More than 10 year ago in a suburban California garage, Google started its endeavour to change the internet. The firm's start with only a few of the world's smartest minds and dozens of lines of programming code could not have signalled the vast fortunes that lay ahead.
Today, Google is an immense operation. The company dominates the search and online advertising sectors, while its entry into the mobile phone market with its Android operating system offers a glimpse of what might yet come. But the real secret to Google's success is not the code behind its website ranking system. Far from it. Although that is an impressive piece of technology, the company's leadership team has been savvy enough to leverage its existing brainpower to acquire innovative start-up ventures that fit nicely into its long-term vision.
Using some of the revenue Google saw trickle in during the first few years of operations, the company began a spending spree to open new doors and invite more people to use its services. Since 2001, Google has purchased 59 other firms, a rate that exceeds its rivals Yahoo and Microsoft in scope. The company integrated many of these firms to launch successful offshoots of its main business, each linked to its search engine to keep users' eyeballs firmly within the website and its advertisements. In 2003, GeniusLabs became Google's Blogger; in 2004, ZipDash, Where2 and Keyhole were all bought to create Google Maps; in 2006, YouTube was acquired and incorporated into the Google fold.
Because the final purchase price in many of these deals was not disclosed, it is difficult to know precisely the size of Google's outlay on acquisitions, but industry observers estimate it is between US$8 billion (Dh29.38bn) and $10bn. Last year's recession stalled Google's expansion efforts, with close to one year passing from September 2008 without a single acquisition. Since August, however, a flurry of deals have transpired, with Google purchasing companies rooted in mobile advertising and voice-over-IP technology, instantly making the search engine giant an intimidating presence in those sectors.
But the failure this month of a $500 million deal for Google to acquire Yelp, a website that lets its users review local businesses, is a telling sign that the muscle behind Google's acquisition plans may be beginning to weaken. Rumours abound that Microsoft may be behind a larger offer to buy Yelp. This may be a good time for Google to look beyond North America to discover new growth opportunities.
It is easy to point to Yahoo's purchase of Maktoob for an estimated $100m in August as a precedent for something greater to come in the Middle East region. It is also easy to point fingers at the venture capital industry or governments for a lack of aid for Middle Eastern start-up businesses to create a better environment for entrepreneurs to grow and ideas to be incubated. Google's presence in the Middle East is, frankly, quite abysmal. While it does offer an Arabic version of its search engine as well as other services such as a reader for really simple syndication (RSS) and an online word processor, Google has the potential to offer so much more in the region. Ejabat, a service that aims to answer specific queries in real time, has been an interesting experiment with roughly 1,000 contributing users.
Google only has two offices in the Middle East, one in Cairo and the other in Dubai, but there are no plans to expand to Jordan or Lebanon, where the bulk of Arab start-ups are based. A position advertised on Google's careers website for the head of its Arabia operations has remained unfilled for several months. There is a growing network of Arab entrepreneurs already making do without any help. Their business acumen and ambition cannot be ignored. Take the Lebanese start-up Woopra, a real-time web tracking application that was recently feted as one of the year's top 25 start-ups by ReadWriteWeb, an influential technology blog.
Or Egypt's Enpronomics, a software development company that won a contest last month by Nokia intended to encourage the creation of Arabic-language mobile applications. Yamli.com, founded by a pair of Lebanese entrepreneurs but based in Boston, is trying to help change the way Arab users search by providing a much simpler method of inputting syntax online. There is not enough ink available to suggest specific ventures that Google could easily transform into success stories. And there is the sociopolitical windfall that the region stands to gain from the involvement of a company of Google's stature.
But as bullish as one could be about the Middle Eastern online market, companies such as Google must be realistic as they enter the space. The online advertising market is expected to grow to $100m next year, a paltry fraction of the billions of dollars that the North American or European market can offer. While it may not be profitable to have a dominating presence in the Middle East today, with about 28 per cent of the region's population of 200 million online, there is a vast opportunity for Google here. The company could easily emerge as a white knight and help drive internet usage to make any venture here sustainable. Yahoo may already have a head start with its Maktoob purchase, but Google's existing cash reserves, reputation and stability could make any competitor buckle.
There are countless technology start-ups in the Middle East that have recently been born in the same circumstances as Google's 10 years ago All it would take for Google to reshape the internet in the Middle East, as has been done in the western world over the past decade, would be a sincere push into the area. And, to borrow one of Google's search features, a little bit of luck. @Email:email@example.com