Media House: In a phase of transition

It is in times of crisis that old strategies come under pressure. This is the time to get a foothold […]

It is in times of crisis that old strategies come under pressure. This is the time to get a foothold in new markets. And this is when the future winners will emerge.

By Kalle Jungkvist, Editor-in-Chief Aftonbladet Nya Medier, Stockholm.

Our journalism has always been the key. Journalism that has been in tune with the spirit of the times, and has reflected the rapidly changing needs of our readers and visitors. This has involved focusing hard, from an early stage, on handling the transition from analogue to digital media, and rapid innovation.

We have also made use of our unique newspaper distribution network, and our very high Internet traffic, to create new products, services and businesses. These have been the most important elements of our strategy to create a progressive media house.

A number of key strategic decisions have been vital to Aftonbladet’s development. As with every strategy, we haven’t always known exactly where we were going right from the start. It has developed gradually, sometimes based on thorough analyses, but equally often on intuition and in some cases without being properly thought through, which has led to major setbacks.

I plan to describe the most important strategic decisions, as well as the underlying principles that have guided us in making them.

To give you an idea of where we were coming from, I must first give a brief presentation of the business.

The print edition of Aftonbladet is a national, “middle market” tabloid for single copy sales, and is Sweden’s largest newspaper. It was founded in 1830, and last year its ABC circulation was 378,000.

Aftonbladet Nya Medier (New Media) was until last year an independent company with 138 employees. The company’s main activity was the website Aftonbladet.se, which has approx. 1.5 million daily unique visitors. In 2008 it made a profit of SEK 105 million – making it, with one exception, the only newspaper or TV website to make any profit at all.

In total, through its two main channels, Aftonbladet reaches a net 2.3 million people each day, which is equivalent to 32 per cent of all Swedish people between the ages of 15 and 79. Over the course of an average week, we reach around half the population.

The group’s third pillar is “Aftonbladet Tillväxtmedier” (New Media Business) – a holding company that invests in, and develops, new online businesses. In total the Aftonbladet group made a profit of SEK 302 million in 2008.

This is a chronological list of the most important events and decisions in the group’s recent history.

Early 1990s

The newspaper:

The newspaper was at that time owned by the whole trade union movement in Sweden. It did not have professional owners, and was independent of the large media groups. Meanwhile Sweden was being rapidly deregulated, commercial TV was developing at an explosive pace, and people were constantly facing new choices in their everyday lives. We modernised our journalism, which meant responding to people’s increasing need for help with making choices in a rapidly-changing society.

As a national newspaper, Aftonbladet had a unique strength – distribution to approx. 16,000 retailers across the whole of Sweden and a strong position by the checkouts of the major supermarket chains. Its approx. 50,000 placards (unrivalled in Sweden) gave the newspaper enormous marketing power.

This position meant that at the start of the 1990s we were able to build up an extensive magazine supplement portfolio with titles covering areas such as TV, health, cars, IT and travel, to mention but a few. The magazines were cheap, and were distributed and sold with the newspaper. They were displayed by the checkout queue, and did not need to battle with their competitors in the more remotely magazine placed positioned displays.

By being first and innovative, Aftonbladet soon became the market leader. The magazines increased the circulation of the main newspaper, whilst also becoming a profitable business in their own right. Today we sell as many of our magazines as the sales of all other magazines combined.

Both the changes to our journalism and our investment in magazines were very important to our subsequent online investments.

The Internet:

Aftonbladet.se was established in 1994, making it one of the first newspaper websites in Europe, far ahead of our Swedish competitors. The decision was based on intuition. We saw that it was a new and exciting technology, and viewed the Internet as a potential channel for reaching more readers and increasing advertising revenues.

We didn’t know exactly how we would manage to do that at the time.

Initially all of the content came from the print edition of the newspaper. But we experimented a great deal with moving images, audio content, community functions, votes and forums. Very many young people had their first experience of chatting on aftonbladet.se

So we were first – far ahead of our competitors – and we were willing to invest. We dared to experiment and to be innovative. And that is precisely what has proved to be the key time and again in the development of the digital world. The market leader makes money. And the market leader is always ahead of the competition.

The late 90s

In 1996 half of the shares in the newspaper were bought by Schibsted, which took over total financial responsibility. Later that year Aftonbladet overtook its leading competitor Expressen to become Scandinavia’s biggest newspaper.

