5 - 11 July 2001
Issue No.541
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Al-Ahram Weekly Online 5 - 11 July 2001 Issue No.541 |
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'The yin and yang of IT'
The hippie days of the Internet are gone and as competition heats up among Egypt's IT portals, commercial ambition replaces vows to save the world, Jasper Thornton reports
Though they work with high technology and are at the vanguard of the new economy, IT people are a mystic bunch. They are moved by the need "to defend Egyptian culture." They vow to renew the world. They fondly quote inscrutable Eastern philosophers. They make up the rules as they go along.
But Egypt's IT landscape is getting awfully crowded. The world of portals is getting especially competitive. Last month, US giant Microsoft signed Orascom's LINKdotNET to provide the content for their huge regional portal, MSN Arabia. MSN Arabia's main sparring partner will be Noor, a portal with $170 million worth of investment set to launch "shortly."
New giants like Noor and MSN Arabia menace smaller jacks like Om El-Donia and Masrawy. Om El-Donia's boss has been flying to the US to court investors in order to survive the coming scrambles. Arabia.com reportedly received a $20 million injection. Suddenly the easy frolicking with the cash of excitable investors is no more. Tough business ethics are setting in, edging out flightier fancies. Keynes elbows aside Confucius; Friederich Hayek supplants Lao Tzu.
But, still, despite the need to answer the accountants, Egyptian IT retains its engaging personality. For those who like their business heroic, even the advent of economic reality doesn't daunt. A portal boss described the new shape of the portal world to Al-Ahram Weekly thus: "Medium-sized companies won't survive. Portals must be big, or small, niche players. You could call them the yin and yang of IT."
Ihab Heikal must be a "yin" man. The Masrawy boss will keep his portal "lean," and chase a specific market. Although Masrawy is dubbed a portal, it is actually several discreet sites, serving esoteric ends, linked to each other. Those specialised ends are grounded in the needs of "Egyptians here, and abroad." Heikal took the Weekly on a tour of his site, pointing out the features that bigger portals may find hard to mimic. "Our site is in Egyptian Arabic: the script operates even if you don't have an Arabic-enabled computer," Heikal says. "We have a games zone, with very Egyptian games like tawla (backgammon)." A graphic of a shisha (water pipe) smoking in the background adds to the local flavour. Masrawy also offers e-mail addresses based around the name of Ahli, Egypt's best-known football club.
If Masrawy ever merges, Heikal is keen that his new partners add to the local tenor of his site. "We look for synergies. You have to look at the details. If you just do it to be on the news, it's the equivalent of hara-kiri [ritual suicide]." It is rumoured that Masrawy will merge with local sites par excellence, Mazika.com (Egyptian music), and Otlob.com (the first online delivery service).
Heikal has good reason for preferring the particular and the local over the regional and grand. He thinks that most people are conservative. He points to a Masrawy user poll. "When asked what qualities they seek in a spouse, almost half of respondents answered 'religion'. Personality was important for 35 per cent. Only nine per cent value looks, while eight per cent go for 'fitness.'" Heikal is just the man to mine this seam. He feels that if Egyptians "don't stand up, we will lose a beautiful part of our wonderful culture." He wants a law that forces Egyptian Web sites to display in Arabic. After all, "freedom of speech is important, but identity is more so. Ultimately it's not about a market, it's about 'a people'."
Lofty as this sounds, commerce is not to be forgotten. Masrawy has far and away the most users of any Egyptian portal, something in the region of a quarter million. And Masrawy barely advertises. "Word of mouth is how we've grown," Heikal says. His challenge now is to turn those numbers into earnings -- something he has yet to achieve.
Over at Link, however, CEO Khaled Bichara is going the "yang" route: big, brash, muscular, masculine. "People will have so much more confidence in us than a small, local portal," Bichara told the Weekly. His virile rhetoric comes from having considerable substance behind him, given Link's recently signed deal with Microsoft's MSN to launch the regional portal MSN Arabia. And Link itself is no small fry: it is owned by the mighty Sawiris group.
Microsoft's regional chief for the Middle East, Emre Berkins, told the Weekly how he saw MSN Arabia succeeding: "We're big enough. And we're rich enough." He points to Microsoft's 1.8 million users in the region (mainly Hotmail users), who will be targeted for MSN Arabia. Noor, another portal with regional ambitions run by Basel Dalloul, acknowledges the same principles. With its nest-egg of capital behind it, Noor is planning to use Egypt as a launch pad for larger things.
