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Schibsted flexes its muscles with restructure and 62% digital revenue result

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Schibsted flexes its muscles with restructure and 62% digital revenue result

Schibsted Media Group released its 2015 final quarter earnings on Friday, and perhaps lost in the good news (overall profits and online classifieds are up) and bad (Norwegian media activities down, including online) was the fact that the company reported that 62 percent of overall revenues now come from digital.

That envious figure is not especially surprising as the Scandinavian-based company has been ahead of the digital transformation curve for quite some time. Many industry analysts have even said that when the Internet was in its infancy in 1995, that Schibsted somehow “got it,” meaning they foresaw how powerful the medium would be, especially in terms of buying and selling.

Indeed, it seems the company’s story never grows old, and it’s surprising how outside of Europe, Schibsted is still not a household name.

In a corporate video last year, CEO Rolv Erik Ryssdal talked about a turning point in Schibsted’s “internationalisation” in 2005 and 2006 when the company started investing heavily across Europe, particularly with its online classifieds business. “I think we were criticised at that time for expanding too aggressively and spending too much money, but it actually changed the strategic mindset of the people working at Schibsted. From that point on, we saw that we were not only a Scandinavian company but a European leader.”

Today, you could easily argue that Schibsted is increasingly becoming a global leader, not only in terms of its growing online classifieds business but even moreso for its strategic acumen in building a seemingly sustainable business and innovative culture as a news media organisation. And what is always refreshing is the company’s willingness to share its strategies, successes, failures and lessons learned on the world stage ­– its Future Report alone is evidence of that.

Schibsted, a short history

Ryssdal shared some of the company’s latest plans and developments with us in January in the following interview, but before we get to that, it’s worth a short recap of how Schibsted reached its star status – and just reported a 1.64 billion NOK (172.1 million euros) EBITDA margin for 2015 or 29 percent YoY growth.

Schibsted, founded 176 years ago, has come a long way from the days when it was a two-newspaper, family-owned company to being a global multimedia, technology-driven business with 6,800 employees operating in 30 countries. Its news brands in Norway (such as the national daily Aftenposten, and the tabloid daily Verdens Gang, or simply VG) and in Sweden (the daily national Aftonbladet and Svenska Dagbladet) have enjoyed unrivalled market penetration levels and are often among the most innovative players in all things digital (mobile, webTV, etc.). Rarely does an industry conference or awards competition today not feature some cutting-edge project, innovation or development from one of these media companies.

Yet Schibsted makes no secret of the increasing challenges those brands face with their traditional revenue streams. For example, the company’s Norwegian media revenues declined by 11 percent in Q4 and 9 percent for the full year. And Schibsted says it projects more cost-cutting measures while continuing to invest in technology and new products to secure that part of the business.

It’s worth mentioning that its Swedish media houses, as they tend to be called here in Europe, increased revenues by 11 percent in Q4 and 3 percent for the full year.

VG earned numerous awards for its coverage of the World Chess Championships in 2013, won by Norwegian Magnus Carlsen.VG earned numerous awards for its coverage of the World Chess Championships in 2013, won by Norwegian Magnus Carlsen.Classifieds giant

But it’s not an accident that Schibsted’s Online Classifieds shows up first in the earnings report as it accounts for roughly 37 percent of the company’s revenues. Two crucial decisions early on precipitated this booming business: in 1999, Schibsted spun off its online business called FINN.no to compete directly with its papers. It featured paid classified ads and quickly took off in Norway to become the market leader. In 2003, after realising its new classifieds site in Sweden was making no headway against the established Blocket.se market leader (free classifieds), Schibsted acquired Blocket for 183 million SEK (about 20.3 million euros) – what then seemed like an outrageous sum.

But after absorbing the acquisition for a couple of years, the concept caught on and Schibsted began to roll out similar models in Spain and France, and the rest is…

Today, Schibsted is one of the top three leading global online classified companies, competing with the likes of eBay and South Africa’s Naspers. It even has a JV with Naspers, along with Telenor and Singapore Press Holdings for sites in Brazil, Indonesia, Thailand and Bangladesh. Schibsted's Classifieds division now has 2,500 employees and operates online classifieds sites in 30 countries, including established sites in Norway, Sweden, France, Spain, Italy, Austria, Ireland, Malaysia, Colombia and Hungary, and ongoing investment operations in several international markets.

Its revenues grew by 23 percent in Q4 (in NOK terms); for the full year, the growth was 19 percent.

‘Accelerating the inevitable’

In Schibsted fashion, the company is not sitting still, as former Schibsted staffer and media analyst Frederic Filloux wrote nearly three years ago: “Hence the unofficial motto that still remains at the core of Schibsted’s strategy: Accelerating the inevitable (before the inevitable falls on us).”

  • Schibsted makes no secrets about becoming a tech company competing in local markets with a global platform. Last year it hired more than 150 technology staff, whose tasks included incorporating image recognition and machine learning into its classifieds sites.
  • In Q3 2015, Schibsted increased its stake in the native mobile marketplace app Shpock from 82 percent to 91 percent, giving it control to roll out that app in a number of markets. Schibsted says Shpock (essentially a mobile flea-market app) is among the most downloaded apps in this sector in its key markets of Germany, Austria and the UK. It launched in Italy, Sweden and Norway in Q4.
  • In December, the company agreed to acquire 80 percent of Hemnet, the Swedish online real estate marketplace. The transaction is expected to close within the first half of this year.
  • In late January, Aftonbladet was the first Schibsted-owned title going live with the media group’s new native TV offering.

Those are just a few recent developments that are part of Schibsted’s new global organisation structure introduced in January.

