Regional business trends and forecasts for 2015: South Africa

Interview with Sebastian Stent, Head of Digital at Media24 News, South Africa. Media24, part of Naspers, has interests in newspapers, magazines, digital publishing, printing, distribution, book publishing, online services and e-commerce.

by WAN-IFRA Staff | January 26, 2015

WAN-IFRA: To what degree is South Africa experiencing a decline in revenue from print operations, as found in many parts of the world?

Sebastian Stent: South Africa is seeing much the same trend visible in the rest of the world. While we were slower than many countries to begin the decline, this has accelerated over the last year or two – with all print brands in South Africa showing a marked reduction in both circulation and advertising revenue that shows no sign of abating. The only area where growth is still visible is in free local newspapers, which communities still show fantastic loyalty to, and which are still able to capture a fantastic level of engagement from brands.

What potential do you see for revenue from digital readership?

Many brands in South Africa are scared to make the transition to paid digital content. They are still stuck in the early web paradigm of believing there is some value in putting content online for free. However, for all but a few brands (and our News24 is the best example in South Africa of a digital brand with a large enough audience to justify putting content online for free), the value of their digital advertising does not make a good case for a sustainable business.

We have been fortunate in seeing an incredible uptake from our Afrikaans audience to our paid digital platforms – and every day we get better and better at creating a platform and editorial strategy that provides news worth paying for. Because of this, we are maturing well ahead of our competitors, and it will take them many years to be able to entrench the same value chain amongst their audiences – and educate those audiences to understand that good-quality journalism costs money to produce, and that there is a real value in an intangible product.

Alongside that, many of our e-commerce sister operations are growing strongly, and in the future we see greater synergies between our digital readership and the growth and development of these commerce brands.

How will native advertising develop as a revenue source for South African newspapers in 2015?

Already, native advertising is a huge priority for us in the coming year. It has taken a while for agencies and brands to begin to understand the concept here – mostly because digital agencies in South Africa have spent so many years dedicated to banner advertising that making the transition to a broader, more nuanced product offering is difficult for them. So both agencies and their clients require a lot of education to get them to a point where they understand how to properly leverage content alongside their brands to grow the trust relationship with their audiences.

Part of that is the content itself – too many agencies only know how to engage in the hard sell – and that works to the detriment of both the agencies and their brands. Consumers switch off from their messages, both intentionally (with tools like AdBlock) and as a result of “banner blindness.”

The return on banner campaigns is getting smaller and smaller; the clickthrough rates on native ads are fantastic in comparison. It’s only a matter of time before brands begin to shift their strategies dramatically towards advertising formats that bring ACTUAL returns. As a publisher, we welcome this shift, and have well prepared our platforms to accommodate these more engaging formats.

In the USA and elsewhere, publishing companies are spinning off print operations from broadcast and online activities (for example, Gannett, and of course the biggest case is News Corp.). To what extent can this be seen in South Africa? What other M&A trends are visible?

Our parent company, Naspers, has always drawn a distinct line between our different operations – from our pay-TV business DSTV to our involvement in multiple commerce and classifieds online businesses. There are many bridges between these businesses, specifically through content and operational synergies – like our digital sports channel’s relationship with Supersport, the DSTV sports channels, and our use of the Naspers-owned digital payment solution PayU, which powers our growing commerce and paywall businesses.

While many international publishers are only now spinning off print operations, it should be noted that, due to the foresight of the heads of our parent company, this is a transition that Naspers performed decades ago – when we went from being a very local print publisher to being one of the most diverse and successful technology companies in the world. Their leadership saw us invest in a number of growth areas long before the market saw their potential,from pay television to our groundbreaking investments in tech companies in many BRIC nations, such as our stake in the now world-conquering TenCent.

Is South Africa similar to the rest of the African continent in the sense that internet access takes place primarily via mobile, having bypassed the desktop? How is mobile news publishing developing as a result?

Definitely yes! While South Africa has a large chunk of desktop traffic (in comparison to the rest of the continent), the rise of mobile has always been a huge component of our understanding of digital access. A lack of broadband (and last-mile) wired access to the internet has allowed our cellular networks to leapfrog our ISPs in bringing internet to the masses.

It’s worth noting that free mobile messaging has only recently come to much of the “developed” world, yet we are almost two decades into our use of such technologies. That’s thanks in large part to brands like MXIT, which provided free messaging long before Blackberry Messenger, WhatsApp, WeChat and other similar services.

Because of the limitations we face, our consumers find incredible ways to make the most of the technology they have. The last few years have seen the emergence of smart devices as a mass-market product, but we have decades of experience as a nation making the most of feature phone technology. The limitations of that technology have spurred our innovators to make efficient and dynamic digital products that use every bit of functionality these “dumb” devices have to offer.

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