The big boys have specific commercial considerations to take into account. Huge sites can lack the local feel that Heikal has identified as wanting in the region. MSN will "allow users to personalise their sites, to make them more homely," though you can already do this with the non-Arabic MSN. They will also get local partners (like Egypt's Link) to find culturally specific content for them. Bichara told the Weekly that this will not come from within the Link group alone. "We will seek out the best and most competitively priced [content]." This should keep quality high, but the content may be too inchoate to give the site a specific flavour. "Specific flavours," research has shown, is what makes sites "sticky", i.e., a place where Net surfers land and stay to look around.
Another difficulty specific to MSN Arabia is that its progress could depend on events in far off places. If MSN in the US does badly (as it is doing now), then Microsoft could decide to withdraw from the Middle East to cut costs. Bichara told the Weekly that it took two years for Link to sign a deal with MSN because management changes and market tilts kept MSN unsure whether or not the Middle East could add profitably to the MSN group. That problem will persist.
Nor are the 1.8 million regional users that MSN Arabia boasts quite the fillip they seem. Many use MSN because they like a site with an American feel, not an Arabic one. Nor can these users necessarily be harnessed as a bloc to sell to advertisers. An Egyptian goods company probably lacks the resources to transport and sell to, say, the Persian Gulf. When it advertises, it will want to target the Egyptians who are its market. Gulf Arabs are irrelevant. The 1.8 million MSN Arabia users pertinent to this Egyptian company would then suddenly contract to the number of MSN Arabia users in Egypt. And if a company has to spend on advertising, it would probably prefer an outlet that can reach tens of millions: the daily Al- Ahram, for example. Advertisers attracted to MSN Arabia's regional reach could, in fact, be few.
Bichara did suggest to the Weekly that MSN Arabia could help Egyptian companies which advertise with it go regional, by, for example, arranging for one delivery company to serve them all, thereby cutting costs for them. That is a smart idea, and may work in a few cases. But the logistics will be fiendish.
MSN's advantage is its name. And as most computer packages are written by Microsoft, links to MSN Arabia could be built into Internet Explorer shipped with computers in the Middle East, as Ihab Heikal pointed out to the Weekly -- though current court cases in the US may forbid that.
Noor's approach, and problems, are different. Dalloul, its dynamic CEO, will set up Noor in Egypt first, and content will be produced in-house. This has the advantage of ensuring that the local flavour of the site is maintained. This is also the route taken by Om El-Donia's CEO Tareq Ismail. The problem with in-house content is that quality can suffer when there isn't the backup of top syndicated material. News produced by a portal's content team will be weaker than that bought from a top newspaper. So the content team needs to be outstanding (signs are that it is).
Noor's piecemeal approach (Egypt first, the region later), has other weaknesses. To set up from scratch in new countries after Egypt will be costlier than it is for MSN, which will already be operating around the region. Noor's income comes from a deal with Egypt Telecom, so it will need to negotiate other such deals with other telecom companies to be viable outside Egypt, which could be ticklish. The bonus is that growth is easier to manage, and Dalloul can ensure that local flavour is maintained, even while growing. A collection of sister sites (Noor Egypt, Noor Saudi Arabia, etc.) would have the personal touch that "MSN Arabia" lacks. To succeed, Noor must build its brand name to overcome the majesty of the MSN logo. To do so, it will be an advantage to launch before MSN Arabia. Noor was due to launch in June, but has delayed while it seeks out the best servers. It ought not to delay too long.
In a way, the problems for all the companies are "yin" ones. Whatever regional ambitions portals have, they must succeed locally first. "Arabia" is not an integrated area: language varies, few businesses export around the region and a plethora of telecom companies and regulatory architectures govern Middle East IT. Opportunities to leverage regional mass to advantage will be slight: advertisers will look at numbers in individual countries first, not regional ones. So all the portals mentioned are in direct competition with each other: even the big ones. Yin and yang is about harmony. But more portals are now chasing limited users and there will be quite some scrap ahead. The winners may be those who take their cue from the martial, not the mystic, arts.
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