Yahoo Buys Maktoob Arabic Portal, Boosts Emerging Mkts

posted on: Aug 25, 2009

Yahoo Inc. (YHOO), said on Tuesday it agreed to buy Arabic online portal Maktoob.com as it seeks to add the Middle East to its expanding strategy for the fast-growing emerging markets.

“This deal reinforces Yahoo’s commitment to invest in emerging markets,” Keith Nilsson, senior vice president of emerging markets for Yahoo, said at a press conference in Dubai, United Arab Emirates.

“With online user penetration and advertising penetration at its infancy, we see tremendous growth potential in this region,” he said.

Nilsson and Maktoob officials declined to disclose the value of the deal.

Yahoo Inc. is looking at further expansion in emerging countries, which are the company’s fastest growing regions. Yahoo ‘s emerging markets include South East Asia, India, Latin America, Africa and the Middle East.

The Sunnyvale, Calif.-based company said in July its second-quarter revenue fell 13% as its online advertising business continued to deteriorate. Yahoo has 44 million users a month in the North Africa and Middle East region, Nilsson said. Maktoob.com has over 16 million users, according to the company.

The deal comes a month after Yahoo agreed to join forces with Microsoft Corp. (MSFT) in the Internet search and advertising business to help create a counterweight to Google Inc. (GOOG) and has upgraded its services as the Internet portal tries to make its core properties more appealing.

Yahoo and rival Google, which already has Arabic internet services, are competing to tap the Arab World’s fast-growing population of over 320 million and high per capita gross domestic product, one of the highest in the world.

“Saudi Arabia and Egypt offer tremendous size and growth opportunities that we will be looking at in addition to other countries in the Middle East,” Nilsson said.

With a population exceeding 70 million, Egypt is the Arab World’s most populous state, and Saudi Arabia is the region’s largest economy and the world’s biggest oil exporter.

Yahoo’s acquisition follows a wave of consolidation in the Middle East’s internet and media industry over the last few years.

Abraaj Capital, a Dubai-based private equity firm, sold in 2007 its 40% stake in Maktoob.com to U.S.-based hedge fund Tiger Global Management. Abraaj bought this year a stake in Mediaquest Corp., a Dubai-based company mainly involved in publishing.

Emap, a London-based media group, paid in 2006 an initial $24 million for AME Info, an online business and information service provider in the Middle East, according to its Web site.

The Arab World’s online advertising market is growing anywhere between 25 and 50 percent a year as internet usage soars, Nilsson added.

Samih Toukan, who helped found Maktoob in 2000, said the shift in advertising expenditure has helped fuel growth in the online advertising industry.

“We are talking of an online advertising budget of probably $40 to $50 million that is even growing this year at 30% to 40% even with this global financial crisis,” Toukan said at the press conference.

Besides the Maktoob.com portal, the Maktoob Group includes web sites such as Souq.com and cashU.com, which will operate under into a new entity called Jabbar Internet Group to be managed by Toukan.

Dania Saadi
Wall Street Journal