World Association of Newspapers and News Publishers


Germany's NOZ Medien: From regional giant to national player

World News Publishing Focus

World News Publishing Focus
Your Guide to the Changing Media Landscape

Germany's NOZ Medien: From regional giant to national player

(This post is adapted from the recently published WAN-IFRA Report, "Alternative Revenue Streams for News Publishers." Information about ordering/downloading the report is available here.)

Osnabrück-based NOZ Medien consistently exhibits an uncommon sense of daring and imagination in its long-range approach to publishing and investing. Blessed with a relatively well-educated, affluent market, it has not ceased to innovate over the years.

That’s why even though World News Publishing Focus interviewed the company’s two CEOs in mid-2015 (see the September/October 2015 edition), we decided to contact one of them again. This time we quizzed Laurence Mehl about NOZ’s strategy regarding alternative revenue streams. Rarely have we heard the successful and not-so-successful ventures in a company’s history described with such candor.

We spoke with Mehl in early January 2016, when a massive acquisition was in the works but not quite ready to be made public. On 24 February 2016 NOZ Medien announced it had acquired the mh:n group, owner of the leading media houses in the northern states of Schleswig-Holstein and Mecklenburg-Western Pomerania, subject to approval by the monopolies commission (which it has since received).

With that bold move, the company grew to more than two and a half times its previous size (measured by daily circulation) and, more importantly, achieved its primary long-term goal nearly a year ahead of schedule. We have updated some of Mehl’s remarks to reflect the changes resulting from the acquisition.

WAN-IFRA: Your company’s stated goal is to be the most successful regional media group in Germany in this year. Are you talking about journalistic success, financial success, innovation? What do you consider success?

Laurence Mehl: I think to be the most successful regional media company in Germany, you have to be the one who’s able to build up a sustainable, long-lasting business model for paid content. We are coming out of centuries of success with print paid content, and obviously the challenge is to transform this into digital paid content. And therefore we have a big transformation process here in our culture, our company culture.

With the aid of our “Strategy 2016” five-year plan, we have not only launched an approach to paid content that holds great promise, but also multiplied our group turnover by a significant factor from its 2010 level. We did that through two acquisitions as well as organic growth from diversification and paid content.

Today we rank among the largest German newspaper groups. Because we regard 2016 only as an intermediate step, NOZ Medien’s follow-up strategy also will insure continued growth, and the company will successfully develop additional regional media markets.

Our vision is to monetize a regional market so well via content and diversification that we have a sustainable business model that allows us to produce quality content – local content, news content. In 2011 there was no model on the horizon to make that happen, so we said we will be the first and the most successful to do that. At the end of 2016, I would like – and that’s what I challenge all my editors and all the other departments to do – to be at 45,000 digital subscribers. So we’re growing very strongly now.

First it was an experiment to find out whether people in our local areas are willing to pay for quality content, digital content – if you do it right, with the right device, with the right software, with changed habits in the editorial department, different working hours – are the people willing? And we can say now, since we have more than 33,000 paid digital subscribers here locally: Yes, there is a model.

You’re very diversified, and it’s quite impressive, all the areas you’ve grown into. If you see a company that’s doing something interesting, what qualities do you look for before you say, ‘I think we should take a share in that company’, ‘I think we should buy that company’, or ‘I think we should partner with that company’?

In the last five years we had a strategy of regional diversification. That means we only watched for companies in our area that were in the areas of programming, service providing. For example, e-commerce service providing or online marketing for companies who professionalize their online marketing, or corporate publishing. What we learned in that time is that this is a good business.

But a lot of those businesses are expanding outside the region, especially when they become pretty successful. And therefore we’re getting more and more into national diversification.

We founded a company called MSO Digital. They started as an online marketing company buying traffic from Google with AdWords. They started as a small company with one or two people and today they have more than 50 people and they’re working Germany-wide, and they have started to work outside Germany. They are among the top 15 online marketing companies now in Germany.

