The Ascent Of The Arab Startup

AUGUST 24, 2012

Why the rise–and acquisition–of web portal Maktoob is a model for Arab entrepreneurs.

When I arrived in Dubai in late 2009, Maktoob was all the rage. The Internet portal, founded in Jordan 11 years earlier, had hit the big time with the kind of exit that technology ventures dream of. In August 2009, a couple months before I arrived, Yahoo! had acquired Maktoob for $164 million. The first from an international Internet titan, the acquisition gave entrepreneurs throughout the Arab world a new home-grown model of entrepreneurial success–as well as definitive proof that a startup based in the region could strike it rich.

The growing penetration of Internet and social media throughout the Arab world has opened up rich opportunities for local and multinational companies. While the large U.S. Web portals still dominate traffic numbers in the Arab world, Maktoob had made significant inroads and gave Yahoo! a strong foothold through its English and the Arabic Web sites. Maktoob roughly translates to “a letter” or “a note,” and its ability to help Arabs communicate helped it gain an edge in the region. Around the time of the acquisition, about 90 percent of its content was in Arabic, an executive told me when I visited the company’s offices in Dubai.

But dozens of less successful sites also publish in Arabic. Maktoob’s greater popularity, he said, stemmed from its ability to define and deliver the services its audience craved: news, forums, entertainment, sports, and cultural and religious content. He and another Maktoob manager raved about one of its most popular sites, Al Frasha(“Butterfly”). A Saudi woman initially developed the site as a forum for women to discuss life issues. As a company official told me during a phone conversation, the content on Al Frasha tends to be extremely open and transparent, a release for women living in a culture that can limit their expression.

Almost all the participants in forums including “Girls’ World” and “Problems & Solutions” take on anonymous online identities, the official told me, so the discussions are frank and straightforward. Topics cover anything from the mundane (shopping and recipe exchanges) to the serious (the woman’s role in a relationship). And while volunteer moderators keep the conversations from spiraling out of control, Maktoob makes no effort to censor the conversations. Nor can it keep out men. When I visited its offices in Dubai, one executive estimated that 30 percent of Al Frasha visitors were men.

Maktoob’s ability to understand and reach the Arab Internet audience made it a prime acquisition target. Online advertising revenue in the region remains a relatively small portion of overall ad spending, but it provides a tremendous potential for growth. Still, the Maktoob acquisition never would have occurred if Yahoo! didn’t truly believe that the Arab world’s online market had reached an inflection point and could grow at greater rates than those of developed markets.

The Next Maktoob

In years to come, when people speak of pioneers in the Arab technology world, Samih Toukan’s name will undoubtedly come up in the conversation. Toukan and Hussam Khoury founded Maktoob in 1998, and when Yahoo! acquired the site 11 years later to expand its presence among Arabic speakers, the two friends instantly became the brightest stars in the Arab technology world. Fadi Ghandour, their mentor and adviser, might top the marquee for recent generations of self-made Arab entrepreneurs, but Toukan and Khoury enjoy top billing among those who tinker with technology and the Internet.

After studying in London and Paris, Toukan returned to Jordan, and following a stint with Anderson Consulting, he started his first business with Khoury. Their initial management and technology consulting firm morphed into the Web development space, and the seeds of Maktoob were sown. They started Maktoob as an Arabic e-mail service and, by adding blogs and other interactive online media, steadily build the largest online community in the Arab world. They flirted with Yahoo! for several years, Toukan told me, initially discussing potential partnerships.

With the gaze of the technology world focused on China and Eastern Europe, the talks stalled until the Arab online growth rates became too fast for Yahoo! to ignore. With a young population, soaring Internet penetration, and a market of more than 350 million people, the strongest online brand in the region made an obvious acquisition target. Maktoob was acquired; Toukan and Khoury became multimillionaires and success stories.

Toukan still felt he had work to do. He became chairman and CEO of Jabbar Internet Group, the collection of Maktoob businesses not acquired by Yahoo! Today he oversees the incubation and continuing development of those mostly e-commerce-related businesses. Each one operates separately, with its own CEO, and with Toukan and his colleagues at Jabbar providing common services as well as strategic and financial advice. Toukan even brought Ghandour in to help advise the nascent companies.

None of the businesses have reached’s stratospheric range, but the market is young, growing, and full of promise, Toukan told me. already is the region’s leading online marketplace, even if e-commerce is still in its childhood in the Arab market. An online payment service goes through cashU, while iKoo handles online advertising. Tahadi Games creates online games and works with international game developers to help make their popular games acceptable to an Arab audience, taking out characters and features that might come across as risque ́ or strike a nerve with Muslim players.

These sites fill out an extensive online portfolio that Toukan and Maktoob played a major role in creating. So now, with the main site sold to Yahoo!, millions of dollars in his bank account, and a stable of small, exciting companies, he’s following the example set by some of the great Silicon Valley entrepreneurs: working to build his next big hit. “We’re helping entrepreneurs here,” he told me. “I’m trying to create a new Maktoob.”

Reprinted by permission of the publisher, John Wiley & Sons, Inc., from The Arab World Unbound: Tapping into the Power of 350 Million Consumers by Vijay Mahajan. Copyright (c) 2012 by John Wiley & Sons, Inc. All rights reserved.

[Image: Flickr user Adam Gimpert]