Moneyweb deal makes Caxton a hyperlocal pathfinder

Attention diverted

The fact that our attention was diverted from the Caxton deal probably suited Moneyweb's executive chairman Dr Andrew Smith down to the ground as he is unwilling to give out much information about Moneyweb's plans to manage the Caxton papers' websites. But this very interesting deal that also sees Caxton acquire 34% of Moneyweb for R21 million in cash is well worth revisiting for a number of reasons, not least because - as Bruce Sturgeon, the CEO of Caxton's community papers, told Bizcommunity.com - it is a "significant move on Caxton's part to get into the digital space".

Caxton, which owns The Citizen newspaper, a swathe of magazines and some of the best and biggest presses in South Africa, has a formidable stable of community titles that span Gauteng, Mpumalanga, North West, Limpopo and KwaZulu-Natal. It wholly owns 89 of them and part-owns 41. Some are free sheets while are others are paid-for titles, such as The Lowvelder, based in Nelspruit. Both Caxton and Moneyweb are listed companies.

Community papers are often considered the Cinderella of the media world, underestimated because they don't break big national stories or win posh awards. But Caxton is a savvy company and it has invested wisely in its community papers.

Roots survey

Take, for instance, the company's Roots survey compiled at a pretty penny every two to three years by Caxton's Newspaper Advertising Bureau division. Started in the early 2000s, the Roots urban retail and readership survey serves as a value-add for Caxton's community newspapers' advertising clients, helps editorial teams keep track of the changing demographics of their readers and is becoming a sought-after research tool for companies such as retailers wishing to open up new outlets.

This market-research capability has probably gone a long way into luring big national advertisers, such as financial services firms and fast-moving consumable goods, to the company's community papers. Gone are the days when community papers were supported only by Mom-and-Pop advertisers and classifieds.

Last year, through the recession, Caxton took a bold decision not to drop the number of pages past a certain threshold, despite a fall in advertising. The threshold differed from paper to paper and it meant taking a financial hit* but, Sturgeon told me earlier this year, he didn't want the papers becoming so thin that the readers felt cheated.

Strategy paid off

The strategy paid off as many of the paid-for Caxton titles such as The Lowvelder, Witbank News and Rustenburg Herald actually increased their circulation in a year when almost all the country's paper suffered a decline.

So this is a sophisticated operation and it now has Moneyweb - which has been doing the business pages of The Citizen for years - to develop a comprehensive online strategy for its papers. Moneyweb, one of South Africa's first Internet news startups, has proven to be an agile little company that has grown in all sorts of interesting directions such as Mineweb, its international mining news website.

What I did manage to get out of Smith - who was once the group MD of the wildly successful ICT firm Datatec and has become far more active in the running of Moneyweb since Alec Hogg moved (with a radio studio) to the KwaZulu-Natal Midlands - is this:

• That the strategy is hyperlocal - not commoditised news - so the idea is not to combine all the community titles'news into one large site such as News24 or IOL but to really push the local news of the various titles;

• That Smith is setting the bar far higher than simply putting the Caxton papers' content on the web, so that over time there will be services and interaction; and

• That Moneyweb will be bringing its tech partner, Cambrient, in for web development but it is hiring staff - and, in fact, creating a new division - to manage Caxton's sites. (Smith wouldn't, however, divulge an expected launch date.) Today, Friday, 27 August 2010 saw Bizcommunity break the news that Cambrient is merging with Stonewall+ and Brandish to form a new "full service digital agency" called Native and Cambrient's Jarred Cinman said the merger would enhance and expand what they can offer Moneyweb and Caxton in the digital space.

Shaping up to be a bold experiment

It looks like this is shaping up to be a bold experiment in hyperlocal - which has been one of the big sexy buzzwords in online and journalism circles overseas for a while.

"Talking generally," Smith told Bizcommunity, "the hyperlocal theme is the next battleground, certainly in the US and the UK, where content providers are looking at trying to move onto the next inflexion point. It's one of the next big themes in the ongoing evolution of the web."

In journalism terms, "hyperlocal" is exactly what it sounds like: neighbourhood or city-based information, that is, what's happening at the local council and the schools, with crime in your area or the state of the park down the road or that there's a new Pilates teacher in town. It's all that information about your day-to-day life that regional and national papers rarely focus on but that your community paper does.

The experts tell us that the web is made for hyperlocal content - many bloggers are already very successful hyperlocal outfits - and in the US newspapers are experimenting with the hyperlocal concept, setting up newsrooms in coffee shops, for instance, and linking up with hyperlocal bloggers.

Not all successful

Not all the experiments have been successful and The New York Times recently shut down one its flagship hyperlocal projects.

The big questions are whether there will be advertising revenue for Caxton's hyperlocal websites and how long the company is prepared to wait for them to turn a profit. And it will want the sites to turn a profit as it is paying Moneyweb a handsome price for them.
Avusa's Daily Dispatch newspaper in East London has been playing with all sorts of hyperlocal content for the past three years and, even with the Avusa sales force on the job, there was so little advertising that the company is now going the paywall route with the Dispatch and its sister paper, The Herald, in Port Elizabeth.

But then the tide is turning and more advertisers in this country are slowly seeing the value in online. Additionally, there has never been anything quite like this on table before.

The good news, however, is that if Moneyweb pulls this off well, online users in the Caxton papers' circulation areas certainly have something to look forward to.

*This week Caxton reported a 26% drop in its full-year earnings, due mostly to the strength of the rand effecting its currency hedges. Owing to a continued squeeze on advertising revenue in the year to the end of June 2010, its revenue rose 1.4%, Caxton said, to R4.1 billion. Fin24 reports that the company hedged on the cost of imported capital equipment and inventory at its printing business and that the "disastrous" currency loss "overshadowed what was otherwise a fairly resilient performance from the media house in a tough trading environment". One analyst said it remains to be seen what value a small company such as Moneyweb will bring to Caxton, writes Fin24, and said improving its online publishing platform will be key to Caxton's future.

See also

• Transcript of Andrew Smith and Alec Hogg talking about the Caxton deal on Hogg's business show on SAfm.
  
• "Naspers, Caxton at war over DStv"