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The
Directory Market in Scandinavia
Thomas Franzén, CEO, Eniro, SE
I will discuss the Nordic directory market. That is, I will include Finland as well. Scandinavia includes just Norway, Sweden and Denmark. I will discuss the similarities and differences between the four Nordic countries. This will raise the question of whether there is really a Nordic market or whether they are four local markets. Eniro is targeting the Nordic market, so we definitely see some similarities. I will expand some of the issues we see and what is important for us in the Nordic market. I will also talk about some key trends in the Nordic market and how we, as a company, are positioning ourselves in order to cope with them.
Eniro is a Yellow Pages player. Our business idea is the same as that of any player, to connect buyers and sellers. For us, multi‑channel presence is very important. We try to ensure that our users can access our services and our advertisers, both on the Internet, paper directories and mobile directory assistance. Last year we had operating revenues of 4.89 billion SEK and an operating income of 1.3 billion SEK. In 2004, within all our sites in the Nordic region, we had over 1 billion searches, not only Yellow Pages search but also White Pages. We printed 26 million directories. We are one of the major players in the Nordic area.
a. Highly developed
From a European perspective, the Nordic is a highly developed market. Yellow Pages advertising has a very high portion of the total advertising market in the Nordic countries. The yellow page search revenue is very high per capita or as a percentage of GDP.
b. High Internet penetration
The Nordic countries have a very high Internet penetration, in all countries about 60%. Broadband technology – DSL or higher – is also very high. In Sweden there is more than 50% Broadband penetration. From a technical point of view, this is quite an advanced market.
c. High customer penetration
We have very high customer penetration. In Finland 25% of companies are in the Yellow Pages. In Norway, the figure is between 60% and 70%. To this end, we use bundling strategies that are not that common throughout the rest of Europe.
d. Market structure
The market structure is such that there are dominant players in Sweden, Norway and Denmark. They have all emerged from the old telcos in those countries. Finland is different because it had several telcos in the past. Its market is now a little more divided
e. Trends
Print is facing flat development going forward while Internet is growing very fast. This is a consequence of the high Internet and Broadband penetration.
f. Bundling
In Sweden and Norway, when a customer buys a basic listing, you get listed in both the Yellow Pages and on the Internet. There are no free Yellow Pages listings in these countries. This depends on the high penetration of Internet. It costs about €200 to be in the Yellow Pages. This gives these countries a very strong starting position.
g. Technology
As the Nordic market is technologically advanced, it is an interesting market for new competition in the online space. The global search engines are moving in. There is also a lot of local competition emerging from the media industry. This is challenging for the existing players in the marketplace.
h. Market statistics
The print market will continue to be flat. In 2009, the online search revenues will be on the same level as those of print. A player in the Nordic area must think about how to protect or prolong the print revenues and ensure that they share in the Internet market.
The Nordic countries are among the top in the world in terms of Yellow Pages as proportion of total advertising market, search revenue per capita and percentage of GDP. This is one of the most advanced Yellow Pages or directory service markets in the world.
In Sweden, Eniro, which emerged from Swedish Telia, has an 83% market share in printed directories and a 41% market share in online. We only have one competitor in Sweden, TDC Forlag in the local directories market.
Findexa has a very strong position in Norway, especially in print where it has a market share of 89% or 90%. There is a lot of competition online in Norway. Findexa is the major player with a 20% market share. Eniro has a 9% market in online search.
TDC is a strong dominant player in Denmark.
In Finland, Eniro bought the directory business of Alisa . Yellow Brick Road Fonecta is, basically, the Sonera sphere. Fonecta is the number one and Eniro is the number two.
Online competition is changing this traditional environment quite significantly.
a. Sweden
Sweden has very high customer penetration and no free listings. This is based on high Internet penetration. The Yellow Pages is a quality stamp: if you are not in the Yellow Pages, you do not exist. This situation is very good for us as the dominant player. This is the position that every Yellow Pages player should aspire to. It is a highly profitable place to be. Findexa in Norway is in the same position. It allows high margins. Other players in Europe occupy a similar position. There is very high directory usage in the Nordic countries in general. Print is stabilising or going a little down while online is growing rapidly. There is high internet and mobile penetration.
b. Finland
In Finland there is a very strong interest in mobile services. This is natural considering that Nokia is a Finnish company. In Finland, DA and mobile services represent a higher percentage than the total market that we would normally find in other markets. Customer penetration is, however, lower than in the other Nordic countries. Print is estimated to grow a little in Finland. Online is growing. There is high Internet penetration and a very high mobile penetration. This is an interesting market in which to test mobile services.
c. Denmark
In Denmark we see very much the same pattern. Customer penetration is a little bit lower than Sweden and Norway. Printed directories have been going down for a number of years but online is growing. There is more competition in the printed market in Denmark. There is high Internet and mobile penetration.
d. Norway
Findexa has a fantastic market share in the printed market. Print is estimated to go down a little while online is growing. There is more competition in online in Norway. There are several Yellow Pages and local media companies playing in this market. There is high Internet penetration and high mobile subscription.
e. Similarities and developments
There is much in common between the different Nordic markets. Eniro tries to use these similarities and create synergies between the markets. However, there are also many differences. Finland, for example, has a more competitive print market than in the other countries. There are regulatory differences. For instance, in Finland mobile numbers are not published for free on the Internet, which is the case in the other countries.
