The house that sales built

The rise of media sales houses in the Middle East has given media owners a valuable tool to increase revenue, but has it come at the expense of healthy competition, asks Richard Abbott.

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By  Richard Abbott Published  October 23, 2005

The house that sales built|~|Gillam,-Mike-200.jpg|~|‘We are always wary about the future.’ Mike Gillam, Unilever’s regional communication channel manager for North Africa, Middle East and Turkey|~|Selling advertising is not for the faint-hearted. There is the time-consuming contact building, the inevitable haggling over rates and the pressure of hitting targets. Which is why some media owners would rather leave it to the experts — namely the growing band of media sales houses that operate in the Middle East. In many cases, the economies of scale come into play. A sales house selling on behalf of five TV channels can use its critical mass to broker a better deal on behalf of each channel. So, when the marketing director of big spenders such as Pepsi, Chevrolet or Nokia comes shopping for ad space, the sales house will factor in deals for all of its clients. And geography is important too. A pan-Arab title can never be truly pan-Arab if its sales team are based only in Dubai. Using the services of a sales house in Saudi Arabia, for example, means the title benefits from insight into the local market. For small-scale start-ups, outsourcing media sales is often the best option. Faced with the wage bill of an ad manager, many instead ask a sales house to take the job on. The UAE-based afternoon daily the Emirates Evening Post is among the latest to tread this path, asking Concept Media to take on its sales operation. The biggest and best known sales house in the Middle East is the Choueiri Group, which sells on behalf of TV stations such as Dubai-based MBC and Qatar’s Aljazeera, and newspapers like Arabic dailies Al Hayat and Al Bayan. But the company has come under fire for controlling too much of the media marketplace. Some industry figures now believe it has too much power and operates in a monopoly position, leaving agencies with no alternative but to accept its terms. One such person is Tarek Ayntrazi, general manager at Future Television in Lebanon. He previously ran the Dubai office of media agency Starcom until a bitter dispute with the Choueiri Group preceded his departure. “There is an unacceptable situation with total control by one person over the market,” he says. “The market is governed by the laws of supply and demand and the people who have interest in this are the media agencies and advertisers. “To put one sales house in charge of this is an issue. Advertisers do not know where they are spending their money. It needs to be rectified in the interests of the market.” Unless this is put to an end, says Ayntrazi, advertisers will choose alternatives. He gives the example of Lebanon where, with Choueiri controlling 60 to 70% of the TV market, advertisers invested their money in outdoor and in-store instead. “I’ve got a BA in economics so I do understand how this works. If you push the price to a certain level then the client will find an alternative. There must be more balance in the market,” he says. His comments follow a similar line to those of Richard Evans, PepsiCo’s commercial vice-president for the Middle East and North Africa, who said the current arrangements are preventing the growth of advertising spend. Speaking at a round table session organised by The Economist last month, he criticised the fact that “if you try to buy media in the region, you have to go through one guy. “The media in this region — words fail me for the right description, since I might get into trouble.” Speaking to Campaign, Evans says: “No buyer likes to deal with a monopoly supplier but that is the situation.” Mike Gillam, Unilever’s regional communication channel manager for North Africa, Middle East and Turkey, is one of the biggest spending clients in the region. He says the monopoly situation has, so far, not had any adverse effect on his business, even going as far as giving Choueiri Group a school report of B+ based on their “reasonable” dealings to date. But he knows the threat is there. “All I am interested in is how many minutes of advertising I am getting at what price. And he [Choueiri] has been quiet reasonable. But the threat is always there. We are always wary about the future. It is a matter of concern. “If he says he is going to double the price of advertising or raise it by 25%, my only recourse is to say that we will cut our budgets.” But Gillam believes he has got an alternative, echoing the fears of Ayntrazi. “Whereas he holds a high degree of monopoly power in the TV market, that is not our only investment decision,” he says. “We have other media to choose from. We can put our budget into Egypt, the Levant, Iran or use in-store or price reductions. So it is not a total monopoly.” Gillam is part of the GCC Advertisers Association, a group that represents the interests of clients. Its primary aim is to secure better return on investment by pushing for audience research. Choueiri Group was asked to contribute to this