Media is in his blood

Ryssdal was interested in media from an early age. His grandfather owned a local newspaper, Agderposten, and young Rolv Erik loved to visit. There, he met the editors and the reporters, and this gave him an early affection for the news business, he says. He joined the Schibsted Group in 1991 and has held several management positions, including CEO of Aftonbladet (1999-2005), CEO of VG (2005-2008) and CEO of Schibsted Classified Media (2008-2009). He holds an MA in Business and Economics from the BI Norwegian School of Management, and an MBA in Business and Administration from INSEAD, France.


'Attracting and retaining top talent is, and will continue to be, one of our main priorities. In an international business like ours, where we are competing with powerful global players like Google and Facebook, this is more important than ever before.'


WAN-IFRA: In Schibsted’s Future Report, by 2017 Aftonbladet said it wants to be an “online media company that also publishes a printed newspaper…” How would you characterise the development of transformation within your news organisations, and is there any specific criteria you are using to measure that development?

Ryssdal: Aftonbladet has a very strong position in Sweden, with a total of more than 3.5 million readers every day (around half the population). Aftonbladet's daily digital reach is equal to Facebook’s [within Sweden], which is unique for a media house. In Norway, VG also enjoys a strong digital position. Interestingly, both of these are single-copy sales papers (not subscription-based) and have experienced a brutal decrease of the print circulation the last years while at the same time having increased their digital reach in a very impressive way.

We are now focusing on developing our media platforms further. We are building and developing the Schibsted Media Platform as a state-of-the-art tool for digital, world class media houses. It was first rolled out in Svenska Dagbladet just before summer, and more will follow. In addition, we are building a new advertising platform to capture advertising revenues. These technological developments are our most important investment for the future of our media houses right now.

What is the impetus behind the new organisational structure announced this past summer to focus on “new geographies and stronger global functions”? And where are those geographies?

Our new organisation has a much stronger focus on global product and technology. We will build on our traditional strengths by being close to local markets, while at the same time taking advantage of our global reach. We believe this will enable us to deliver world-class products to our users and advertisers, and capture new and exciting growth opportunities. In short, the aim is that the new organisation will make us more speedy, innovative and competitive.

The four geographies are the following:

  • Norway (with companies like VG, Aftenposten, Finn.no, Bergens Tidende, Stavanger Aftenblad and Fedrelandsvennen)
  • Sweden (with companies like Aftonbladet, Blocket.se, SvD, Lendo, Prisjakt, Let’s Deal)
  • Schibsted Established markets (France, Spain, Italy, Austria)
  • Emerging markets for Schibsted

One of the stated goals of the Products and Technology Group is to “transform Schibsted into the new European Internet Giant.” As a world-class media company, would you say Schibsted is today a world-class technology company, able to compete with the likes of Google and Facebook?

We have for some years now ramped up our technological competence and capability substantially. Today, Schibsted employs almost 2,000 tech-savvy experts. This gives us better tools to fight for our users attention and digital advertising revenues going forward. In some markets, we believe we have the strength to compete with Facebook and Google, while we at the same time realise that this will take a lot of hard work and excellent product development on our side.

How do you attract, nurture and retain top talent at Schibsted?

Attracting and retaining top talent is, and will continue to be, one of our main priorities. In an international business like ours, where we are competing with powerful global players like Google and Facebook, this is more important than ever before.

We have recruited key people in central positions and know that they will attract more talent. In order to retain talents, we need to offer possibilities to grow and develop their career. We offer top notch development programs and believe that the best thing we can do is create a culture of great leadership as leaders develop leaders.

In 2012, the Aftonbladet Online Academy was started, as I understand it, to help staff across news org to develop the skills needed to thrive in today’s digital ecosystem. Is that a group-wide effort as well, i.e. extending to different parts of the business besides editorial?

No. From the group, we currently run initiatives like “Schibsted Journalism Academy,” “Schibsted Sales Academy,” and “Schibsted Brand Academy.”

Beyond Blocket, how much growth, revenue and profit, is Schibsted seeing from its Nordic services businesses, selling insurance and home services to its core customer? Is this enterprise a big or small one? What have been the learnings?

We have over a few years invested in a range of digital services that are adjacent to our media houses and online classifieds services. Personal finance and price comparisons are among the key focus areas. We see that we are able to build strong positions for these services backed by the traffic and the competence we have in the rest of our organisation. At the same time, these types of services can contribute valuable data about our users. This is useful for us in order to create more targeted consumer products and advertising. In Sweden, this business has annual revenues of around SEK 1 billion and a gross operating profit of a bit more than 20 percent.

How big might VGTV-like businesses become? Can Schibsted benefit – in a big way – by taking TV ad money from broadcasters? Is it already benefitting?

We believe that live pictures are a vital part of excellent digital media houses. So far, we are ramping up our efforts in this area most notably in VG and Aftonbladet where we spend around 100 MNOK on web-tv yearly. We are happy that the use is increasing, but at the same time revenues are currently lagging behind. We expect this to adjust so that web-tv will challenge for even more advertising revenues.

A number of publishers are starting to delegate their ad revenue to programmatic… what are your thoughts on this?

Programmatic has been a big shift in the industry that has been going on for a while now, but in the Nordics, the shift has gone a bit slower than for example in the USA and the UK. However, we saw that the growth on programmatic revenues in Sweden and Norway really took off in 2015, and many of our classified sites around the world are well up to speed within programmatic by now. With our new more tech-driven organisation and our global partnership with AppNexus, we are well suited to be in the front row when more and more advertising is being sold and bought programmatically.

Author

Dean Roper's picture

Dean Roper

Date

2016-02-23 18:48


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