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Taking on Google

Rolf Wenkel / nm
April 19, 2014

Some German publishers, including Axel Springer, see themselves as David, taking on the giant Google in a battle for supremacy in the digital information and advertising market. In terms of revenue, the analogy fits.

Die Welt newspaper
Image: picture-alliance/dpa

German newspaper publishers like to think of themselves as quiet giants, whose print, online and mobile products reach about 80 percent of Germans over the age of 14 every day. "Print remains an important part of the success of this business model," according to a Federation of German Newspaper Publishers (BDZV) report on the economic situation of newspapers in Germany. Meanwhile, though, "Publishers are tapping into digital markets and developing mobile and online options for readers, internet users and advertisers."

In 2012, the industry posted around 8.5 billion euros ($11.7 billion) in revenue. More recent sales data isn't yet available. In the past, two thirds of these earnings came from advertising and one third from daily newspaper sales. Over the past five years, the ratio has been reversed. Still, at around 3.23 billion euros, advertising revenue remains one of the main sources of income for media companies. After television, newspapers are Germany's second largest advertising medium.

Transition to the digital world

Publishers have had some success in transforming the classic daily newspaper for the digital era. About 41 percent of those over 14 years of age, or nearly 29 million users, "visited the publishers' websites each day," seven million used their mobile phone to navigate a local newspaper website at least once a month, and "with 14 to 29 year olds - a difficult-to-reach target group for print content - publishers have seen a 12 percent boost in coverage to 64.7 percent since the end of 2011."

But Facebook, Twitter and Google are the real success stories when it comes to the digital information and advertising market. The search engine that bills itself as doing no evil has become a money-making machine, thanks to booming online advertising. Google's revenue in the first quarter of this year reached $15.4 billion (11 billion euros) - a 19 percent increase on the previous year. The company's profit rose about 3 percent to nearly $3.5 billion.

Google's logo
The internet giant is accused of unfairly disadvantaging its competitionImage: picture-alliance/dpa

Abusing the market?

In other words, Google earns more per quarter than all German newspapers make in a year. It's a reality many publishers aren't happy about. Mathias Döpfner, the head of conservative German publishing house Axel Springer, has accused the internet company of market abuse and unfair practices.

In an open letter to Google Chairman Eric Schmidt, published this week in the "Frankfurter Allgemeine Zeitung," he wrote that Google ranked search results on the internet in favor of their interests, and at the expense of competitors.

At the moment, Döpfner wrote, digital technology companies are competing with traditional content companies to see "who will take on the role of the publisher in the digital future." His company certainly has a place on the digital map, and it plans to keep spending money and expanding. Last year, the Berlin-based group invested most of its funds moving the business online, despite expecting an initial slide in profits as a result.

Still enough in the bank

Last year, profits dropped by nearly 9 percent to 454 million euros, before interest, taxes and depreciation. Turnover, however, increased by 2.3 percent to 2.8 billion euros. This year, the publisher is aiming for a profit in the low double-digit percentage range.

German newspapers
Axel Springer is Germany's biggest publishing houseImage: picture-alliance/dpa

The group is preparing to launch another charge, and has promised a boost in profits as well as new investments. "We want to take advantage of further acquisition possibilities," said CEO Matthias Döpfner at the presentation of the annual balance sheet in March. The company's coffers are well-stocked, not least because of the 920 billion euros sale of longstanding publications "Hamburger Abendblatt" and "Hörzu" to the Funke Media Group.

The Springer publishing house is emerging as a pioneer in testing new digital business models in Germany. They've introduced a pay wall for the online versions of their dailies "Die Welt" and "Bild." And in trying to grow in a competitive digital environment, they've rejected the usual survival methods - saving funds, dismissing staff, cutting newsrooms in half, terminating collective bargaining agreements. The rest of Germany's publishing industry is looking on with interest.