Naspers' reach in emerging markets worldwide.

Naspers, the R115-billion media company that owns the Daily Sun, Rapport, Beeld and Die Burger, released excellent interim results last week, driven largely by  growth in its pay-TV operations such as DSTV in South Africa and digital businesses in emerging markets across the world such as in China, Russia, Eastern Europe and Latin America.

Revenue for the six months ending September 2009 was up by 6% to R13.5 compared with the comparable period in 2008. Core headline earnings were 37% higher at R2.4bn. Not too shoddy for the middle of a recession!

Grubstreet spoke to the company’s CEO, Koos Bekker, about its digital businesses and the star performer Tencent, the Chinese internet services firm, that contributed R1.1-billion to the group’s R4.1-billion consolidated profit  –  a 49% increase from the same period in 2008.

GILL MOODIE:  From the interim results, we can see that Naspers internet revenue is up from 21% in the last financial year to 23% (for the half year ending September 2009), driven by this fantastic growth of Tencent in China. Do you expect this to become an ever increasing slice of the pie?

KOOS BEKKER:  Gill, you know the internet moves fast. You could be surprised. But there are two things in China that I like. The one is that about 27% of the Chinese population is now online and that can probably go up to 70% or 80%. If you look at South Korea, it’s at 80% so the sheer number of warm bodies on the internet will increase. But secondly, at the same, the amount of money that people devote to the internet increases month by month… goes up so the effect of both elements  is  actually quite noticeable on top line, where not only Tencent but several internet service in China are growing quite well. And I think growth can continue as far as we can see.

GILL MOODIE: What fascinate me about Tencent is that we really don’t have anything like it in the English-speaking internet world that I know of. Tencent really is an ecosystem. If you’re there, there’s no need to go elsewhere on the net.

KOOS BEKKER: “Ecosystem” is a very good word for Tencent. If you look at its strengths, its strongest point is that it’s a communications system with instant messaging. Add to that, it’s the biggest internet portal in China. Then it’s the biggest games platform in China. The Chinese play games mainly to socialise; not to beat the machine or to bash each other’s heads in. It’s mainly to meet people. (Tencent) also has a very wide social network system.
Where it’s weak, it has very limited search capability. It’s also by far the number two (in China) in terms of e-commerce. So on search, it’s a distant third and on e-commerce a distant second and the other areas it’s quite strong in.

GILL MOODIE: I’ve read that international analysts expect the growth of Tencent to slow in the next three to five years because gaming is becoming increasing competitive and games was a big driver of Tencent’s growth recently. What’s your view on this?

KOOS BEKKER:  Tencent is not reliant on one technology. When we invested almost 10 years ago, Tencent had only instant-messaging services so initially they had no income. So the initial income was when people paid to do instant messaging – not between PC and PC, which was free, but PC to cellphone – and then it went into portals and it started getting some advertising income. Then it went into e-commerce and then and then and then. So Tencent, using your term, is a fairly complex, diversified ecosystem  and should people play fewer games, they will do something else on the web. You know, they’ll socialise more. Well, Tencent has the biggest social network in China. Or maybe they’ll interact with each other in the blogging set-up or maybe there’s a new kind of Twitter activity. Who know? It doesn’t really matter.
Tencent now employs almost 11 000 people and last year alone it appointed 400 new engineers so it’s an enormously hard-working, very tech-savvy outfit. And, consequently, if something new develops on the internet, they have a chance of adapting and using it for themselves.

GILL MOODIE: Koos, you’ve said before that when it comes to Naspers’ foreign ownerships of companies that you’re happy to leave the local managers to do their thing. But Tencent and Mail.ru in Russia (an email and social networking firm), for instance, are large potatoes now. Will you continue in this vein when there’s so much more at stake?

KOOS BEKKER:  You see, the management team at Tencent is really extraordinary. It’s one of the best management teams anywhere in the world in the internet. And they are close to their market, they understand the culture. We can’t do it half as well as they can so we’re very happy to sit on the board, sit on the committees and play our role and we sometimes discuss things with them but they run the show. We have the same with Mail.ru, where we have about  40% (shareholding). We try to find very good local management and we follow them and support them for years. When we started with Tencent, it had 30 employees. It was making a loss. So you stick with a team and over time a certain loyalty develops and you learn the trade. We tend to be patient long-term investors. We’re not there for the quick killing.

