Superman versus Sun Tzu

One man is spending big, the other is trusting brains. Jasper Thornton gazes up at Egypt's new portal giants
Tareq Ismail looks like a dot-com entrepreneur. When I meet him, he is unshaven. He is wearing track suit leggings and a sweatshirt. He leads me through his office overlooking the Shooting Club, out to a small balcony. Wicker chairs crowd in a jumble around a low table. A smashed glass trails across the table top; the debris of a six-hour meeting last night, Tareq tells me. Reclining in his chair, Tareq looks relaxed. But don't be fooled. Across his chest is the legend "McGill Law." Tareq catches me looking at it and grins. "Grade point average 3.99," he says.
Tareq is owner and chief executive (CEO) of Om El-Donia, the latest portal to reach the Egyptian market. "I want this to be something the whole world looks at and goes wow," he says. "I want to provide every single service an Egyptian or a foreigner in Egypt could want. Everything from Britney Spears to Umm Kulthoum, to where to buy trainers. We will offer e-mail with 10 megs of memory. You will be able to download movie trailers before you've even heard of the movie," he continues. "There will be an investor's corner, a women's corner, toys for men..." The former lawyer looks almost rapturous.
Across town, a man called Basel Dalloul is planning to squish Om El-Donia on to the tarmac of the information superhighway. Dalloul is the CEO of Noor, which will be launching its portal in June. At first blush, Dalloul is a very different creature from Tareq Ismail. His office, high in the LG building by the Mustafa Mahmoud Mosque in Mohandessin, has a sweeping view down Gam'at Al-Dowal boulevard, through vast, paneless windows. It is all minimalist lines, sharp edges, leather, blacks and greys. Dalloul's presence fills the room: this is his territory. He wears a charcoal suit and plain shirt and tie. At his wrist flares a gold watch. It is very large. A mobile phone headpiece, looking like the latest thing from Tokyo, sits on his ear. There are other signs. Dalloul speaks eloquently, with a strong US accent. His speech is pungent with silicon valley argot: "This is a technology wet dream; Egypt's an economic green field." He is rumoured to have a taste for fancy belt-buckles: the superman "S," or a roaring bulldog. The last numbers of his mobile phone are 007.
One thing is plain. Both men mean business.
Tareq tells me that he doesn't plan to make money with Om El-Donia for at least five to seven years. "It's an investment in the future." Until then, Tareq will finance Om El-Donia through four sister companies. Gebly.com will be an e-commerce site and Mezad.com will auction goods. Tareq is pasting a lot of hopes on Web Spot, which offers web development services. "It's a cash cow," he says. He drops the names of two companies. Later, I check with both. Each says it hasn't signed with Tareq yet, though they have talked. A fourth arm, transferring technologies, will provide further revenue. But the biggest burden will hang on Tareq's own pockets. I ask how deep they are. Tareq smiles. His brother now owns a third of the company.
Con O'Donnell, an Internet strategist with Egypt's National Systems Research, is cautious about portals making money. "There is a basic weakness," he says. "If I'm interested in Britney Spears, or Umm Kulthoum, I'm going to go to their dedicated web sites, not some general purpose thing that covers them inadequately." "Sites that work will be focused: jobs, education, small ads. The expense of maintaining an all purpose site is huge, too." O'Donnell used to work for Nomad international, an Egyptian portal that spectacularly crashed last year (see box), so he knows.
Nor is O'Donnell yet a believer in Egyptian e-commerce. "With auction sites, it is difficult to make micro payments. Who's going to send a cheque for 50 piastres commission for the bookcase they've just bought?" Tareq's answer is that users can print out a bill and fax their credit card number, or someone can go and pick the commission up. "All this is costly and unwieldy," O'Donnell says.
E-commerce also has hitches. Egyptians are reluctant to pay over the net. For an e-commerce site, that means that retailers will need to feel there are enough users to make it worth the logistical hassle and expense of selling electronically, paying a commission to the site owner, and delivering to a home. O'Donnell feels there aren't enough users in Egypt yet to thrill the retailers. Tareq counters that numbers are growing.
Ihab Heikal, CEO of Masrawy, is another surprising opponent of straight portals. "The portal model is dead," he told Al-Ahram Weekly. "The business model is redundant. Just having lots of users and banking on advertisers doesn't cut it. It didn't work for Yahoo, why should it work for us? After the failure of Nomad here, and the collapse of the US dot com market, all of us need to prove we can earn. The answer is to add value to specific services, and charge for it." Masrawy is now working to provide very specific things, such as domain names and Al-Ahli football club e-mail accounts, in return for cash. It will also try to sign its portal users to its Internet Service Provider (ISP). Heikal holds up the America On-Line (AOL) model. "Even they are no longer a straight portal. They're going for premium services and connectivity."
Heikal is bemused by Tareq's plan to finance the portal through sister companies. "If you need to go to other businesses, you shouldn't be in portals in the first place: be in the others. It's like being in construction but financing it by selling cars," he says.
But others are more tolerant of Tareq's plan. An IT investment specialist with the Swiss bank UBS Warburg told the Weekly that, "this is a normal way to pay for a growing company." But he did caution about companies which won't profit for five years. "They may well be a good investment. But five years is the outside edge." He added that five years was a figure CEOs often pluck out of thin air.
