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Bracing for a Boom
With 25 million users, Egypt’s internet penetration is the highest in the region, ushering in waves of online ventures, both for profit and learning initiatives. By Amr Aref
10 August 2011, 5:53 pm
 

 In the early 1990s, if you wanted to surf the internet, you had to be a very patient individual. First, you had to wait for a dial tone to call the internet service provider (ISP) and then endure a series of annoying beeps and tones. Finally, a terminal screen would pop up, where you could type your username and password.

 

 

This series of steps opened a gateway unlike anything the world had seen. Although getting online wasn’t as easy as it is today, the sheer number of commercial possibilities of the technology could not be ignored, even then. In 2000, Egypt entered the digital age by offering broadband access, heralding the end of the days of dialup.

 

 

With over 220 ISPs offering broadband at relatively cheap prices, internet penetration started to rise. Now there are over 25 million internet users, up from just 450,000 users in 2000. These figures mean Egypt has one of the highest penetration rates in the region at almost 30%.
 
 
 
The swelling number of users on the web represent a huge, mostly untapped, market for businesses. Currently the majority of content Egyptians see is foreign, whether they are shopping online, reading news and entertainment or logging onto social networking sites like Facebook and Twitter.
 
 
As more of their lives become virtual, users are demanding greater accessibility via mobile technology and wireless hot spots. They are also lobbying for more products and services to be available on the web such as online banking and bill payment as well as cheaper, faster internet and local content.
 
 
The ever-growing list of demands hasn’t yet been met, making it only a matter of time before every business, organization and government office realizes the potential and, if they haven’t already, invests both time and resources in their own online presence, say experts. 
 
 
Investors are already putting money in online ventures — some online businesses have been recently acquired at 10 times their earnings before interest, taxes, depreciation and amortization, a testament to the kind of return companies predict they will make. A recent example includes Nefsak.com, a online shopping portal that was acquired in part by investment bank EFG Hermes.
 
 
A world full of treasures
Mona Afifi, partner and co-founder of the country’s first online boutique Style-Treasure.com, shared  her experience in the online realm.
 
 
According to Afifi, the time for Egypt’s internet boom has come.
 
 
She and her partner launched the site with the aim of selling local designers’ clothing, jewelry and accessories, taking advantage of the fact that many young designers have trouble convincing stores to sell their products.
 
 
“The idea was to provide young, talented designers with a platform. Stores were not willing to take their products and chose to ignore them.
 
 
Shop owners were still stuck at the phase of importing and stocking up with big expensive brands,” Afifi says. “My partner and I were very fond of several local brands and we used to wear them ourselves. We are both very passionate online shoppers, and we were always wondering why there weren’t any online stores in Egypt.”
 
 
The growing number of internet users combined with city dwellers moving to the outskirts of Cairo makes shopping in the flesh logistically difficult, a trend that has perhaps helped promote the popularity of online stores. Having an online shop also saves the overhead costs of having a physical store.
 
 
At the start of the operation, Style-Treasure only featured three designers’ products. After two years, they now have 62 designers and their products, ranging from clothing to personal accessories, bags, shoes and a new line in the homes and gifts section.
 
 
“The homes and gifts section was only introduced last November, and it quickly flew to make up around 45% of our sales,” says Afifi.
 
 
The company only requires that the designers are legally registered and that the products are original and fairly priced. The idea is to maintain a certain level of quality without being marketed as  couture.
 
 
Afifi says: “We want someone to be able to buy from our site once or twice a month and not have to spend their entire salary on a bag.”
 
 
In terms of sales, the site is doing well. Afifi says March is her benchmark to measure the site’s performance because of Mother’s Day.
 
 
According to her, so far sales have doubled every March, month-on-month.
 
 
One of the factors contributing to the steady sales are the different methods of payment available. Style-Treasure offers cash on delivery, the most popular for local orders.
 
 
“Knowing that online credit card purchases don’t sit well with the Egyptian people, we offer cash on delivery to Egypt and 19 other countries. And cash on delivery is the top choice when it comes to local orders,” she says.
 
 
Some 70% of sales originate in Egypt with the bulk being in Cairo and Alexandria, but Afifi says that their products are being bought around the country. “Cairo and also Alexandria [are] a very big market. But you would also find other places that you wouldn’t expect [there] to be shopping online — like in Upper Egypt, Luxor and Aswan.”
 
 
The remaining 30% are divided among Gulf countries. In hopes of increasing that figure, Afifi plans to advertise her site abroad to help boost her sales.
 
 
“For advertising, I honestly think the real exposure came from Facebook and public relations. […] We are still a small company, and I would love to afford advertising outside of Egypt, I think there is a huge market out there that is interested in Egyptian products given the culture and heritage of the country” she says.
 
 
Afifi believes that the Egyptian online market is booming, and hopes to see more businesses go online, competition she believes will benefit the economy.
 
 
“We had no competition at the beginning and we were happy to enjoy two years without any competition. Now we are hearing of new online boutiques — and we are glad, and I think it is about time. Even existing shops need to have their online stores,” Afifi says.
 
 
What the sector is in dire need of at the moment is government support. According to Afifi, the previous government made online ventures and telecom infrastructure a priority. She says there are numerous designers, manufacturers and craftsmen that produce quality products and
 
if the government provides the necessary support they could showcase their products to customers around the world and become an integral part of the economy.
 
