Digital is better.
The new consumer.
The digitalisation of the world we live in has upended consumer habits and behaviour. Once upon a time, radio and printed newspapers were the key information channels for the masses. Since the victorious onslaught of the Internet, they are slowly but surely drifting into the realms of insignificance. Instead of opening the morning paper at the breakfast table, users – no longer readers – check their Facebook threads and the latest tweets. Instead of gazing at the haunted fish tank waiting for the next episode of their favourite soap, the selfsame users click their way happily through the visual wonderlands of YouTube and Netflix. The media concerns have to bear the consequences. Falling audience and consumer figures mean falling advertising revenue, and are a stab in the heart that endangers the continuing existence of long-established concerns.
Kill off your darlings.
Could the example of Silicon Valley come to the rescue? How are established concerns there led into a bright and promising future? Futurologist Paul Saffo has a simple answer – they aren’t. According to Saffo, Silicon Valley has no respect for the obsolete. He says that if you want to enjoy a wonderful and ripe old age, you have to lay a solid foundation for it early on. Can anyone imagine life in Germany based on principles like this? Probably not. Nevertheless, droves of managers set out on their Hajj to the digital Mecca to find illumination. Including Mathias Döpfner, CEO at Axel Springer – one of Germany’s most important agents of change. Under his regime, 2013 saw the Axel Springer Verlag divorcing itself from classic print media like the Hamburger Abendblatt and the Berliner Morgenpost, both of them steeped in tradition. The press was in uproar, Springer was taking an axe to its roots. And then?
Almost concurrently, Döpfner fathered a collaboration between Springer and a startup accelerator from the USA. This was the beginning of the Axel Springer Plug and Play Accelerator – a bridge between Berlin and Silicon Valley. Since its restructuring, the concern has begun to concentrate increasingly on the digitalisation and constant expansion of its media portfolio.
Success in figures.
In Q1/2015, the publisher earned 60 per cent of its revenue on the web, for instance with property and job portals like Immonet and Stepstone. At the same time, overall corporate revenue rose by 10 per cent to a figure of 1,577 million euros. As a consequence of the ongoing digitalisation of the business model, advertising revenue at Axel Springer rose to 985 million euros – an increase of almost 15 per cent. Around 80 per cent of this advertising revenue was attributable to the concern’s digital business models. Even though Springer had no qualms about divorcing itself from the big daily papers, the restructuring process was above all initiated to enable the survival and continuing existence of the historic Springer Verlag. This is the German interpretation of the Silicon Valley philosophy. Here, we preserve, nurture and care about concerns steeped in tradition.
On the face of it, it’s not all that surprising. In effect, they took classic newspapers, snipped out the news, articles and other bits and simply pasted them all back together with digital glue. They continue to offer regionally relevant content, but can now be placed under global control. No matter where readers are, the days of ringing classifieds with a ballpoint are history, today it’s all digital, and done with a click. It’s a money-spinner, too. Could this dismantling of the newspaper as we know it also be applied to the digitalisation of cars?
Media for Equity.
In July 2015, ProSiebenSat.1, the TV concern from Munich, and Axel Springer Verlag publicly announced their plans to collaborate on the acceleration of digital startups. It is an ironic chapter of media history that, of all branches, a newspaper publisher actually entered into a joint venture with a TV concern – something that could only happen in a digitalised world. Sworn enemies suddenly become friends – or, as Dr. Dieter Zetsche would say, ‘frenemies’.
The aim of the initiative is to invest in and promote innovative digital business models and startups and establish Germany firmly on the map of international digital players. To ensure that this happens, the initiative is planning investments in enterprises and funds, the networking of incubator and accelerator programmes and media-for-equity investments. A typical example of this is their investment in the startup myticket. Each of the concerns holds a 20 per cent stake in the startup. In return, myticket benefits from media-for-equity deals or advertising in the form of TV commercials, print and online ad formats to the tune of around 18 million euros.
A pretty neat move. The gaps in the advertising budgets of the concerns are sold to the startups as six-figure investments – a win-win situation for the parties on both sides of the fence. In Munich, ProSiebenSat.1 employs this selfsame principle for startups like Verivox, Flaconi, Amorelie, RapidApe or the YouTuber-network Collective Digital Studios. In Berlin, the publishers do the same for enterprises like Kaufda, Leidenzeile, Idealo or Stepstone. When it comes to marketing activities, Springer and ProSiebenSat.1 concentrate primarily on consumer startups from the later-stage segment and international sectors abroad that are trying to gain access to the domestic market – for instance Talenthouse and Shopkick, both of which are proven business models. In this, the concerns apply leverage with every last bit of their marketing muscle.
Holding on tight to the status quo.
New business models are one side of the coin. Funding them, learning from them – and perhaps even buying them out – pays dividends. That other side of the coin is that it becomes necessary to fundamentally change established corporate cultures. This gnaws at the substance and involves immense costs. Nevertheless, it makes good business sense for Springer to stop outsourcing digital IT services and establish its own, in-house IT division. It’s quite simply easier to control and much closer to where the decisions are made.
German startup biotopes.
These examples may not have silenced the reservations of sceptics. It is an uncontested truth that accelerator programmes are costly. There are also no guarantees that startups will evolve and become unicorns worth millions. More often than not, we hear of startups that blossom briefly and wilt away. Be that as it may, it is still no reason to cast doubt on the basic principles of startup acceleration. If big German concerns can’t get the hang of it, where will we find the leaders, creative minds and innovators who will take us into the world of tomorrow? The best idea for anyone scared of bringing up a child of the likes of Silicon Valley is to take a trip to Palo Alto and find inspiration by breathing deeply of an atmosphere saturated with the omnipresent spirit of innovation. Anyone who gazes grimly at Germany and curses a system with more brakes than accelerators – and wishes that all German enterprises would immediately relocate to the Valley – must also be prepared to put up with astronomic costs for office space, housing and wages. At the same time, if we wish to forge ahead with the digitalisation of our business models, we must search for alternative forms of collaboration with startups. Aside from incubators and accelerators, what else can we offer that could attract the interest of startups? What other incentives could we create that go beyond the co-working spaces, workshops, mentoring and financial support we already provide. Which of these known factors must we tweak to enable us to present a previously unimagined accelerator concept? With their media-for-equity idea, Springer Verlag and ProSiebenSat.1 have already come up with a pretty neat concept.