Common to all markets is the need to understand how to stabilise print and grasp the online opportunities.
f. Product developments in print
In order to prolong the life of print, Findexa in Norway publishes a pocket guide that is distributed through petrol stations and so on. It is used a lot by motorists in Oslo. In Sweden, we are publishing a lot of special guides, such as lifestyle, restaurant, body and soul and wedding guides. These aim to get traffic back to the printed product and to give advertisers good return on investment. We need to keep the usage of printed products up. As long as we can do this, we can prove return on investment to our advertisers and prolong the market.
a. A strong player
Eniro has made many advances in the online market. In print, there are different markets and traditions and the synergies constitute basic things like print and paper. In online, we are using the same platform development for all countries. We have been quite successful in all four countries. We are in the top ten in all of them. There are a lot of very strong competitors with a lot of money and muscle to develop their offerings. In order to face this competition, we need a bigger online market. All the countries are relatively small. Sweden is the largest with 9 million inhabitants. The situation is different here than in Germany or France, where the markets are large. The Nordic markets are small and in order to develop online services, you need to have a broader view of the market. The challenge we face is to build enough muscle to meet the competition in all four markets at the same time. We want to be one centre of excellence in the development of services.
b. Eniro online concept
Eniro has been developing a fast search for people, businesses or products. We have been quite successful, especially in Sweden. Our awareness rating is around 60%. Users know that if they want to search, Eniro is the place to go. A couple of months ago we were elected the number one search site in Sweden. Google was number five. We are proud of this and find it encouraging. We seem to be doing something right.
a. Consolidation
The trends in the Nordic countries reflect those of all of Europe, perhaps for the whole world. Consolidation is taking place in the marketplace. Some private equity players are moving into the region. In the east, Macquarie Group purchased Yellow Brick Road, of which Fonecta forms part. TDC Forlag is now up for sale. In Norway, Findexa has been owned by private equity for four or five years now. There is room for further consolidation in the Nordic countries. I think there will be some deals done within five or six months, which will create a new environment for the Nordic players. It is a very interesting place to be at the moment.
b. Localisation
Eniro is building more on its strengths rather than trying to be everywhere. We are now focusing more on the local. We used to be all over. For example, we sold our companies in the east. The question of globalisation versus localisation also needs to be addressed. The increased competition of the search players occupies about 25% of my time every day. This affects the long‑term future of our company. We really need to understand how we can keep the position we have in the Nordic countries and, of course, how to improve it.
c. Margins
Offline offers us very good margins. In an increasing online world, how can we ensure the continuation if these margins. This is quite a challenge but I think it can be faced.
d. Technology
A lot of new technology is emerging. This is particularly relevant in the Nordics where there is a very high Internet and mobile penetration. This allows for many new search possibilities. It also makes the Nordic countries a test bed for many global players. This means that we really need to be on top of technology, much more so than in the past. We face an environment that is rapidly changing and we need expertise in technology. It is clear that we need to build new competencies in Eniro to deal with technology issues. I would not be surprised if, in the next few years, we have more people coming from the telco and IT industry. The directory industry is transforming into an IT and telco industry more than anything else.
e. Users
The customer is very important, but if you do not have the users, you do not have the customers. We are now focusing very much on the users. The user is key to the online market. If we do not have users, we do not have advertisers. In the past, we did not spend much time thinking about users and user behaviours because the pace of technological change was much slower.
f. Forerunners
These are very interesting times. It is very interesting to be a Nordic player and to cope with all these things. From this point of view, the Nordic market is interesting to watch for the whole industry. In many ways we are forerunners. Changes are happening faster in the Nordic countries than in other areas.
g. Eniro
This means that Eniro has to really decide where to go. We will be there for the active users. We will be in several channels. The user should always be able reach our services, whether he or she is travelling, surfing the Internet, reading a book or calling our DA services. The user will get the same service no matter what channel they will use. We call this ‘ever‑present.’ We want to be always available and to go much deeper into content than we are today. If we continue to provide only contact details we will be killed. Contact details are not really what the users are looking for on the Internet. Rather, they are looking for a fast search and, to a large extent, products. Why search for a company if you are searching for a product? If I want to buy a pair of Adidas shoes, why should I search for shoe stores?
The Nordic market is very interesting and highly developed. We will continue to work with print but we do not see any growth in it. The usage of print is still very high and we will continue to have that. Online is key for any players that want to work in this market. We need to understand how to meet the competition from global players. There are many similarities between the Nordic markets but also many differences. The differences lie very much on the sales side. However, Eniro looks at the Nordic market as a whole and sees a lot of synergies in the online market. We need a bigger market to be able to fight off competition.