Spiegel Online Economics Edgar Atukeren MBA SBS (Swiss Business School) Alex Rau, Daria Revanchenkova, Arsa Grgurevic Table of Content: 1 Background 2 Assignment 3 Interactive Classified Advertising in Germany 4 Choosing the right segments 5 Business Idea and Concept 6 Competition 7 Financial Projections 8 The Problem 9 Possible Solutions 10 Conclusion 11 Recommendations and Lesson Learned Background Spiegel Online is one of the leading news Web sites in Germany and other German speaking countries, as Austria and Switzerland.
It is a part of a Spiegel Group, publisher of several print products in addition to Der Spiegel and producer of the Spiegel TV Magazine. The Spiegel Group was also active in television film production. It took first steps toward internationalization by English-language editions of Spiegel special and the monthly publication of magazines in Hungary and Poland. In 2005 the Spiegel Group had more than 1,400 employees. Total revenues of the Spiegel Group were approximately around 322 million euro, of which Spiegel Online contributed 15 million euro. 0% of revenues resulted from online advertising, making this the most important source of income for Spiegel Online. The webpage is covering various topics as politics, business, panorama, arts, science, education, entertainment, sports, and travel. Spiegel is also a major contributor to the Hamburg Media School. It organized as a public-private partnership and offers MBA in Media Management, film, and journalism. In their second year, MBA students typically engaged in consulting projects with major media companies. Assignment This year the students must research on 2 questions: ) Were there any chances for an economically successful entry into the market for interactive classifieds? 2) What would the business model look like in detail? They had only 2 restrictions: anything in the adult segment was seen as inappropriate and the budget will be limited. The student team split their analysis into four steps: * Research of market volume and growth * Analyses of possible competitors * Selection of lucrative niches * Development of adequate concepts Interactive Classified Advertising in Germany The interactive advertising in Germany is based on offering space for classified ads for other companies.
There are approximately 20,500 Web sites, which are doing that and they generate around 4 percent of all online revenues. Online services had gradually replaced newspapers and magazines in the classifieds segment. There are 3 most important interactive segments nowadays: * Automotive (which cover 1/3 of all customers looking for a car) * Real estate (200 billion euro are generated per year) * Job advertisement (30% of jobs are found online) Choosing the right segments Spiegel Online is following a brand new strategy: horizontal integration into a new market (interactive ads). The company decided to expand and cover new arket, which can generate additional revenue for the company. As automotive, real estate, and jobs interactive segments are already dominated by large competitors, Spiegel Online needs to interfere in the industry, by carefully choosing the segments, which are the most profitable ones. So it decided to concentrate on high quality standards and products that matched the image of Spiegel and chose high-quality cars, high- paying jobs and art objects. Spiegel Online Art Platform The team prepared a full business plan on each of the three market segments. The automotive and job segments seemed to be generally profitable and growing.
Art, on the other hand, promised to be an interesting niche that had not yet been covered by any well-known company. Competition Most Web sites were positioned in the upper price segment. Serve as a marketing and sales tool for high-value objects. In the lower price segment, Web sites are mostly created by amateurs and hobby artists. These Web sites did not attract large audiences. The online art market had received some attention from investors and media companies (Example Burda-photo gallery Lumas). Opportunity for Spiegel online is to create platform in the middle and lower price segment.
Business Idea and Concept The concept consisted of two integrated parts for the Spiegel online users interested in the arts: a selling platform and a community platform. Art platform Core to the Spiegel Online art platform was the sales platform. The sales platform homepage would lead to all art objects up for sale. A search engine would allow sorting objects by price, style, size, artist… Navigation menu would allow quick access to additional site functions. The home page would also include a voting area. Community The Virtual Art Gallery could be customized, like MySpace. Users can create their own profiles.
The profile included a virtual walk-through to gallery. Artist and galleries could use the Virtual Art Gallery as a marketing tool. Target group The Spiegel Online art platform addressed two target groups: first, people interested in art, and second, artist and galleries. Consumer benefits For buyers: low-risk playing field, moderate prices, high transparency, users don’t need specialized knowledge. For sellers: Low entry barriers, low sellers fees, attractive for young unknown artists. Benefits for Spiegel online Monetary: New revenues by commissions, insertion fees, and shop sales. Non-monetary: Parent brand, high-quality image.