Launching an internet company in the the region can be a challenging endevour. While there is lots of startup activity going on, it is worthwhile looking at what those challenges are when starting up or assessing the success rate of the newest kid on the block. The three big challenges facing entrepreneurs in the region are:
- Low internet penetration
Across the entire Middle East and North Africa (MENA), you’re looking at approximately 25 million internet users (of which less than 6 million have broadband). But that doesn’t give you an accurate figure for the size of the market – to get that number we need to remove Iran and Israel which leaves us with an astonishing figure of under 10 million internet users and about 3 million broadband users.Whichever way you look at it, 10 million is not a big number. To put it into perspective, France alone has nearly 16 million internet users (with 12 million broadband users) but entrepreneurs are finding it difficult to start-up just for the French market. Loic Le Meur tells the story of Richard Branson telling him that his problem was that he was French which limited his market. Loic has moved to decided that it was too small a market to start Seesmic in so he moved to San Francisco.This of course does not mean it is impossible to build a company or site for the Arabic interweb, it just means that there is a problem of scale.
- Online advertising market immature
So even if you managed to capture a sizable chunk of the online audience, you’re faced with a problem of revenue generation. Forget trying to build a business based on a subscription model (which is so 1.0 anyway) since credit card penetration is probably lower than internet penetration. So what you’re left with is seeking out online advertising or sponsorship.I have yet to see a serious player in this market (if you know of one please let me know ASAP) which sadly means that there is no serious underlying business model. This is changing slowly – Google has setup shop in the region and has been promoting Adwords to the marketing folk but I suspect it will take some time before we see impressive CPMs. - The environment is not conducive for startups
But even if there was an advertising model that worked, we’re still left with the fact that there isn’t a strong internet startup culture and most online plays lack any serious innovation. Even the sweet services from the TootCorp gang are more or less localised versions of Silicon Valley startups (Ikbis = Youtube & Watwet =Twitter).Of course, this problem isn’t limited to the region but it should be something people are concerned about. I’ve seen people being put down in so many ways when trying to launch something new and novel. I have two university students interning for me – they are super-smart, motivated and hardworking. There is no reason that they couldn’t build a rockin’ internet company. Unfortunately I’ve seen many people (from lecturers to people who should get it) continually being totally hostile to the web projects they work on. Definitely not the way to foster innovation….And lest we forget the bureaucracy…
Challenges are meant to be overcome and I’m confident that progress will be made. With some of these challenges it is just a matter of time and maturity. Google has entered the regional market and have noted that based on their data there is a “trend that what happens in US/Europe happens 6-12 months later in MENA”. This, coupled with the following factors provide lots of opportunity:
- High mobile penetration
In some parts of the region the mobile penetration is just ridiculously high. As soon as the mobile operators start making data cheaper, there will be lots of interesting opportunities in the mobile web. Of course, chances are that you’re more likely to see a tripling in internet penetration before you see the mobile operators charging reasonable rates… - Rapid growth in Internet access
The market is small now but the population is approx 300 million so there is going to be lots of growth as people come online. - Youth Boom
This growth becomes much more interesting when you couple it with the youth boom in the region. Lots of young people mean lots of people ready to login. These young people have a thirst for information and expression. And it’s about time someone other than these ridiculous SMS to TV Music Stations filled this vacuum.
This website is a fantastic initiative to track how the market develops and what opportunities are being pursued. Whereever there is challenge, there is opportuniy!
Postscript : I’ve been loose during this post when talking about “the region”. One needs to be aware that you cannot speak of the Arab world as if it is one homogeneous entity where time and space does not matter (Edward Said already settled this in Orientalism almost 30 years ago). Some of the key differences within the region are:
- Internet and Broadband Penetration
- Available Technologies
- Disposable Income (Gulf States Wealthier)
- Languages (Arabic ubiquitous but also French, English, Farsi …)
- Different political realities / attitudes
- Different responses from political regimes
This is such a great article. Thank you Mohamed (both of you) for this.
I was just having this same discussion a couple of days ago, and i would like to add a couple of points to your post here.
First, I believe that we generally can not just offer translations of silicon valley based startups and pass them off as legitimate Arab startups. So i do not believe that the traditional path of “Oh, let’s make a new Arabic Facebook, or a new Arabic Flickr” will work. The audience (regardless of its size) is more intelligent and demands more. Plus, you have to offer your audience an incentive to migrate over to you, and language is often not big enough of an incentive. So i think new startups will have to follow new directions where they try to make their web apps fit the general audience instead of the other way around.
