Google’s Arab Spring

Google, the 13-year-old technology giant, had a record run last year. The company’s total revenues for 2011 were $37.9 billion (LE 228.88 billion), up from $29.3 billion (LE 176.94 billion), largely driven by advertising revenues. In 2012, Fast Company magazine named Google the third most innovative company in the world, citing its “hit lineup” of products, including YouTube, Android and Chrome. Google’s Chrome browser overtook Firefox in November to become the most popular global browser with 26% of the worldwide market, according to StatCounter.

While the MENA region represents a small portion of total international revenues, a surge in online users across the region spurred entrepreneurship and created growth opportunities for search, online advertising and e-commerce. Arabic became the fastest-growing language on Twitter in 2011 and other social media saw a similar surge in Arabic-speaking users.

While Egypt is far from matching India or China in terms of IT competitiveness, it offers the largest talent pool among Arabic-speaking countries, according to Egypt’s Information Technology Industry Development Agency (ITIDA).

“Psychologically, people have been liberated,” says Karim Elsahy, a founder of Cairo-based Genius Ventures, a venture capital firm launched six months ago. “You would not find very many people who would want to be an entrepreneur a year or so ago. They [are] more daring now, willing to lack some security in that pursuit of bigger dreams, which is a reflection of the revolution itself.”

The internet remains the second most-used media source in Egypt after television. There is massive growth potential with a 25% internet penetration rate at the end of 2011, according to TNS Egypt.

Google took notice and was among the few companies that reacted quickly to shifting market dynamics. “The internet literally is on fire in this part of the world, because we have been completely under-automated,” says Wael Fakharany, regional manager at Google Egypt. “And it’s time for us to get our fair share of Arabic content [and] applications.” After opening its first office in Egypt four years ago, the 45-year-old Fakharany says 2011 was the “best year ever” for Google Egypt.

As the revolution unraveled, Google’s head of marketing for MENA region Wael Ghonim became a prominent revolutionary figure. Relying on social media and Google applications, Ghonim extended his web expertise to help engage thousands of young people online. His emotional appearance and expressed gratitude to the revolutionary martyrs on national TV following his detention and release became a pivotal moment for many in Egypt. Ghonim quickly became an international celebrity and remains widely respected among revolutionaries in the street. Ghonim is currently on sabbatical from Google promoting his newly released book, Revolution 2.0: The Power of the People is Greater than the People in Power.

Shortly after the revolution, the company launched YouTube and Maps products locally, showcasing video content that is specific to Egypt. “We’re accelerating the launch of products more quickly because we see people are adapting and embracing the technology, so we are trying to react to the market’s needs,” says Maha Abouelenein, a spokeswoman for Google Egypt.

“Having a local YouTube domain makes the user experience locally relevant, so you don’t log on and find a video about Lady Gaga when the country is in the middle of a crisis,” Abouelenein says. In December 2011, Google launched Arabic Voice search in six MENA countries, including Egypt, in an effort to expand its Arabic-language content and lure local users.

Other applications and products saw an increase in users as well, with Google Maps growing 180% from March to December 2011 in MENA.

Drivers of growth
Within the search market, Google solidified its dominant position in Egypt with a 95% share in 2011 as well as 2010, according to Google data. Egypt has the second greatest number of searches in the MENA region behind Saudi Arabia. Google’s searches were up 25% globally last year, with one billion searches per day.

After securing a lion’s share of the search market already, Google’s YouTube and mobile platform have seen the largest growth over the last year across the MENA region.

Heightened demand for information and new ways of sharing it spelled phenomenal growth as last year became “the year of the video,” according to Fakharany. Uploads to YouTube, which Google had acquired in 2006, soared by 150% in 2011 from the previous year. The number of views also jumped by 220%.

“After the revolution, Arab Spring, we saw a huge change in user behavior, in terms of uploads and viewership, the growth was unmatched elsewhere,” says Haisam Yehia, Google strategist in charge of YouTube operations in Egypt. YouTube estimates 60 hours of YouTube video were uploaded every minute last year, compared to 30 hours of video uploaded to YouTube the year before.

Just months after the political uprisings in Egypt and Tunisia, YouTube launched local domains in seven MENA countries in March 2011 including Egypt, Saudi Arabia, Tunisia, Yemen, Morocco, Jordan and Algeria.

In addition to expanding its audience geographically, YouTube is working to improve its partnerships with local TV and online channels and making the content more relevant. It plans to unveil more local domains in the region in 2012.

