a recent report, 'Winning in Mena's new media scene' by Booz & Company.
The study however also highlighted that despite the rapid change in the market scenario, CMT players have been slow to capitalise on the increasing shift to new media and its avenues of growth. The study focuses on consuming and producing media anytime, anywhere; a potential hot spot for new media; competing in the age of convergence; telecom operators and media companies.
Asked by Emirates Business to comment on the numbers revealed in the report and if these were startling or expected given the state of the regional industry, Jayant Bhargava, Principal at Booz & Company, said: "The results were expected and in line with global trends. We do not see that the region's new media consumption pattern is any different from that of developed markets.
"Though the internet and broadband penetration is much lower in the region, the consumption habits of users with connectivity is quite similar. Where the region is lagging behind global standards is in the supply of attractive new media experiences to consumers and to advertisers."
According to the study, "Technologies are converging, traditional lines of demarcation between telecom operators, media companies, internet players and handset manufacturers are blurring, and there is a vacuum in terms of the customised, readily accessible, digital content that consumers want. To succeed in this radically different landscape, players must understand four key dynamics and devise strategies to capitalise on them. These involve the regionalisation of media, the changing demographics of connected users, the shift to advertising-driven revenue models and the importance of strategic partnerships."
In favour of the digital platform, the study states that the digital platform offers true pan-Arab coverage, providing opportunities for regional expansion. It advises local players to quickly build regional online assets and invest in necessary content and marketing to capture their share of the regional audience.
Youth users and new media
'Youth users' and 'female socialites' are emerging as the champions of new media and will account for the lion's share of the regional audience. Successful players will build products and services that address these segments' quest for ubiquitous and interactive content," according to the study.
"Mobile platforms will remain dominant for new media content, but will increasingly adopt advertising-based revenue models. New media players will need to achieve fluency in common and emerging advertising schemes," the study added.
Comparing regional statistics to global numbers, Bhargava said: "The region, especially its youth, has proven time and again that when it comes to new technologies, it is a de facto early adopter. Youth constitute a majority segment in the region.
"So we expect the industry to catch up very quickly with global standards, provided current supply shortcomings are addressed. With the growing interest of global players such as Yahoo and Google in the region, and the wake-up call that local media players are experiencing with regard to new media, we expect the regional new media industry to catch up very quickly with global levels."
He attributed these reasons to basic elements of demographics, stating: "While the consumer demand has been growing in line with global trends, the regional new media suppliers have under-performed their global peers. There is a shortage of high quality professional Arabic content available on digital platforms."
Several reasons were cited for this. "Media players are focused on growth opportunities in their traditional assets (traditional media continues to grow) and have been slow on uptake of digital (online and to a certain extent mobile as well). The economic slowdown has acted as a catalyst for a focus on digital and we can expect a greater level of activity in digital coming from the regional media conglomerates.
"Telcos, a key contender in new media, have experimented with digital content, but have not been able to develop rewarding/engaging experiences for consumers.
"Advertisers have also shown little interest for new media, due to a lack of education on its benefits and return on investment capabilities, and a visible aversion towards big shifts in marketing budgets. The region lacks key capabilities required to generate interest in digital advertising. Despite the global ad agencies having significant investments in specialised digital outfits, few of them have a presence in the region," the study said.
"There has been a radical shift from traditional media to digital communities," revealed the study. "Such a strong emphasis on consumers presents a profound challenge for traditional content producers. However, this also creates powerful new opportunities for players that can best address their needs," explained Gabriel Chahine, Partner at Booz & Company.
Regional CMT players already have a certain advantage in their location. Several characteristics make the Mena region particularly receptive to the shift to new media. First, whereas traditional broadcast and print media mostly operated within national borders because of regulations or distribution restrictions, new media unlocks the entire Arab region of 295 million people.
Despite being spread across a vast geographic area, this audience possesses a fairly homogeneous socio-cultural heritage – and a relatively high literacy rate, with the six countries of the Gulf Co-operation Council (GCC) at roughly 75 per cent or higher. In addition, several of its nations are extremely wealthy.
