David Le Page
The closure of Kagiso Media’s infant Internet venture BigMedia, announced 10 days ago, may foreshadow much turmoil among online publishers. The BIG (Broadcast Interactive Group) plan was to provide a single consolidated Internet platform supporting a network of broadcasters around the country. This would have amounted to a far cheaper option for radio stations than running their own Internet sites.
According to Irwin Manoim, co-founder last year of BIG with Anton Harber (Manoim and Harber founded the The Weekly Mail in 1985), Kagiso Media shareholders have become reluctant to support an ambitious Internet venture at a time when so few Internet publishers appear to have short-term prospects of success. “If M-Web and Metropolis can’t make a go of a risky medium, why should Kagiso?” is Manoim’s summary of the prevailing logic.
Both M-Web and I-Africa vigorously contest Manoim’s summary of their business positions. But M-Web acknowledges having outsourced much of its content creation to other divisions of Naspers, such as news24.co.za. “We have changed focus from being a content creator to being a content aggregator,” says M-Web’s William Marais. “We have restructured some of our divisions by returning staff to other divisions of Naspers.” “[CEO] Antonie Roux has been saying we’ll be profitable within the next 24 months.”
Mike Braby is CEO of Primedia-owned Metropolis, which manages the iafrica.com portal. He denies plans by Metropolis to cut back on staff.
He acknowledges, though, that there have been cutbacks, restructuring and “a few retrenchments” at Metropolis over the past six months. These had the effect of reducing the company’s losses from R20,6-million in the first half of 2000, to R6,98-million in the second half. Braby says Metropolis has plans for eight new “revenue-related activities” which will be introduced over the new few months. Primedia confirmed this week that it is likely to delist Metropolis this year.
Howard Plaatjes of Independent Online (IOL) acknowledges that his company plans retrenchments, saying the staff complement of 78 is likely to be reduced to around 60. “We’re trying to bring ourselves in line with international Internet activity [of online publishers moving closer to traditional partners]. We’re still in the process of recognising our core focus … Unfortunately, we’ve had to recognise a few dead-ends in the process.” IOL is not yet profitable, he says, but its losses are “nowhere near the likes of some of our competitors”.
Online publishers that have done well are those that have grown organically and refrained from throwing capital into ambitious operations.
Moneyweb, the specialist business and investment news portal (now contributing to the M&G) is profitable. It employs 30 people, with only 40% of revenue coming from online advertising, while 35% comes from four investment newsletters and 15% from broadcasting. Moneyweb “broke even pretty much from the word go,” says CEO Alec Hogg, and currently has R10-million in the bank. Hogg ascribes Moneyweb’s success to the respect it affords people: both staff and listener-readers. Staffers have share options and participate in an annual profit-sharing arrangement. “We want the people who work here to have a stake in what they’re doing and benefit from the success of the company. At Moneyweb, you can build a future for yourself as a journalist, without having to move into management. The Web has done away with printing and distribution costs, so you can pay people better, reward intellectual capital better,” Hogg says. The other (near) success story of South African Web publishing is the news portal Woza, which makes most of its money from online advertising. “The real growth in the South African market is still to come,” says founder Kevin Davie, pointing out that there are predictions of eight million Internet users in South Africa by 2005.
He believes the leading places in the industry are still up for grabs, and that there’s much room for mergers and rationalisation. Woza is not yet profitable, but “not far off it. We expect to be profitable in six months’ time.” Unlike some of its competitors, Woza has been “incredibly cost-averse”. Davie quotes Internet start-up advice to the effect that publishers should “spend money as though you’re giving blood”. Davie admires the “cross-media” advantages exploited by the likes of Moneyweb. And he’s an admirer of Manoim. “It’s a tragedy that he’s not on the Web. The M&G did cutting-edge stuff when it started up. But the M&G sold its electronic future [to M-Web] on day three-and-a-half of the Internet.” The M&G website is 35% owned by M&G Media and 65% owned by M-Web. There appear to be some rules for success in this newest of business games. Striving for high-quality content and a unique voice is important, as is building interactivity. Investment in people is more important than investment in technology. There is enough money in the thin online advertising market to scrape out a living if you can hold down your costs.
And exploiting cross-media relationships can be crucial. Manoim says that surveys in the United States have proved radio to be one of the most effective ways of bringing visitors to websites. Part of the key to Moneyweb’s success is its partnership with broadcasters. Ironically, by dropping BigMedia, Kagiso would appear to have squandered a chance to exploit similar cross-media relationships following from its radio interests that few of its competitors enjoy. Manoim points out that the “failure” of the Net is largely a matter of investor perception the medium is constantly improving.
In three years’ time, in a matured Internet media sector, Kagiso may well end up kicking itself the only kids on the block without the shiniest kind of marble, an Internet portal.