By Benoît Faucon and Rory Jones
TEHRAN--Decorated with a foosball table, brightly colored walls
and videogame consoles, the offices of Café Bazaar look no
different than many Internet startups in technology hubs like San
Francisco, London or Berlin.
What's unique about Café Bazaar, an Android software app store
that mimics Google Inc.'s Google Play, is its location: an upscale
high rise in central Tehran.
The company is among dozens that have popped up in Iran, part of
a technology scene that has developed amid--and some say because
of--international sanctions and strict censorship laws that have
scared off global tech companies, at least for now.
Facebook and Twitter, whose users include the offices of
Ayatollah Ali Khamenei and President Hassan Rouhani, are
particularly popular with Iran's increasing tech-savvy population
of 78 million people. But foreign companies, deterred by
international sanctions or banned in Iran, have yet to launch
Iranian versions of their content.
But those hurdles are fueling the rise of fast-growing local
companies. Café Bazaar offers more 25,000 downloadable Iranian and
international apps for gaming, social media, messaging and other
uses, and it gets roughly 20 million visits a week within Iran.
Adding to its popularity is the fact that Google Play and Apple
Inc.'s Apple Store are difficult to use in Iran, largely because
sanctions make international banking transactions a challenge for
Iranians. Café Bazaar has stepped in to fill the void.
Other local startups have seized similar opportunities in fields
like social media, e-commerce and online video, mimicking the
services of companies like Amazon Inc., Groupon Inc. and Google
Inc.'s YouTube unit.
Iranian technology entrepreneurs say sanctions and restrictions
on Western companies have helped them grow by reducing competition
from established foreign players. American technology firms so far
have had limited or no access to the market because of bans on
their content or restrictions on foreign companies setting up in
Iran.
YouTube, the online-video site, is banned in Iran. That has
allowed Aparat, an Iranian video-sharing platform to build a
following of millions. The website, which is owned by Saba Idea
Technology Co., averages five million views a day and has 22,000
minutes of video uploaded daily. Takhfifan has created a successful
group-buying website. Digikala, an e-commerce platform similar to
Amazon, ships more than 4,000 daily orders.
"The restrictions have actually been in our favor," said Ali
Tehraninasr, Saba's director of business development and
international affairs. He said Aparat is mindful that the videos
posted on its sites should show respect for Iranian culture, but
that there is no direct censorship of its content. Music, clips of
movies, animals and religious content are all popular.
But its success might not last. Foreign companies are beginning
to explore ways to start tech companies in Iran or allow their
services to become available in the country. The Wall Street
Journal reported last year that gadget giant Apple was in talks
with Iranian distributors to sell its products in Iran when the
sanctions eventually are lifted.
That has fueled concerns about new competition. "The Iranian
startups now have to beat these guys or be beaten," said Said
Rahmani, founder of Tehran-based venture-capital firm Sarava Pars
and an early investor in Digikala.
Already some cracks have begun to show. The social-media website
Cloob once had more than three million registered users, but the
number has fallen by 40%, a decline Saba's Mr. Tehraninasr
attributes to Facebook's growing popularity here.
International sanctions can hurt as well as help. Mr.
Tehraninasr said Western companies stopped selling Saba servers
five years ago because of the restrictions, and Saba now has to
rely on Chinese equipment of lesser quality. In addition, the
purchases are made more costly by Iran's weak currency, which has
lost half its value compared with China's yuan in the past two
years.
But there also is a sense of freedom in the startup universe in
Iran that is missing in more traditional sectors of the economy.
While the average Iranian state official typically wears in a dark
gray suit and a collarless white shirt, Café Bazaar co-founder and
Chief Executive Hessam Armandehi turns up to work sporting a polo
shirt.
While many Iranian government offices feature pictures of staff
"martyred" during the Iraq-Iran civil war, Café Bazaar has an
oversize green fluorescent cushion on the floor topped with a sign
that invites a "free hug."
Write to Benoit Faucon at benoit.faucon@wsj.com and Rory Jones
at rory.jones@wsj.com
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