| Proceedings | Programme |
SLIDESPublishers’ Panel: How to Manage Declining Turnover Gerry
Gosney, Reed Business
Information, UK Ove
Leth-Sorensen, Kraks Forlag,
DK Petri
CHARPENTIER, Publico OY, FIN Peter
Villa, Bonnier Product
Information, DE I. IntroductionsGerry Gosney Every year we have driven subs revenue up by £1 million a year thorough our Dot Com delivery. We have a similar product in the travel industry that gives honest information about hotels to travel agents, so they can tell their customers a little bit more about the hotel they may be going to. The further migration of hard copy subscribers and advertising to the web is a big issue in our business at the moment. Regarding cost control, our IT systems were built originally for book publishing with yearly results and we now want them to deliver dynamic results day in and day out. Consolidation is another issue, as a move to the web while remaining cost efficient can be difficult. You can provide
more content online and crudely, content gives you traffic, traffic gives
you response, and response gives you advertising.
But you can’t neatly pigeonhole products to buyers or market
segments online, so only the best products survive.
Ove Leth-Sorensen Kraks is traditionally a B2B publisher that dates back to 1770. We started to invest in internet in 1995 and our internet service KraksDK receives 100 million visits a year, 600 million page impressions a year and is the second largest service in Denmark. 10 days ago, we launched a new B2B service in which we have invested about €7 million. It will be a personalised service where you can get information, communicate and access other processes, such as filling in tax returns, through the involvement of the Danish public sector. Although two thirds of our turnover today is from the internet or electronic media, we still publish about 20 directories, reference books and maps and directories, but electronic marketplaces lie at the heart of our business and profits. We have been through a period of heavy investment and while we have not been making a lot of money, we are confident that profits will pick up. Peter Villa The Bonnier Group’s oldest business directory was founded in 1859. My division, Bonnier Business Information, was founded in 1989 and is divided into different units. Kompass, a product information company, exists in six countries, Seibt, builds machinery in Germany, and our ABC companies in the Benelux countries, produce ‘traditional directories’, although most are now on the web. We have company information companies like Hoppenstedt in Germany, Hoppenstedt Bonnier in Hungary, the Czech Republic, Poland and Italy, and ICC in the UK. We have financial information companies like Hoppenstedt Financial Information and SIX in Sweden. We also have a unit called Direct Marketing, dealing with direct marketing and advertising mostly in Scandinavia. Our division is the smallest in the Bonnier Group, representing around 7‑8% of the total revenue for the Group. We operate 100% in the B2B segment and are comprised of 80 small companies in 18 countries in Europe, following the Bonnier strategy. Since the mid‑1980s, our strengths have been in directories, headed by me, and in database‑driven content information, so giving us extensive experience and competence in those fields. Our revenue is driven from advertising on the product side and information stays in our companies. Petri Charpentier My company represents the smaller directory publishers. We were established in 1992 and have a turnover of around €2 million. We specialise in advertising sales in B2B sectors, especially in heavy industry like energy technology, and forest technology. We launched our internet operation in 2001 and achieved 15% growth last year, rising to 28% this year. Internet operations currently make up about 50% of our sales. II. PanelNikolaus Futter Toon said that the information market had a bright future, and Bernhard said that there was not much decline in advertising turnover, but many of my colleagues are facing hard times. Peter, how did you experience declining turnover in the 18 countries you cover, what were the differences between them, and what can you say about recent developments in your marketplace? Peter Villa Of course we have had problems with turnover and sales – the majority of statistics on global and European levels come from Yellow Pages publishers. In the B2B segment, Petri told us he experienced growth. In some countries we have grown, but because we moved directories from printed to electronic media, we have a problem in all our product information services. The last three years have been tough, especially in the previous growth area Germany. In some countries like Scandinavia, we have kept up sales, but don’t have the same growth as other parts of the industry. It has undoubtedly been a tough time, but we have achieved a lot in this time. We changed the revenue stream from printed to electronic media. We have active sales in 11 companies in 10 countries, but have to go through the tough process of educating the sales representatives. It has been difficult to keep up revenue and sales in the product information arena, but ICC UK, our information sales company, for example, has been fantastic, achieving growth in the last three years, along with some of our Scandinavian companies. In some countries, we have not been able to compensate the drop in