The Future is Yours; The Future is Digital

June 22, 2011 by
“A New Tech Bubble…Perhaps, but not in Western Nations”

Social media has transformed the manner in which we connect, network, access information and do business. It has shown it has as much the power to sell a product, than it does to lead an uprising (or two or three for that matter). Twitter has changed the way in which we digest news; Facebook the manner in which we communicate with friends; and LinkedIn the manner in which we seek potential business opportunities. Whilst the 1990’s will have marked the Dot-Com boom, a decade into the new millennium, the internet bubble has been replaced by a social media bubble. But it doesn’t stop short at social networking sites. Rather, the rise of the social media giants has given way to a new era of digital online content, spawning traditional media, advertising, television and mobile communications. New sectors have emerged, and with that, new markets which were traditionally more difficult to penetrate. Nowhere is this more evident than in the Middle East, who has used its young demographics to successfully capture and harness this change into innovative opportunities.

When Rupert Murdoch acquired MySpace in 2005 for US$ 580 million in 2005, the world turned in surprise at the valuation of his acquisition, and questioned the mogul’s motives. How could he have justified this valuation on the basis of the network’s valuable young demographic alone, particularly if his motivation was geared towards acquiring advertising inventory? However, Murdoch’s original intention was to utilize the scope of MySpace to compete with MTV by providing an online music network to…MTV’s target audience, the under 25’s. The subsequent failure of MySpace could have been due to Murdoch capitalizing on this emerging market before the market had been shaped. However, nobody batted an eyelid when Microsoft bought a 1.6% stake in Facebook for US$ 260 million, determining a valuation of US$ 15 billion, or US $300 per user. This new bubble is being ushered by the recent public offering of LinkedIn, who reached US$ 40 a share last month and its 100 million users valued at US$ 9 billion. Not limited to social networks, the twenty-month old deal website Groupon has been valued at US$ 20 billion, whilst internet games developer Zynga is planning to file for an IPO estimated at US$10 billion. A new tech bubble? Perhaps, but not in Western nations.
The future of social media and digital content lies in growth markets, most notably Arab countries. Why? For the exact reasons that made people sneer at Rupert Murdoch: its booming young demographics, pace of internet and mobile penetration, and demand for innovative online sources of media and information. The latest trends demonstrate that social networks are as much a tool for communication and advertising, as they are a necessity for government and civic engagement.

When Governments Get Social…

The Arab Social Media Report 2011, compiled by Dubai School of Government showed that in the first quarter of 2011 alone, Facebook users in the Arab world grew by 30%, with 15 to 29 year olds accounting for 70% of users. In parallel, the Arab Twitter population is estimated to be over six million, and at the peak of the Tunisian and Egyptian uprisings, the estimated number of daily tweets from the region reached 175 per minute. Put into contrast, with an approximate 300 million regional population, more than 70 million people in the Middle East are online. Of that number, 25% are what have been coined ‘digital natives’ a population of 25 to 30 year olds who shape online trends, be it in digital advertising, e-commerce or online content , and determine the new influences in the digital sphere.

The rate of adoption of social networks are part of just one of the tools which enable to determine the future patterns of ‘emergent behaviour’ taking place digitally in the Middle East. Governments and organizations alike have realized that their success and efficiency is dependent on tendering to this growth within a relatively untapped market. The growing dominance of the internet experience is about interactivity and access to knowledge. From the 25 most competitive companies ranked by All World Network in Lebanon, three of those operate in the field of social media and online digital content, and rake a turnover above US$ 1 million. NEL Interactif is just one of these agencies that have grown to build interactive online experiences for brands and users alike, building international partnerships with London-based consultancy firm 90:10 Group as to expand social media services throughout the Middle East. 90:10 Middle East is hosting the Social Media Week in Beirut in September 2011.

Governments have seen the value of utilizing social media to communicate more efficiently, acquire feedback and respond to the needs of civil society. According to a study completed recently by Youngberry and ThinkMediaLabs based in Beirut, 77% of young Arab Facebook users would ‘like’ a government-initiated Facebook page. An overwhelming 86% would wish for Arab governments to communicate and make information more available through social networks. And some governments have been quick to respond to shifting online civic behaviour, not only through the creation of e-governance portals, but by using social networks to respond to societal changes. The UAE government for example is aggressively adopting mobile applications to provide better services to its consumers, and currently offering between twenty to twenty-five applications which enables access to various governmental services. On the other side of the spectrum, the Moroccan government is using crowdsourcing to enable youth to vote on constitutional articles for reform through a dedicated website . A similar technique has been adopted by other governments outside of the MENA region, most notably Iceland, Rwanda and South Africa, who are all crowdsourcing their constitutions through social networks.