And this know-how is for us, as a media company, extremely valuable. What they do mainly now is analyze traffic, optimize sites, and increase conversion rates, loyal users, and so on. That is kind of a science in itself. So we have extremely professional online marketers in our company, and that helps us in so many other areas.

And then we bought another small company, and this company now has about 60 employees, and they help the editor-in-chief to fulfill all his wishes in the sense of, ‘I want to have a perfect content management system, where the workflows are very lean, and it’s custom-made’. They’re working hands-on for the editor-in-chief. But of course they started to build up external business. First they built up normal websites, then they built up small e-commerce shops. Today, they are one of the big players in e-commerce service providing, with a strong reputation across Germany. They found out that you can earn more money with bigger tickets, and therefore you have to leave the regional area.

Can you address any areas where you’ve said, ‘Okay, this was not such a good investment. This is not a growth area’, or ‘This is not suitable for a media company, so we’ve left that business area’?

Yes, of course. For example, we built a competitor to Groupon. We didn’t like the idea that they would make money from our regional market, so we built a competitor. We invested a lot of time, energy, and so on, and it worked – Groupon didn’t get their feet on the ground here. But we never earned money with that. Therefore, after Groupon finished activities here locally, we also quit the company. So strategically it made sense, but of course our expectation was to earn money.

Also, we have a postal service that handles about 10 percent of all the letters sent here in our area. We built a service there… a hybrid system, and said [to businesses], ‘If you send us your invoice, we can transmit it digitally for you, in a secure way that is accepted by the finance authorities.’ We calculated that companies could save hundreds of thousands of euros doing that, through reduced postage fees and human resource costs.

We used it ourselves, and we had big customers like Bertelsmann and others that jumped on it. But it took terribly long to set up [the necessary technical infrastructure], because we couldn’t get inside the IT systems of the customer companies. The burn rate was terribly high. So we quit that, we killed the company. What we kept was a hybrid system for our postal service…

We operate it only on a small scale, because most companies are not ready for it. In the end, that was a disaster. We lost a lot of money, because we were too early.

Then we had a coupon portal… We did that together with some really big investors. That was already three years ago. We tried to install location-based mobile search functionality for all the coupons you can imagine.

We had a really big offer, but people didn’t jump on that. We tried that hard. In the end, we lost a seven-digit sum.

We tried to install, as the first area in Germany, mobile payments here in Osnabrück, together with the mr. net group [a Flensburg, Germany-based company that provides communication, billing, and debt collection services]. It was a QR code-based payment system. At that time we started with, I think, 30 retail businesses – cafés, hairdressers, and so on. You could pay with your smartphone by scanning a QR code. In a restaurant, I asked for the bill, and I got a bill with a little QR code on it. I just held my iPhone over it, it went ‘beep’, and I touched ‘OK’, and that was it. We got 1 percent of every transaction. That was our business model. We gave the businesses the hardware and we paid for the installation of the retailers’ payment-processing software.

But isn’t that going against the continued huge popularity of cash for retail payments in Germany?

Yes, but our region served as a small ‘laboratory’ for this project. We have an area of about 800,000 people, with high income and no unemployment to speak of. We have media dominance here with newspapers, free sheets, TV, radio, out-of-home, Internet. We did a hard push, with the idea that if the concept did not work here, it would be difficult to make it work anywhere else. If it had worked here with a relatively small investment, we had partners who would have been willing to scale this model out of our region to all of Germany.

The funny thing was, we started that and three or four months later, PayPal started their competitive product in the neighboring city of Oldenburg – exactly the same model. First they tried to buy ours. Looking back, I have to say we should have sold it to them, because it wasn’t working.

Then at the end of the year I closed a local cable TV station. We had three cable TV stations originally, and we already had closed two of them. I think regional or local video is extremely important, and as a regional newspaper, we need that. So we will continue producing regional video content. But our companies that produced it for cable TV used analog technology. We invested a lot of money there to build up penetration and reach, and so on. But we saw those measurements drop dramatically in the last two years, because a lot of video traffic has moved to the Internet.