 
“We have so many talents here as well as factories and workshops — we have it all. I really believe that with some government help, over the next five years these young designers would be contributing to Egyptian exports.”
 
 
Providing solutions
And the internet’s potential is not only in the services and products that are finding their way online. There are numerous supporting businesses such as web design and software development firms that could reap the rewards.
 
 
One such business is Paradigm Solutions, an Alexandria-based developer that offers web and software solutions. Seif El Sawaf, a co-founder and partner in the company, says businesses now understand the importance of an online presence.
 
 
“For the website business, there is now awareness among companies and especially family businesses that having a website is vital. As the young generation starts taking charge, they all know the importance of having a digital presence and they are pushing their families or parents into investing in a web presence,” he says.
 
 
Nowadays, a business card bearing a Gmail or Hotmail account is seen as unprofessional since companies are also running their own domains.
 
 
“The lack of [one] makes you question their seriousness,” Sawaf says.
 
 
Paradigm formed in mid-2007 when Sawaf and partners Ahmed Luxor and Mustafa Mazen took on a small website project.
 
 
“We decided to start something without taking any risk, meaning that we didn’t invest a penny. We took a project, very small software development plus a website, and we worked on them and made LE 5,000,” Sawaf recalls.
 
 
They used that money to establish their company, renting out a shared office and hiring an employee. By the end of 2007, the trio were working on multiple projects. Realizing the potential, they moved to a bigger office and hired another designer and two software developers.
 
 
“We started putting [together] targets and a financial plan and figuring out how much money we need to make and how many contracts we need to sign per year and so on,” Sawaf says. “Our strategy for the following years was to grow the website business as a cash cow to ensure continuity of the company, while we develop our software — which we believe [was where] the real potential lies.”
 
 
After two years of research and testing, Sawaf and his team completed Shipro, software that tracks information for shipping companies. 
 
 
“We spent two years developing this product, mainly depending on cash from this one client as well as the websites’ business. At the time, we were breaking even, which in the world of software companies is pretty good,” Sawaf says. (Usually software companies show a loss the first few years because they are in the development phase.) 
 
 
The company’s sales growth on the back of the websites’ business reached staggering levels — 220% in 2009 and 60% in 2010. He predicts another 100% growth rate this year on the back of rising software sales.
 
 
Its growth is not limited to Egypt — online entrepreneurs have also started to reach out to other countries in the region, increased their capital inflow and signed a partner in Dubai.
 
 
“We are considering having an office in Dubai, probably a virtual office that handles website projects in order to help us during the difficult times that Egypt is going through,” Sawaf says.
 
 
He is also eyeing the Saudi market as a potential niche for their company.
 
 
“We already had a client from Saudi [Arabia] that saw our portfolio and is now working with us. He says that [Indian companies] over there are in control of the market, [but] they are very expensive,” he says. “It is obvious that there is good potential and room for competition if you just look at the currency variance between here and there.”
 
 
Social expansion into education
Style-Treasure and Paradigm Solutions are a small cross-section of the success young entrepreneurs have seen in this field. But the internet’s potential also encompasses social endeavors.
 
 
Motaz Attalla, an education consultant with experience working alongside NGOs and the Ministry of Education, is developing a learning tool to revolutionize the educational system — a project he says represents the phrase “thinking outside of the box.”
 
 
Funded by Yahoo!, Maktoob and a Nahdet El Mahrousa initiative called Social Innovation Starts with You, Attalla’s idea is to create an online learning directory where teachers and students can connect directly. He explains that the idea behind the Cairo Learning Directory “is to try and match our learning process with our needs, interests and circumstances.”
 
 
Attalla says that given the poor quality of education in Egypt and the rigid borders of the system, teachers and education experts need to question its limitations and how to move beyond them. 
 
 
Attalla says his inspiration comes from  a 1971 book Deschooling Society, where Austrian philosopher Ivan Illich proposes creating a way for students and teachers to connect freely and develop programs and lessons that directly serve their interests.
 
 
“Illich envisioned a database that anyone could constantly update and people can access it and find out who is teaching what and who needs what. And this was in 1971,” Attalla says. Forty years later, the internet has given Illich’s a vehicle. 
 
 
Attalla’s online directory will functions as a conventional content management system where teachers post their profiles online. A profile would include what they teach, their working hours, whether or not they do private lessons as well as contact details. Students then search the site to find teachers that are knowledgeable specific fields.
 
 
There are similar directories around the world, the most famous of which is US site  TeachStreet.com and School of Everything.com based in the UK. Attalla’s blueprint is similar, but will have localized content to best serve Egyptian students and educators. 
 
 
“The reason why we decided to build the site is that we wanted something local and in Arabic. Also these learning tools don’t work on their own; they need ground work and [organization] to determine the needs of the region it aims to serve,” he says.
 
 
One of the site’s features that Attalla is user reviews to rate and comment on their experience.
 
 
“We can’t endorse all the teachers that post their profiles,” he says. “There might be thousands and so we can’t go to all them and that’s why there is a review system, where people would post their opinions and evaluate their learning experience.”
 
 
The online directory is still a work in progress and Attalla hopes it will launch in October. When it does, it will provide a working example of how the internet can help promote social enterprises in the country. 
 
 
Egypt has proven the power the internet can have in shaping politics — now it must go one step further and realize the role it can play to drive the nation’s economic growth and educational horizons. bt
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