NAIROBI (Reuters) - The arrival of global advertising agencies has raised the stakes in east Africa’s $1 billion market, with new players hoping to wrestle a piece of the action from the Kenyan company Scangroup, the regional leader.
French-based Havas Media International and South African media group Carat, a unit of Aegis Media, are also angling for a piece of the action in a sector fuelled by a fast-growing middle class in Kenya, east Africa’s largest economy.
Kenya’s advertising market accounts for over half the more than $1 billion annual revenue in the region, according to research firm Ipsos Synovate.
Tim Smyth, chief executive of TBWA, a unit of U.S. group Omnicom, is headhunting local talent to help set up shop, igniting a bidding war with other new entrants.
“It is a bit challenging to break into a market with a dominant player. But we believe we have the capacity and experience to do so,” he told Reuters.
Smyth was referring to Scangroup, the only listed marketing and advertising company on the Nairobi bourse and part-owned by the world’s largest advertising group WPP.
Scangroup has gobbled up smaller firms and struck partnerships to help it ease into new markets, putting it in pole position in sub-Saharan African economies.
With this strategy, Scangroup has grown its market share in the region to nearly 80 percent, bagging most of the big deals.
The group does not see this changing even with new entrants.
“Competition will always come in, but a lot of our clients expect us to deliver across multiple African countries and not only east Africa because we have a fairly large infrastructure,” said Bharat Thakrar, Scangroup’s founder and CEO.
“We acquired Ogilvy because they had a bigger print across Africa, which expanded our base on the continent.”
Scangroup stole a march on Omnicom and its U.S. peer Interpublic by buying Ogilvy & Mather, giving it access to new markets in Africa.
Small east African ad agencies are also seeking to embrace global firms so as to extend their regional presence, and secure bigger and more lucrative deals.
One such firm is Nuturn, which expanded its services and footprints through partnerships with Creative Eye in Tanzania, Centric Branding in Rwanda and Ongea Consult in Uganda.
Such partnerships have been the preferred entry vehicles for firms like TBWA, Havas and Carat into the region.
“The focus now is on the developing world and in Africa they have realised that there are one billion emerging consumers of which 355 million are already considered middle class,” said Grant Fraser, a director at Aegis Media.
A deepening euro zone crisis, tepid U.S. job creation and slowing growth in China have prompted cutbacks in the global ad spending so far this year, but emerging markets such as Africa have recorded double-digit growth in recent years.
According to the World Bank, seven out of the top 10 fastest-growing economies globally are in Africa. The world’s poorest continent is seen as a big destination for global investment.
East Africa is also focusing on expansion of roads, ports and airports as spelt out in national budgets. The region has also become a hotspot for oil and gas after large new finds inland and offshore east Africa.
Gina Din-Kariuki, who founded Gina Din Corporate Communications 10 years ago, said there was still room for more medium-sized firms such as hers as well as global players.
“Media now is widespread and that poses a huge potential for marketing and advertising firms,” said Kariuki, referring to the growth in mobile phones usage in Africa.