Several days ago, we received confirmation that ikoo had closed its offices in Saudi Arabia (Jeddah and Riyadh), Kuwait, and Egypt. 

The news seemed unlikely, following the regional ad network's $3 million investment from STC Ventures six months ago and the launch of its video advertising service, but the move appears to be part of a strategic refocusing. 

In a call and over email, Isam Bayazidi, ikoo's CEO, confirmed that ikoo is adjusting its strategy to focus on two new business lines, which led to a reduction in the volume of work on the ground in those three markets.

"In 2013, ikoo launched two new business lines, premium advertising, as well as its video advertising network, all of which we are seeing great demand and interest in. As well, with the emergence of technology for real time buying, ikoo had been investing in operation and technology that would allow us to link and integrate with advertising agencies and advertisers in a way that maximizes their reach and audience intelligence," he explained. 

"Those market developments brought changes in our strategy," he added. "As a result... earlier this month we made changes on our sales team, which resulted in temporarily closing the sales offices we have in Jeddah, Riyadh, and Kuwait, which had a total of five employees. Our teams in UAE, Jordan, and Tunis were not affected, and continue to serve clients all over the region as they have been. We plan to re-open our offices in those countries as soon as possible."

Bayazidi asserted that the shutdown is part of a long-term growth plan, and the closures are temporary. "We plan to reopen those offices in 2014 for sales as we see growth and maturity in demand for Premium and Video advertising. Saudi is the largest and most valuable market in region, and Kuwait [is among those markets with] the highest ad-spend per capita in the world. We are serving those markets remotely for the time being, and committed to return to them as soon as possible," he said.

ikoo doesn’t have a plan to return to Egypt in the near future, however, due to instability in the market. The company didn't have an actual office in Egypt, Bayazidi said, but employed two sales staff there. "In Egypt, we had work-from-home sales members. They've been having difficulty selling for the last two years given the political and security situation in Egypt, and the decision to reduce our presence in Egypt happened in parallel with the changes that we started to implement this month."

However, he also asserted that, in general, the management’s decision was independent from the team performance. When queried about profitiability, he noted that "the purpose and focus of this transformation is long-term growth of our display advertising business, rather than short-term profit generation." 

Over the longer term, ikoo will be relying more on digital technology, especially its Real Time Buying program, which allows publishers to sell ad slots to advertisers in real time based on the demographics of each user. STC and ikoo will continue to work together, Bayazidi said, independently of the investment received by STC Ventrures.

A few of the company's employees spoke to Wamda on condition of anonymity. 

“The decision came by surprise at the beginning of a working day, despite the fact that some of us were appointed less than seven months ago," one says. "We faced a collective problem to communicate through our emails. Then, we received individual phone calls to announce the company’s decision. Of course we’re not happy about it, but we understand the new trends of the company. We didn’t get any compensation yet, but that is defined according to the Emirati law. We hope that our negotiations with the management in the UAE will be fruitful.” 

Some have claimed that more than seven employees were let go, a claim that Wamda has not been able to verify independently. "The total number of employees that we had in those offices is seven," Bayazidi says, counting all three markets. 

Bayazidi affirmed that the company will make efforts to compensate its employees appropriately, without discrimination, regardless of their location or position.

Although digital ad spend in the Middle East is some of the lowest in the world, it's also the fastest-growing. ikoo's closures may have caused a small tremor, but they may also be a harbinger of broader market shifts over the next few years. if the Jabbar company is optimizing its strategy, its new approach will likely be a model for other ad companies to take into account.