Rapaczynski
By : Anna Kocinska
Agora, Poland's leading media company and publisher of daily newspaper Gazeta Wyborcza, has garnered great interest since the company announced its internet plans in January. The publicly traded company has watched its share price rise 47.5% since Jan. 21, the date the company laid out its strategy of developing local and national portal sites to augment its existing Gazeta Wyborcza site, which is one of the most visited internet sites in Poland. Outside of that, the media giant's strategy is a little hazy. Agora has said that it wants to build on the strength of Gazeta Wyborcza's site, which has benefited from the newspaper's expansive content and brand recognition. The company has also said it intends to spend zl. 14 million ($3.41 million) for 2000 on the staff and equipment for its internet project and as much as zl. 40 million ($9.75 million) by 2002. That spending compares to the zl. 689 million ($176.6 million) in revenue Agora rang up in 1999, a 25.4% increase over the previous year. The WBJ's Anna Kocinska talked to Agora President Wanda Rapaczynski about the company's internet strategy as well other possible media ventures. The following is an edited, translated version of their conversation.
Q: Do you personally believe in the power of the internet?
A: Yes, I do. I've had this feeling for some time now that the market is right about the internet. I think that what we are dealing with is a great revolution. It might be even greater than the industrial revolution and will completely change the way companies deal with one another as well as the way people function in the world. People will be empowered to make choices in a way they never have been before. For instance, if you don't like the carrots at the Polna market in Warsaw, you will be able to order them straight from Korea (or anyplace else). Of course it doesn't mean that a company's shares, which went up because it used the 'e' word, will automatically continue to rise. There will be winners and a lot of companies will fail.
I can tell you an interesting anecdote, which I heard at this year's World Economic Forum in Davos. I happened to be at a meeting with a Japanese bank president. He asked the audience to vote 'yes' or 'no' about whether a bubble exists among internet stocks. Seventy percent of the audience answered 'yes.' So, he asked a second question. 'Will the internet business outgrow the PC business?' he asked. The majority, 97.2% of the audience, answered 'yes.' Then he interpreted those answers. He said, 'First of all, when I was here last year and I asked the same question, and the answer was the same. ... (But) in order to outgrow the PC business (in terms of market capitalization), the internet business would have to increase by 500%. So, the bottom line is that the internet bubble will grow.'
Q: What's your vision of a multimedia company?
A: There was a time when the answer to such a question was obvious, almost instinctive. A multimedia company meant that television, press and radio were within its scope. It was quite clear. Today, if you look at this new world with the expansion of the internet, such visions are not so obvious any more. So, if you build a multimedia company, you have to avoid acting automatically. You have to ask yourself how the media world will look with the internet as a part of it. So, the question to answer is no longer what media but what kinds of activities. Such activities vary according to content and methods of distribution. So, it's a much more tricky question.
Q: So does that mean that Agora is considering making the internet part of its core strategy?
A: Of course, we are. But, I would say that the Polish internet market is still in a kind of pre-natal state. To understand what will happen here, one must look at mature markets. It's our great advantage that we can benefit from the experience gained earlier by Americans and Europeans. We can also analyze what makes them different. It is quite obvious that American and European internet markets are not similar. One can see that some U.S. business patterns (models) haven't worked in Europe, due to cultural and linguistic differences. At the same time, and this is an important piece of information for us, we can see that American press publishers have gotten lost in this new world and have not used it to their advantage. There are two reasons for that. One is structural, as there are practically no national papers in the States. That is a regional market by nature. There is only one national paper, the Wall Street Journal, which is addressed to a specific audience and has not made use of its market advantage.
The second reason why American papers have missed the opportunity of the internet era is that the revolution scares them. They began to consider the internet their enemy something that would eventually take them over. As a result, they adopted a defensive strategy. In Western Europe, on the contrary, major web sites usually belong to two or three national dailies. They don't look at the internet as an enemy but they use it as a medium that enables them to reach more readers with their content. For us, the internet is more than that. It's not only a medium that enables us to distribute the same content in a different way. For us it's a way of expanding our activities.
