Why is the Souq.com acquisition so significant? [Opinion]
For those who have been in the dark, Amazon has acquired Souq.com for over $650 million.
The news of an acquisition of this size has long been awaited by investors and digital entrepreneurs alike in the MENA region, and will carve a significant milestone in the history of our digital development.
The previous major milestone occurred seven years ago with the acquisition of Maktoob.com by Yahoo!
Here are my observations about why it matters to regional entrepreneurs:
1. Growth focus, bottom line obsession. The exit value of the deal proves that the age of evaluating a company based on revenue growth alone is over, and profits matter more than ever. In a new era of depressed economies, the companies that will matter more are the ones that ensure they have a healthy business. A healthy business, in capitalist economy, is measured by profitability.
2. It takes time to build an impactful business. The Souq.com deal is proof that you need to stick around as an entrepreneur for years running a healthy business prior to seeing a potential exit. There are no quick wins here.
3. Digital media entrepreneurs, shape up! Amazon coming to the region means a lot of MENA-based digital media companies that need to obsess about creating effective audiences around ecommerce platforms, in order to get a share of the digital advertising, increasingly being snapped by global platforms like Facebook and Google.
4. A wake-up call to traditional businesses. If you don't observe, embrace and potentially acquire what regional entrepreneurs are creating, the foreign market will do that on your behalf.
5. Expect more entrepreneurship. I for once was inspired to start Vinelab after the Yahoo-Maktoob acquisition in 2010. How many entrepreneurs will now be inspired to start?
6. There will be more M&A activity going around for sure, but I think mostly from regional players. As far as more global acquisitions to companies in the region, there haven't been many at this scale so there could be more, but I am not sure I can count many profitable startups in our region either.
Feature image via Amazon.