This was thanks to a complete revamp of the newspaper’s journalism and marketing.

But the online edition was also very important. It influenced views of Aftonbladet, and the younger generation saw us as being modern and innovative.

Becoming the biggest, market-leading newspaper after being the underdog for almost 40 years imposed completely new requirements on our organisation. As a result, we carried out a management, branding and strategy review.

The most important conclusion was somewhat surprising for a market leader: although the circulation of Aftonbladet was rising rapidly, the long-term trend for the tabloid market was one of decline. In the long term we would not be able to survive by simply producing a print edition, as the business would gradually become weaker and weaker. We needed more channels – we needed to create a media house.

It was not entirely clear what this media house would look like. But the decision involved committing ourselves to the Internet as a first step.

At the turn of the millennium, Aftonbladet Nya Medier was created as an independent company. The aim was for it to have short decision-making processes and to focus on developing online-specific journalism and businesses.

Senior managers from the newspapers were given the job of investing heavily in the new media. I was deputy editor of the newspaper at the time, and was appointed editor-in-chief, whilst the newspaper’s marketing director Mats Eriksson became the CEO.

We then made a number of strategic decisions that laid the foundations for our subsequent success:

• We focused heavily on real-time news. Our competitors were mainly happy to upload the content of their newspapers onto the Internet.

We defined our readers’ main needs as getting quick answers to two important questions:

1) Has something happened?

2) What are people in Sweden talking about today?

Being first and being quick were absolutely essential. Even if we were only a few seconds ahead of the news agencies we saw it as an important victory. For major international news events we compared ourselves to CNN, BBC and the New York Times.

We called ourselves “Sweden’s news website”, and no-one has even managed to get close to taking that title away from ever since. Each year we still have internal competitions aimed at ensuring that we always remain faster than all of our competitors.

• We expanded our content, and used material from all of the newspaper’s magazines in order to create strong subsections: cars, travel and games were some of our sites that soon became the biggest of their kind in Sweden.

• We focused on interactive services – helping readers to find personalised solutions to their problems. Whether they wanted to know where to save for their pension, or what PC to buy

• We defined a news website as a social medium, and increased our focus on forums, chat rooms and other meeting places.

• We had our own sales team – separate from the newspaper. Our main job was to promote the Internet as an advertising medium, and to help advertisers find creative ways of using it. The traditional newspaper advertising salespeople neither had the necessary time nor expertise – for them the online business was still too small.

• We used our market position to transform the marketing space on the website into stakes in various start-ups.

• All of this led to rapid growth in traffic, and excellent financial results.

The dot-com bubble of 2001:

There is a saying that crisis is the mother of invention. For us that was very much the case in 2001. Overnight, Nya Medier lost 50 per cent of its advertising revenues. In 2001 the previously profitable company made a loss of approx. SEK 35 million. Most of the shares that we owned in start-ups became worthless.

Aftonbladet had to make two important strategic decisions:

• Did we think that the online business would recover – or was the digital revolution a cul-de-sac for traditional newspapers?

• Should we cut back on investment, in order to become profitable in the short term – or should we protect and reinforce our market position?

At Nya Medier we gathered all of our employees at various conferences and meetings where journalists, salespeople, technical staff and business developers together discussed how we should aim to make money in the future.

That turned out to be the right move. Out of necessity our organisation was decentralised. Both our journalists and salespeople were trained to take quick, independent decisions. Bringing everyone from the various areas of our business together led to a surge of creativity.

Out of this fire-fighting exercise, the beginnings of a new strategy emerged. We saw it as self-evident that the advertising business would recover in a channel that was visited by so many people each day. Where there are readers, there is also money to be made.

In brief, our programme looked like this:

• Aim to further reinforce our market position.

• Develop new advertising formats that give advertisers better value for money.

• Develop paid services. Being 100 per cent dependent on advertising revenues was considered too risky a business model. The aim was to try to get consumers to pay for some of our journalistic content.

• Enter the classified ad market – the traditional morning papers were afraid of investing in the online market for fear of cannibalising the business of their print editions.

The plan of action was approved by the Board of Directors, which in hindsight proved to be an absolutely key decision to the development of Aftonbladet. We cut all of our costs – except staff. As a knowledge economy business, we defined our employees as our main tool for continued growth and developing new revenue streams.

