Challenges to Web 2.0 in the Arab World

My friend Ahmed Humeid (co-founder of video start-up ikbis.com) has asked Has the Arab web 2.0 failed? He provides a scathing analysis of the state of the Middle Eastern interweb and and suggests that it's still stuck in Web 0.5. He suggests that 2008 may be more interesting as some of the international players start focusing on the Arab market, big media brands take the web seriously and the mobile operators join the game.

I had shared some thoughts on "Web 2.0 in the Arab World" late last year with some policy wonks in DC. Here is the crux of what I argued:

There are three main challenges to "Web 2.0" in the region:

1. Low internet penetration
   Across the entire Middle East and North Africa (MENA), you're looking at approximately 25 million internet users (of which less than 6 million have broadband). But that doesn't give you an accurate figure for the size of the market - to get that number we need to remove Iran and Israel which leaves us with an astonishing figure of under 10 million internet users and about 3 million broadband users.

   Whichever way you look at it, 10 million is not a big number. To put it into perspective, France alone has nearly 16 million internet users (with 12 million broadband users) but entrepreneurs are finding it difficult to start-up just for the French market. Loic Le Meur tells the story of Richard Branson telling him that his problem was that he was French which limited his market. Loic has moved to decided that it was too small a market to start Seesmic in so he moved to San Francisco.

   This of course does not mean it is impossible to build a company or site for the Arabic interweb, it just means that there is a problem of scale.

2. Online advertising market immature
   So even if you managed to capture a sizable chunk of the online audience, you're faced with a problem of revenue generation. Forget trying to build a business based on a subscription model (which is so 1.0 anyway) since credit card penetration is probably lower than internet penetration. So what you're left with is seeking out online advertising or sponsorship.

   I have yet to see a serious player in this market (if you know of one please let me know ASAP) which sadly means that there is no serious underlying business model. This is changing slowly - Google has setup shop in the region and has been promoting Adwords to the marketing folk but I suspect it will take some time before we see impressive CPMs.

3. The environment is not conducive for startups
   But even if there was an advertising model that worked, we're still left with the fact that there isn't a strong internet startup culture and most online plays lack any serious innovation. Even the sweet services from the TootCorp gang are more or less localised versions of Silicon Valley startups (Ikbis = Youtube & Watwet =Twitter).

   Of course, this problem isn't limited to the region but it should be something people are concerned about. I've seen people being put down in so many ways when trying to launch something new and novel. I have two university students interning for me - they are super-smart, motivated and hardworking. There is no reason that they couldn't build a rockin' internet company. Unfortunately I've seen many people (from lecturers to people who should get it) continually being totally hostile to the web projects they work on. Definitely not the way to foster innovation....

   And lest we forget the bureaucracy...

Challenges are meant to be overcome and I'm confident that progress will be made. With some of these challenges it is just a matter of time and maturity. Google has entered the regional market and have noted that based on their data there is a “trend that what happens in US/Europe happens 6-12 months later in MENA”. This, coupled with the following factors provide lots of opportunity:

1. High mobile penetration
   In some parts of the region the mobile penetration is just ridiculously high. As soon as the mobile operators start making data cheaper, there will be lots of interesting opportunities in the mobile web. Of course, chances are that you're more likely to see a tripling in internet penetration before you see the mobile operators charging reasonable rates...
2. Rapid growth in Internet access
   The market is small now but the population is approx 300 million so there is going to be lots of growth as people come online.
3. Youth Boom
   This growth becomes much more interesting when you couple it with the youth boom in the region. Lots of young people mean lots of people ready to login. These young people have a thirst for information and expression. And it's about time someone other than these ridiculous SMS to TV Music Stations filled this vacuum.

I've been loose during this post when talking about "the region". One needs to be aware that you cannot speak of the Arab world as if it is one homogeneous entity where time and space does not matter (Edward Said already settled this in Orientalism almost 30 years ago). Some of the key differences within the region are:

• Internet and Broadband Penetration
• Available Technologies
• Disposable Income (Gulf States Wealthier)
• Languages (Arabic ubiquitous but also French, English, Farsi ...)
• Different political realities / attitudes
• Different responses from political regimes

After discussing the challenges to Web 2.0 in the Arab World, I want to issue a little challenge as well. A few weeks ago I was taunting my star developer with the news that 15 Israeli Startups were chosen out of a application pool of 70+ to go on the Israel Web Tour of Silicon Valley where they would be meeting the who's who of the internet. My taunt? Can you name me 15 web startups from around the region who could sit across the table and pitch to Google, IAC or Facebook?

Thanks to Ammar, Abdurahman, Basheer, Moeed, Morad, Riyaad and Safdar for helping flesh out these ideas.