Nov

12

Marco’s Magical Mystery Tour

Filed Under Blog, Education, Financial services, Industry Analysis, internet, mobile content, news media, online advertising, Publishing, Search, social media, Uncategorized | Leave a Comment

Two days at the Old Billingsgate conference centre last week, but for investors  and early stage and post start-up information service and technology players the annual Noah conference, moderated by Noah’s co-founder and genial ringmaster/moderator, Marco Rodzynek, has never been a chore but an exhausting pleasure. The meeting seems to go by in a blur – I  seem to have written notes on 55 short presentations – and the food, drink and parties all add to the atmosphere. Even the Prime Minister’s office talking about the Shoreditch Tech City sounded upbeat (and a bit spaced out!). Marco and his colleagues shifted the focus a bit this year, and while there were a satisfying number of UK, French and German companies, there was special emphasis on Turkey, Israel and Russia, releasing some really interesting perspectives on those marketplaces.

There were specialist break-out groups for those who wanted to get closer to the action than the variety show on the main stage permitted. And there were a couple of really interesting panel sessions and investor recaps/case studies. Two of these – a session on the digital investment strategy of Axel Springer, and a strange panel on the future of television, which oddly sounded like “everything will change except the primacy of broadcast, schedule and channel” (ie nothing will change) – were mentioned here in Friday’s blog (“Monty’s Flagging Circus”). Both gave food for thought. And it was a good idea to put Priceline (the forgotten man, but now a critical investor), Facebook and eBay up to talk about their strategies. On the other hand there was a muted atmosphere to the music industry panel, with a strong feeling that while some would still like to play the old tunes, the band has moved on for this sector.

It was in the agenda sessions that the real value lay, as a wonderful diversity of information and tech players each gave a 10 minute toot on the trumpet. It almost feels invidious to mention names, but who could fail to be impressed by Fiverr? The global marketplace for services – “turn your hobby into a revenue stream” – is now in 200 countries, has a million listed businesses, and 15% of those see Fiverr as their primary income stream. AVAST, the consumer antivirus player from Prague, now has an installed base of 170 m computers and works in 43 languages. Naturally, it shifts into mobile, with 1 million new Android users joining per month. They have their incremental cost of a adding new customer down to 2 cents per year – and currently, on all devices, 250,000 are joining each day. In conversations around the hall, I heard advocates for Klarna, the online payment system that started in Sweden, has Sequoia and General Atlantic amongst its investors and says it will do 140m euro in revenue this year. Wix (Bessemer, Mangrove, Benchmark) have 27 million users for their quick build website service, and have now built 23 million sites. MyTaxi, meanwhile, one of the start-up school of 2009, report 2.5 million downloads of their taxi calling service as they move it out from Hamburg, across Germany and into Washington DC, Madrid and Warsaw this year. 90 million people download IronSource per month to ease software download problems in a market where 40% of consumer downloads fail. Or consider Schibsted’s LeBobCoin.fr (a mirror of blocket.se), a classifieds site with revenues of 63m euro and an ebitda of 70%. I sat wondering whether this market would turn into matchmaking services, but at the moment, as with Axel Springer, the classifieds business, now unrelated to news and newspapers, is forging ahead.

Are you getting breathless? Have a look at Nordeus, from Serbia, whose TopEleven game has 2.1 million daily active users. Then dash over to hepsiburada.com, Turkey’s most popular shopping mall. In a country without nationwide branded departmental stores, and 50% of the population between 15-45 (40% of internet users are under 25) there has to be a future for shopping. Then check out Russian fashions on KupiVIP.ru, or, if growth is your magnet, look at Spain’s Privalia, strongly selling end of season fashions and competing for Spanish speaking populations of over 500m with only 50% current internet penetration (USA is around 80%). Their demographic profile is the 20-40 age range, they claim more Facebook connections than any other fashion site, 1 in 4 sales are on mobile devices, and their 300 m euro revenues are rising at 100% (400% in Latin America) CAGR. And if you are fed up with stores, try Stuffle for an online flea market – they have done 450k in revenue in the first six months.

And still I have not done justice to the show. WyWy is an interesting Shazam-style service for television. Wynsh has 3 million users who record their wants photographically while the brilliant and beautiful Busuu.com goes from strength as a language learning environment for consumers. The peer to peer element is interesting here, as is the mobile apps angle. Since it is estimated that 2 billion will speak English by 2020 improving performance is going to be a big market. Or Cooliris, claiming to be the no 1 app on the iPad in 75 countries as it helps people manage and present their photographs.  I would also like to talk about Skobbler, the navigation site, or the very impressive small loans site Kreditech from Hamburg. Given space, we could look at Wrapp, the social gifting service, or Burda’s HolidayCheck travel review site or Israel’s Conduit (or ask.fm from Riga with 9 m users). But you are now tired and I am exhausted – you need several days to sleep off a Noah conference.

I left with a profound impression of huge growth and energy in Europe on the internet, and a feeling in consumer markets that building a base of a few million users is no longer the problem. Sustaining and renewing that audience is the issue, and it is interesting that the Noah seedlings are now very various in size and shape. And the Noah people are right about something else as well: this is now a dynamic investment market with real growth prospects, especially where European players are able to seek global markets as well as local ones.

