Rocket’s departure doesn’t change the strong long-term fundamentals of Turkey’s internet sector

Rocket Internet, the internet business cloning company led by the Samwer brothers from Berlin, recently decided to close its 400 person operation in Turkey. Rocket’s Turkish presence was concentrated in e-commerce where it targeted the clothing, jewellery, sports apparel, and homeware verticals. Since Rocket is a knowledgeable and respected actor in the global internet industry, their actions have caused entrepreneurs and investors alike to express skepticism about the potential of the Turkish internet sector. These concerns are misplaced because Rocket’s exit is not reflective of the underlying performance of the Turkish internet sector. Rather, it is the consequence of the incompatibility between Rocket’s strategy of flipping businesses and the long-term commitment necessary to succeed in Turkey.

Rocket is notorious for its short-term focus. The company readily acknowledges that it is not interested in making the costly long-term investments necessary to come up with new business ideas or creative ways to improve an existing model. Instead, it relentlessly focuses on copycat execution to outperform its competitors in the short-term. Its goal is to identify an attractive profit opportunity, ramp up fast, and exit fast. This is the model that brought it success with Alando, which it sold to EBay for $54M only 6 months after launch in 1999, and CityDeal, which it exited to Groupon for a valuation in the triple digit millions 5 months after starting in 2010.

Given these successes, Rocket tried to replicate the same model in Turkey. It was attracted by the country’s emerging internet industry and effectively purchased the option to explore flipping opportunities by entering the country in February of this year. Rocket then went on a hiring spree to rapidly grow its team to 400 people. Despite this large team, Rocket Turkey’s senior leadership was not Turkish. The lack of homegrown leadership in an e-commerce market with unique local characteristics like low customer loyalty is a clear indication of a short-term focus. 

Rocket didn’t want to invest in developing local senior leadership because its goal was to evaluate the value of its option in the next 5 to 6 months, just as it had done with Alando and CityDeal. If it had skyrocketed in value, it would exercise the option by exiting to a strategic buyer. If it looked like Rocket would need to hold the option for a significantly longer period of time for it to realize its value, it would redirect its finite resources to other short-term opportunities. A 2-3 year perspective is simply not part of Rocket’s DNA, and for good reason. The Samwer brothers don’t see the need to adopt a long-term philosophy since they already have a secret sauce which mints money in the short-term.

Rocket’s departure from Turkey is not a statement about the long-term fundamentals of the country’s internet sector. Rather, it is a reflection of the misalignment between Rocket’s short-term strategy and the long-term investment necessary to succeed in the Turkish market. In fact, however short it may have been, Rocket’s stay in Turkey has been a blessing for the country’s internet industry. 400 people may be unemployed now, but they are equipped with the experience and confidence to launch internet businesses of their own or to contribute to the growth of existing businesses with a long-term orientation. By learning from their employer’s activities, Rocket employees can apply their new skills to build sustainable companies which thrive in Turkey’s growing internet sector.