x Abu Dhabi, UAEMonday 24 July 2017

Yahoo's Maktoob purchase Middle East's internet dawn

Insight In years to come, we are likely to look back on the history of the Arabic web and say its golden age began with Yahoo's acquisition of Maktoob.

(Left to right) Malek Sultan Al Malek (Executive Director of Dubai Internet City), Keith Nilsson (Senior Vice President, Emerging Markets, Yahoo Incorporated) and Samih Toukan (Founder of Maktoob Company) share a light moment after the press conference announcing the deal.
(Left to right) Malek Sultan Al Malek (Executive Director of Dubai Internet City), Keith Nilsson (Senior Vice President, Emerging Markets, Yahoo Incorporated) and Samih Toukan (Founder of Maktoob Company) share a light moment after the press conference announcing the deal.

Yahoo's purchase of the local dotcom was a win for the true believers. Investors and young entrepreneurs are promising it will be remembered as the start of an era. While real life may be more complex, history books will often point to a single event as the beginning of an era. Just as we say modern Europe began with the French Revolution, conventional wisdom says the dotcom bubble started with Netscape's multibillion-dollar public offering.

In years to come, we are likely to look back on the history of the Arabic web and say its golden age began with Yahoo's acquisition of Maktoob. It is not just the money, although the price tag estimated at between US$75 million (Dh275.4m) and $100m has certainly made millionaires of many, and will become the figure that untold numbers of young Arab entrepreneurs have running through their head as they slave over their keyboards late into the night.

And it is not just that in being bought by Yahoo, Maktoob and its employees have become part of one of the great internet companies, which has been at the centre of the web since the beginning. What makes this deal truly historic is that it has given a vital dose of value, respect and validity to an Arab web industry that has spent far too long in the shadows. For more than a decade, the fruits of millions of hours of labour by some of the region's brightest young entrepreneurs have been largely ignored, not just by global businesses but by their own economic and political leaders.

Ahmad Humeid, a veteran entrepreneur and investor in Jordan's web community, reacted to the acquisition with pride and optimism but also regret at a lost decade where the market was given little attention. "This has taken far too long and actually it is a little pathetic when you think that we are celebrating the region's first major deal almost 15 years into the web," Mr Humeid said. "It is crazy that in a region as rich as the Arab world, it took until 2009 for something like this to happen."

Mr Humeid was part of a team that built Arabia.com, one of the first Arabic-language dotcoms, back in 1995. The venture attracted funding and considerable attention from the fledgling internet community, but never quite took off, quietly dying before the number of web users in the region began its explosive growth. "If you look back then, starting such a business was an unlikely thing to do in this kind of environment," Mr Humeid said. "If we had concentrated on buying and selling land we would have made more money."

Across the region, a similar logic has badly hurt the development of an internet industry. Citizens of Gulf states enjoy an abundance of money-making opportunities, from being the sponsor and silent majority partner of a foreign business to taking part in the region's infrastructure and property booms. Risking it on a dotcom made little sense. In North Africa and the Levant, a similar challenge held back entrepreneurs. In Cairo, Beirut and Amman, money and ambitious graduates were flocking to the property and finance sectors, both of which were flush with petrodollars.

Entrepreneurs with a passion for the internet and the revolutionary changes it entails built websites and did their best. But few were interested in helping them. Things have changed. The acquisition of Maktoob has acted as a mirror for the follies of less successful investments, showing an inverted image of the billions lost in speculative stock and property gambles. Maktoob and its core group of brilliant young entrepreneurs have slowly but surely built a business empire based on an assumption that turns out to be more correct than one which hopes property and stock prices will always rise: hard work, talent and innovation will inevitably be rewarded. It is a lesson that will inspire many more like them.

It should also inspire the region's investors to take a closer look at the huge value that is yet to be created on the internet. Maktoob's success shows that the space for a good web portal is clearly profitable. But what about online shopping, entertainment downloads or price comparison sites? Billion-dollar businesses have been built out of each category in foreign markets, and they will inevitably become similarly successful in the Middle East.

"There is a certain mindset out there among regional investors to wait until the big players come in before entering a market," said Emile Cubeisy, who heads IV Holding, the region's most active venture fund for internet companies. "Those people will now take a much closer look, come in and play a much larger role in the future of the industry." Fadi Ghandour, the founder of the logistics group Aramex and one of the Middle East's most successful entrepreneurs, was amazed at the low-key coverage that the acquisition received in the Arabic media.

"I turned on the television after the announcement and the business channels were talking about oil prices, stock markets, when this is clearly the biggest business story of the year," he said. But while the importance of the deal may take time to be absorbed, Mr Ghandour, a founding investor in Maktoob who kept his stake to the end, thinks its impact has not been lost on the entrepreneurs of the future.

"Their success is going to be very contagious," he said. "It means so many things to so many people, and most importantly for entrepreneurs it shows that it can be done, from the idea to the execution to the big payday, it can happen. "And I know that because of this deal, so many young entrepreneurs are going to make it happen." tgara@thenational.ae