When Norwegian media group Schibsted launched FINN.no, an online classified site, in 2000 the company’s executives knew it would cannibalize a vital revenue stream for its more than 140-year-old national newspaper Aftenposten and its sibling Verdens Gang. It was hard seeing the traditional business suffer, but the publishing company, which was first launched in 1839, had to look to the future, says Raoul Grünthal, CEO of Schibsted Sweden.“You must accept that if you have disruption in an industry, that’s a fact,” says Grünthal. “If you don’t disrupt yourself, somebody else will. And at the end of the day, it’s better that we do it than somebody else does it.”
Too often the media industry behaves in a very defensive way, he says. “We want to protect our business rather than occupy new territories and if you think that way in business, very often you become a loser,” he says.
By setting up online rival marketplaces to its print classifieds, Schibsted transformed itself and its fortunes, escaping the downturns experienced by most major media companies and turning itself into a global company. Profits from its classified business rose to more than $184 million (1,098 Norwegian Krone) in 2012, close to matching the still strong, but declining, profits from its traditional media properties.
“They are absolutely a brilliant model for other companies around the world,” says Peter Zollman, founding principal of the U.S.-based classified advertising consultants AIM Group. Schibsted was “very smart and aggressive very early,” and although it would be harder at this point in time for others to follow the Norwegian media conglomerate’s path, “any publisher would do well to emulate what they have done. Even now,” he says.
“Most of their counterparts in the newspaper business had the foresight to see what was coming, but did not have the ability to adapt appropriately to deal with the changes,” Zollman adds, “and they have really suffered as a result.”
When asked if Schibsted is now a digital company, Grünthal does not hesitate to answer. “Absolutely. We still have the print parts of our business, but we are mainly a digital company. You must mentally say to yourself, ‘Okay, now we have really changed the core of our business and become a digital company.’ If you don’t, you stick to old ways. The most important thing is to change your way of working and put the emphasis on the future, not on the past.”
With FINN.no, Schibsted seemed to be following the advice of Harvard Business School professor Clayton Christensen, the man who popularized the word “disruption” in his book “The Innovators Dilemma.” Christensen argued that to innovate, large companies had to spin out smaller start-ups.
“They launched FINN.nonot as a defensive move, but as a very aggressive, standalone business, standing on its own and competing with the newspapers and it was a brave decision. They saw this was working in Norway and they started to look into what could be done in Sweden,” explains Martin Frey, the CEO of Blocket.se, Sweden’s most popular classified web site — which was acquired by Schibsted and is now a subsidiary of Schibsted Classified Media.
A key part of Schibsted’s approach to innovation is working with entrepreneurs and acquiring start-ups like Blocket, Grünthal says.
“Compared to many other large media companies that tried to do everything on their own — either by trying to do everything within their organization, or having a stance of just trying to acquire companies that stood apart from the core business — we instead acquired new companies that became our core business,” he says.
“We accepted the fact that we cannot be the best in the world at all kinds of businesses and we don’t have all the knowledge within our current business so we really needed to get the best entrepreneurs within these different new areas and that was a key success factor I would say.” Grünthal says identifying entrepreneurs who can help the Schibsted continue to disrupt itself remains a key part of the company’s strategy.
Schibsted has come to believe that “the Internet is made for classifieds and classifieds are made for the Internet.” That is because in newspapers, classifieds had limited text and no photos, and when you bought an ad, it often would appear in only one or two editions, says Blocket’s Frey. The Internet liberated classifieds.
“Now when you place an ad on a site in Blocket, you can add long text descriptions, you can add several photos, you can add a video if you want,” Frey says. “The ad is published basically for two months. For the seller, it’s so much information. For the buyer, it’s so much easier to search and sort. Classifieds are very well suited to online, much, much better than the paper product.”
Classifieds are a seemingly simple product, but at Blocket and other Schibsted sites, teams are constantly tweaking and developing to make transactions easier and safer. The changes are constant and almost imperceptible, Frey says. “Most of the innovation is just about improving rather than breakthroughs or big bangs.”
The teams are also constantly looking over their shoulders for upstart rivals. Copycats are not a concern, but what Frey says they do worry about is someone coming along with a completely new model for classifieds. “We haven’t seen any signs of that, not internationally either, of any totally new ways of running a classified site, but we have to look out for that.”
Another advantage of digital classifieds vs. print is the ability to scale platforms globally. Blocket has launched local versions in more than 30 countries.
A group called “the shotgun team” specializes in remotely launching sites into undeveloped markets from Stockholm. “When we get traction, then we set up an organization in that country,” Frey says.
Sites set up by the shotgun team include Chile’s yapo.cl, Belarus’s kufar.by, and Morocco’s bikhir.ma. Each now has local teams based in the countries they serve. But other sites like the Nigerian classified site tradestable.com.ngand a few others are still being run from Stockholm.
One of Schibsted’s company values is “we are here to win.” Internet economics mean few consumers want to buy ads on the local second-best classified site.
“For the Blocket concept, we believe it’s a winner takes it all market,” Frey says. “So when we go into a new market, the goal is to become number one. But we go in for the long term because we know it’s going to take some years to become number one. If we don’t believe that we will become number one, then we don’t believe that we should be in that market.”
In addition to being number one in Norway and Sweden, Schibsted owns the most successful classified web sites in France and Spain.
“Before it was more mature markets, Western Europe and the United States and so on, that were the main focus and it still is of course for us, but less developed countries, the BRIC countries and so on, are now becoming more and more interesting. Now it’s becoming a truly global market,” Grünthal says.
“Brazil and Indonesia are potentially huge markets, but you have to invest a lot to create a strong market position in order to make money in the future.”
The biggest change in the market in 2013 has been mobile, Grünthal says. “The mobile ad market has really exploded this year and I suppose that’s good news because we have a very strong position on mobile. “That’s a fundamental change. In a very short span of time, it has changed the Swedish advertising market and it’s really the growth driver for advertising in Sweden.”
More than half the traffic to Blocket.se now comes from mobile devices, Frey says, adding the number of people using apps to place ads has also surged in the past year.
Grünthal believes the growth in classified advertising is important for Schibsted, but it also wants to spur innovation in journalism. This year it established the Schibsted Academy of Journalism. Its mission is to develop journalism skills for digital platforms within its media group.
“The fact that we say we must change and accept the fact that our old business models must be replaced by new ones doesn’t change that we believe in journalism and think journalism is something very important from a societal point of view, but also from a business point of view,” Grünthal says. “It’s not about giving up journalism and putting all the money into classifieds. It’s also about innovating journalism.”
As Schibsted expands its digital horizons, the company is also finding itself in a new league. “We are considered to be a very successful company compared to our national and regional peers but the problem in a globalized market is our new competitors are Google, Facebook and so on. These are very clever international companies with lots of power and this is a new competitive field for us,” Grünthal says. “To be best in Sweden, or Norway, is not the big thing any more.”
Going digital, the company is finding, is a process that doesn’t stop after you add ones and zeros into the mix. Even for those like Schibsted that have profited from early-mover advantage, fear of getting scooped on the new, new thing is a constant worry. As other publishers have learned the hard way, it is all too easy to end up becoming yesterday’s news.