Bizcommunity: So you guys have just launched Zappon [in March 2011], a homegrown version of the international deal-a-day website Groupon. Did you develop that in-house?
Elan Lohmann: Well, I decided we needed to get into this market and we needed to do it quickly. That was before Groupon launched in SA. I decided to do an experiment and do it guerrilla-style. I said: 'Give me this small amount of money. We're up to capacity with staff here with Avusa Media Live so let's get a small team of young people together quickly and do it garage-style" - totally different to how you would do it at a corporate. At one stage I was paying people on my credit card. It was done in coffee shops and the team was scattered around the country, using Google Docs and Gmail.
We took a very fast and dirty approach to it because the main idea was to get into the market as quickly as possible and almost 'fall forward'. We knew there was some risk in that but I saw more risk in going the usual route [and doing a long development].
Biz: Why do you guys want to be in that market?
Lohmann: Look, I don't think that a business like Groupon is one that I would invest in, in that the barriers to entry are very low in terms of copying it. The switching cost is also very low because people just go where the best deal is that day. Ultimately, on that face value I would invest in a Facebook than I would in a Groupon... But that's also the very reason why we've gone there because we think we can take a piece of the pie because it is a very fickle market.
I see it as a nice extension to a publishing business (Avusa) because we build audiences and we try sell advertising to them. This is another angle on that content.
I also like the fact that the deal is your content so if you've got the deal, you've got the content and you're probably going to be generating revenue. And you know quite quickly [if it's coming off]... We haven't spent a fortune on it and it's really about: 'Let's just get here quickly and test the market'.
Biz: Is it too early to tell what the take-up is like?
Lohmann: I think it is too early. We've been finding our feet. We had technical issues initially - that's because we took an off-the shelf solution that we customised and that came with its own set of problems. But we're relatively stable now... and Zappon is being mentioned [by people] so we exist.
Now we need to build our buying base but we are moving deals. It's just been a bit sporadic. I don't think our deals are any less good than what you find on Groupon. They know how to build their buying base quickly and that's something we're learning at the moment. I'm positive. I think we can make this work and I don't think it's a winner-takes-all market.
Biz: Are you guys considering doing other things in this transactional vein?
Lohmann: We have other ideas which I obviously wouldn't want to give away. But the point is that what publishers need to start taking note of is that we build audiences that we sell to advertisers so that they can sell their products to our audiences.
I think we need to get more involved in the selling of the products to our audiences - and I think there lies some potential business models that might be more effective than only running advertising models.
Biz: How's the Daily Dispatch and The Herald's websites doing [after going the paywall route in December 2010]? That was always meant to be an experiment, wasn't it?
Lohmann: Yes, ultimately advertising wasn't materialising in those regions [the Eastern Cape] and it was costing a fair amount of money to keep those products going. So from my perspective, if we only sell five e-editions there, we're better off on a commercial level.
I think it's going fairly well because what's happened is that the print teams have now taken ownership of those products because the deal was that they could still happily provide breaking news content and community news to those communities.
I think it's a win-win for all because it allows them to focus more on trying to find community news rather than the focus being on just dumping the print content [online]. The subscription numbers haven't been bad. I don't have the latest on me but there has been uptake.
Biz: Can you give me a guesstimate on the subscription numbers?
Lohmann: We've handed that over to them really but in the first month or so, we did a couple of hundred or so. So it has exceeded our expectations.
Biz: Is the pressure on you to monetise online quite pressing?
Lohmann: Definitely. Everybody knows traditional revenues are slowing. We don't know the timeframe on that but the signs are there globally. Obviously, there is major pressure to turn our businesses into very profitable businesses. Which is why [last year] I spilt Avusa Media Live away the traditional business because the online businesses need to stand on their own two feet.
But I also think the perception of Avusa is not correct in the market because we have profitable businesses like I-Net Bridge and Career Junction. When we look at our digital portfolio, we're doing pretty well.
