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US internet giants ramp up Middle East investment

Google and Yahoo! see traffic and advertising revenue growth in region

US internet giants ramp up Middle East investment
Yahoo! reports double-sigit revenue growth in the region.

US internet giants Google and Yahoo! are seeing significant growth in traffic and revenues from search engine advertising in the Middle East, despite overall revenues remaining low.

Yahoo! Middle East is seeing double digit revenue growth while competitor Google is ramping up its investment in the region, regional executives said.

"[The Middle East] is one of the fastest growing in the company in terms of revenue growth so we're looking at very strong double digital growth every year. Year-on-year the average growth for digital spending is around 25-30% as a market," said Ahmed Nassef, vice president and managing director of Yahoo! Middle East.

Key drivers are the region's rapidly rising internet penetration rates and its burgeoning youth population. The UAE has the highest internet penetration in the region at 60.9 percent, followed by the rest of the Gulf countries.

Two thirds of the Arab world is under the age of 25 and among the fastest adopters of new online technology.

There are no statistics for regional digital advertising but experts estimate it to be less than five percent of total spend. The speed at which it is being adopted, however, is rapid.

"The industry ad spend today as a percentage of total on online is less than two percent," said Mohamad Mourad, Google's regional managing for the Gulf region.

"There is no reason why this number cannot become 30% which means a fifteen fold increase," he said, adding that regional pickup in demand will be quicker than western markets.

Google, the world's largest search engine, is "aggressively" hiring staff and boosting investment in both its English and Arabic-language products in the region.

"We are really serious about MENA and we are investing according to this thought. Not only saying we are very serious, but we are also investing in many ways to match this commitment. We're definitely hiring aggressively," said Mourad.

Yahoo!, owner of the second most popular US search engine, paid $164m for Arabic language venture Maktoob.com in 2009.

In less than two years, the site has grown its users from 30 to 80 million while its Middle East homepage is the company's fifth most visited homepage.

"Our growth is very high. I think as we get to the 5-6% of [total advertising] spends then you'll see the Middle East becoming a more important revenue contribution to the company globally," said Nassef.

 Google chairman Eric Schmidt said Thursday that Arab leaders were wrong to block internet access during the recent Arab Spring revolts and had only hurt their own economies.

"It is a terrible mistake for them to do so," he told a briefing on the sidelines of a G8 summit. "Among other things it completely screws up the economy, communications, the exchange of goods, the electronic commerce, the flow of information into these countries... It's not a good idea to shut down the Internet in your country."

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