"The demand in the region for integrated content and information delivered with new media functionality has exceeded supply. There is a notable shortage of local digital offerings," noted Bhargava. Very few media outlets offer pan-Arab marketers true regional coverage. Satellite TV is currently the only advertising medium that reaches the whole Mena region; newspapers, most magazines, radio stations and outdoor advertising are all locally focused.
Even the reach of satellite TV is limited to either the GCC countries or the Levant; viewers in these markets have different viewing habits, content preferences and dialects. With the exception of Rotana Cinema, which has achieved significant viewership in both markets, top TV channels in the GCC and the Levant are totally distinct, causing a division of ad budgets between the two markets.
In contrast, leading websites in the region such as Maktoob, MSN Arabia and kooora.com already capture audiences from all over the region and consistently rank among the 10 most visited sites in most Mena countries.
According to the study, "In the new media universe, the audience is no longer confined by restrictions such as delivery areas or service contracts or even national borders. Instead, it includes everyone who can access content via the internet and it is segmented by usage patterns."
Research has established four key audience groups for new media in the Arab World. Any new initiative from CMT companies must be undertaken with these four categories in mind, said Bhargava in the study.
- Youth Users (33 per cent of the market): This audience is extremely comfortable with electronic media, having come of age during the advent of print. The youth category's main digital content is sports, games and music. People in this group, like their counterparts in other parts of the world, rarely use media in traditional formats.
- Female Socialites (31 per cent of the market): Users in this group engage in new media primarily for self-expression and to connect with friends and communities that have similar interests. Their preferred content is lifestyle media, along with music. Notably, the segment includes people at all income levels, from wealthy, non-working women to working females in the low- to middle-earning income brackets.
- Leisure Males (31 per cent of the market): This audience also spans income levels, from old-money elites to low- and medium-income earners. Leisure males use media technology to socialise, but also to get entertainment and political news.
- Professionals (five per cent of the market): Although this is the smallest audience, it is the most attractive for marketers and advertisers, because its users spend far more money than those in other groups. These are pragmatic users, primarily accessing business information.
The gap between the amount of revenue earned from fees and that earned from advertising stems from a lack of viable options. In short, there is a large, unmet and growing demand for high-quality digital content that can attract and support advertising.
Focus on partnerships
"Media companies need to figure out how they can turn this development into something positive. From telecom operators, the promising growth of mobile advertising has prompted Web 2.0 players to compete with operators over the question of who really owns the customer," said Chahine.
Communications, media and technology companies will need to go beyond their own comfort zones by joining forces with other players that offer complementary competencies. Collaboration is king. In this context, the ability to forge the right partnership, on the right terms and at the right time, will define the winners. To ensure success, the new partnership should have a clear business plan of its own, along with an explicit and differentiated content proposition, sufficient management talent, and complementary capabilities.
Telecom operators in the region are still reaping the biggest share of digital revenue, thanks to their control over distribution channels and access to customer intelligence on a subscriber base of more than 200 million users.
The underlying imperative for telecom players is to secure a certain control over content so as to guarantee a steady and competitive supply. Operators are actively acquiring and aggregating content, typically through proprietary portals, Bhargava explained.
Media companies attempting to compete effectively in new media have two principal options, which can be thought of as conservative and aggressive. In the conservative option, they leverage their traditional assets and monetise them through a 360-degree approach.
In the aggressive approach, media companies embrace new media as a relevant opportunity to diversify their business. In addition to transitioning existing properties, this approach involves building a digital business.
The study concludes by pointing out that CMT space in the Mena region is at a significant inflection point, that traditional revenue streams are being upended by new technologies and a seismic shift in consumption patterns. Vastly different from the environment of just a few years ago, the market today resembles a dynamic, complex and interconnected ecosystem in which telecom operators, media companies, internet players, technology players and ad agencies depend on one another to thrive.
Communications, media and technology companies must try to anticipate future demand – and make necessary arrangements to develop or otherwise secure infrastructure, marketing and other key competencies – even as consumer behaviour and technology continue to evolve at accelerated rates. They are in essence aiming at moving targets, according to the study.
Stating the margin of error, Bhargava said: "The survey interviewed a total of 324 respondents in the UAE and in Saudi Arabia. The margin of error is around five per cent." It was conducted through a third party professional research company, which took two to three weeks to conduct the interviews and compile the results.