This year, the UAE looks set to become the first country in the world to take broadband penetration above the 100% ceiling. If successful, the move will push the country’s broadband service among the world’s top 10 – and well ahead of America, Japan and the UK – which is all the more remarkable considering that, as recently as five years ago, the UAE boasted fixed broadband penetration of as little as 16%.
Sultan Bin Saeed Al Mansoori, the UAE’s minister of economy, has vowed to continue investing in the country’s internet infrastructure to foster greater growth in the wider economy. A key component of this is to establish the UAE as the undisputed hub for Middle Eastern content, with Dubai already experiencing some success in providing an attractive platform for media companies and content publishers. Yet can the Emirate press on and become the "Hollywood of the Arab world" (once a position held by Egypt), and the "vanguard of Arab journalism" (a title formerly held by Lebanon), and what will be required from Middle Eastern carriers to support the development of an Arabic content hub?
From Silicon Valley to the UAE
Behind Al Mansoori’s aspirations, of course, are significant investments from global operators and various consortia, including the launch last year of GBI’s long-awaited cable system connecting international carriers to Gulf States across the Middle East. The $500 million project, along with other landings through SEA-ME-WE and IMEWE, has spurred a plethora of unique content publishers and rich-media application companies to develop opportunities in the region. Many are basing themselves in Dubai, the Middle East’s answer to Silicon Valley.
One company that has successfully taken its platform from California’s technology hub into the Middle East is Mobile Roadie. The Los Angeles-based mobile application platform claims to offer content owners a web-based tool designed to create a quick application launch that can develop localised content to specific markets. Abed Agha, managing director for the Middle East, laments a time when the influx of content was not so prominent and the lack of local distribution channels allowed his company to stand apart from the competition: "The MENA market took a while to fill up," says Agha. "There was a lack of developers to fuel the mobile app ecosystem because they saw the need for content owners to distribute the content to consumers, and not rely on the telcos to do that. We try to fill that gap."
The sticking point now, he adds, comes from the operators, who are charging up to 50% from all revenues that the content generates: "That is a lot for a content owner to pay."
This is a hard pill for content providers to swallow – not least because the smaller, creative content owners tend to develop the rich-media content that subscribers desperately want, while the operators simply provide the distribution channels through which it is delivered to the market. It is, as some content providers have pointed out, a huge price to pay for access to what is in essence a dumb pipe.
But Hosam El Sokkari, head of audience at Yahoo! Middle East, takes a different tack, and is far more complimentary and favourable about the operator’s role in distributing content: "We are all part of a huge ecosystem and the operators are instrumental in reaching a large segment of the population," he says. "We all share a passion in growing the business and it is true they hold a part of the solution. While 50% seems high, this agreement is always revisited and adjustable according to demand."
Centralising content in the UAE
Yahoo! Middle East has so far been one of the most successful aggregators for Arabic content and Sokkari says his company
has built up a repository of over 600 Arabic movies and thousands of hours of drama and video clips. In addition, it is the only multimedia partner to tie up
with the BBC in the Middle East. The company has also established a strong
partnership with Al Jazeera to access its print editorial and video services. Like many major companies, Yahoo! has opted to set up its operations in the UAE, with Sokkari claiming "the UAE provides regional and international connectivity, allowing for greater accessibility and ease of communication".
Although undeniably attractive in terms of location and access, the UAE’s sheer economic prowess and access to international talent sets it apart from potential rival hubs. "The UAE is already a massive success story which can only grow," says Jawad Abbassi, general manager and founder of Arab Advisors. "It started with satellite, and it now has a nice model in which companies can set up shop. If companies want additional talent, they can hire all nationalities after a simple visa process. Government regulations mean this is not the case in Lebanon, Egypt, Jordan or Saudi Arabia."
The Arab state is certainly unique, and it is questionable whether any other region in the world would see similar developments in language-specific content. And it is all the more remarkable given that the UAE significantly lags behind rival states with regards to its Arabic-speaking population. According to Internet World Statistics, the UAE boasts just 3.6 million internet users who speak Arabic, ranking the country seventh out of 22 Arabic-speaking nations and placing it well below Egypt, Morocco and Saudi Arabia.
However, the population demographic has done little to dissuade Etisalat from investing heavily in the state. Headquartered in Abu Dhabi, it appears Etisalat recognised the potential for Arabic content a few years ago. Last year, the group launched a hosting service named Smart Hub. Designed to leverage national and international infrastructure to provide a regional ecosystem for content providers, Etisalat attracted a significant number of partners to create what many see as an industry first – a content hub controlled by an operator.
Ali Amiri, EVP of carrier and wholesale services at Etisalat, says that with the help of the government, the company has worked to ensure the UAE continues to sustain its position as a content hub. "Virtually every regional cable and every cable connecting Europe to Asia lands at Smart Hub, which in turn provides access to the regional Gulf, the Middle East, Africa and south Asian markets," he says. "This hub is not just beneficial for content providers, but also for mobile operators as I believe the evolution of this market will occur with IPX, and Smart Hub will provide the delivery platform for the exchange of mobile content in the future," he adds.
External investment, development and challenges
There is no doubt about the huge amount of investment coming into the UAE. Amiri, like Abbassi, says the advancements the UAE has made in television and social media hold important significance, specifically in news, with CNN also setting up in Abu Dhabi alongside the BBC and Al Jazeera. However, the factors motivating companies to set up in the country remain disparate. The case remains that much of the original content creation is coming from Egypt, Lebanon and Jordan, largely because it is much cheaper to create content in these states.