Biz: I-Net Bridge is the major revenue contributor to the digital portfolio, isn't it?
Lohmann: It's one of them. It's a solid, established business. Career Junction also does very well.
Biz: The one that really interests me is the Sowetan's website. Since last year's relaunch, its audience has grown fast and Avusa has always been about sewing up the black middle-class market.
Lohmann: Ja, you know it is extremely significant that the percentage (at 46% according to the AMPS 2010 AB report) of black online users [in SA] is now greater than that of whites. Whites will never be the majority again. You can say it's obvious because of the population demographics but, for me, it's exciting that the classes are shifting.
You know the virtues of the digital space in terms of social action - so for us it's a very exciting trend and a lot of these people are new to the internet. [Internet and mobile expert] Arthur Goldstuck always talks about the maturity curve and we've obviously got a core constituency of people who've been online for years. It's exciting for us that we've got a whole of lot of new people coming online and particularly in the black market, people usually go to brands that they trust and the Sowetan is one of those.
I believe that Sowetan Live is going to become in the next two-to-three years one of the top-ranked sites in the country. The audience is very receptive. Anything you do with this audience is taken up - even the advertising yield is much higher than the market average.
But I'm also very excited about Times Live. I believe that [news editor] Reuben Goldberg has done a phenomenal job. I believe its news offering is 100% competitive with anything in the market... We are launching a new Times Live design in May, which I think is really hot. It's a cosmetic thing but the idea is to really highlight the content better - because the content is good.
Biz: So is it a fresh new look or is it a bit more than that?
Lohmann: I think it's going to be the hottest news site in the country... It is one of those that I think we're going to launch and I think it's going to be impossible for people to say we didn't do a good job. We had that experience with Sowetan Live.
Biz: What's your impression on what advertisers want from online? Are they asking more complex questions about what it can do for them?
Lohmann: I don't know. I believe there's still too much spread-betting going on in the industry. I don't want to generalise too much because there are pockets and areas where people are being smart about it. But in general, the online planning is basic and rudimentary, to say the least.
This is what generally happens: 'I'm a planner and I have a budget of R100 000 so let's just portion it out between these sites. We give the big site R50 000 and that site R20 000 and maybe that one R20 000' - and that's the extent of most people's planning. As far as I'm concerned, you'd be better off saying: 'I'm going to back this horse; I'm got to put the whole 100k in this site'.
I don't think the spread-betting approach is effective at all... Also, people are not actually spending enough online to get the result they are looking for. We're still working in an industry where the value of the average campaign is around the R30-50k mark... You hardly ever get campaigns booked for R200 000 unless it's someone like Vodacom relaunching its brand and it decides to wallpaper the South African web...
It is improving and we're starting to see signs at agencies that there is more willingness but I think there's still a huge lack of education around digital... You could argue that the digital market is still small but at the end of the day there's is a big enough group of people with disposable income in the right target group for me to pursue.
So, for example, why aren't expensive whisky brands like Johnnie Walker Black not running big side-panels ads on the Sowetan Live website? That audience is exactly what they're looking for: young, up and coming with disposable income.
Biz: The last thing I want to ask you is about tablets. Got any apps in the works?
Lohmann: We're going to be launching some very cool apps this year. We've taken a slightly different approach to it - a more measured approach in the sense that you can weigh up being there first vs what's your strategy in this space.
In some product sets - such as with Zappon - you've got to be there quickly and build some traction. But I think in the app space, some of our competitors are already there and you could argue they're already building audience there, which I think is valid.
But to me an app must give you a major benefit as a user. A lot of the news-type applications already available on iPad in South Africa are just a bunch of RSS feeds. Quite frankly, if I use the website on the browser [on the iPad], I get a better experience.
What we're trying to do is come up with applications that are actually useful and that we think will be appealing... and more lifestyle-focused. I believe that in this category the opportunity around lifestyle is far bigger that the opportunity around news content.
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