Most of our competitors did the exact opposite. Aftonbladet.se doubled its traffic in a year, and since then we have been almost three times as big as our nearest competitor. The gap continues to grow.

Paid services:

The decision to attempt charging for our journalistic content led us down two different tracks.

1) Traditionally the Swedish tabloids had been successful at selling newspapers on the basis of people’s need to feel good and lose weight.

Using that knowledge, we created a personal and interactive health website focused on healthy eating and exercise as a means to losing weight. We call the service Viktklubben – “the weight club”.

The price was approx. SEK 200 for a three-month membership, and the service was an immediate success. Since 2003 it has been used by over 300,000 people in Sweden, and the concept has been exported to six European countries.

We were the first mover, creating a completely new online market in Sweden. Today Viktklubben has at least ten tough competitors, but it remains the market leader.

Being first and biggest were once again the main reasons for our success.

2) The second track involved an attempt to charge for the more exclusive areas of our journalism. We collected in-depth interviews, travel guides to 100 different destinations that could be downloaded as PDFs, service journalism, consumer tests, insider’s guides to betting on horse races and football matches and a great deal more besides in a single service.

We called it PLUS, and priced it at SEK 129 for a three month subscription. However, we did not entirely trust the strength of our journalism. We therefore developed an online dating service and a basic e-mail function that we also included in PLUS.

The service was not a success, and barely broke even. A survey of people who tried the service gave us a clear answer why:

“You don’t have the best dating site, and you don’t have the best e-mail service either. Concentrate on what you are best at – journalism”.

Our readers were smarter than us – and we followed their advice. We repackaged the service, focusing on the journalistic content. We changed the price to SEK 19 a month, with autopayments by bank card or mobile phone.

The change produced immediate results, with up to 1,000 new subscribers signing up each day. The service currently has 150,000 members, and we recently raised the price to SEK 29 a month.

Over the years, our paid services have contributed between 20 and 30 per cent of our profits. In 2008, when advertising revenues grew extremely quickly, paid services contributed 20 per cent, or SEK 20 million, of our profit.

Our strategy has been criticised and questioned by virtually the whole online community. But I am convinced that newspapers must continue to develop clever ways of charging for their journalism, even online. This will become even more important with the next platform that is on its way, which has an even weaker business model – the mobile phone.

Classified ads: The print edition of Aftonbladet has never sold classified ads. When the Internet revolution took off, it was clear that classified ads would move online.

However, at the start of the millennium, none of the traditional media groups had made serious attempts to enter this area.

The challenge we faced was to try to capture the market. We did not succeed, in spite of our high traffic levels and the fact that we offered free advertising, whereas our competitors charged for their services. We were not the first mover – and we didn’t become biggest.

Our response was to buy majority shareholdings in two of the biggest players in the market. These were Blocket – a C2C website for all kinds of stuff, and Byt Bil – a B2C website for used cars. The price tags of SEK 183 million for Blocket and approx. SEK 50-60 for Byt Bil were described as crazy by the trade press.

Both of the sites were experiencing rapid organic growth, and with the additional traffic from Aftonbladet.se they became completely dominant in their respective markets. When Schibsted’s main competitor Bonniers finally attempted to challenge us, their efforts ended in disaster.

Once again it was all about being first and biggest. When Schibsted last year bought Blocket and Byt Bil, in order to export the concept overseas, the two websites were valued at approx. SEK 3 billion.

Our traffic strategy

The acquisition of Blocket and Byt Bil involved various changes to Aftonbladet’s commercial strategy:

1. Our journalism is the key. The journalistic style of the newspaper and website have given us an extremely strong position online.

1. This traffic can be used to create new websites – either developed by us, or acquired at an early stage of their development.

1. Rapid traffic growth helps to generate profits and increase the value of the sites.

1. These returns can then be used for new investments.

1. The combined traffic is used to further strengthen the position of all of the websites in the network.

In recent years, Aftonbladet has acquired and developed a number of businesses, including:

• Hitta.se – a directory service which is now challenging the previously dominant Eniro, becoming very profitable in the process.

• Prisjakt.se – a price comparison service, which recently overtook its biggest competitors and continues to achieve good profits.

