Knowledge Bridge

Global Intelligence for the Digital Transition

paidContent 50 holds lessons for digital success

Digital media business-model watchers paidContent have released their second annual pC50, a league table of the most successful digital media companies in the world. The overview ranks the companies based on their digital revenue, a challenging task for the team at paidContent because many companies don’t clearly break out digital revenues. Even if they do break out digital revenue in their balance sheets, they often do it in different ways making it a real challenge to do a like-for-like comparison.

The overview is truly global, including not only giants from the US and Europe, but also stars from rapidly developing, emerging markets. Coming second only to Google is Chinese Mobile, that is also joined by Chinese internet giants Baidu and Tencent and Chinese gaming powerhouse Shanda Games. China is not the only emerging market represented in the list. South Africa’s Naspers also joins the list and, as paidContent has pointed out, Naspers is a “case study in how to expand digitally”.

[It] is best known for making savvy online investments in fast-growing emerging markets. Naspers owns or partly owns the shopping sites Allegro (eastern Europe), Ricardo and OLX (Latin America); the social networks Gadu-Gadu (eastern Europe), Mail.ru Group, vKontakte and Odnoklassniki (Russia); among others. It also owns a third of Chinese internet giant Tencent, from which it gets around a half of its internet revenue.

Take a look at the full list, as well as the individual entries. paidContent has a summary of its own takeaways from the list.  The first is the rise in digital revenue; the pc50 boasted $150bn in digital revenue. However, they point out that of these companies, digital still only makes up 16.5 percent of total revenue.

However, I think you need to dive a bit deeper into the data before you can pull out an average like that. In the list, you’ve got internet companies like Google, Baidu and Tencent. While Google earned 96 percent of its $36.4 bn  from digital revenue, there is almost $29 bn separating Google from second place, China Mobile.  There are a range of different companies in the list including search companies, social networks, telecommunications companies, advertising agencies, broadcasters and news groups making it a challenge to compare like-for-like.

Another takeaway that paidContent highlights is that a lot of digital advertising revenue is being captured by major agencies. This has been one of the major challenges for news organisations: in the shift to digital, other players are capturing significant slices of the digital advertising pie. Google and other search engines such as Yandex and Baidu capture a huge percentage of digital advertising. paidContent shows that major advertising agencies including the Publicis Groupe in France, British group WPP and Japanese groups Hakuhodo DY and Dentsu, a 200,000 employee giant of a company, have aggressively expanded into digital advertising services. For example, Dentsu is the official advertising partner for Facebook in Japan, and WPP went on a global buying spree last year, making 36 acquisitions including in Vietnam, Russia, China and Brazil.

Social media challenge more than Facebook

Here are some of our takeaways at the Knowledge Bridge.  US internet companies like Google, Groupon and Facebook get a lot of attention for their success, but, as paidContent’s list shows, major digital media companies are growing outside of the US. Chinese internet companies are moving outside of their home market. For example, Tencent opened up operations in Indonesia late last year and is already making waves in what it sees as a key market.  Earlier this summer, it launched a mobile messaging app, Qute, which works across both smartphones and low-end phones with internet access.  With little promotion, the app has already seen a million downloads.

As we pointed out earlier this year, Russia’s social media giants, Mail.ru and Odnoklassniki are both tapping into Russian-speaking audiences outside of their home country.

News organisations need to realise that in the competition for digital advertising revenue that they are not just competing against other news groups but also against search engines and social media services.

Diversify

The battle for advertising revenue is fierce in digital, but you only have look at Naspers to find a great example of generating digital revenue through investment and diversification. The newspaper group expanded into pay television in the 1980s, and it has made some incredibly savvy digital investments in emerging markets. It is worth looking at some of their investments and acquisitions, which include shopping sites, social networks, online gaming firms and even a social shopping firm, Multiply, which provides social media tools to help merchants promote their goods to potential customers.

Paid content

As paidContent points out, the list is split between those who charge and those who don’t. We’re starting to see a number of promising paid content developments, including the success of national paid content groups like Slovakia’s Piano Media and also metered paywalls, including the high-profile launch of one at the New York Times last year. Under a metered paywall model, readers get some content for free but either have to pay for certain types of content or are asked to subscribe once they have read more than a certain number pages.

Looking at the previous point, diversification, one area where paid content is thriving is business content. Business giant Bloomberg is number three on paidContent’s league table, and there are a number of other business data and information providers that have made the list. It is worth thinking about business news and information opportunities for possible revenue opportunities to pay for your critical accountability journalism.

Article by Kevin Anderson

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