Egypt, for example, has skipped an entire generation in terms of technology. According to On Device research, the country has the highest number of mobile web users in the world, with a staggering 70% penetration, leading India by 11%. With this in mind, Agha believes that overseas investors will continue to look for opportunities in the content arena: "It appears venture capital firms from across the world have a mandate to put part of their budgets into the Middle East. Talk to anybody investing in content in the Middle East and they are busy making money," he says. Yahoo! set the tone with its acquisition of Maktoob.com in 2009 for $164 million. Last year, Baidu, China’s answer to Google, set up shop in Egypt as an Arabic-only site, while the UAE-based GoNabit, a consumer site, was snapped up by US giant LivingSocial.
The successes, rapid investment and development are impressive, but Sokkari warns of the potential pitfalls, and in particular, of the risk of content being replicated by smaller companies because of the ease of entry afforded to start ups. He claims there is still a lot of work to be done in the Middle East content space for it to reach its true potential. "The evolution of content has been rapid, but there is still a significant difference between the number of users in the Middle East, and their access to Arabic content," says Sokkari. "I often hear rates being quoted of 6–8% of internet users having access to 1–2% of content. But this figure is wrong, because it is quantative not qualitative, and a lot of content is replicated so it could be even lower. Some of the same content is released on different days by different companies. Remember, there is a lot of talent in this region, and at Yahoo!, while we want to increase the inventory and distribution, we also want to develop the talent for the creation of rich-media technology."
For Google, the world’s largest internet company, the challenge mainly lies with the lack of diversity that comes with Arabic content. The global content giant has grown modestly in the space, and is yet to establish a library of rich-media Arabic content like Yahoo!, but not many will doubt they will do so in the coming years. Sokkari says Google "doesn’t do a lot of what Yahoo! does in the Middle East because the nature of its business is different", but Mohamad Mourad, Gulf regional manager for Google, plans to change all that. He is charged with building on the company’s present position as the leading news aggregator in the region, with 80% of users: "We are seeing content creation coming from all corners in the region, and we have a strong track record globally of betting on companies with the potential to change the future direction of technology," he says. "The fact is, almost 75% of all content from the MENA region falls within the categories of online communities; internet and telecoms; arts and entertainment; people and society; and news. It is our job to innovative this."
Yahoo! notes the companies will always compete in terms of eyeballs and reach, and Agha believes Google’s limits in the Middle East stem beyond the development of Arabic content and the influence of Yahoo! to the fact that it is yet to launch Android in the market. "Apple is massive at the moment, but Android is a lot more affordable. It could prove a game changer when it launches at some point this year." It will also be interesting to see how Google develops beyond its recent launch of an Arabic voice engine that addresses several dialects, an Arabic satellite navigation system and the introduction of its Google+ format in the language.
The benefit of hindsight
With the UAE’s influence and money, the presence of Yahoo! and Google, and the infrastructure afforded by companies like Etisalat, the future for Arabic content and technological innovation looks bright.
Joichi Ito is the venture capitalist largely credited with seeing the potential and making the investments in many start ups in Silicon Valley over a decade ago, including Twitter. Now based in Dubai, he is predicting the formation of a new entrepreneurial hub for technology worldwide over the next 10 years spanning across MENA. But he believes the region’s potential largely depends on how much freedom both governments and the larger companies afford for innovation and entrepreneurial spirit. In some ways, this rests on whether venture capitalists like Ito back the right companies at the right time. The stakes are big: if he fails, UAE’s attempts to create an Arabic Silicon Valley could prove to be a false dawn.
The Turkish challenge
In some ways, there are great commonalities between Turkey and the Middle Eastern markets. Without drawing too much on cultural and religious similarities, Turkey also has a population apparently hungry for language-based content, a young demographic that is seemingly highly technology savvy, and a potential content hub in Istanbul to provide the platform for content distribution. The imminent launch of the fully redundant terrestrial Regional Cable Network (RCN), which spans from Fujairah in the UAE, through Riyadh, Amman, Syria and into Turkey, is expected to open the market up to the development of rich local content and provide this capacity to underserved nations.
Turkcell Superonline, a major investor in the cable, claims the system will "end the Middle East’s reliance on submarine cables for delivering high speed internet". Murat Erkan, general manager at the company, believes the development of Turkish content will come in tandem with the development of supporting infrastructure in the country, which is still not as advanced as it should be.
"Content is certainly attracting attention and it is constantly innovating, but these advancements will be redundant without a delivery infrastructure, which is what we are now focussing on," says Erkan. "Turkey has strategic importance geographically and demographically in the Middle East and while content develops in Turkey, its demand is becoming apparent internationally. It is important for us to act as a bridge and enabler."
The link between Turkey and the Middle East, and the innovations occurring in Turkish content, in addition to the cultural ties between the two, means translating Turkish content into Arabic is a much easier phenomenon than English content translation. And while there are apparent ambitions in the Middle East for the UAE to become the hub for technology innovation, it appears Superonline and Erkan have their own ambitions for Istanbul. "We are working with six ISPs, as part of the Turkish Network Alliance Platform (TNAP) to make Istanbul the new internet base of the world," says Erkan. "It is important to ensure Turkey has a much stronger presence in the international arena, and there are appropriate investments being made within this collaboration to ensure Istanbul achieves this." Abbassi takes a similar view for the capital’s potential. "Istanbul is already the cultural and economic capital of Turkey, serving over 80 million people, so can it not be established as a regional content hub, even within Europe?"
The potential is clear, but while the UAE operates as a largely open market for projects and developments heralded and funded for by the government, the same regulation is not apparent in Turkey, which could prove a stumbling block. "Content in Turkey will only develop with clear and liberal legal infrastructure for the content business," says Erkan. "The storage and distribution of content is not developed, and there needs to be an established set of rights and obligations of the content owners and the telcos that serve such content." It appears that this rather cryptic comment again relates to the obscene rates operators charge its content partners for distribution.
