July 9, 2012 5:22 pm

Tea with FT Middle East: Samih Toukan

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Samih Toukan©Maktoob

It took Samih Toukan almost a decade to turn Maktoob, the internet company he founded with partner Hussam Khoury, into an Arab internet giant. But less than three years after the $164m sale of the company to Yahoo!, Mr Toukan thinks he has built something even bigger.

The speed at which Jabbar, his new group of internet businesses, has grown says much about the rapid expansion of the Middle East’s web industry. And it also speaks to the abilities of Mr Toukan who, at 43, is by a large margin the Middle East’s most successful online entrepreneur.

His connections to the region’s internet industry go back to some of its earliest days. After a brief career in management consulting, Mr Toukan started his first business in the late 1990s, a consultancy based in his home city of Amman, Jordan. One of its first contracts was with Aramex, the regional logistics company; the brief included building one of the first Arabic-language corporate websites.

“That was our entrance into the internet,” Mr Toukan recalls from his office in Dubai’s Internet City, where Jabbar is based. “But I’ve always had that feeling, how can I create something that has more impact on the Arab scene? We wanted to go regional, across borders.”

The result was Maktoob, which in its original form, launched in 2000, was the first website to offer online email accounts with an Arabic interface. At the time, the entire Arab world was home to less than a million internet users, and its web industry was almost non-existent. Maktoob counted its users by the thousands.

Part of Maktoob’s early mission was explaining the internet itself, which was still a novelty for many. On a trip to Damascus in the early years, Mr Toukan met a Syrian businessman who seemed interested in its potential – only to later ask if he was the official “agent” for the internet, with its exclusive regional distribution rights.

But with the dotcom boom in full stretch in the US, and Middle Eastern governments – including that of Jordan, led by the newly-crowned and tech-friendly King Abdullah II – beginning to talk up the economic potential of the internet, things were soon to change. Maktoob quickly found funding from the Egyptian investment bank EFG-Hermes and by 2003 had crossed the million-user mark.

In the decade after the company launched, internet use in the Arab world grew faster than anywhere else in the world. Mr Toukan’s cautious management meant Maktoob played a slow and steady hand through the decade, avoiding the carefree spending or overambitious growth agendas that are often the death of web businesses.

“The temptation is to try and take it all, launch the biggest and the best from day one,” he says. “We did it differently: start small, grow smartly and expand into a complete portal. Even our investors were saying to me ‘why are you keeping money in the bank?’.”

The gradual approach preserved cash and ensured the company never over-reached. It meant that by the second half of the decade, when internet use in the region was booming and the commercial possibilities of large web audiences were first emerging, Maktoob was well-placed to go on an acquisition spree, buying up around a dozen smaller sites that collectively added millions of new users to its total audience.

One such deal exemplified the frontier nature of the Arab internet industry at the time. Mr Toukan had found a site specialising in Arabic-language software reviews and downloads, and made its owner an offer to buy the site. Closing the deal became complicated as the owner revealed he lived in a mountainous area of rural Yemen, which was not served by the courier companies needed to deliver contracts and paperwork.

An offer to meet in Dubai fell through when the owner said he did not own a passport and would face complications travelling to the Yemeni capital, Sana’a, to get one. Even when these challenges were overcome, paying for the acquisition turned up its own difficulty: the owner of the site had no bank account.

“If you think about it – this guy didn’t have a bank account, he didn’t have a passport – but we were doing a deal with him that was going to change his life,” Mr Toukan says. “The internet really created a lot of opportunities for people.”

It has certainly proved a profitable enterprise for Mr Toukan. The $164m Yahoo! deal remains the biggest-ever transaction in the Arab internet industry, the gold standard for other entrepreneurs looking to strike it big on the Middle Eastern web.

And almost immediately after the sale was completed, Mr Toukan began building a new company, Jabbar, based on units of the former Maktoob Group that were not included in the transaction.

“I said to everyone at the time ‘Maktoob took 10 years – give us three years.’ And in three years now, I think Jabbar is bigger than Maktoob,” he says.

While Maktoob’s growth was based on the early fundamentals of the web – email, discussion forums, news – Jabbar is very much a product of the more recent era of the industry. Mr Toukan is chairman, while Mr Khoury is president

Its biggest unit, Souq.com, has become the Arab world’s largest online retailer, offering a growing marketplace to a region where global giants like Amazon have yet to build a formal presence.

Jabbar’s group revenue grew by 160 per cent in the last year, and the company expects over $400m of transactions to be made through its sites in 2012. Mr Toukan thinks the three-year old company will be employing 670 people by the end of the year.

While Mr Toukan originally saw opportunities for Jabbar across the web, from online learning to gaming and advertising, the group is tightening its focus to consumer e-commerce.

“The market has started moving much faster, there is more investment, and with time we realised we can’t win at everything,” he says. “We chose our strength.”

That discipline and focus is one of the defining characteristics of Mr Toukan, who looks likely to be the first Arab to build not one, but two, internet companies valued in the triple-digit millions. A patient, restrained approach to spending kept Maktoob alive through the lean years of the internet’s regional infancy – even as others came and went.

The most prominent burnout was Arabia Online, the first experiment in launching a pan-regional web portal. Started by a group of Jordanians and funded with tens of millions from investors including Saudi billionaire Prince Alwaleed bin Talal, the site was Maktoob’s biggest competitor. But its management’s aggressive spending in an era when revenue streams were virtually non-existent led to a quick demise.

On a flight to Amman during Arabia Online’s heyday, Mr Toukan walked past the company’s management team seated in the business-class section. The men, friends of Mr Toukan from Jordan’s tight-knit internet community, gave him a good-natured ribbing as he passed through on his way to economy.

“We all had a little bit of a laugh,” Mr Toukan recalls. “And I said to them ‘let’s see who is sitting in first class later on’.”

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