Battle intensifies for ad revenues

Search engine traffic in the Middle East is growing at an exponential 500 per cent a year thus invigorating the battle for shares in the advertisement revenues it can potentially draw, the CEO of the one of the most prominent search engine companies has said.

Search engine also commands the lion's share (about 40 percent) of the internet usage in the region, he added. There are about five players in the field and this number is expected to grow, according to market estimates.

"When we look at the search patterns in the region and the amount of content online, we get feelers regarding the growth of internet traffic in the region. Most of the online searches are still based on one key word. We see people getting more specific about their searches. Then much of the content is yet to be made online in Arabic. All that content is being made available online and this is leading to 'five times a year' growth," said Adonis El Fakih the CEO of Ayna Corporation. Launched in 1997, Ayna is the pioneer of Arabic search engines. Google recently rated it as the second most used search engine in the Middle East.

Search engines draw their entire revenue from advertisements. Online advertisement revenues are growing at the fastest pace among all modes of mass communications, say industry insiders. The total advertisement revenue that will be cornered through online advertisements in the GCC alone by the end of 2008 is estimated at $80m. "If you talk about online revenues itself, we are growing at 50 per cent a year. We are in fact expecting to gain from the current financial crisis considering the advertisers will get more and more focused on their target audience," affirmed Hussein Freijeh, the Advertising sales director of Maktoob, a portal catering to Middle East readers.

El Fakih said in countries like the UAE the prospects of search engine markets are the brightest.

"You have advertising agencies handling campaigns worth $20m. So it's possible for search engines to attain an annual turnover of $4 to $5m within few years of launch," he said.

El Fakih said the online search market is focused and competitive and does not treat horizontal growth aspirations well.

"A few years ago we tried to move on to several other services. That did not go well. We realised that our only key to success lies in customised search. Google provides several other enterprise services, but then it's revenues primarily come from the search engine," he said.

Search engine companies specialising on information from the Middle East are trying to break the language barrier. "The script of Arabic may be the same across the Middle East, but then dialects differ from one country to another. So we are trying to meet specific needs in the Arab countries. We already offer search options in French and English besides Arabic. We have witnessed strong interest in Middle Eastern affairs from Russia, Italy and Germany. We have therefore launched the primary version of our search engine in Russian and German," said George El Khabbaz, the Search business manager at Ayna.

While 58 per cent of the queries on an Ayna search comes from the GCC, 20 per cent comes from North Africa. North America and Europe provide about three and nine per cent of the search engine traffic. "The trick is to understand the specific needs of customer and provide it the services," said El Khabbaz.

Global online revenue figures are certainly more attractive. According to a study conducted by the Interactive Advertising Bureau (IAB) online advertising revenues reached a new rate of $4.9bn during 2007's first quarter, a 26 per cent increase compared with the same period in 2006. 77 per cent of the internet users employ search engines more frequently than any other online media for discovering websites. "For companies like us, it's important that we keep our costs low. We, therefore. open centres in countries like Jordan and Egypt where it's relatively cheaper to operate. Our headquarters are in the US where it is not very costly to operate either," El Fakih said.

The Middle East markets are expected to mature in days to come. "Till about six months ago 70 per cent of the searches that people wanted to do on the internet was related to sex. Now better queries are coming in. Brand names and news are gradually edging to the top of search options," El Fakih said. According to a JP Morgan estimate, global search queries will grow 32.5 percent from 2006 to 2010. Additionally, the number of monetized queries is expected to grow 50.6 per cent from 2006 to 2010.