Profiting from growth in online Arabic content

As the number of active internet users among the world’s 630 million Arabic speakers grows and consumers in the Middle East demand more relevant and locally produced original material, global online media leaders like Google and CNN are investing substantially to boost Arabic‑language online content.

Launch of Arabic domain names will boost online content

By Peter Feuilherade

This article was first published in The Middle East magazine, London, May 2014 issue.

 

A report by the global consultancy Booz & Company estimates that the number of active Arab internet users will rise to 13 million by 2014, compared with 10 million in 2012. The study also reveals that around 37% of internet users in the MENA region are not satisfied with the availability of Arabic websites.

Google notes there has been a great improvement in Arabic online content creation in the last two years. However, Arabic content still comprises only about 3% of overall internet content, and there is “a huge gap between the number of people who speak Arabic and the amount of content available online,” according to Maha Abouelenein, head of communications at Google for the MENA region.

CNN recorded a 70% increase in unique users and visitors to its Arabic‑language portal, CNNArabic.com, during 2013.

Al‑Jazeera, MSN Arabia and BBC Arabic are also driving growth in Arabic-language news content. Meanwhile internet giant Yahoo’s Middle East portal, Yahoo Maktoob, has revamped both its Arabic and English content. It promises extensive football coverage in the run‑up to this year’s FIFA World Cup in Brazil, including exclusive analysis from Chelsea manager José Mourinho, Yahoo’s “football ambassador” signing for 2014.

The growth potential for content in Arabic is immense, and the arrival and spread of Arabic domain names will be a major boost.

The first Arabic top-level domain name, meaning “web” and transcribed in English as “shabaka”,  was approved for use in March 2013 by California-based ICANN (the Internet Corporation for Assigned Names and Numbers), the global authority which manages the world’s domain names and IP numbers. Shabaka became generally available in February 2014, in the anticipation that it will stimulate a new phase for Arabic content online.

dotShabaka Registry is a Dubai-based internet technology company behind the new domain name. Yasmin Omer, general manager of dotShabaka Registry, explained that while previously search engine users had to type in English and use web translation to get into Arabic websites, with the introduction of .shabaka, they could now type in Arabic and get directly into Arabic content. “There is no better way for businesses to demonstrate their affiliation with the Arabic language online than by registering a domain name," Omer told the Abu Dhabi newspaper The National.

As the market for online content in Arabic expands, a growing proportion of the content is appearing in video rather than text form.

According to a March 2014 survey from Jordan-based Startappz, an app developer and digital advertising agency, about 93% of the videos produced in the Middle East are in Arabic. Technology and gaming, news, music and comedy are all popular categories.

Content producers on Google-owned YouTube are rushing to meet the demand for Arabic content. With four billion views globally per day and a billion unique visitors per month, YouTube launched its monetization policy in 2013 in the UAE, Saudi Arabia and Egypt. This allows users to earn money from content uploaded.

"We have 310 million views a day and have two hours of video uploaded every minute and most of it is in Arabic," said Diana Baddar, YouTube video partnerships manager for MENA. “We also have the second largest presence in the MENA region after the US and have thousands of creators creating content in Arabic, which is diverse and popular.”

Top categories for videos produced in the Arabic language “are across general entertainment like comedy, music and movies”, according to Google.

Although YouTube offers only visual content, the site could be significant in adding to the overall online content in Arabic. “General Arabic content, regardless of where it came, is a plus. It is the right step in increasing Arabic content,” said Dr Fayeq Oweis, a language services manager for Google.

But analysts point out that increasing digital content does not simply mean creating more websites and mobile apps in Arabic. High-quality content is also required from producers in ‘traditional’ industries such as writers, film makers, game publishers and government bodies.

Education and learning, information services, entertainment and gaming, and social media are seen as among the most profitable sectors. A report by the US market research firm Ambient Insight forecast that revenues for self‑paced e‑learning products in the Middle East would reach US$ 560 million by 2016, with the public and private academic institutions comprising the region’s biggest buyers.

Another area to benefit from the expansion of Arabic content is the Middle East’s e‑commerce market, in which the UAE, Saudi Arabia and Qatar are the current leaders. A study by PayPal forecasts that e‑commerce across the MENA region will grow to US$ 15 billion by 2015, with 10% of transactions done via mobile devices. The Gulf has some of the highest rates of smartphone penetration in the world, with the UAE close to 200%, closely followed by Saudi Arabia.

Annual revenue on smartphone applications in the Middle East is predicted to reach more than US$ 200 million by 2015 as demand for Arabic‑language applications increases.

In March 2014 the Dubai-based e‑commerce site Souq.com raised US$ 75 million in funding from the South African media conglomerate Naspers. Souq will invest part of this funding on developing its mobile technology, as its founder and CEO Ronaldo Mouchawar is adamant that the high mobile penetration rates in the GCC region are providing a major boost to e-commerce.

The deal for a stake in Souq.com valued the company at more than US$ 500 million. A Wall Street Journal commentator described it as “another milestone for e-commerce in a region traditionally averse to transacting online”.

Although the private sector has been the driving force behind most Arabic content produced in the region, multimillion dollar projects to expand electronic government (e‑government) have also created opportunities for content developers. Again, the lead is coming from the GCC states. All six member countries operate their own e‑government portal. They are now in transition to the next stage, which will see the rapid expansion of the provision of public services over smartphones and similar mobile devices.

Finally, another massive expansion of Arabic content is expected to flow from the various “smart city” projects that have been launched in the Gulf in recent years: six in Saudi Arabia, three in Qatar and two in the UAE: Masdar City in Abu Dhabi and Smart City Dubai.

