Uber acquiring Careem is just the latest in a string of foreign acquisitions, red flagging a recurring theme in the region that could turn out problematic in the long run.
It seems that unless you're primarily government-backed, like Saudi Aramco, Emirates Airlines, or Emirates NBD, your brand will eventually give in to the allure of a fat foreign paycheck.
Today, we are quickly losing our star-studded Arab brands.
After acquiring Souq.com for $580 million in 2017, Amazon has now set in motion the next part in its plan. It has now rebranded the Souq.com site in the UAE to Amazon.ae.
However, this piece of news, coupled with the fact that just over a month ago Uber, announced it is acquiring Careem for $3.1 billion, has brought an interesting question to the forefront.
Is Middle Eastern business losing out to international corporations?
A homebred brand image lost
It’s not often that the Middle East gets its own homegrown breakout startups. Ride-hailing firm Careem was putting so much pressure on Uber regionally that the American corporation decided to outright buy it out, especially in light of its upcoming IPO.
Similarly, Souq was the star of the e-commerce scene in the Middle East, and companies like Emaar Malls were clamoring to get their hands on it, offering a bid as high as $800 million.
Eventually, despite conflicting reports on the matter, with Careem pushing for independence, it eventually submitted to Uber’s offer. However, it has maintained that it would maintain operations under the Careem brand.
Again, along a similar tune, Souq’s co-founder and (recent) Amazon MENA Vice President Ronaldo Mouchawar is enforcing that the transition will allow for the best of both worlds.
“Amazon.ae brings together Souq’s local know-how and Amazon’s global expertise, something we believe will be of significant benefit to UAE customers,” he said.
Still, there’s no denying that the Souq brand identity could very much be lost in the homogeneity of that which is Amazon. No one can dispute that Souq has accomplished great things in the field of Arab e-commerce by pushing its limits in the region to new heights. As such, it’s a little unfortunate to see these efforts and accolades absorbed by a giant corporation such as Amazon, furthering its global hold on e-retail, and taking away one of our Arab stars.
An alternative for the greater good of regional business
While an exit is a completely natural stage in the lifespan of a startup, perhaps Arab startups should consider other options.
Elie Khouri, CEO of Omnicom Media Group MENA, is of this sentiment, taking to the media last month to express his opinion on the Uber-Careem acquisition, as well as the Amazon-Souq deal.
“After Amazon’s acquisition of Souq.com in 2017 for $580 million, the $3.1 billion price-tag for Careem in cash and shares intimates the appetite for the Middle East’s Internet start-ups is growing,” he said last month. “Most observers celebrate it as proof that tech investments in the region are judicious and can lead to a profitable exit.”
“But are we being blinded by the short-term impact? Is the deal as good as it seems for our ecosystem and region?”
That is the crux of Khouri’s argument. Should successful Arab startups forego a fat foreign paycheck for the greater good of regional business?
“As is the case with most foreign acquisitions, profits will most likely be channeled back to the home country rather than being reinvested locally,” he said. This could take the air out of the room if we’re not careful.”
If there is one thing that we can learn from the success stories that are Souq.com and Careem, it is that the MENA market has great potential for business. However, the market is highly specialized and region-specific, meaning mega corporations with big wads of cash hoping to secure themselves a healthy slice of Arabian business are not guaranteed to succeed.