Expansion and Monetization

Social Networks have also proven to be the life-blood of the wave of entrepreneurial fever that has gripped the region. The success of Facebook, LinkedIn and Twitter has led to a number of replications which aim to cater to a regional network. Jeeran, a web-hosting portal launched in 2000 is one of the most popular Arabic sites for user-generated content. With over 8 million unique visitors a month and hosting 160,000 blogs, Jeeran’s competitive advantage is its ability to adapt social networking tools to the experience sought by the local audience, and meeting the increasing demand for local information, social gaming, animation and e-commerce. By doing so, not only does it provide an opportunity to generate Arabic content, but increase the flow of digital advertising and geo-targeting beneficial to local enterprises.

The need for a regional network linking entrepreneurs, angel investors and venture capitalists saw the launch of in November 2010. Geared towards bridging the gap between entrepreneurs and potential sources of finance or business partnerships, Wamda has created a regional community based on the sharing of knowledge, experiences and ideas. Similiarly, Areeba Areeba has branded itself as a Middle Eastern amalgam of Facebook and LinkedIn. With already 400,000 users since its launch last year, it aims to bridge the digital ‘cultural gap’ between East and West by attracting both regional and international users to share their business experiences and opportunities. Following this trend, Bayt, the Middle East’s largest job search portal has announced it would create an online network ‘People’ which would enable users of its site to connect and communicate directly among themselves.

The demand for such tools cannot be contested, but can these social networks truly compete with international giants? Is localization the key to success, and are people going to abandon the usage of international sites in preference of regional ones?

The answer is not clear cut. However, regional social networks can garner a competitive advantage over their international counterparts by understanding the regional trends that motivate the use of social networks and ensure that they integrate themselves into the regional digital value chain. They need to tap into the emerging behaviour which dictates digital life. Today, people seek information, knowledge, value and opportunities. They seek content which is customized to their location, lifestyle and interests. They wish to utilize networks which are multi-functional and offer them a diverse array of services that simplify their online experience and aggregate information onto one platform. People wish to feel part of a community and a movement. It is essential for regional social networks, and more broadly, social media to understand these key trends, and formulate them in a manner which enables monetary capitalization. For them to function successfully, they should become a key component of the digital value chains of other individuals, enterprises and organizations.

Firstly, the revenue potential from digital advertising has seen exponential growth in the MENA, partly due to the financial crisis and businesses wishing to be more cost-effective whilst targeting a specific audience. According to the latest reports, digital advertising accounts for up to 5% of advertising expenditure in the MENA region, and is expected to have grown by 8.4% by 2013. Increased budgets by MENA companies in digital advertising has been focused specifically on email marketing and social networks (27% and 28% of budgets respectfully) as they are best suited to geo-targeting and enable customer-product feedback. Secondly, people are becoming more willing to pay for online content, particularly if it enables them to access privileged news and information. Although a recent poll in Lebanon showed that currently on 14% of internet users would be willing to pay for content, successful business models such as UAE-based Zawya shows that providing ‘premium’ information or packages to a limited amount of customers is possible. To succeed in a monetization strategy, platforms must be willing to invest in increased development and production, as well as widen their talent pool so that content is successfully developed, exploited and consumed and enables user-retention.

The most important assets of regional social networks are their add-ons. A social network is dependent on new disruptive technologies, applications and social features. Just as Zynga made its mark through providing social gaming on a Facebook platform, Peak Games, a Turkish and Middle Eastern games developer has announced a funding of US $ 7.5 million to expand its social games library throughout the region. Peak has successfully been able to monetize the usage of its platform by localizing its platform to fit in with cultural online behaviour, providing its online community with private chat rooms, allowing increased interaction and ensuring privacy for its members. Similarly, if a social network is able to develop mobile applications that ensure that usage incorporates into the users’ lifestyle, it builds into a huge youth market that is willing to pay for this service.

In addition, the widespread usage of social networks and mobile applications has given birth to a new talent source: developers and entrepreneurs that can integrate their products and services into the digital value-chain. ArabNet for example, has created a hub for digital professionals and entrepreneurs to connect, learn and benefit from opportunities in this sector, whilst Seed Startup, based in Dubai provides incubation and seed funds for internet and mobile entrepreneurs.

The factors that will influence the success of home-grown social networks and social media are to engage with its customers and fully invest in an online experience. The key differentiating point will be not to replicate international models, but build on the local momentum and changing consumer behaviour and demographics. It is about finding the niche in the market that engages with consumer demands and an evolving digital landscape, whilst finding solutions in terms of privacy and security features. By using local talent to develop regional platforms, both local and international players will be able to capitalize on the emerging ‘tech bubble’ seeping throughout the Middle East and build thriving digital communities which generate ‘offline’ opportunities.

Check Tatjana’s Blog : The Entrepreneurialist


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