OPINION: The Acquisition Of Souq.com By Amazon Is A Defining Moment For Businesses In The UAE
I remember when I arrived in Dubai first to live almost five years ago, the context of where the Middle East sat with the rest of the world was one of the first things that became apparent. Apart for the geopolitical landscape, how businesses around the world viewed the region was quickly apparent.
At the time, globalization focused on the BRIC nations. Most global companies had a presence in the US and Europe, APAC and LATAM became the next bedrocks. MENA was often, almost always overlooked.
There weren’t many companies who had significant regional offices in Dubai. Some choose Singapore, Google had a base in India. But MENA wasn’t considered.
I remember having an interview on the phone in 2013 with Ebay for a Head Of Social Media role for emerging markets. They weren’t too concerned where I lived, it was probably going to be Switzerland, but the work would be split between Brazil and Russia. There was little or no interest in Dubai or the Middle East region. I was surprised that the region was so blatantly overlooked and didn’t share the same view.
Some of the reasons for this are the obvious
– Geopolitical tensions
– Low spending power of most MENA nations and the lack of a common market
– Difficulties of doing business including local ownership and share structures
– Relatively low internet and mobile penetration across the region
That would explain why we haven’t had any major takeovers. Yahoo! acquisition of Maktoob was a content marketing play almost eight years ago now. (The office has since shut down)
There has been a lot of graft across the region and some good infrastructure put in place to facilitate the growth of start-ups, while venture capital has increased year on year (an example of this being that Careem raising $350m late last year), there was little to show for on the global scale.
That is until today, when global internet giant, Amazon acquired Souq.com.
This isn’t new information; talk of Souq.com being the first unicorn of the region has been doing the rounds of the tech scene for the past 18 months. Indeed, acquisitions take time.
Amazon were muted to be the suitors early this year. Things went quiet for a time. Then they heated up again. Emaar came in with a late bid. Finally, the deal was done.
During this period, the general sentiment on social media is that people are happy Amazon were the successful party placing trust in a tried and tested e-commerce model
The acquisition is significant for various reasons:
– It’s the first time when Silicon Valley money has been pumped into the Middle East e-commerce scene
– It gives huge confidence to other e-commerce portals like Jado Pado and Mumzworld to name a few
– It is an acquisition model, that shows confidence is what has been built here, (for example, Uber choose to set up alone rather than acquiring)
– It’s also significant that the purchaser is Amazon, and not a local property development company, Emaar, or even an Asian internet giant like Alibaba
What’s more, it’s a big success for Dubai.
As HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum said today
“Amazon’s entry into the region reflects the visionary foresight of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister and Ruler of Dubai, who launched Dubai Internet City in 1999 and adopted the e-commerce and online business legislation of 2002.”
HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai
So what next?
Acquisitions, especially those at this scale, take a long time to happen and are not always success stories. There are far more tech acquisition failures that there are successes. The challenges will be mainly integration. Then, Amazon, will inherit some challenges from Souq.
Profitability is still a question mark. E-commerce platforms typically make low margins, much of this high price tag, rumored to be for $650m, is based on the potential opportunity. Not only that, it’s not a clear playing field. Noon.com is set to launch soon and there are a number of other successful e-commerce sites that are looking at multiple verticles.
For now we can put this day down as a successful one for businesses in the UAE, congratulating Souq.com on their exit and extending a warm welcome to Amazon to the region.
