Can you justify $20m invested in

Venture capitalists yesterday announced an injection of $20 million of funding into We thought we'd do some number-crunching on that investment to see whether it made sense.

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By  Rob Corder Published  June 13, 2001

Here’s an interesting game you can all play at home. It’s called: “What’s in the business plan?” It’s designed to give you hours of family fun working out why venture capitalists pump millions of dollars into certain ventures.

The fun, of course, comes from the fact that the business plan is in a sealed envelope that only venture capitalists can see.

So gather the family round and lets play.

Today’s subject is, which has just landed a juicy $20m in funding from a consortium of investors including Intel Capital and Kingdom Holdings.

The only clues to the future business plan that presented to its investors is that the company is convinced the online advertising market will pick-up sooner or later in the Middle East and will be there to reap the benefits. The company’s CEO, Ramzi Zeine, told a press conference in Dubai that it was only a matter of time before local advertising agencies wake up to this new medium. We were also told that the $20m would see through for the next 2-3 years, when are projected to move into profitability.

That’s all the information we’re giving you right now, so turn that egg timer over and get to work.

I had a stab at this exercise last night, and my deliberations led me to some interesting conclusions. As you will discover when you play this game at home, there are some mathematics involved, so stay with me.

I thought a good way to guess “What’s in the business plan?” was to look at global online portals with publicly available figures and compare their revenue models to’s potential strategy.

I chose because it seems to be the closest global equivalent to Yahoo has been one of the most successful attractors of online advertising, so it seemed like a good place to start.

Now remember in the game of “What’s in the business plan?” you are up against the clock, so don’t expect my maths to be perfect. Check them yourself and you’ll find that I’m pretty close.

I set out to compare revenue per page impression from Yahoo with what I am guessing is expecting for its business.

In March, 2001, Yahoo registered 1.1 billion page impressions per day. I couldn’t easily find a total for a quarter on their Web site (remember the egg timer!), so I plumped for 1 billion multiplied by 90 days to give me 90 billion page impressions in the quarter.

Yahoo’s revenue for the first quarter was $180 million. So, to find out the revenue per page view, you divide 180,000,000 by 90,000,000,000. Before your head explodes trying to work that one out, the answer is $0.02, or 2 cents per page impression.

I’ve sent a request of to Yahoo for an official quotation on their price per page impression, but my egg timer will have run out by the time it comes back. If their quote varies widely from my guess, I’ll get back to you.

Now for Here, we are fumbling in the dark a little more, but I’ll give you my thought process and you can agree or disagree with my arguments as you see fit.

Ramzi Zeine is aiming for profitability in 2-3 years and the $20 million will see the company through until then. Lets split that 2-3 year estimate down the middle and say profitability in 30 months. My assumption is that investors will want to see $20 million in cumulative revenues by that time. That would mean $666,000 per month, or $2 million per quarter in turnover. Clearly the company expects revenues to escalate over that time, but that makes the maths too complicated for my brain.

Now let’s look at’s traffic. According to the company’s submission for the Arabian Web Index, generated 37,710,974 page views in April. Let’s round that up and say 120 million page views per quarter.

Run the same sum as you did with Yahoo (divide quarterly revenue into quarterly page views) and you get $2,000,000 divided by 120,000,000, which equals $0.01, or 1 cent per page view.

In other words, for to generate $20 million in revenue over the next 30 months, it can sell page views at half the price of Yahoo.

Is this the mathematics that is underpinning’s business plan? We may never know.

If it is, the $20 million invested doesn’t look all that bad a bet. Most Internet analysts agree that more focused sites will sustain their advertising yields better than broad mega-portals. Now may be a portal, but at least it has geographical focus on its side. Arguably, should be able to charge more per page impression than Yahoo because it has that geographical focus.

Like any venture capital investment, the $20 million comes with some pretty hefty risks. The online advertising market in the Middle East is so small right now it is barely measurable. will certainly not generate $2 million in any quarter this year since the entire market is only expected to spend $5 million online this year, according to Ajeeb Research. That means will have to catch-up pretty fast if it is to ramp-up revenues pretty fast next year to get back on track with my back-of-a-fag-packet mathematics.

There are no guarantees that the online advertising market will ever take-off here. Even if it does take-off, there are no guarantees that will dominate that space over other local portals or the international giants. does have a chance though, and that’s what venture capitalists look for in an investment. The company has had to slim down by laying-off staff, and this may have been a prerequisite from the venture capitalists who probably wanted to lower its capital burn-rate.

So there you go. I hope you are ready to play along with the “What’s in the business plan?” game. I’m sure we’ll revisit it next time we try to make sense of the vagaries of the market.

Let me know what you think. E-mail me at

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