Additionally, we have to notice that the landscape in this region is different than other parts of the world, specially the united states. As you mentioned, mobile penetration is high, and many people always race for the latest and greatest mobile phones. Unfortunately the data capabilities of new mobile phones are not utilized in the Arab world. It is in part, as you said, due to the high costs. However, it is also because there isn’t any serious effort to target that sector. So, i believe that the next big startup should also take that into a consideration. Perhaps offer a service that relies on the internet and mobile platforms .. both of which being complementary and necessary to one another (rather than using the mobile platform as a mere after thought).
Anyway … this is a very thought provoking article. Thanks for it.
Also, can you please provide me for the source of that Google quote you mentioned ? I am very interested to read more.
This is such a great article. Thank you Mohamed (both of you) for this.
I was just having this same discussion a couple of days ago, and i would like to add a couple of points to your post here.
First, I believe that we generally can not just offer translations of silicon valley based startups and pass them off as legitimate Arab startups. So i do not believe that the traditional path of “Oh, let’s make a new Arabic Facebook, or a new Arabic Flickr” will work. The audience (regardless of its size) is more intelligent and demands more. Plus, you have to offer your audience an incentive to migrate over to you, and language is often not big enough of an incentive. So i think new startups will have to follow new directions where they try to make their web apps fit the general audience instead of the other way around.
Additionally, we have to notice that the landscape in this region is different than other parts of the world, specially the united states. As you mentioned, mobile penetration is high, and many people always race for the latest and greatest mobile phones. Unfortunately the data capabilities of new mobile phones are not utilized in the Arab world. It is in part, as you said, due to the high costs. However, it is also because there isn’t any serious effort to target that sector. So, i believe that the next big startup should also take that into a consideration. Perhaps offer a service that relies on the internet and mobile platforms .. both of which being complementary and necessary to one another (rather than using the mobile platform as a mere after thought).
Anyway … this is a very thought provoking article. Thanks for it.
Also, can you please provide me for the source of that Google quote you mentioned ? I am very interested to read more.
Good points.
The quote is from a Google presentation on AdWords in Dubai last year. Sorry – no online reference – I was there IRL 🙂
Good points.
The quote is from a Google presentation on AdWords in Dubai last year. Sorry – no online reference – I was there IRL 🙂
Finally some down to earth facts!
without a sufficient Internet population, there is no way you can put up a business that can scale fast enough to survive global competition, in fact, i find any website that has over 100K visits/day in the region to be a “miracle”
I don’t want to be overly pessimistic here but even the hopes related to the high mobile penetration should be scaled down, no matter how cheap data rates become, it will ALWAYS be too expensive for users… i had an interesting chat recently with a top manager of a tunisian mobile operators, basically he said “if we take a snapshot ANYTIME of the current customer prepaid credit, we ALWAYS get this result: 98% of customers have less than 5DT (roughfly 4 dollars) in their account and prepaid customers outnumber postpaid ones by 100 to 1”
other astonishing facts:
do you know how many PCs have been sold in Tunisia (an average income country) ever since PCs have become a commodity (early 90’s)? 750K! that includes schools, public sector, businesses, everything!
knowing that most of them are pretty old now, that leaves us with merely 200/300K internet usefull computers…
One last thing, of the 300M+ arab population, the UN estimates there are 90/100M illiterate people…
Basically, w’re not gonna experience a real web boom anytime soon.
knowing that, it is still worth the try, the arab region is the one showing the biggest growth in Internet penetration rates right after China & India, it’ll just take a lot of time
Finally some down to earth facts!
without a sufficient Internet population, there is no way you can put up a business that can scale fast enough to survive global competition, in fact, i find any website that has over 100K visits/day in the region to be a “miracle”
I don’t want to be overly pessimistic here but even the hopes related to the high mobile penetration should be scaled down, no matter how cheap data rates become, it will ALWAYS be too expensive for users… i had an interesting chat recently with a top manager of a tunisian mobile operators, basically he said “if we take a snapshot ANYTIME of the current customer prepaid credit, we ALWAYS get this result: 98% of customers have less than 5DT (roughfly 4 dollars) in their account and prepaid customers outnumber postpaid ones by 100 to 1”
other astonishing facts:
do you know how many PCs have been sold in Tunisia (an average income country) ever since PCs have become a commodity (early 90’s)? 750K! that includes schools, public sector, businesses, everything!
knowing that most of them are pretty old now, that leaves us with merely 200/300K internet usefull computers…
One last thing, of the 300M+ arab population, the UN estimates there are 90/100M illiterate people…
Basically, w’re not gonna experience a real web boom anytime soon.
knowing that, it is still worth the try, the arab region is the one showing the biggest growth in Internet penetration rates right after China & India, it’ll just take a lot of time
I have a different more optimistic view. I disagree with many of the facts in the article. The number of Internet users in the Arab world is above 35M…Maktoob alone has 10M and this is an ABC audited number.
