The honeymoon's over

Tarek Atia talks to two Internet entrepreneurs about whether the dot-com drive has gone bust -- or just shifted gears
Cisco Systems, the global Internet networking giant, recently released a report prepared for the company by Gartner Consulting confirming what analysts have been predicting ever since the world's second-largest stock market, NASDAQ, crashed in April 2000. Dot-coms are not the future of the Internet economy, the report says, and the dot-com meltdown, despite the publicity surrounding it, is definitely not the end of the story.
The report predicts that the future of the Net lies not in flashy brand names like Amazon.com and its ilk, but in a more fundamental use of the Internet: to help businesses become more productive and efficient. That is the essence of the much-ballyhooed term "B2B" (business-to-business) e-commerce.
The report notwithstanding, the Middle East's Internet economy may still have to undergo the same hype cycle that its counterpart in the US is seeing through. This seems clear given the sheer number of dot-coms starting up in the region. Okazion.com is one such entity, primarily a B2C (business-to-consumer) shopping portal. Offering Middle Eastern consumers the opportunity to purchase mobile phones and computers online, the site is set to launch in the next few months.
Omar Abdel-Hay, Okazion's managing director, says he remains optimistic about the potential success of his site "in spite of trends worldwide, because Egypt is still a virgin market." Abdel-Hay's confidence is based on several factors, but he is primarily banking on the fact that his company has already been in the business of computer distribution for six years. This "offline" experience has allowed Abdel-Hay to establish partnerships with major computer manufacturers like Microsoft, Compaq and even the smallest Taiwanese companies to supply the online side of his business. In fact, Abdel-Hay says the multinationals are willing to give distributors an extra discount just to promote the idea of e-commerce in the region.
With prior online experience as the managing partner of Good News for Travel, a site which brokers deals for airline tickets and hotels, Abdel-Hay works on the principle that "the structure of the company is what makes a dot-com succeed." You have to keep things lean and mean, employing a multi-function staff and letting the software take care of a lot of the customer-site interaction. He claims the travel site is one of the few in the Middle East that is actually generating revenue.
Okazion, meanwhile, aims to pursue a long-term strategy of regional expansion, using smaller margins to bring in customers, since the company has other, offline sources of revenue as well. In fact, it is this hybrid model of "brick and clicks" that is gaining popularity among investors and entrepreneurs.
Along the same lines, Moshtriat.com is a site that is trying to encourage Egyptian businesses to complement their offline presence with a potentially lucrative virtual one. Ahmed Sabry, the company's CEO, calls the site a B2B marketplace. Basically, Moshtriat is trying to get as many companies as possible online, selling their products and services. Companies can get their own site for prices as low as $30 a month, but instead of being just another site in the vast world of cyberspace, the sites become part of the Web's largest directory of Egyptian companies, as well as a catalog of products, Sabry says.
Buyers will have to pay to use the service, probably along the lines of the same $30 a month. "We learned from the dot-com lesson," Sabry explains. "We are not offering a free service." For now, however, the site is free, and currently features some 13,000 tender offers from different companies, mostly culled from the papers since the site went online in July 2000. In the future, Sabry hopes laws will be adjusted to give online postings of tenders the same status as those that appear in print.
Sabry is banking on the combination of access to thousands of tender offers, as well as the product offerings of thousands of companies, to give the site weight in the business community. Funded by a group of 120 investors, all of whom are employees of the IDSC (the cabinet's Information and Decision Support Centre), Moshtriat's market capitalisation is over LE13 million, with 10 per cent paid in. The company is growing rapidly, and looks to have 24 employees in the next few months. Sabry's target is to get 1,000 companies signed up for the service within three months, and is holding off on publicising the site until the catalog is comprehensive.
Both Moshtriat and Okazion are looking at a return on their investment within the second year of operation. Both companies are hoping that some of the more general hurdles to a successful Internet economy will have been surpassed in the interim, e.g., the establishment of solid e-commerce laws and a more sound telecommunications infrastructure.
But even the Cisco and Gartner experts admit things are not all bleak for the dot-coms. Cisco's Mike Couzens and Gartner's Nicholas Smith both told Al-Ahram Weekly that "B2C is not dead," but that only those dot-coms that open their eyes to things like "collaboration, consolidation, and sharing customer equity" have any chance of surviving. "The cream will rise to the top," they argued, and those online companies that also develop offline infrastructure are more likely to thrive.
That's certainly a far cry from the prevailing wisdom of dot-com's glory days, when everybody thought everything must go completely virtual, but it's also food for thought for entrepreneurs who want to turn their big ideas into online gold mines.
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