GATES EYES THE MIDDLE EAST
Microsoft enters the crowded field of Arab internet portals. It could liven up a quiet part of the Web.
There are 300 million Arabic speakers from Morocco to Oman; only 5 million of them use the internet. That penetration rate of less than 2% is about the same as China’s; Japan’s, by comparison, is 30%. It’s a telling sign of the tenuous connection between the Middle East and the rest of the world.
Microsoft will help to change this. In October it launched its own internet portal, MSN Arabia. With the press of a key, the crown prince of Dubai, General Sheikh Mohammed bin Rashid al-Maktoum, launched the site.
Microsoft is up front about its ambitions. “MSN is targeted to be the No. 1 destination on the internet,” says Microsoft’s regional managing director, Emre Berkin. “As we have MSN in different markets and countries, we decided that we must have it in the Arabic market.”
In the Middle East, the arrival of such a powerful internet player as Microsoft is a significant event. Up till now dozens of local Arabic portals have been fighting for a part of this small market. None of them are believed to be making a profit. Of the seven or so companies that have made some headway, the most significant is Arabia Online (arabia.com), founded in 1995 and backed by, among others, the Saudi prince Alwaleed bin Talal, the region’s richest man. Arabia Online estimates that it receives 1.5 million visitors a month (a number audited by Accenture). It had to raise $20 million in private placement funding last year.
Most of the portals only try to develop a local following. Omeldonia.com (“Mother of the World,” that is, Egypt), which is based in Cairo, was established in April 2000 for the Egyptian market and claims 300,000 unique visitors a month; it is developing its own syndicated news service. Another Cairene portal, Otlob.com (“Order!”), started by delivering fast-food orders and has branched out to pharmaceuticals and videos.
Some of the portals say that Microsoft’s arrival could threaten their survival. “We cannot do this on our own; it’s time for us to merge [with a multinational portal] to be able to compete with MSN Arabia,” says Tarek Ismail, the owner of Omeldonia.com.
Microsoft not only brings deep pockets and technical prowess; it has a clever local partner, Linkdotnet of Egypt, founded by its 30-year-old president Khaled Bichara and 11 of his fellow graduates of the American University in Cairo. Linkdotnet is 64% held by Orascom Telecom, owned by the billionaire Egyptian family of Onsi Sawiris and sons. Linkdotnet has been managing Microsoft’s Middle East websites since 1997. By midyear users of MSN Arabia will be able to get access to the web wirelessly with Orascom’s mobile telephones using wireless application protocol, a precursor of third-generation telephony.
To bind users to MSN Arabia, Microsoft has a range of services that help customers communicate and buy things on the web. An Orascom or other mobile-service subscriber can, for example, receive one-way instant messages from MSN Messenger and alerts the user when a desired e-mail message arrives in his MSN Hotmail in-boxes. At the end of September, Orascom had 3 million customers, from Algeria to Pakistan. Linkdotnet is expanding its internet access services beyond Egypt, launching the first subsidiary, in Jordan, in January and at least one more later this year, says Bichara.
Microsoft’s other advantage in the region is that its Hotmail service for e-mail has 2.3 million registered users in the Arab world (according to Microsoft’s estimates, which are audited by PricewaterhouseCoopers). Hotmail users do not need to use MSN Arabia to gain access to their mailboxes, but if they were to do so, it would give the portal nearly half the Arab-speaking users of the internet.
To encourage the crossover, all Hotmail subscribers registered in the Middle East will soon find that MSN Arabia has become their default home page. All copies of Microsoft’s Internet Explorer browser shipped or registered in the region will also default to MSN Arabia as their home page.
In late February, MSN Arabia’s website offered a chat room for “romance,” a chance to vote for the handsomest Arab celebrity and a recipe for tomato soup. It plans to add a shopping channel in the next few months.
MSN Arabia’s competitors are bracing for the possibility that it may lower its advertising rates to capture a bigger share of this small market. If it does so, others, such as Arabia Online, will probably have to either merge with MSNArabia or join forces with Yahoo or AOL Time Warner.
Things are heating up in the desert.