The author might have been refering to Internet connections but there are at least 3 users on average per connection at home and at work. We have 200 users per 10 connections at our office. So the number of 35 M is more accurate. At Maktoob we have a 10M reach which not many TV stations in the region have.
As for online advertising it is a growing market and Maktoob, Ameinfo, Zawya, ITP , Google are just some examples of companies making money. I also know of several one man show sites making between 5 and 15k a month, better than any other job they can get.
My view is more optimistic. The numbers are good and growing fast and its the begining. If you are an entrepreneaur with a good idea and you have a good business model, management team and financing then this is the future and more and more advertsiing dollars will shift online in the next 10 years.
I have a different more optimistic view. I disagree with many of the facts in the article. The number of Internet users in the Arab world is above 35M…Maktoob alone has 10M and this is an ABC audited number.
The author might have been refering to Internet connections but there are at least 3 users on average per connection at home and at work. We have 200 users per 10 connections at our office. So the number of 35 M is more accurate. At Maktoob we have a 10M reach which not many TV stations in the region have.
As for online advertising it is a growing market and Maktoob, Ameinfo, Zawya, ITP , Google are just some examples of companies making money. I also know of several one man show sites making between 5 and 15k a month, better than any other job they can get.
My view is more optimistic. The numbers are good and growing fast and its the begining. If you are an entrepreneaur with a good idea and you have a good business model, management team and financing then this is the future and more and more advertsiing dollars will shift online in the next 10 years.
Maktoob is part of the “Miracle” web sites i was referring to along with kooora and a couple others
More seriously, it’s great to see some people succeed in this field, sure the market is growing, and there will be more and more opportunities, but i still think, one should be relatively pessimistic, i’ve seen so many fail, when they actually had a great product, the funding and everything else… they just lacked proper knowledge about the market, some down to earth figures are an eye opener and energy saver
Maktoob is part of the “Miracle” web sites i was referring to along with kooora and a couple others
More seriously, it’s great to see some people succeed in this field, sure the market is growing, and there will be more and more opportunities, but i still think, one should be relatively pessimistic, i’ve seen so many fail, when they actually had a great product, the funding and everything else… they just lacked proper knowledge about the market, some down to earth figures are an eye opener and energy saver
I agree with Samih’s optimistic view.This sure does seem like the current trend in the middle east. Add to that that big giants like Google & Yahoo are eyeballing this region .. so there must be signs of change and high growth.
I still think that business and operational models should be adapted to better fit our region & culture. However, even without that you are seeing some good progress.
I agree with Samih’s optimistic view.This sure does seem like the current trend in the middle east. Add to that that big giants like Google & Yahoo are eyeballing this region .. so there must be signs of change and high growth.
I still think that business and operational models should be adapted to better fit our region & culture. However, even without that you are seeing some good progress.
OK so internet users in our region cannot be compared to those in other regions of the world, but we are talking about internet startups here,right?
internet equals international , why to limit yourself to a certain group of people if you have the whole world?
i mean who said we cannot create a real internet company , a website that is used by users from different regions, different cultures, and different languages.
OK so internet users in our region cannot be compared to those in other regions of the world, but we are talking about internet startups here,right?
internet equals international , why to limit yourself to a certain group of people if you have the whole world?
i mean who said we cannot create a real internet company , a website that is used by users from different regions, different cultures, and different languages.
Nice article.
I think the number of internet users is more than 10M (Around 3M in Saudi, say 3M in Egypt, maybe 2 or 3M in UAE alone.. what about others?), and Samih has answered this point more accurately.
The number is growing fast, and again the number of ADSL lines bring at least 2 people in the game .. at home i have a signle ADSL connection, with 5 people connected to it using their own PCs and Laptops. Parts of the region will have bigger growth (Gulf Counties) than others for many reasons.
But again, lets focus on the point:
If entrepreneurs are going to build something, why focus on the Arab world? why not the whole planet? why limit our self to any geographical restrictions? why focus on the 10M or 35M and leave >200M in the US and >200 in China? Google, Facebook, Youtube and others didn’t focus (only) at their local market (which might be enough for them), but kept their system scalable to adapt with any person who wants to use their service.