Dalloul, on the other hand, has already accepted that his portal won't make money. "It's a loss leader," he explains. He has a very specific plan for making money. Dalloul will offer free Internet access, through the Noor ISP. But for every pound that a user pays Egypt Telecom while on the line, Dalloul gets 70 piastres. Nodding to Aric and Layla, members of his content team, Dalloul remarks, "If these guys can work out a way to make money out of the portal, that's great. They'll all get whopping bonuses! But the income will be through the connection." Noor will be the first ISP to offer connection free. As Dalloul points out, "Two things will decide whether a user chooses your ISP." If it's cheaper than the rest, and if it offers better connection. Ours is free, and has capacity for 1.6 million users. So it will be fast. Beyond that, users have to know about it. That's where the portal comes in." Aric Cheston, Dalloul's content manager, says, "We're offering e-mail, communities, music downloads through deals with US companies, Cairo relevant stuff like city guides. All for nothing. We think users will find it very exciting."
Dalloul's numbers add up, according to Ihab Heikal of Masrawy. "We're using the same model now, though we have a massive first mover advantage." Dalloul is less sure. "Everyone heard we were going to offer free connection and are now promising it, too. But it took us a year to get all that in place." Dalloul has other advantages. His infrastructure exists now, as Noor already services enterprise. So he gets bandwidth at cost. That frees more money to spend on promotion and getting the portal's content right. Dalloul will spend 137 million dollars in the next two years. Blink. "My plan is already fully financed," he says. Egyptians make up 30% of his investors. The rest are regional and international. A couple are from the US, a couple from the UK. His debt is low: in relation to investment it is 15:85. Our Swiss banker thoroughly approves. "For a growth company that's a great figure," he says. Dalloul thinks he needs to capture 160 000 subscribers two years from launch to profit. It is estimated that there are now 800 000 Internet users in Egypt, and that number is growing 50% every six months. Tareq on the other hand is holding investors off until as late as possible. "We launched Om El-Donia on the fourth of April. On the sixth, two Saudi investors rang to offer me cash. I said no. Why let them buy cheap, and make a killing on my efforts?"
Tareq Ismail claims no interest in philosophy. But his talk is littered with wisdoms. "You can outrun money with brains," he says. "You don't have to be rich to become rich." Tareq has plenty of ambition. But while Noor and Om El-Donia go through their birth pangs, they will need money to establish market share and maintain their costly portals. As Nomad discovered, that demands doughty investors. When it comes to financial muscle, Noor is bench-pressing far heftier weights than its rival. Tareq's favourite book is Sun Tzu's The Art of War, the Chinese guide to battle strategy worshipped by Wall Street and Tokyo financiers. "I've read it 23 times," he says. He even gives it to friends.
One of Tzu's sayings is, "though an obstinate fight may be made by a small force, in the end, it must be overcome by the larger." If Tareq wants Om El-Donia to survive Noor's super-powered set-up, maybe he should call those Saudi investors back.
Pride comes first
NEW PORTALS are springing up in Egypt. They will need plenty of money to stay buoyant. They would do well to heed the fate of Nomad International.
The large basement office of Nomad International is like a tomb. Dust hangs sullenly in the air, draping computers and desks. Skeletal hardware -- old monitors, battered keyboards, grubby hard drives -- piles about. No air stirs, until a door-keeper comes in. "All gone, all gone," he pipes mournfully. It is like a lament.
A year ago it was all so different. The office hummed with chatter. Phones rang. Work on Nomad's portal, Minhina, proceeded well. Then, in October, salaries stopped. Omar Biblawi, the chief executive, told everyone to keep working. "Salaries will come," he said. People kept working. The salaries didn't come.
Five months later Nomad's workers are angry. A Web site team leader (he preferred not to be named, lest this endanger his chance of ever being paid. Most said that.), told the Weekly, "How could they abuse employees so? They never wasted an opportunity to waste an opportunity. And we have no legal recourse, as they never gave us contracts. The worst is that they never said they couldn't pay, they just kept us here on false hopes. It's a crime." His voice is brittle with bitterness. Con O'Donnell, former content director said, "Through a mixture of fantasy and inexperience, they screwed up. Now 80 people are jobless and owed money. Many left their other jobs for Nomad."
So what happened? Tamer Said Ahmed, Nomad's owner, told the Weekly that he has spent eight million pounds of his own money on the company. Yet he can't pay his employees. That suggests a want of thrift. But more tellingly, between July and December, EFG-Hermes, an Egyptian brokerage house, suddenly cancelled a LE six million loan they had granted to Nomad, according to Hassan Abduh, vice-president of EFG-Hermes' Horus fund.
In an interview with the Weekly, Mohamed Taymour, EFG-Hermes chairman, preferred the Weekly not to publish the details of why EFG-Hermes had recalled the loan. But he did demonstrate to the Weekly that EFG-Hermes had not broken its side of the contract, contrary to widespread rumours. Ahmed has now fully repaid the loan.
The Weekly asked Ahmed whether the salary arrears would be paid. "I have never looked for other investors. If one can bring something other than cash, like strategic value, only then might I consider it," he answered. Ahmed also told the Weekly "I am committed to Nomad's future." That won't comfort the many unpaid, still bitter about Nomad's past.
Declaration: the author of this article formerly worked for Nomad International.
Recommend this page
Related stories:
The honeymoon's over
Portals here, there, everywhere 27 April - 3 May 2000
© Copyright Al-Ahram Weekly. All rights reserved
Send a letter to the Editor