Foreign investments a vote of confidence in Middle East e-commerce

 By Peter Feuilherade

Continuing broadband penetration across most of the Middle East and North Africa has not only boosted the numbers of Facebook and Twitter users but is also a major factor in the steady growth of e-commerce.

This article was first published in The Middle East magazine, January 2013 issue.

Electronic commerce, or e-commerce, is the buying and selling of products and services over the internet and other electronic systems.

There are currently more than 72 million internet users in Arab countries, who spend an average of two hours online daily. Euromonitor International forecasts a 54.7 per cent increase in internet users in the MENA region from 2012 to 2020, as more content in Arabic becomes available. There are more than 250 million mobile subscriptions in the region, with Saudi Arabia leading mobile sector growth.

Estimates of the current value of the region’s e-commerce market vary considerably.

The Jordan-based Arab Advisors Group puts the value of e-commerce related transactions in the Middle East at about $11 billion a year. The global e-commerce business PayPal, which launched its Middle East operations in November 2012, is similarly optimistic, estimating e‑commerce in MENA to be worth $9 billion in 2012.

A study by Visa and Interactive Media reported much lower figures, albeit based on data from 2010. It said that the UAE led the way among the Gulf states in e-commerce spending, with sales reaching about $2 billion in 2010, accounting for 55 to 60 per cent of total GCC e‑commerce sales. Saudi Arabia was the second largest market, with an estimated $520 million, followed by Qatar ($375 million), Kuwait ($280 million), Bahrain ($175 million) and Oman ($70 million).

But according to Euromonitor, online shoppers in three key markets - the UAE, Saudi Arabia and Egypt - spent just over $1 billion on internet retail sites in 2011, a figure expected to double by 2016.

Since only 15 per cent of businesses in the region have an online presence (according to Google), the take-up of e-commerce has been slow. And with many consumers still wary of paying for goods online, 70 per cent of the region’s e-commerce deals are cash-on-delivery.

In the words of the New York Times, e-commerce in the Middle East “is still relatively young and fragmented, extremely capital intensive, and facing logistical hurdles that have led many sites to shut down… But success stories are now starting to emerge.”

Foreign investment

In recent months international investors have committed tens of millions of dollars to three of the Middle East’s largest online retailers.

Souq.com, the region’s largest online retailer with a customer base of eight million, secured $45 million from Naspers, a South African multinational company, and Tiger Global, a New York hedge fund. This marked the largest investment made in an e-commerce and internet business in the Middle East since the 2009 sale of Arabic-language internet venture Maktoob.com, the largest portal in the Arab world, which was sold for $165 million to Yahoo!, the second-most popular internet search engine.

JP Morgan Chase and Blakeney Management invested $20 million in Namshi, a UAE-based online retailer focusing on fashion and footwear.

And Marka VIP, a sales site focusing on luxury goods, raised $10 million from multiple international venture capital firms.

Market leaders

In the GCC, the UAE is the market leader in e-commerce spending. With more than three-quarters of UAE households having broadband-enabled computers, the growing number of middle- and high-income consumers online has driven the growth of internet retail sales.

Saudi Arabia not only leads social gaming consumption and mobile internet subscriptions in the MENA region, but also ranks second in e‑commerce sales in the GCC region, and represents the biggest retail sector in the region.

“Being able to capture the Saudi Arabian market is a critical success factor for e-commerce ventures in the Arab region,” according to Hassan Mikail, regional manager for e-commerce at Aramex, a global shipping firm based in Amman.

In Jordan, a survey by Arab Advisors in April 2012 showed “a significant growth” in e-commerce, with increases in both the number of people purchasing items online and the amount of money being spent, from $192 million in 2010 to $370 million in 2011.

In Egypt, according to Euromonitor, online expenditure is expected to more than triple in the next four years, with Egyptians spending as much as $447 million on e-commerce in 2016.

And in Morocco, again according to Euromonitor, internet retailing was one of the most dynamic retailing formats in 2011, with current value growth of 18 per cent, albeit from a low base.

 

Challenges

Customer aversion to online payments, logistics and curbs on regional trade, including complex and different customs, tax and border regimes are obstacles to MENA e-commerce companies trying to compete on price with traditional retailers.

In Egypt, for example, the Central Bank prohibits sending funds abroad until they are checked through the Central Bank itself, which usually takes around a week, impeding the operation of international e-payment services. And as The Economist notes, concerns about money laundering and financing of terrorist networks mean that new payment providers “not only have to deal with the usual red tape but also cope with layers of additional regulation”.

There is also a lot of work ahead to raise consumer awareness about e‑commerce. Historically, internet users in the Arab world have been more active on news and social media sites rather than transaction-based websites. Consumer mistrust in e-commerce is still widespread. A survey by the consultancy Booz & Company and Google found a general reluctance to buy goods online because of worries about fake websites or concerns over payment security and the delivery of purchases. Another study showed that 45 per cent of credit card holders in the UAE preferred not to use their cards online because they were afraid of fraud.

Mobile broadband access charges across most MENA are high by any global standards. In the Gulf states, Saudi Arabia and Lebanon, producers of apps, games and e-books are looking to cash in on the high ownership levels of web-connected mobile phones and tablets, but for this to happen, more books and content in Arabic must be made available.

In spite of these obstacles, the optimism of e-commerce advocates continues to grow. It is bolstered by regular forecasts of spectacular growth to come, such as the November 2012 report that online travel bookings in the Middle East are expected to account for 22 per cent of all travel bookings made in the region within the next two years, with a total value of $15.8 billion.

In the words of Elias Ghanem, managing director of PayPal Middle East and North Africa, “mobile and online commerce is very popular in North America and Europe, but it is still in its infancy in the Middle East…  However, mobile technology is hugely popular and people are gaining confidence in online retailing here, through exposure to daily deals, private sales, airlines websites etc.”