• A number of other businesses that are gradually becoming even stronger.

All of these companies are owned by the same holding company – Aftonbladet Tillväxtmedier, which has taken the strategy a step further. A joint traffic fund has been established. Each company pays a certain percentage of its turnover into a common holding. The holding company contributes an additional sum. Each company then receives a monthly payment out of the pot, based on how much traffic it generates for the other members of the network. The model stimulates greater cooperation, and drives traffic between the various sites. Tillväxtmedier’s 20 sites now receive a combined seven million visitors each week.

Verticals:

Most of Tillväxtmedier’s websites are purely commercial services. The most recent development has been to create content verticals.

This strategy started at the initiative of Aftonbladet’s sister newspaper Svenska Dagbladet, which is also owned by Schibsted.

It is an upmarket morning paper with a very strong position in economics, finance and business reporting.

Together Svenska Dagbladet and Aftonbladet created a completely new business website – E24. Svenska Dagbladet contributed the financial journalism and its brand name, whilst Aftonbladet provided web-traffic and Internet know-how. By providing links to material on the website, Aftonbladet was also able to offer its readers first-class financial journalism.

E24 soon became very successful, with 800,00-900,000 unique visitors each week, and it was profitable within a year. The site is now challenging what was previously the completely dominant player, the Bonniers-owned website Dagens Industri.se.

The next step is to build a travel vertical. Aftonbladet.se’s travel section has been demerged and combined with a travel booking

engine called Destination.se. The staff travel journalists at the newspaper and website have been transferred to a separate company, which also produces a magazine supplement for Aftonbladet.

We believe that this trend will continue. In order to meet the increasing competition from growing niche websites, we need a strong focus and rapid innovation in important areas such as food, cars and IT. As always, the key is to become the market leader. And that in turn requires smaller, entrepreneurial entities with a complete focus on the main task of becoming number one.

We have defined the following main features of a successful vertical:

1. Journalism – news, services and inspiration.

1. A strong community – reader-generated material is vital.

1. Online-specific services that generate new business in their own right. One example is the travel booking engine on Destination.se, which generates income for each booking made.

1. A traditional advertising business – coordinated with other websites in the network.

1. Content integration between suitable sites in the network in order to increase traffic.

1. Producing a varying amount of journalistic material for Aftonbladet, and in the future probably also for Svenska Dagbladet.

Communities:

The Internet is fundamentally a social medium. The traditional role of the journalist is challenged by the visitors themselves. Historically journalists have acted as megaphones – we have produced a message, published the article and that’s the end of the story. There have been minimal amounts of subsequent discussion in the product itself.

On the Internet, that is an untenable model. New generations of readers and visitors expect to hear more voices, more slants and more outlooks.

They want to take part and offer their comments – or at least read other people’s comments.

The traditional media are also being challenged by readers acting as media critics in blogs and various other forums.

It is absolutely vital to make use of readers’ knowledge, as well as be open to debate and criticism, in the new media landscape. In the future the publication of an article will be a starting point – for updates, corrections, different outlooks and slants, influencing public opinion and debate. A significant part of this will come about through communication with readers/visitors. If the traditional media fail to understand this challenge, they will relentlessly be marginalised.

Against this backdrop, Aftonbladet has drawn up its own community strategy.

We have:

• Our own blog tool – with 30,000 active bloggers on Aftonbladet.se.

• Our own YouTube-like tool for readers’ video clips.

• Forums and comments linked to all of the areas of our journalism.

• A separate blog portal, which classifies and presents blogs on the Swedish market.

• Automatic links from the blog portal to our articles that are being discussed in the blogosphere.

• A special community for our journalism, where readers can use their profile pages to present themselves and their various contributions to the site. It has also become a meeting place for our regular visitors.

We believe that a community strategy that promotes the involvement of readers is vital to a news site like Aftonbladet.se. It creates loyalty, and provides a useful tool for renewing our journalism and interacting with our visitors. It also helps us to spot trends in our visitors’ habits, and to revamp and expand the content of both the print edition and Aftonbladet.se

Web TV:

In the future, multi-media journalism will become increasingly common. The combination and integration of text (primarily intellectual) and moving images (primarily emotive) will change the nature of journalism. Meanwhile, TV consumption in Sweden is moving rapidly from the traditional channels to the Internet.

