Sci & Tech

No Takeoff for Rocket Internet

No Takeoff for Rocket Internet
No Takeoff for Rocket Internet

Rocket Internet is one of the least known but most prolific Internet companies in Europe, if not the world.

In recent years, the German Internet giant, which applies business formulas to new markets, came to Iran under the guise of a joint operation with MTN-Irancell a few years ago with over €300 million.

The two companies, each with 50% of the shares in their joint venture Middle East Internet Holding, were positive about their plans in 2013.

But, for as much money the company has invested, they lacked experience in Iran compared with the local competitors.

Firstly, Rocket’s entry to Iran looked assured as it set up a joint venture with the second largest telephone operator Irancell, due to the telecom operators’ large reach via the traditional SMS system and concerted efforts to upgrade their 3G and 4G LTE.

However, for all the expertise the company could muster, including that of Iranian-German managers, Turkish-German experts and joint German-Arab Internet professionals, the company simply could not adapt to the local culture.

Rocket’s Iran plan was straightforward in its initial stages, as the company hoped to tap into the growing e-commerce market by competing with current market leader DigiKala, while emulating other well-known business types, such as Uber, eBay and JustEat to name a few.

But each of their well-funded online businesses received a poor response; with little or no brand recognition in the wider public even after high-profile advertising campaigns across Tehran.

Rocket Internet’s problems did not end with just misguided advertising campaigns. The main issue with their Iran operations was far more fundamental.

What would seem as clear-cut jobs in any e-commerce company were routinely executed in the wrong fashion, claims one person who used to work at the company.

Other serious transgressions included, according to another person, managers paying themselves the salaries of imaginary staff, to the tune of $30,000 a month claimed by one manager.

While the Internet juggernaut floundered with seemingly endless mistakes, their failure in adapting to local norms, or at the very least understanding cultural habits was stark.

One example pertains to TaxiYaab—later known as Snapp—that was slapped by the taxi association with a fine, according to a local executive.

TaxiYaab’s main mission was to be the Uber-like taxi hailing app of Iran, but users simply did not download the program.

As one business insider recently said, “The taxi eco-system is already highly segmented and a tertiary system that called for hailing a cab by using an application seemed excessive.

Iran’s taxi industries are highly developed with several sub-categories of taxis. The developers of TaxiYaab seemed to have missed this prescient point and thought their service could win over the public.

Then comes the group’s online property website Eskano, which aimed to do what did for the British real-estate market. Iranian real estate is a difficult nut to crack and Alexa rankings of Eskano do not look positive at 3,529th place in Iran.

Around the country, properties are often advertised without images—something which has become standard—and location is not mentioned. To make matters worse for the Internet company, the local industry is mainly run by independent entities that guard their buyable properties like hawks and don’t trust third parties to muscle in on their action.

Next, their online food delivery system Bodofood hoped to grab a chunk out of the growing takeaway market. This too suffered from a lack of response by locals and ultimately had to merge with rival Zoodfood, who as TechRasa reported back in September, was purchased for $270,000.

For Mozando, an online marketplace website, it too suffered from lack of growth and exposure. It was merged with Bamilo just to keep the remaining merchants on board.

The leader in the Iranian marketplace sector remains Divar, a local site, which became the de-facto online merchant website in the country during 2014-15.

Nevertheless, Bamilo, the group’s largest investment, also failed to gain a larger market share as it had hoped back in 2013 even after an investment of €60 million, according to a London-based Iranian entrepreneur.

Black Friday deals aside, the Internet shop has still not managed to beat the market leader and was placed at 19th much behind Digikala’s sixth ranking, according to SimilarWeb.

DigiKala CEO Hamid Mohammadi announced this week that his company retains an 88% market share of the e-commerce market.

One of the only positive achievements of their initial jaunt into the local market is that they still have an advantage over some local competition, namely which, according to SimilarWeb, stands at 2,019th place.