Menafn.com plots e-finance success

Jordan-based Menafn.com knows that survival in the online financial services space may mean more than offering just e-brokerage

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By  David Ingham Published  March 29, 2001

Two revenue streams|~||~||~|It’s already ultra-competitive out there in the Middle East’s e-finance space, but a new offering that went live last month is confident that it will still make an impact. Jordan-based Menafn.com is positioning itself in two ways.

Obviously, there’ll be a portal play based around financial news and products, but the company also aims to build a second profit centre around software development. It’s thinking is that as Menafn.com grows and matures, it’s also developing a lot of very valuable, proprietary technology. So why not package that technology and resell it to financial institutions that are just starting out on own their own e-finance projects, or want to improve existing offerings? “As we build our portal for the end consumer, we’re bearing in mind that later on we’ll be providing packages for other people,” says Sawsan Dabaneh, co-founder and executive vice president for operations & technology.

In these days of weak stock markets and dot-com doom and gloom, Menafn.com’s approach is one that’s being taken by a growing number of Internet companies. These smart minds are increasingly using their Internet real estate as shop windows that can showcase their abilities as developers of technology that could be resold to other companies.

In the first few years of its existence, co-founder and CEO Ramzi AbdelJaber explains, Menafn.com’s balance sheet will look very much like that of a typical e-broker. Revenue will be generated primarily through transaction revenues on online trades and fees charged for matching buyers with sellers of financial instruments.

However, as time goes on, Menafn.com expects a larger and larger proportion of its revenue to come from the resale of its technology to financial institutions. For that reason, the company says it’s deliberately developing its system in a modular way that will allow specific bits of it to be taken out and sold standalone to third parties.

“Initially, we’re going to be driving revenue from customers, but as we grow it’s going to come more and more from institutions,” says AbdelJaber. “Our revenue structure will change tremendously over time.”

One example of a technology that Menafn.com believes it could resell is its global portfolio tracking system, which allows investors to track their local and global equities together. Another feature that AbdelJaber sees as having big resale potential is investment games, exactly the sort of ‘value add’ that brings surfers to a site and keeps them there.

||**||Finetuning strategy|~||~||~|Menafn.com began to finetune its business strategy after reviewing its situation around the Middle of last year. The company had initially wanted to develop and resell proprietary financial content and build this into a revenue stream alongside e-brokerage. It moved away from that plan when it became clear that there is limited opportunity for serious financial reporting in the Middle East because of a lack of company transparency.

It also became obvious as time went on that the technology the company was developing was a tangible, and potentially very valuable, asset. Look too at the financial difficulties that pure online financial services ventures are having and the arguments for diversifying revenue sources become stronger.

For example, Ameritrade, a prominent US e-broker, lost $13.626 million for financial year 2000. Rival DLJdirect (now renamed CSFBdirect) reported a loss of $6.6 million for the quarter ended June 30, 2000 – its last reported results prior to its acquisition by CSFB. In that light, Menafn.com’s move to develop this alternative revenue source makes perfect sense.

Nevertheless, Menafn.com insists that its portal will be a money maker it its own right, and not just a money losing shop window for its developers’ talents. One way it aims to strengthen the portal is by bringing in second round investors that already work with the type of customers it needs to acquire.

Menafn.com won’t say at this stage who those investors might be, but you could imagine a bank without a strong online presence being a candidate. That bank would take an equity stake in Menafn.com, direct customers that want online services towards the site and take a share of the company’s profits. “We’re currently raising our second round of financing and we’re looking at investors that can drive customers to our Web site,” says AbdelJaber.

The other way to build a customer base is to make a site a great browsing experience and to build in what is commonly referred to as ‘stickiness.’ This is where Menafn.com emphasises the work it’s doing to develop features like investment games and global portfolio tracking. “These are the things that aren’t currently available because no-one’s gone through the pain of making them relevant to the investor in the Middle East,” says AbdelJaber.

When it comes to developing crowd-pleasing technology, Menafn.com is not exactly a beginner. It’s office in Jebel Amman, Jordan is housed in the same building as Integrated Business Solutions (IBS), a Web developer that’s well known in Jordan. Sawsan Dababneh is chairwoman and co-founder of IBS and the company’s client list includes Arab Bank and Jordan National Bank, as well as Aramex International, Global One, and Jordan Telecom.

Ramzi AbdelJaber has also done time with financial institutions. Both in the USA and back in Jordan, he’s worked with Goldman Sachs, Merrill Lynch, American Express and Arab Bank. When it comes to familiarity with the financial services sector, Menafn.com therefore clearly has plenty of experience under its belt.

||**||It's still competitive out there|~||~||~|Still, whilst experience is vital there’s certainly plenty of competition out there. TAIBdirect, IslamiQ.com, and CSFBdirect-eUnion are all vying for share in the regional online brokerage space, with iHilal.com also set to come online later in the year.

Menafn.com says it’s going to at least match all the things that those portals do well and add more. For example, whilst everyone can offer e-brokerage, AbdelJaber says Menafn.com will be able to offer it at a lower cost per trade than its regional rivals. It can’t say yet what the cost per trade might be, but CSFBdirect-eUnion charges $20 and IslamiQ, a Shariah investment site, charges $29.95 per trade.

Menafn.com is also promising Arabic telephone support. A further feature will be a financial products marketplace. It’s pledging that its offering will not be biased towards any mutual fund or credit card supplier but will be wide open to all companies, giving consumers a broad choice. “That’s why in our investment structure, we want to make sure that no single financial institution has a majority share,” says AbdelJaber. He believes that at least one rival e-finance portal excessively promotes a key investor’s financial products.

As it builds up its capital base and its service’s functionality, Menafn.com will establish physical bases outside its native Jordan. A Gulf marketing and support centre and an Egyptian product development and marketing office are the most likely candidates.

At press date, Menafn.com was still working on its second round of funding, but it did pull in some very credible backers for its first round. One is Ibtikar, the US-based Arab venture capitalist, which invested in Arabia.com and is believed to have put a seven figure dollar sum into Menafn. Other major investors were General Atlantic and Capital Z.

Ibtikar certainly sees potential in Menafn.com After putting money into Arabia, the company was searching for an investment with the potential for short term profitability. “Financial services and particularly stock trading was high on the list,” says Amal Alayan, co-founder and managing member, Ibtikar.

Out of two e-finance proposals that were looked at, Ibtikar gave Menafn the nod. “We always prefer to bring top tier US venture capital firms as co-investors in our deals,” says Alayan. “Menafn already had efinanceworks, they had a comprehensive vision, and an intent to execute with a simple appealing message to Arab consumers: ‘Demand More.’” Menafn believes that its mix of financial portal and software development business will give it the ingredients to deliver on its ambitions.||**||

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