feature, but did not respond to calls. Aside from Choueiri, there is a growing cluster of media sales houses in the Middle East who have built a successful business. Many sell on behalf of clients based outside the region, mainly in Europe and India, while others sell for media brands inside the GCC and Levant. Speaking in Campaign earlier this month, Kevin Clancy, head of marketing for Adline — a sales house that represents print, TV, radio and cinema clients across the GCC, including Showtime and Future TV — said that it was very difficult for smaller media owners to get face-to-face time with agencies. Sales houses are able to present several options to an agency at a single meeting. ||**||The house that sales built|~||~||~|“There are now essentially between five and ten extremely large media buying points and that’s swinging the balance of negotiating power,” he says. Clancy says this makes it very difficult for media owners who operate their own sales department to compete with their bigger rivals. “As an individual media owner you are lacking power, which is where representation comes in.” Dubia Media City-based company Focus Media Services acts as a sales house for a portfolio of media owners, giving them a bigger presence in the market. Clients include Egyptian magazines Al Watan Al Arabi and Al Watan Al Riady. In the face of a powerful competitor like Choueiri Group, Guy Djermakian, owner and managing director, has focused on offering a bespoke service to smaller media owners. “I will not try to compete with them,” he says. “Bigger companies will have more interest in one channel than the other. Smaller channels would not get as much as the big channels — maybe just the free ads. “I prefer to work in partnership with smaller channels.” Djermakian says one of the main reasons that a small media owner will join forces with a sales house is to generate earlier revenue. “Usually it takes 60 to 90 days to get money, occassionally up to six months. The publication needs money earlier so that it can go to print. They prefer to deal with someone who can give them money every 30 days or so.” This is one of the biggest draws of using a sales house — smaller media owners often have no choice if they are to be financially stable in the crucial early days. Dubai Media Incorporated (DMI), the parent company of Dubai TV and The One, partnered with Choueiri Group last year. The group is the sole representative of the station, promoting the station commercially to media agencies, corporates and government institutions. Speaking when the deal was signed, Hussain Ali Lootah, CEO of DMI, called Choueiri Group’s credentials “second-to-none”. Those credentials can be put down to one word — size. With Choueiri controlling such a large chunk of the market, agencies have to go there to buy media. One of Choueiri’s biggest clients is pan-Arab TV broadcaster MBC, which runs four entertainment channels and 24-hour Arabic news service Al Arabiya. Michel Costandi, business development director at MBC, says the relationship makes sense. “We joined up with Choueiri because he has been here for a long time and the company has proved itself on a number of levels across the region,” he says. “They have very good sales knowledge and know-how, and are very professional in the way they go about their business.” He says the key to having a successful relationship with a third party sales house is playing to each other’s strengths. “Our duty at MBC — as a TV station — is to always ensure that we have the best TV programmes that attract the widest number of viewers,” he says. “Choueiri’s duty is to maximise those attributes in revenue terms with advertisers.” Ultimately the decision of whether to outsource ad sales depends on many factors. But with one company controlling so much of the advertising sales in this region, can anyone afford not to join forces with the big boys? SHOULD ADVERTISING SALES BE OUTSOURCED? PROS Employing a sales person means you have to pay them a salary and manage their progress, which takes up valuable time. And if they do well, they may get poached. Sales houses can offer local expertise in a country that your company is not familiar with. Sales houses are specialists, which means they will be efficient and professional, saving time chasing phone numbers and e-mail addresses. You have complete control of your costs, as the sales house will do the job for a pre-arranged price or percentage of revenue. You should sell more ad pages than would otherwise be the case. CONS Face-to-face communication is preferable. In-house ad departments can meet with counterparts easily. P Your page yield will usually be much lower when you use a sales house. There are often many parties involved in an advertisement: agency planners and buyers; creative agencies; below the line agencies; client; editorial; sales. Why add another link? A media sales house is foused on several client’s sales goals, rather than just one, so there is more potential for a conflict if interest. Using a sales house is a short-term solution. Isn’t it a bit like renting a house when you should be investing in the future and buying one? ||**||

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