This is a major challenge to a newspaper business without a foothold in, or experience of, the television world. But it also offers great opportunities.

Aftonbladet.se was one of the first websites to experiment with the use of moving images. We produced Sweden’s first live, online rock concert as long ago as 1997. A few years later we started transmitting highlights of the matches from Sweden’s top football and

ice-hockey divisions. That was at a time when the rights were virtually free of charge.

In 2004 we decided to invest heavily in web TV. We bought the same national and international feeds used by the big television companies. We repackaged and edited these reports to make them suitable for the Internet. We built up a separate web TV department, which produced its own reports, and was sent out to cover major news and sports events.

We started with brief clips, but continued with much longer formats produced entirely in-house: various news magazines and talkshows covering sport and entertainment. To start with, the longer formats had very few viewers. But we wanted to get our visitors used to the idea that we were also capable of producing proper TV programmes.

We did this long before our competitors, including the traditional television companies. That has given us a unique position today.

Our web TV service on aftonbladet.se has 300,000 daily viewers. Over the course of a week we reach approx. 1.3 million people, significantly more than both the public service and commercial channels on their websites.

The business is growing quickly. Our advertising format essentially comprises a 15-second spot for the advert combined with a banner beside the player. It has proved to be very effective, and significantly less disturbing for our visitors than we had feared.

Again our strategy of being first in order to build a dominant market position has been effective. It is unlikely that we have the necessary resources to maintain that position in the long term. But our strong position means that we have a much better chance of finding partners to help us develop the business, so that we can compete for the online rights for major sporting events, for instance.

The big setback: In 2006 Aftonbladet started its own TV channel. The idea was to create a low-budget channel that would create original content for web TV, or material that would at least also be suitable for publishing online.

We were neither first nor biggest; in fact we were closer to being last and remained the smallest. We seriously underestimated our lack of expertise and the difficulties of creating a traditional TV channel within a successful niche. Audiences were small, and the combined advertising package did not achieve the desired results.

We closed down the channel after just over a year on air, and the lesson was clear:

• Do not enter a mature market at a late stage without a revolutionary new concept.

• By all means experiment – but close down operations quickly when they don’t work.

The newspaper:

Until the mid-2000s, the newspaper’s circulation increased in spite of the rapid development of the Internet. We had successfully identified two important trends amongst our readers.

The first trend towards the end of the 90s was an increasing interest in international sport, and particularly football. The big teams in Europe were creating world stars who people wanted to read about, and it obviously helped that some of those stars were Swedish.

In 2000 Aftonbladet started publishing a daily tabloid sports supplement, which came free with the newspaper. It was printed on pink paper – inspired by Gazzetta dello Sport – and was an enormous success. Aftonbladet clearly overtook its leading competitor to become the number one sports newspaper in Sweden.

The second trend – a rapidly growing interest in international celebrities – led to the decision to start a weekly magazine focused entirely on celebrities.

Both of these moves led to increases in circulation, and the sports supplement remains extremely important to the newspaper.

In 2005, circulation figures started to fall at an increasing pace. Currently they are falling by approx. 7 per cent. The big revenues still come from the print edition, whilst the profitable website has more readers. Our challenge: how do we manage the transition from analogue to digital?

Free newspapers: Our aim is naturally to maintain the newspaper’s revenues for as long as possible. In order to find new streams of advertising revenue and new advertising partners, in 2006 Aftonbladet started publishing a free newspaper. The competition was incredibly fierce. Stockholm was where Metro started out, and it had built up a very strong position. Our main competitor Bonniers had also started publishing free papers in Sweden’s three biggest cities.

The paper was heavily loss-making, and the advertising synergies between it and Aftonbladet never really took off. However, our efforts did achieve one of our goals: a restructuring of the market for free newspapers in Sweden.

Bonniers’ free paper was in practice competed out of existence, Aftonbladet’s free newspaper was closed down, whilst Schibsted bought 35 per cent of Metro Sverige.

A strong new advertising partnership between Aftonbladet and Metro was established. It is still too early to evaluate the results, but for Aftonbladet the overall advertising package it can offer will be vital with the tabloid market continuing to shrink rapidly.

Additional products: As previously mentioned, Aftonbladet print edition has a unique distribution network and a strong position with retailers.