Star of the show goes to Yossi Vardi, veteran Israeli investor and doyen of the tech community. Peering into an audience of 1400 paying delegates, he said that while giving  a recent speech in Tel Aviv he noticed that a man in the third row had fallen fast asleep. So Mr Vardi pointed to the man next to him and said “Wake him up, he’s fallen asleep”. To which the man next to the sleeper replied “You wake him up – you put him to sleep in the first place”.

Nov

9

Monty’s Flagging Circus

Filed Under Blog, Industry Analysis, internet, mobile content, news media, online advertising, Publishing, social media, Uncategorized | 1 Comment

Oh, dear. Why, O why, when business models fail, do bankers and businessmen fall victim to the idea that if we did things bigger, cheaper, or louder then the old magic would return? These thoughts came to mind while attending Marco Rodzynek’s wonderful NOAH investment show this week: inside the hall we were all pondering how to invest in innovation, while our newscreens were full of images of David Montgomery, looking as inscrutably Calvinist as ever, getting ready to cut jobs and take the hard decisions necessary to keep the newspaper industry alive. Local World, the Montgomery vehicle, is prepared to absorb Northcliffe and the tiny Iliffe – as long as Lord Rothermere and Lord Iliffe leave some money on the table – and just about everyone else in British regional papers. The idea is that if one builds Size, and removes any local overlaps, and removes the distraction of too many advertising opportunities, and concentrate production in a handful of regional centres, and raise prices, then the regional press will once again become an attractive possibility for UK investors. Trinity Mirror are reported as havering, Johnston Press have said “no” (Ashley Highfield, its CEO, remains my best bet for “Inventor of Whatever It Is Which Replaces Local Newspapers” – remember you read it here first!). And I have to add that the last Montgomery vehicle, Mecom, did valiantly with this idea in Northern Europe before it too succumbed to circulation falls, advertising downturns, and the sad, underlying truth that not enough people of the right age like local newspapers anymore. A German victim of this process once claimed to me that Monty did  more damage to the German newspaper industry than the eponymous Field Marshal did to the German economy, but for a brief while it looked all right. Then it looked all wrong and hit the buffers.

So Local World has form. But does it have a chance? My own view, after the Fish4 experiment of the 1990s, is that the UK regional press has lost touch with “local” – and rather than rationalization, it needs to rediscover the proximity, recency and inter-activity which will characterize the services that they next offer. Just “going digital” doesn’t cut it. You can “migrate” into a cul de sac on the web – as Johnston Press have demonstrated. You can “transition” into pure opacity, as Trinity Mirror have shown. If your future is on the screen of a smartphone then even laying claim to being a newspaper may be pointless. But these businesses need to do something while they still have profits (aka re-invention time) to shelter them into the next phase. The £1 bn plus price for Northcliffe that DMGT’s board refused just six years ago now equates to a £200 m stake in Monty’s Local World. Surely that is a sign of the sands of time running out quicker towards the end of the game?

Now if Mr Montgomery had taken time out from all of this exciting dealmaking he could have encountered the future at NOAH. Not the future as described by people like Rupert Murdoch, whose online newspaper, The Daily, appears to be losing touch with its targets. The Independent last month reported it as having 120,000 unique users, while it needs, after 9 months, some 650,000 subscribers at $39.9 to break even. Smaller than the Ohio paper, the Toledo Blade, sneered the Indie, from the advantageous position of being smaller than both. They should all have sat still and listened to Jens Mueffelmann, Head of Digital at Axel Springer Verlag. Here the game is partnership and investment – not picking winners, but getting some skin in lots of activities which, as they iterate, will give direction and confidence to building futures. Can you do this as a sideshow? No, they have invested over 1 billion euro in 140 companies. Do they own everything? By no means. They always leave the management with a stake, and now partner with General Atlantic, who have 30% of the business for 237 m euro. This in turn enlarges the investment pot and brings more skills to bear on further acquisition. Axel Springer Digital Classifieds now dominate classifieds in Europe as the largest European player with 80 million uniques per month. With revenues forecast at 982 m euro, and EBITDA now edging up towards 30% something really interesting is happening here, and happening at real scale. But throughout the session the keywords were “experimentation” and “collaboration” – we are not the “colonial masters” in this new empire, said the speaker – we are a digital shareholder learning as we go.

And yet, of course, parts of Axel Springer, owner of Bild and Die Welt, really are traditional media. But they are run by businessmen prepared to stand back, listen, and catch at the drift of history. Later in the day I listened to a panel talking about television, and once more found myself  astonished by the confidence that existing players have in brands and positioning – and the enduring power of channel and broadcast and intrusive advertising. All that the television world lacks is really good metadata in order to enable a programme guide which would allow you to follow the television that you like, and arrange it into time patterns that suit you. Once that tagging can be ascribed automatically, we shall be able to test whether most people really do want to see the event when it is broadcast – or cheaper and later and ad-free. This panel was superbly complacent about piracy, and had no thought that their industry was overpricing, over-bundling, and too inflexible to change. In fact, just like the newspaper industry of the 1990s. Or the music industry. In the next three years these forerunners will seem mild exemplars compared to what happens when television unravels in the networks. Then Mr Murdoch really won’t know which section of his empire is the Good bank and which is the Bad!

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