Yahoo! has agreed to acquire Maktoob.com, the Arab world’s largest online community, marking the first major investment by a U.S. technology company in a region where internet penetration is still in its infancy.
The global internet giant said on Tuesday it has entered into a definitive agreement with Jordan-based Maktoob Group to acquire Maktoob.com for an undisclosed fee. Maktoob Business is a part of Maktoob.com.
Yahoo! said it expects the acquisition to be completed in the fourth quarter.
Following completion of the deal, Maktoob.com will become a wholly-owned subsidiary of Yahoo!, while the remaining products under the Maktoob Group will operate under a new entity called the Jabbar Internet Group.
Jabbar will retain products such as online auction site Souq.com, online payment platform cashU.com and Arabic search engine Araby.com.
The acquisition will allow Yahoo! to offer Arabic-language content for the first time as well as Arabic versions of its products and services, such as instant messaging and email.
"With the acquisition of Maktoob.com and our investment commitment to the region, the Arab world will soon get the entire Yahoo! experience in Arabic with relevant local language content, programming and services," Yahoo! CEO Carol Bartz said in a statement.
The deal will also boost Yahoo!’s already considerable market share in a region where rival Google, which began Arabising products and content in 2006, holds the number one spot in most countries.
Maktoob.com, founded in 2000, is among the top 10 internet sites in almost all Arabic-speaking countries, according to U.S.-based research firm Alexa.
"With the combination of the Yahoo and the Maktoob brands … and the breadth of content and services that we have, we expect to be one of the strongest players in the region," Keith Nilsson, Senior Vice President, Emerging Markets, Yahoo!, told Maktoob Business.
Yahoo! and Google are currently embroiled in a global battle for internet domination and facing fresh competition from the likes of Facebook and Twitter.
Competition has become increasingly fierce amid the global financial crisis, with advertising revenues in developed markets declining dramatically as clients cut budgets.
In an effort to bolster revenues, the pair have been expanding into emerging markets, where internet penetration and technology take-up are relatively low compared to the West and advertising is still witnessing double-digit growth.
Internet penetration across the Middle East stands at around 23.3 percent, compared to more than 70 percent in the UK and U.S., according to InternetWorldStats.com.
In Egypt, the Arab world’s most populous country, internet penetration stands at just 12.9 percent, while in the oil-rich kingdom of Saudi Arabia penetration is only 22.7 percent.
Ahmed Nassef, General Manager, Maktoob.com, said: "In most part of the Arab world we are just at the start of internet penetration.
"Yahoo! Maktoob will create the products to bring the Arab world online, and then offer Middle East businesses the opportunity to talk to that audience."
For Maktoob.com the takeover will likely bring significant investment and access to Yahoo !technology with which to optimise its current offering.
The deal will also boost the English-language side of Maktoob.com as Yahoo! is already the number two website in many Arab countries without Arabic support or a regionally-focused content.
The specifics of the deal and timeframe for integration of the two companies’ products and content have yet to be finalised, but Arabised email, instant messenger and search are likely to be a high priority.
"Our product road map will be put together over the next few months. Today we are announcing the deal. It will take a few more weeks for the deal to be completed and during this time we will be working on the product road map," said Nassef.
"However, it is clear Arabic Yahoo! Mail, Arabic Messenger and Arabic Search are all key pieces that will come up first."
Users will not see noticeable changes to Maktoob.com until the first half of 2010, Nilsson said.
"After the deal closes there will be small changes, you may see the Yahoo! brand on the homepages and a few other changes to the experience, but there will not be substantive changes with introducing Yahoo! products until the first half of next year," he said.
There is also no word yet on whether the acquisition will lead to job cuts.
"We will be looking for synergies - and opportunities," said Nassef.
"There will inevitably be a change in where we focus our resources. We will have a clearer idea of this over the next few weeks."
One hurdle both companies will face is concerns over freedom of speech.
Arab countries are well known for their censorship and many in the region will be looking to see how Yahoo! reacts when governments challenge it over content.
Maktoob users, meanwhile, are concerned the acquisition could lead to censorship of content critical of the U.S. Nilsson said this would be an "unfounded fear".
He added: "We don’t plan to change Maktoob’s approach to content on the Matkoob site. We think Maktoob has taken a healthy, balanced approach to the content."