advertising sales with information sales, so are struggling. I think that is a reality for all the countries we operate in, especially in the directory business. Gerry Gosney Our revenue has remained reasonably stable on the top line, but underneath there is a lot going on. One of those things is the migration from hard copy to the web. We invested strongly in our Kelly’s product, to make it more competitive in the online environment, particularly the taxonomy to give you precision searching. But we have subsets of Kelly’s, such as Adial , which find it difficult to uphold the discreet revenue they had in the past. Whilst overall the revenue looks stable, within the business, there are quite large swings between competing brands. Ove Leth-Sorensen We kept our revenues up, but our figures were affected by heavy investment. I hope we will achieve future growth. Nikolaus Futter Bernhard said that the advertising spending in Finland decreased by 2%. Petri Charpentier In our company, we have been shifting revenues from print to internet, especially in our B2B sector. There is not a very big drop in printing products, but we are not declining, as they are steady in our sector. When we changed our focus from print to internet, investing heavily, that lowered our revenue, but we haven’t found any specific decline in print. Peter Villa Our business is completely electronic now; we no longer produce printed directories, except niche products. The change from print to online gained a lot on the cost side, but the overall revenue remained the same, meaning that online revenue is less than print revenue was. So was this shift really healthy for us? The actual size of contracts decreased because people experience intangible online ads differently to printed ads. In my experience, margins seem to increase initially through lower costs from cutting out print, but overall, results are not as good as you might initially expect. Petri
Charpentier, Publico OY, Finland My company’s online margins are certainly higher. Our strategy for print products is to try to make as much money in the market as possible and as long as print products are profitable, we will produce them, in accordance with consumer demand. We have cancelled some low margin products, but are staying in print as long as there is a profit to be made. Gerry Gosney We have grown in the online environment, because we have been able to prove response, we have been able to prove traffic and therefore have been able to move the business forward. Peter Villa When we had printed directories, we had very high profit margins, especially at Kompass and ABC. I think this time is over now; we have to change the way we handle customers, and accept lower profit margins than we had some years ago. In some countries we are losing volume and it is extremely hard to regain that volume, because it is tougher to get the average price that we had in printed media. I still think there is an opportunity to make money, but it takes time and hard work and I do not think we will see a return to the high profit margins of 10 years ago. Gerry Gosney Our clients do not see this as advertising, but rather as listings revenue. A lot of them distinguish between their advertising and their listings or search engine budget, which they perceive as crucial. Participant A question for Ove Leth-Sorensen.
Ove Leth-Sorensen We are traditionally a B2B publisher, but are also involved in the B2C market, being the biggest publisher of maps in Denmark for instance. The success of our internet activities has mainly been that they were both for the B2B and B2C markets. In
tough market conditions, we found the public sector, one of our expansion
markets, lucrative. We are
now expanding in these potentially dangerous markets, but things are going
well so far. Gerry Gosney At the small company level, behaviour can mimic that of consumers, compared to large businesses with regulated buying policies. With a search engine, you can reach an audience that might have been hard to reach with a hard‑copy, controlled‑circulation directory product. Nikolaus Futter Peter mentioned that it is difficult to find salesmen to sell intangible products. Formerly, when selling printed ads, customers booked a box and knew what they had paid for. You also mentioned the possibility for advertisers to see what they are getting. Is that not dangerous for some of us, as if they see key words that are looked up, or only pay as they are seen or clicked on, will it not become even more difficult? Could you start by commenting on sales organisation? Peter Villa We have problems with sales representatives because it has become a tough industry to understand. In the past, you had a directory to show its advantages, talk about product information, and show copies being sent out. Now we have another medium, sales representatives have to understand the business idea, understand the web, how it works, how CD‑Rom works, and sell them. Customers ask why they should be in Kompass, or ABC, or Hoppenstedt, surely Google is good enough. Training is
more important today than it was previously.
The advertising industry is demanding proof of visitors on the
site. With a small, specialised directory
of the German machinery industry, like Hooblt
Machinery,
we
don’t have 100 million hits, but rather 100,000‑200,000
high‑quality hits per year. We
have to educate the market about our service quality.