In a recent interview with AllThingsD technology website, a YouTube head, Salar Kamangar, said the push is part of the so-called “third wave of media” in recognizing demand for niche, specialized video content that is more relevant in terms of language, categories and personal tastes. “The first wave was the broadcast networks. The second wave was cable networks. Now it’s about giving people exactly what they want to watch today.”

In tailoring and organizing content to viewers’ tastes no video competitors have yet come close. “We are competing with ourselves — focusing on our user, targeting them better,” Yehia says.

Growing the market
How does a company grow after establishing a 95% share of the search market? Google’s strategy is nothing short of ambitious: to grow the market as a whole.

“We want to develop the ecosystem. We are not just here to be a search engine and do ads. We want to make sure we help people, inspire them to create their own Google,” Abouelenein says.

Back in June 2009, Google signed a $10 million (LE 60.38 million) agreement with the Egyptian government to do just that. According to the agreement, Google has to give back $2.5 million (LE 15.09 million) to the community, trying to grow the internet and invest in infrastructure. The rest will be spent on advertising and online marketing in Egypt and globally.

As part of this initiative, Google launched “Start with Google” competition last year selecting and mentoring 50 finalists on the path to launching their own companies. In March, Google will award $200,000 (LE 1.21 million) to one grand prize winner. For the other top 20, Google is arranging financing through angel investors. Out of the top 50, investors already approached about a dozen teams.

Fakharany acknowledges some finalists were skeptical at first about Google’s motives. “We’re growing the market,” Fakharany explains. “If we’re spending x in this competition, we will make 10x in a couple of years because we’re growing the market by growing the [number of] players.”

Google believes growing the total number of players will lead to more clicks and uploads for its other products, including YouTube, its new social media application Google+, AdWords as well as the Google search engine.

The bulk of the contestants are concentrating on the sectors Google regards as having the greatest potential for growth: Arabic-language content, e-commerce, location-based services, mobile applications and cloud computing.

“We want people to come out of this believing in themselves saying ‘I deserve much better. I deserve to start my own company,’” Fakharany says.

Competitors
Google’s competitors in the region also moved to expand their Arabic-language content, including Yahoo!’s partnership with Miscrosoft’s Bing.

In November 2011, Yahoo! introduced Yahoo! Mail in Arabic, which offers a full Arabic interface. “Our plan is to keep expanding this portfolio of content and services to keep it fresh and relevant for our growing audience,” says Ahmed Gamal, head of sales at Yahoo! Egypt and North Africa.

“We have a unique offering in that we bring consumers the content that our own journalists, video producers, and other experts create,” Gamal says. “Our focus has always been on developing content that is relevant to users in the region with an emphasis on increasing quality Arabic content online.” Yahoo! targets other niche markets through Helwa women’s portal and OMG Arabic, which is dedicated to celebrity news. Yahoo! Maktoob partnership, which was created in 2009 to boost Arabic-language content in the Middle East region, attracts more than 55 million users per month.

In addition to existing search players, Fakharany acknowledges there is more potential competition now from non-traditional competitors in advertising space from Twitter and Facebook.



“Search isn’t over yet. Search is the heart of the internet, [and] a lot of innovation is about to come. Although it’s a big boys’ game, you can do something innovative in search and you can capture the hearts and minds and the clicks of hundreds of millions of people,” he says. “This is what is exciting about this field: If you are using Google now, you are just one click away from using another competitor.”

The barriers to entry may be the highest for search, with more engineers working on search in Google than any other product in the company and tweaking the search algorithm twice daily.

This explains why local Arabic-language competitors have been less successful. Onkosh, a search engine launched by Orascom Telecom in 2007, closed down last year due to technical and financial difficulties according to analysts. Orascom Telecom did not return a request for comment. Remaining Arabic-language competitors such as Yamli Arabic Search launched in 2007 did not gain enough traction or investment to catch on.

In fact, one of the 50 finalists, Al Khawarizmy, plans to unveil its latest search engine project this March. The founder, Hossam Mahgoub, says he first had an idea for the Arabic-language search 22 years ago.

Mahgoub says now is finally the right time to replicate in Egypt and in the larger MENA region what Yandex succeeded in doing in Russia, Naver in Korea, Seznam in the Czech Republic and Baidu in China, namely snatching up the bigger share of the search-engine market.

