Internet giant bases Middle East activities in Egypt

Daily News Egypt
6 Min Read

CAIRO: Google Inc., the company behind the world’s most popular search engine, continues to build up its presence in the Middle East and, to the surprise of many, has decided to base its activities in the Middle East and North Africa region in Egypt instead of Dubai. Since Dubai is associated with a healthier investment climate and lower costs of doing business, it has attracted a large number of Middle Eastern headquarters across industries and many had speculated that it would attract Google as well.

Google has instead simply gone where most of its customers are. Egypt has the largest number of Internet users in the region with over 5 millions users, followed by Saudi Arabia, Morocco and the UAE.

“The places Google does best are the places that have a large percentage of SMEs and Egypt has a well developed family type of business, says Sherif Iskander, Google’s regional manager for the Middle East and North Africa. The sheer number of advertisers in Egypt is higher then anywhere else in the region, although it is not the biggest advertising market in terms of advertising spending.

However, IT penetration of Egyptian SMEs remains very limited. Less then 5 percent of SMEs are estimated to have Internet access, although that number is growing quickly. “It is not a concern to us; we see it as an opportunity. They will have to come online. It’s just a matter of when.

Egypt’s booming tourism industry has also attracted Google Inc., as it forms one of its largest advertising markets. To illustrate how much local businesses have to gain, Iskander cites the examples of diving centers, which for a daily advertising budget of LE 65 can attract several customers spending LE 1,800 each at the center. Iskander expects financial services such as insurance and banking as well as stock brokerage to become a second pillar of online advertising in Egypt soon, as these services are fairly underdeveloped but are growing fast.

Google needs nothing more than local content to be able to sell customized and targeted ads associated with it. But in this sense, the market is not ready for Google. Local content is lacking and Google Inc., with its business model based solely on advertising, will first have to put an effort into creating its market by generating such content.

Less then 1 percent of the Internet’s content is in Arabic, although it is the sixth most commonly spoken language. There are 23 million Internet users in the Arab world, more than in many smaller Western countries where users nevertheless enjoy tailored software programs in their respective language. If the needs of this given market were addressed, the number of Internet user could jump once enough local content is provided across the region. Access as a barrier to Internet usage is also being addressed across the region. In Egypt, ADSL tariffs just came down significantly, from LE 150 to LE 95 per month for a 256k-connection.

However, the online advertising market in the Middle East remains quite small; Iskander estimates that the market reached between $13 million and $25 million in 2005.

In order to spur growth in the market, Google has begun addressing the lack of local content. Google has already developed its search offer in Arabic, as well as its news portal.

“We are trying to at least put the limited amount of content in one spot, says Iskander. In addition, Google Inc. offers a tool to translate articles and Web sites from English into Arabic to further increase Arabic-language content.

Iskander sees high costs as the main barrier to local content. Google Inc. hopes its free communications tools and tools to create an Internet presence will be a first step in boosting Internet adoption by users and SMEs. “We start making money when they promote themselves online, he says. Users could then generate money with Google’s advertising and search tools.

One reason why the Middle East is amongst the last regions of the world to be addressed as a market of its own by companies such as Google Inc. is the complexity of the Arabic language. Iskander would not say what costs are associated with developing search instruments in Arabic, saying that Google does not break down its development costs into different languages.

While Google’s decision to administer its regional activities from Egypt is something for the government to advertise with, it will have minimal impact on employment in the industry. An online giant such as Google Inc. does not need a lot of personnel on the ground, so Iskander is building up Google’s presence in the region by himself. While he is currently trying to hire people to be based in the main MENA markets, he is also looking for Arabic-speaking product managers to serve as an interface between the market and the products, although it is unclear yet whether they will be based in Cairo or London.

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