Google searches for new users

The Arab world presents two contradictory faces to the outside world, one conflict-ridden and full of despair, the other brash, confident, and awash with petrodollars.

Into this uncertainty has ventured the world's hottest internet company, with the launch of Arabic versions of its products to encourage the spread of the internet in the Middle East and north Africa.

Google's decision to expand into the region on the eve of this summer's cataclysmic conflict in Lebanon and against the background of Iraq's seemingly unstoppable descent into civil war may seem premature. But it comes at a time when the need for instant online news in Arabic has never been greater and it has been welcomed by the local business community as a sign that, in the wake of the oil and construction boom in the Gulf, international companies are finally taking the region seriously.

Nevertheless, Google's foray into the Arabic world has received a mixed welcome from the online community. Some worry that the group's technical and financial might could spell the demise of local internet companies that have only just begun to be profitable in the past three to four years. "I'm not sure if we should be congratulating ourselves or if we should be concerned about the impact of Google's Arabic offensive on long-established Arab online businesses," says media industry blogger Ad Blog Arabia.

Dennis Woodside, Google's recently appointed director for emerging markets, says the move into the Arabic language was driven by a belief that the region was poised for a rapid expansion of internet usage - much as mobile telephony took off once prices fell to an affordable level.

Internet usage in the Middle East and north Africa is currently below 10 per cent of the population, compared with about 50 per cent in Spain or Italy. In addition to an Arabic-language e-mail service, Google has launched a version of Google News - the first time the Arab media has been given a unified presence on the internet.

Google's news sources inevitably reflect the limitations of the local press - which is highly self-censoring, online and in print. This has led to criticisms from some observers. "Right now it is not doing a good job of identifying the most important stories or the most important sources," complains Marc Lynch, a US-based Arab media expert.

But despite the apparent teething problems, by aggregating content it should help a wider range of sources reach a larger audience.

The region's two leading internet companies, both based in Amman, Jordan, are convinced that their local knowledge will enable them to hold their own.

AlBawaba, a leading Arabic-language news content provider established in 1999, has been growing at a rate of 80 to 100 per cent over the past two years.

Hani Jabsheh, AlBawaba's director, says the company's content service, which consists mainly of news, business and entertainment, and generates 60 per cent of the company's revenues, is likely to benefit from the exposure Google's news site will give it. Mr Jabsheh believes, in any case, that the internet industry is co-operative and everyone will benefit from Google's presence.

Google believes it can help local businesses by expanding the region's online advertising network. "We can help start-up portals monetise traffic, through the thousands of advertisers we have in the region," says Mr Woodside. AlBawaba, which generates 40 per cent of its revenues from advertising, sees room for further growth.

"There has been a change in advertising attitudes recently, with a strong shift towards the internet, led by the booming real estate industry, and followed by travel and cars, which have found they generate more sales from online advertising," says Mr Jabsheh.

Maktoob, the region's other big internet company that launched initially as an Arabic e-mail service in 1998, is equally sanguine, in spite of the fact that Google's Arabic e-mail service could pose a threat to its core web mail business, which has 4.5m registered users.

Maktoob has been profitable for the past three years and in June 2005 attracted an investment of $5m (£2.6m) from Abraj capital, a Dubai-based private equity company. It recently negotiated a deal to take news content from the Arabic service of the BBC.

Ahmed Nassef, vice-president, acknowledges that Google's entry into the market is likely to force established providers to raise their game. But he insists Maktoob's relationship with Google is not one of rivalry - it already takes Google adverts on its site. "Our main interest is to grow the whole internet industry in the region. Everyone will benefit," says Mr Nassef.