“If these guys can do it for their languages, why can’t we do it?” Mahgoub says. “We’ve got the expertise in all areas. What it takes is putting the right kind of people together and this is what I have been searching for the last 21 years.”

Al Khawarizmy, which is named after the famed mathematician who developed the concept of the algorithm nearly 1,200 years ago, has a linguistic approach to search for the words’ closest meaning, similar to Russia’s search engine, Yandex. By developing technology and focusing on localized search results, Yandex gained a dominant position in Russia’s search market in 2000 and currently holds a 63% share, according to LiveInternet, a online statistics monitor. “Our strengths are in technology development and understanding of what Russian users want,” says Vladimir Isaev, manager of international media relations. “According to our data, from 15% to 30% of Yandex searches are requests for local information.”

This is what Al Khawarizmy aims to replicate with its search model. “We’re covering a niche that’s been ailing an Arabic search user for a long time,” Mahgoub says. “What he gets back is either information that he never looked for or [its] high redundancy. ”

Not everyone is as optimistic. Karim Elsahy says a serious domestic search competitor to Google is unlikely to materialize anytime soon. “Google’s got thousands of the smartest engineers in the world, tweaking their algorithm,” Elsahy says. “I think there is too much barrier to entry for any realistic company here to compete.” El Sahy serves as one of the judges in the “Start with Google” competition.

Google’s welcoming attitude towards potential competition has already earned the respect of contestants. “We are in love with our competitors,” Fakharany says. “Because it keeps [us] on our toes and the user has a choice. We truly believe that if there is a competitor to us, it’s great news because it allows us to innovate, it allows us to capture users’ hearts and minds.”

Mahgoub, who has worked with Google previously at IBM, says Fakharany himself encouraged him to enter the competition. Fakharany says he encourages anyone with creative ideas.

Collaboration with the government
Armed with its global mission of organizing information, Google is seemingly tireless in finding new venues and applications for its products. During the parliamentary election cycle, Google collaborated with Egyptian Higher Elections Committee and provided users with technological support and electoral tools. These tools included election news aggregated through Google News, candidate information, locations of polling stations and video hubs for sharing videos from political parties and candidates such as YouTube Town Hall.

Google also wasted no time in lobbying the new government. “There are a lot of things we want to do. We want to continue [the election tools] in the presidential campaign,” Abouelenein says, noting that many are eager to embrace the new technology. “Secondly, we want to start training these members of parliament on the value of the internet and the openness of the web, talk about privacy, censorship, access to information, sharing.”

Outlook for 2012
Google still sees potential for search as well as greater growth opportunities for the underdeveloped online advertising and mobile markets.

“[For] the internet — the best is yet to come. We’re scratching the surface in terms of what can we do, how technology can help [solve] real-life problems,” Fakharany says.

Separate third-party reports estimate online advertising market at around $180 million (LE 1.09 billion) or only 3% of the total advertising market in MENA. “It’s growing at phenomenal speed,” Fakharany says, noting that Google is a major player. Google does not disclose figures on its portion of the online advertising market.

While mobile search is growing regionally, shopping via mobile tools and other mobile services remain an unexplored sector in Egypt. Only 2% of mobile internet users in Egypt shop using their mobile devices compared to 34% in China for example, according to a recent TNS Digital Life study completed in January 2012.

“There is a huge appetite for increased internet access and mobile services among consumers in fast growth markets,” says Matthew Froggatt, UK-based Chief Development Officer at TNS. “As online communities mature, brands have fantastic potential to drive rapid growth from this nascent consumer base.”

Introduction of cloud computing, in which computing infrastructure and processes can be accessed from anywhere, presents additional opportunities for companies. Social media product Google+, which launched last year globally, is estimated to continue to grow. “Web users in MENA are fervent users of social media and Google+ will continue to gain momentum — we are seeing Google+ pages for businesses in addition to user profiles so there are some exciting ways users are using the platform,” Abouelenein says.

Ultimately it will not be up to Google, but the rest of the market to step up momentum. While Google’s competition is not the only program fostering IT innovation in Egypt, sector analysts and other contestants believe other global companies should launch similar competitions to help foster domestic startup businesses and take full advantage of the growing online user base.

In 2011, Egypt’s total IT spending declined 13% compared to the previous year, according to IDC, a global provider of IT market intelligence.
“We started this, but we do not want to control it,” Fakharany says. “We would like to create this chain reaction of initiatives from other companies, even our competitors.”