We found out that if we publish breaking news on our website, the reach is close to what we got on cable.

The problem was that, for example, if there was a big event at noontime in the city and a team covered the event via cable, you could see it that evening at 18:00. On noz.de you can see it 15 minutes after it happens.

It’s a dead end, so we decided to quit this activity. That was harsh for the employees, of course, but as I told you before, we’re growing very strongly, and of course we always have little steps back in some areas.

We bought a social network in our region called OS Community (www.os-community.de). It was really big four years ago, with 400 million page impressions per month. But the same thing happened as with studiVZ [a German social networking platform for students that grew rapidly and was acquired by the Georg von Holtzbrinck Publishing Group, then imploded starting in 2009]. We couldn’t compete with Facebook. About 2011, it was okay, but 2012 was a disaster. We had about 500,000 subscribers for a while, but the number dropped dramatically… Today they only have somewhere around 20 million page impressions a month, so it’s only a shadow of itself. That was a really big fail.

Facebook’s scale was the problem?

Actually, that was the big lesson of the social media disaster we had here: the scale an international company can bring as a strength – we cannot compete with that. Because we have maybe 20 or 30 engineers, and they have thousands. Also, in Germany we have these privacy laws. They alone would be enough to keep us from being competitive with Facebook.

What do you think will be the next wave of investment for NOZ – mobile services? What about wearables?

Obviously, it’s mobile. But there’s also a big misunderstanding on the part of a lot of people because I think desktop will last longer than most people think, simply due to the usage situation in workplaces. But as we can see in our own figures here, mobile is growing very strongly, of course.

I think virtual reality could be a game-changer, but it will take a few years. We are talking now about the early adopters, but so many people are absolutely nuts about the idea of virtual reality. But we all know you need graphic memory power that only a few hardware platforms have today. It will take a long time.

Another area that is becoming important very quickly is data analysis. I think for regional media groups – for all media groups – it’s getting more and more important to know as much as possible about your customers, about their behavior, to analyze data from them or data you acquire from a third party – and do that in real time. That means analysis and optimization in real time, and not only on the website, but especially on mobile. And when you do this, then you’re able to individualize it. That means to bring the relevant individualized content or data to the customer, and I’m sure that will be extremely important.

That, in essence, is truly Big Data?

Actually, from my point of view, no media company in Europe or worldwide is doing Big Data. Google is doing Big Data. I would call it more like “smart data.” Building up knowledge on how to handle data and to capitalize on or monetize it – that’s so important. We have a big company now here who are specialists in analyzing, and I think that’s only the beginning. I think the next wave will be putting even more technology into media companies.

Let’s return to business models for a moment. How much life is left in the ‘marketplace’ business model – the Uber marketplace for taxi services, the marketplace for buying and selling horses that you operate [ehorses], and so on? Are you still looking to expand into more marketplaces?

I think that’s extremely interesting, and there’s still a lot of potential, because there are so many small vertical target-group markets. Even regionally – a target group could be a [geographic] region. And if you do services better than everybody else in the world, you can challenge there (of course it’s difficult because of scale).

We’re a small company, but we were able to build up over the last three or four years, with ehorses, a marketplace in this very specific target group that is a world champion now. It’s extremely profitable, it’s growing very strongly, and we will definitely invest much more money there, to accelerate growth. Why not do this in other areas?

I was on the supervisory board of Immowelt AG, one of the leading real estate classified platforms, when they were very small, and we built them up until they were number two in the market. I learned that the mechanism of these marketplaces depends on a lot of things, but they are very structured.

I tried to bring this blueprint to horses and, as you can see, it worked. So the mechanism is the same everywhere. So why should it not be possible to do it once more with dogs or with cats, or whatever? And with every sports area you can think of: with golf, with tennis, and so on? It’s very interesting.

Author

Anton Jolkovski's picture

Anton Jolkovski

Date

2016-05-13 16:09

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