Everyone should read this story from the IHT, although it only begins to explain how one Norwegian newspaper built its online business into 20 percent of its profit. That number is anticipated to become 60 percent next year for the company, Schibsted.
Thanks to Mathew Ingram for pointing out the story. Here are the high points, as I see them:
- Leaders recognized early on that the Web competes with newspapers. Instead of letting competitors emerge, they decided to compete against themselves.
- The newspaper used the Web to expand coverage into nearby geographies that are outside its traditional print boundaries.
- Some coverage was divided into niche Web sites that report only on business, for example. Not everything is lumped into one giant newspaper Web site.
- New Web sites are designed as classifieds standalone and search standalone, ensuring the newspaper company the title of market leader.
Special note: Unfortunately, the IHT story's statement that online business comprises 20 percent of Schibsted's revenue conflicts with the company's own Web site, which says it's actually 20 percent of the profit. That's a big difference, not just a semantic one. I've gone with the number cited on the company's Web site. Truthfully, I don't know that 20 percent of profits is even noteworthy now that I'm thinking about it. Originally, I wrote this based on the IHT's understanding that it's 20 percent of revenues.
Comments (6)
Agreed. Depending on how you're accounting for expense, 20% of profit is a bit on the low side of an average, well-run paper-affiliated web site.
Still, it's significant that any online news operation now accounts for much more than a rounding-error on the profit side of the ledger. And those numbers are only going to get larger.
Posted by Tim | February 20, 2007 8:43 AM
Posted on February 20, 2007 08:43
Still, if you look at profit margins online only, they are quite impressive for some of Schibsted's businesses. I can only find the preliminary full-year results for 2006, much too general, but for 2005, Finn, the company's Norwegian classifieds venture had a 49% profit margin, VG, Schibsted's Norwegian tabloid, an online profit margin of 42,3%. Both VG and Dagbladet, Norway's two top tabloids, have very impressive profit margins online, much better than the profit margins for their print versions, where Dagbladet was in the red in 2005. How these tabloid achieve impressive online traffic, for Dagbladet it surpasses it's print readership, is a different matter, however. They've been very clever about that, I'll see if I can find to blog about that soon.
Schibsted's business coverage site, E24, is by the way part of their newspaper sites - it features as an integral part of all their Norwegian an Swedish newspapers. They just rebranded this site last year, in Norway from N24 to E24 (like in Europe 24/7, not official, but hard not to make that connection). Very ambitious media company this, aiming to become the leading pan-Europan media company, and Aamot, it's CEO, is a sweet talking man, great for soundbites...
Posted by Kristine Lowe | February 20, 2007 1:19 PM
Posted on February 20, 2007 13:19
I've contacted the media relations folks for Schibsted about the discrepancy and here is part of the response from Helena Müller:
Now we know that online comprised 14 percent of revenues for Schibsted, which is almost double what most major newspaper companies are doing in the United States. So, pretty impressive.
Posted by Lucas | February 20, 2007 1:52 PM
Posted on February 20, 2007 13:52
I've just gone back and read the story for the fourth time very carefully. And with the stats from the media folks at Schibsted in hand, I think I understand now what the IHT was trying to say. It was trying to say that online is projected to become 20 percent of revenues, not that they are now. What is actually happening is that online accounts for 14 percent of total revenues, according to Schibsted’s own media folks.
In other words, the IHT based its story not on what actually happened but on what one bank's analysts think will happen. Maybe the IHT reporter contacted several people who said the same thing (for example, the Harvard professor quoted elsewhere) or did his own research to support these projections, but I can’t surmise that from the story.
Then the IHT reports a statement about earnings – a.k.a. profits – that is really surprising compared to present reality.
But online business now accounts for only 28 percent of profits, according to Schibsted's media folks, and 20 percent, according to an apparently outdated number on its Web site. A rationale for increasing so dramatically in one year’s time isn’t explained by the IHT article. My guess is the projection assumes declining profits in the traditional print business in parallel with somewhat aggressive growth in profits online. Not sure. Anyone know why the estimate is so high?
I don't see any reason to leave the entire news peg of the story to a quote and prognostication. The IHT could have used real figures posted on the Schibsted Web site. A graphic charting the last couple years’ financials would have helped report it. What has happened at Schibsted is impressive even without the rosy forecasting.
Posted by Lucas | February 21, 2007 7:01 AM
Posted on February 21, 2007 07:01
The Schibsted Q4 presentation slides (http://hugin.info/131/R/1105602/198918.pdf) includes a graph on page 27 of online activities share of EBITA, perhaps best illustrating the growing importance of the Internet for Schibsted. It also shows the profit share excluding new online initiatives. Q4 profit share was 28% including and 38% excluding new online initiatives. A rolling four quarters calculation should smooth out the quarterly variations as well.
Posted by Ted | February 22, 2007 4:38 AM
Posted on February 22, 2007 04:38
Comments on this post are now closed. Please see my latest update, which includes a conversation with a Kaupthing analyst, in a new blog entry.
Posted by Lucas | February 22, 2007 6:16 AM
Posted on February 22, 2007 06:16