There is a big difference between our service and Yellow Pages,
concerning quantity and quality. Petri Charpentier In the B2B sector, quality overrides quantity. Human resources are a major problem for our company. We have noticed a change in the quality of the sales force in that our internet salespeople, usually aged around 20 or 25, are more enthusiastic about the product. In terms of human resources, we have noticed that it is hard to recruit over‑30s to sell online products. Ove Leth-Sorensen We re‑examined all our processes and I am sure many of you have done the same. But we really looked at our sales, order, production, advertisements, and product development processes, and seem to have gained a lot of people that can move to front office from production or back office. At the same time, we established a new Kraks Academy to systematically train our salespeople. I agree that sales requirements are higher today, and we therefore have to put in a lot more effort than previously, but we are trying now to strengthen this area. Gerry Gosney Regarding customer control, in the online environment people expect to be given responses information. If we cannot compete, there are other bigger people out there who will, such as Google. We have to deliver value back to our advertisers. The days when they booked on trust and people did not need to be coaxed to the market are gone. If you move to the online environment, you are expected to show response and value. We are able to do that successfully with one of our brands, but not with our smaller brands, which are being cannibalised as a result. Nikolaus Futter Ove, you invested heavily in future products and IT. Why did you have to make such a heavy investment? The others could also comment on their experience of switching from print to electronic. Ove Leth-Sorensen When I joined the company less than two years ago, we held strategic sessions with our board of directors and established that we had to invest to prepare ourselves for the forthcoming electronic era. We identified nine product development projects, including our new public sector corporation and the launch of the B2B portal. So after planning and product development, we are in the market with new products. Consequently, perhaps a bit late, we are now strengthening our sales effort, hiring more sales people and so on and now run the risk of launching in quite a difficult market. Peter Villa Look at Hoppenstedt in Germany. We were able to transfer most products to electronic media through company industry. It was a tough process, but all the brands are available on the net now with different functionalities. That was a major investment and we have been investing equally in all the countries we work in, particularly in editorial systems. We have noticed that by doing so, we can change the workflow with a code of classification, thus saving money. In the UK market, we invested heavily seven years ago in ICC, building a database with all the English companies and this major investment has now paid off. The system we have for the English market is called Plum and our company information database is named Jupiter . We have some growth and are investing a lot, although fighting with the board for funds is not easy, as revenue is not completely stable. I think we have to invest, because if you do nothing, especially in product directories, you will not move, so we are taking a risk that I hope is right. Ove Leth-Sorensen Regarding investment, we have entered several partnerships. One example is Microsoft, where our data is available on the new edition of Office, on the Outlook calendar system. Through data integration, when planning a meeting, you can access company details, the route you have to drive, or when you have to leave. I think that this sort of partnership bodes for a very interesting future. Gerry Gosney Similarly, we invested in large databases that we can take a book or web extract from, and in taxonomy to widen and perfect searches. We are now trying on using spiders to get content back, achieving good levels of accuracy on prime data. But we always need to match product to company and the equity is not quite there yet. It is a very interesting development and one we are keen to pursue as a way of keeping down costs and refreshing our data more effectively. Petri Charpentier In 1999, we started to invest in IT on a structural basis, so when we changed ownership, it was important for the company to have a senior partner and board member who specialises in information technology. As a small company, it is very important to have in‑house knowledge, and we now have an IT department of three people, which for us is a huge investment. Nikolaus Futter Gerry mentioned that the electronic environment led to the cannibalisation of some products, presumably because they all come from the same database. Has anybody else has experienced this? Peter Villa We have three
German brands, Kompass Germany, Hooblt Machinery
and Seibt, in the same market, creating huge database synergy.
This can be a struggle for sales representatives, but we stress the
importance of separating the brands and try to instil a pride in the brand
they work for. Gerry Gosney It can also work the other way. We spun off a subset of the Kelly’s manufacturing database to get us into construction, a new market for us, and were able to partner with the Reed Business Construction Journal, a leading brand in that marketplace, that opened the door to the advertisers. That is a very nice symbiotic relationship when you rely on big search engines to give response, so it is not all bad news. But we do find that going online is a very testing environment. Ove Leth-Sorensen I also think that electronic media provides new opportunities. The geographical maps in our database are an example of the possibility to synergise other information, be it B2B or B2C. Nikolaus Futter Most of us have cut costs recently and I am interested in how and where you achieved that. Ove mentioned cutting down on internal processes. Did you realise or see any negative effects on your organisation? Many of our B2B publisher colleagues are quite small operations like Petri’s, and if you cut costs, you quickly get to the point where it becomes dangerous for the organisation itself. Ove Leth-Sorensen We have cut costs, but have also had to say goodbye to a number of our top executives. In the management group, I think two out of seven survived, mainly because we had to get new people who knew the internet and could bring us into the future. Gerry Gosney Cost cutting is done every year by looking at the cost base and seeing how costs can be reduced, through systems or through people. Of our 400 odd employees, 23% are in IT, a massive overhead, but how do you drive your product forward without that level of investment? I am sure all of us here have made those hard decisions and we look to outsource wherever we can, apart from IT, and move some operations offshore in order to reduce costs. Peter Villa Our company information companies have big editorial staff and we will change the workflow so we can cut costs. If the market does not grow, we have to see how the companies can survive. It is not strictly cost cutting, because changing workflow, some people have nothing to do because of the different kind of media. We no longer publish as many printed directories, so do not need the same staff. We have many small companies and it can come to a point where the managing director is managing director, IT manager and has so many functions you come to a critical mass. We cannot cut many more costs and have efficient working practices, so are hopefully the right size. Petri Charpentier We have already achieved cost cutting. Four years ago, we outsourced almost everybody in the print production department through to investment in information technology, and we let go two people in the administration department. Now we see ourselves as a sales organisation and the rest just supports sales, the idea being that everything else has to go. Nikolaus Futter Could you comment on Toon Lowette’s statement, ‘don’t wait, go ahead’? Petri Charpentier I agree. Ove Leth-Sorensen If we do not succeed, I will take it up with you. Peter Villa We have many different projects going on and we have a lot of competition here, so I cannot tell you now, but we are trying to look to the future to do something new. With one of our IT managers, I could do a great job creating new ideas, new databases, new systems – wait and see. |