New research finds Arab world ready for "serious" e-commerce and online ventures

AMMAN, Jordan, Jan. 23, 2001 -

Latest research by the Arab Advisors Group (www.arabadvisors.com), a specialized new economy strategic research and consulting company, concludes that while the potential for Internet ventures in the Arab world is not yet sterling, enough ground exists for solid business models and ventures to succeed if planned and executed carefully.

The findings and analysis, which were released to subscribers of the Arab Advisors Group’s Strategic Research Service, are based on comprehensive primary research of the eight countries of Saudi Arabia, UAE, Kuwait, Oman, Qatar, Bahrain, Jordan and Egypt.

The Benchmarking and primary research upon which the findings are based is the first of its kind for the Arab world, and has been released in several reports by the Arab Advisors Group covering the Internet and telecommunication markets in Egypt, Jordan, Saudi Arabia, United Arab Emirates, Qatar, Bahrain, Kuwait and Oman. Complete findings, analysis and projections are available in five separate reports: GCC E-commerce Primer, Jordan Projections Report, Jordan Internet Landscape Report, Egypt Projections Report and Egypt Internet Landscape Report. The table of contents of these reports can be viewed at Arab Advisors Group’s web site where they can also be purchased online.

The group bases its assessment of e-commerce business models in these eight countries on what it calls the "e-commerce pillars," which include Internet usage penetration levels, infrastructure development, education levels, financial services, such as the availability and usage levels of credit cards and debit cards, and income levels.

According to the Arab Advisors Group, there are currently more than 2.04 million Internet users in the combined Internet market for the eight countries of Egypt, Jordan, Saudi Arabia, United Arab Emirates, Qatar, Bahrain, Kuwait and Oman, expected to grow to more than 3.5 million Internet users by 2002, a Cumulative Annual Growth Rate (CAGR) of 31.4%.

The Arab Advisors Group estimates total Internet users in the whole of the Arab world, including the rest of the Levant countries, and the Arab countries in North Africa at more than 3.1 million users by the end of 2000.

Considering that none of the Internet "pure-plays" targeting the Arab World are publicly traded yet, no disclosures or solid metric reporting has been available to date about the performance of such ventures, and numbers on online ads and Internet commerce in the Arab world have been merely estimates and projections.

"Only through such means of primary extensive research, and third party analysts, like the Arab Advisors Group, will investors, entrepreneurs, and operating companies be able to confirm or negate such figures and consequently make informed and wise decisions," comments Zeid Nasser, a technology columnist and analyst on Arab world Internet and technology markets.

Overall, the report concludes that early stage genuine e-commerce and online ventures market potential exists in the Arab world and is growing fast. The Arab Advisors Group, however, stresses that not all models will succeed, and regional ventures are lucky enough to have the ongoing DotCom shakeout in North America and Europe as a very useful benchmark for what could work and what will not.

The report includes analysis of several models of online and e-commerce ventures including the advertising model, online retail, and online financial services.

"One advantage in the favor of new and established online ventures in the Arab world," notes the Arab Advisors Group is that "with much lower burn rates than their rivals in the US and Europe, online ventures in the Arab world might have an opportunity to reach profitability on relatively lower revenues."

In the released report, Arab Advisors Group outlined specific analysis for each of the models outlined above, and concludes with recommendations for both "pure-play" Internet companies, online ventures of traditional economy companies, and recommendations on the fundamentals, which any online venture in the Arab world should consider, as well as focus on models that leverage the aggregate market of the Arab world rather than individual countries.

The Arab Advisors Group, meanwhile, notes the crucial importance of Internet fundamentals: solid margins and economies of scale. "The days when every Internet based model, no matter how far fetched, was funded are gone forever," the report warns.

The Arab Advisors Group stresses that established businesses adding an Internet-based channel to their existing sales channels will have the biggest chances for success. As such, a very lucrative market potential strongly exists for payment and back office infrastructure providers, such as Application Service Providers (ASPs).