A recently published research conducted by the Arab Advisors Group 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 group bases its assessment of e-commerce business models in eight countries (Saudi Arabia, UAE, Kuwait, Oman, Qatar, Bahrain, Jordan and Egypt.) 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 these eight countries, expected to grow to more than 3.5 million Internet users by 2002, a Cumulative Annual Growth Rate (CAGR) of 31.4 percent.
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 at 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.
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.
“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.”
The released report 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 report, 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). — (Albawaba-MEBG)
© 2001 Mena Report (www.menareport.com)