With falling circulation, we asked ourselves how we could use this strong position

to open the way for new business opportunities. As a first step, we revamped and improved our magazines. Prices were doubled, but circulation figures only fell marginally. This improved their profitability dramatically.

For several years we had also sold one-off products such as music CDs and DVDs with the newspaper. Generally this had been successful.

Our closest competitor took a new step that also inspired us: we started sending our retailers collector’s series of well-known films, with the first one coming free with the newspaper. The rest of the series is sold weekly with the paper at a competitive, but profitable, price.

This business has now been taken further. Three times a week our readers can now buy an additional product – films, CDs or audio books.

The profitability of our main newspaper has so far been maintained through:

• Increasing the price of the paper

• Improving and raising the price of our magazines, whilst also launching new titles

• Selling additional products

• Successful advertising sales and advertising partnerships.

New organisational structure: The keys to Aftonbladet’s success in the digital media have been focus, fast decision-making and rapid innovation. By transferring our digital business to a separate company, we allowed it to focus on developing online journalism, online technology and online business models. We moved from uploading material from the newspaper to creating Internet-specific content. Good technical staff and creative web developers were just as important as competent journalists. The aim was for aftonbladet.se to always be at the cutting edge. The fact that our sales team was trained in, and completely focused on, online advertising was a huge advantage when the dot-com bubble burst in 2001.

Now the situation is different. Today aftonbladet.se is far stronger and more robust than ten years ago. There is now less risk of the website being subordinated to the specific requirements of the print edition. Meanwhile, the tensions between newspapers and the Internet have increased. We do not currently exploit all of the power that a combined media house can exert.

That’s why we decided to break down the barriers between the companies at the turn of the year 2008/2009. We are now in the process of building up a completely new organisation, so that together we can continue to conquer the digital media world and modernise the business model of the newspaper. The key for the combined entity will be to not lose our focus on the channel-specific challenges, whilst efficiently directing an ever greater share of resources to our digital business.

Schibsted Sweden: The current financial crisis has led to a dramatic fall in advertising revenue. That presents Aftonbladet and Schibsted’s other businesses in Sweden with new challenges: how do we keep up the pace of innovation during a period of decreasing revenues?

The crisis has pushed forwards a move towards greater cooperation and a restructuring of Schibsted’s businesses in Sweden.

All of the companies owned by Aftonbladet, Svenska Dagbladet and Tillväxtmedier are to be combined in a single media house – with a number of business areas.

The aims are as follows:

To effectively coordinate of all of our resources, in order to aggressively reinforce our position on the Internet, and to develop our online business.• Strategic coordination, in order to create the next generation of newspapers.• To coordinate and merge various administrative functions so as to reduce costs.• To develop new organisational structures over the long term, which will lead to the coordination of certain aspects of our journalism.• To develop new, joint businesses.

In two years time the businesses will therefore move the shared premises.

Challenges: In my opinion, the digital revolution is still in its infancy. The media industry will be fundamentally restructured in a way that is hard to predict, other than to say that the changes will be dramatic.

I am convinced that many newspapers without a profitable online business will

not survive. Meanwhile, the traditional television companies will for the first time be seriously challenged by new entrants.

That presents us with enormous challenges:

• We must at all times understand the changing needs of our readers and visitors

• We must continue to innovate fast – in spite of falling revenues

• We must maintain the profitability of our print edition for as long as possible.

• We must find a good way of transferring resources from our analogue to our digital services.

• We must develop much more sophisticated target group-oriented advertising services online.

• We must develop new online business models that allow us to charge for journa-listic content.

• We must develop a business model for mobile phones. Since the launch of the Iphone, the use of the Internet on mobile phones has exploded.

Aftonbladet is the market leader – but what will this business look like in the future?

Finally: it is in times of crisis that old strategies come under pressure. This is the time to get a foothold in new markets. This is when the future winners will emerge.

Kalle Jungkvist is Editor-in-Chief of Aftonbladet Nya Medier. Reporter, news editor and Deputy Editor at the newspaper Aftonbladet for 20 years, Editor-in-chief at Nya Medier for 10 years. From June 2009 he will be a senior advisor to Schibsted Sweden, and visiting professor for the journalism degree course at Umeå University. He is Vice-chairman of the Swedish Newspaper Publishers’ Association and a Board Member of the IFRA.