Q: Agora has said it will focus on the consumer segment of the internet market by creating vertically integrated 'lifestyle' portals. Can you describe what this means?
A: Gazeta Wyborcza has a lot of information that could serve as a handbook for many different areas (which could then be used to build vertical portals). That's the paper's strength. My favorite example of a vertical lifestyle portal is www.homeowners.com, which comes from the United States. It is a model of what we would like to achieve here. In America everybody constantly moves from town to town. On that web page, you can find a list of apartments for rent, houses for sale, etc. Thanks to that web site you can not only buy or rent a house on line but also insure it, arrange financing to purchase it or even find a new school for your kids. So, on one page you get a whole range of services, all linked with one theme a house.
Q: Aren't the funds Agora plans to put aside for these projects too little? Have you fully anticipated the cost of promoting such sites taking into consideration that promotion can account for up to 90% of a site's expenses in Western Europe?
A: The estimated spending of zl. 40 million will go to two things: typical operational expenses such as salaries and other staff-related costs and the costs of necessary servers, etc. We've also said quite clearly that our estimates don't include promotion, advertising and possible tie-ups with third parties.
Q: Could you say roughly what Agora will spend on advertising and promotion?
A: It depends on which advertising strategy we adopt. We can put advertisements into our paper in a form of links that teases readers to our internet pages. These can also be placed at the end of stories. There are no doubts, however, that we also have to involve other media in the campaign. Before we can estimate the final cost we have to decide what kind of a communication strategy we will implement. A couple of years ago we made a mistake because we agreed to an advertising campaign in which the paper (Gazeta Wyborcza) was treated like washing powder. The campaign was extremely costly and ineffective. That was when we learned that advertising a newspaper involves strenuous, daily work. It cannot be done through one spectacular, expensive campaign. So, we still need to choose the strategy, but obviously the cost of this upcoming campaign will not be insignificant.
Q: How long will Agora give its internet projects before determining if they have succeeded or failed?
A: Within three to five years. But before we start talking about a project's success financially, we will first focus on what kind of impact that venture has had. We will need to precisely measure interest in our pages and the effectiveness of each site visit. What will also matter to us in assessing a project's viability will be how many people visit the thematic pages on purpose and not by chance, as tends to happen at many sites.
Q: What kind of revenue did Gazeta Wyborcza's internet site attract last year?
A: Last year, we made zl. 1 million ($256,000). When compared to the paper's revenue, it's practically nothing. But what I look at is how this figure is growing from month to month. In 1999 it increased by 400% as compared to 1998. It's this curve that attracts my attention.
Q: You announced that you are going to look for partners for your internet project. What kind of partners are you talking about suppliers or acquisition targets or long-standing cooperation agreements?
A: At this point we want to buy a portal system from a supplier. We are working together with our adviser Arthur Andersen on a possible choice. I am not convinced that we need someone (a partner) on a permanent basis. If we want to build our project on the assumption that our basic strength is the paper's content then software is not a priority. If further development of the project requires software development, we will have to decide whether we should pay for such services or rather make an alliance with someone who is a genius in this area. We are open to interesting proposals. We did say we want to become leaders, didn't we?
Q: Is there any other fast-growing segment of the market, apart from electronic media and the internet, in which Agora is thinking about investing?
A: Outdoor advertising is something that interests us, mainly because since 1995 we have had our own project. It's nice but tiny, too small to become an expansion possibility. So, this year we will have to decide whether and how we want to enter this billboard business (outdoor advertising). It's a no-yes kind of a decision. If we do enter this market, it will mean investing in an existing company because the market is already built-up to a great extent.
Q: And what about a totally different kind of medium, such as television?
A: The television business is an interesting question. We have to make a decision about what we are going to do next, after having invested in the Cyfra+ digital platform (Agora acquired a stake in TKP, parent company of pay television channel Canal+ and digital service Cyfra+). And don't forget that today when you think television you also think internet. But, we (in the company) also love books. So, we are trying to figure out what we could do within the book business. Of course, due to our responsibility to our shareholders, it would have to be a profitable undertaking.
