Like the thousands of expats who find their way to this glitzy sheikhdom, Sim Whatley and J.C. Butler came to Dubai several years ago seeking jobs. But what they found instead was the opportunity to create an online classified website for the region, Dubizzle.com.

Originally, the website was created for classified listings in Dubai. Now, the website enjoys market domination in the United Arab Emirates, and has expanded its presence to virtually cover the entire region, with separate pages for each country, and offering different language options. Last June, South African multimedia company Naspers acquired an undisclosed stake in the company.

As the region's online advertising market is now worth US$150 million, other competitors have expanded to target specific classified ads, while new ones have been launched to grab a share of the same regional market that Dubizzle seeks. Whatley and Butler say that a constant process of refining ideas and business strategy helps the site evolve, and keeping Dubizzle's classified ads free for the non-professional seller helps its popularity.

"Classified websites in general are mostly about concepts," Whatley says. "Even if you have the best website in the world, if you don't have any ads to sell in our website or you do not have any financial benefit from our website, you will feel no point going to it. I think [success in this market] is a great mixture of carrying the most selection in these markets as well spending lot of time, lot of money in development."

Difficult to Navigate

Unlike the U.S., which saw sites such as Craigslist take substantial chunks of the classified ad business away from newspapers, the Middle East has been slow to transition. Globally, the online classified market in 2010 was worth US$8 billion, with the U.S. market at US$2.6 billion, according to a report by McKinsey & Co. In the Middle East, only US$150 million, or 12% of advertising budgets are allotted to online, a figure that includes classifieds, according to the Nuqudy 2011 Arab Internet report.

Searching for jobs in Dubai made it apparent to Whatley and Butler that they could replicate the success of classified sites in the West. "The newspaper classifieds [here] are difficult to navigate through," Whatley says. "You can't search, and you can't sort. If you are interested in anything, you have to call them, and then maybe the receptionist says, 'Sir is not here, Sir is busy.' This is not the most efficient way finding the things."

The pair studied classified websites elsewhere in the world, and devised a business plan. With backgrounds in finance and economics, the two sought out a local developer to help them build out the website. It was tough going at first, Whatley notes. "It was very much a shoestring budget," he says. "We were not making a lot for the first couple of years. We were trying to take the idea off the ground. We always reinvested into the business. At any time we would make a bit of money it would go back towards advertising or towards development."

Two years after getting the website operational, the pair decided to stop outsourcing its development. "We built a website all together," Whatley says. "So we hired a couple of developers and then and accountant. At first the company was built slowly."

Dubai suffered in the global financial crisis, as investors and banks punished the city for its commercial entities being unable to pay back loans. Workers leaving the country unannounced became a regular theme. But it was a boom time for Dubizzle, Whatley says. "When the recession hit Dubai the hardest in early 2009, traffic to the site exploded with lots of people listing to meet their household needs. At that point we just began growing by leaps and bounds. There was a period when we hired 25 people. Basically we were hiring a person every other week."

Whatley and Butler are happy to say that after years of just getting by, Dubizzle.com has become a profitable company. Without divulging profits, the pair estimates that roughly 70% of Dubizzle's revenue comes from corporate advertising, and the remainder from its property section. "Property is one of our most popular sections, and we've been able to see how regulations affect the market," Whatley says. "Buyer investing in property can go down and then go up; it is kind of interesting to see that and definitely lot of our traffic is generated through real estate searches."

Having cemented itself as the UAE's dominant source for online classified advertising, the website enlarged its ambitions, expanding over the past year to almost the entire Middle East. Each country has its own unique website. Countries in the Maghreb and Levant offer French in addition to English and Arabic language site options.

"The UAE is definitely still the biggest market for us," Whatley notes. "But we expect that will change, as we have a huge market in Saudi Arabia that has lots of potential. We are working hard towards that. But having spent five and a half years in the UAE, it's going to take some time to bring them on the same level."

'It Has to be Big'

The expansion of Dubizzle to almost all of the Middle East, save Yemen, is the fruition of an original goal, Butler says. "When we first started, we understood it was economies of scale. For a web business to work, it has to be big. From early on, we wanted to be regional."

In seeking expansion, there have been challenges that seemed deceptively easy at first, such as implementing language scripts on the websites. The company has also had to weigh options on how to approach the mobile market, Butler notes, explaining that instead of rushing to build a mobile app, the company developed a mobile website first. "The challenge was what should our mobile strategy be," he says.

But the technical challenges have paled in comparison to the demands of business strategy and management of a suddenly regional business. "There have been growing pains, and a getting back to the basics," Butler says. " There was a little bit of overcomplicating things, and we had to get back to the roots of classifieds. It doesn't work as a international company. It works as a collection of local companies."

Butler says that part of the site's evolutionary process has been a realization that each country site needs a tailored approach to grow. "We have to approach each market differently," he says. "We have boots on the ground, but there was too much focus on consistency, and limits on change. We're allowing things like technology, and even the branding or message to diverge in each market, to become home grown.

Additionally, the company partly views each of its country websites as individual efforts, Butler notes. "In some countries we behave as startups. It's a manual process of meeting people, showing them how this will help them. Classifieds are very much tied to consumers and these daily transactions between individuals, which are very unique on the basis of thousands of variables."

One thing that has stayed constant is a philosophy to keep Dubizzle's classified ads free for the non-professional seller, Butler says. There are models to consider, such as paying for premium positioning on the site, but the goal is to keep things reasonable for customers, he states. "In classified ads, if you're number two, you're not going to make any money. For us, of all the things, getting the number one position is the most important."

Published June 12, 2012 in Arabic Knowledge@Wharton