That was our main reason of building darrb.com (marketplace for delivery services)in English and keeping it as restriction-free as possible. We believe we have a genuine new idea that wasn’t copied from any where and has a big potential to be integrated with different Internet activities/marketplaces.
ebay has made a lot of people become millionaires. they started by selling useless stuff in their garage and ended up opening companies that “ONLY” sell through ebay.. these companies now employ a big number of people .. we are talking about tens of millions of peoples around the world who use ebay and a lot of them depend on it for living! if we can have something similar .. something that creates such a big change in how things are done, we will get more people in the Internet game soon & this is how to create a boom:) create a reason that makes people run to shops and buy PC or laptops to get a peice of the cake:)
Nice article.
I think the number of internet users is more than 10M (Around 3M in Saudi, say 3M in Egypt, maybe 2 or 3M in UAE alone.. what about others?), and Samih has answered this point more accurately.
The number is growing fast, and again the number of ADSL lines bring at least 2 people in the game .. at home i have a signle ADSL connection, with 5 people connected to it using their own PCs and Laptops. Parts of the region will have bigger growth (Gulf Counties) than others for many reasons.
But again, lets focus on the point:
If entrepreneurs are going to build something, why focus on the Arab world? why not the whole planet? why limit our self to any geographical restrictions? why focus on the 10M or 35M and leave >200M in the US and >200 in China? Google, Facebook, Youtube and others didn’t focus (only) at their local market (which might be enough for them), but kept their system scalable to adapt with any person who wants to use their service.
That was our main reason of building darrb.com (marketplace for delivery services)in English and keeping it as restriction-free as possible. We believe we have a genuine new idea that wasn’t copied from any where and has a big potential to be integrated with different Internet activities/marketplaces.
ebay has made a lot of people become millionaires. they started by selling useless stuff in their garage and ended up opening companies that “ONLY” sell through ebay.. these companies now employ a big number of people .. we are talking about tens of millions of peoples around the world who use ebay and a lot of them depend on it for living! if we can have something similar .. something that creates such a big change in how things are done, we will get more people in the Internet game soon & this is how to create a boom:) create a reason that makes people run to shops and buy PC or laptops to get a peice of the cake:)
Murshed, yea sure, there is enough talent to “go for the world”… But the environment we live in is awfull, everything is VERY slow in our region, setting up a proper infrastructure (personal experience: it took us 4MONTHS to setup an 8 server hosting bay with the best provider in tunisia, this takes an hour in france and 30minutes in silicon valley), dealing with bureaucraty (in most arab countries you need to go through complex procedures to be able to pay your stuff online legally, even 10buck domain names)
Recrutement is also a problem, finding smart AND motivated people, is often a daunting task, not to mention explaining to your banker you need the money for marketing, salaries and you won’t be buying any heavy equipment or trucks… let’s face it, we live in a different world
Imagine you have a great idea at the same moment than a person in SF, one year later, i bet y’ll still be struggling for the money, the guy in SF would be at IPO stage 🙂
Murshed, yea sure, there is enough talent to “go for the world”… But the environment we live in is awfull, everything is VERY slow in our region, setting up a proper infrastructure (personal experience: it took us 4MONTHS to setup an 8 server hosting bay with the best provider in tunisia, this takes an hour in france and 30minutes in silicon valley), dealing with bureaucraty (in most arab countries you need to go through complex procedures to be able to pay your stuff online legally, even 10buck domain names)
Recrutement is also a problem, finding smart AND motivated people, is often a daunting task, not to mention explaining to your banker you need the money for marketing, salaries and you won’t be buying any heavy equipment or trucks… let’s face it, we live in a different world
Imagine you have a great idea at the same moment than a person in SF, one year later, i bet y’ll still be struggling for the money, the guy in SF would be at IPO stage 🙂
i think thats all true since we couldnt target the right gaps that facebook and others similar are missing that we need in the arab world, so facebook was the only one for arabs to trust as going with the flow. I have been working for the past year on developing a state of the art arab/english social network website that targets not just the arabic language but also the arabic nature and culture in terms of our privacy and our closeness to family as well as friends, that led me to create fameego which will have all what we need in one portal… its not in beta/prototype phase which you see at http://www.fameego.com
i think thats all true since we couldnt target the right gaps that facebook and others similar are missing that we need in the arab world, so facebook was the only one for arabs to trust as going with the flow. I have been working for the past year on developing a state of the art arab/english social network website that targets not just the arabic language but also the arabic nature and culture in terms of our privacy and our closeness to family as well as friends, that led me to create fameego which will have all what we need in one portal… its not in beta/prototype phase which you see at http://www.fameego.com