GILL MOODIE: Did you ever think Tencent would become this big, when you first bought into it?

KOOS BEKKER:  You know, some things you can predict in life but one of the most difficult is market size.  When we started with MTN in 1991/1992, our business plan showed 300 000 subscribers… Today, what does MTN have? Fifteen million or whatever. It’s very difficult to judge market size simply because what is a luxury to one generation is a necessity to the next.
When cellphones started in this country, I envisaged it would be businesspeople or maybe the wife of a fairly wealthy professional person would have one but certainly I didn’t imagine that his kids would be running around with cellphones in the school playground. Even farmers have sheep herders on cellphones. So the internet will pervade the whole of society. It will penetrate all disciplines of life and Tencent wants to get a slice of that action and so do Mail.ru.

GILL MOODIE: You told Bloomberg after the release of the interims that you guys are looking at potential acquisitions in Malaysia and Indonesia. But there’s also been speculation recently about buying ICQ from AOL and buying Astrum (games developer) in Russia. Can you say anything about this?

KOOS BEKKER: Yes. Mail.ru is talking to Astrum in Russia. They’re still awaiting some (regulatory) approval but there’s an active negotiation going on. Astrum provides games and so Mail is interested in Astrum as Mail has some games but it’s still relatively weak. It has seen how  well Tencent is doing with games so it’s keen to strengthen itself so there’s much substance to that story and we hope that the clearances will be received this week. The whole ICQ thing is just pure speculation. We haven’t talked to them. There’s some similarity to our business but the problem is – not that I’m a big expert in ICQ –  but they have big businesses in the US and Germany that, frankly, don’t interest us at all.

GILL MOODIE: And Indonesia and Malaysia?

KOOS BEKKER: We’re very interested there.  We are interested only in the emerging markets. We’d probably get killed in the US if we tried to compete with those powerful, well-funded, well-run Silicon Valley types. We used to have two gaps in the emerging markets. Latin America was very weak and southeast Asia was very weak.
We recently closed the BuscaPe deal (in Brazil), which gives us one of the two leading e-commerce players in that part of the world. But we’re still weak in southeast Asia. In particular, we look for good management teams and then we back them.

GILL MOODIE: Since you mentions the US, I’d really like to get your view on Rupert Murdoch’s latest moves, saying he wants paywalls for his newspapers’ websites and now that he’s talking to Bing (Microsoft’s search engine) to take payment for indexing and exclude Google. When someone with that amount of influence starts to change the game, does it have any effect on the internet players in the emerging markets?

KOOS BEKKER: We’d like Murdoch to succeed because there is a grave problem for newspapers worldwide. They generate content and pay journalists and incur legitimate expenses. But the ratio from your income at the moment from the internet to your print readers for a newspaper like the New York Times is about 10 to one. In other words, whatever your income is for a print reader –  the price he pays you for the copy plus the advertising worth of his eyes – your income on the internet is about one-tenth of that.
So it just doesn’t make sense. If want democracy strengthened and promoted by people doing serious investigative work, someone needs to pay the bill and on the internet, no one is paying the bill. I really wish Murdoch would succeed in finding a way in getting payment. We’ve been in the internet since 1997 and it’s very hard to get payment. For example, the moment you ask someone to take their credit card out (on the net), you lose the vast majority of your readers.  If you have 10, you lose nine of the 10.

GILL MOODIE: If you play in the digital space, especially transnationally like Naspers does, developments happen so fast and all over the world. How do you as a 50-something keep track of these developments. It’s hard for someone like me in their 30s, for instance, to keep up as it seems like such a young person’s game.

KOOS BEKKER: You know, the hard truth is that people of your age make things happen on the internet and people of my age are roadkill. There’s nothing you can do about that. Inventions on the internet are made by young people working terribly long hours, trying many things and most things fail. Only occasionally do things succeed and then it takes off like a wildfire. It’s a wonderful, interesting world.
Now, I’m too old to invent anything. All I can try to do is when I see a good entrepreneur, give him encouragement, sit with him and try to advise him when he faces business problems or when he wants to list, have a look at the company and maybe persuade them to wait a bit.
What makes for a good internet company is a mix of talent – the code writing and the inventions of the young people. Sometimes we can give them advice on business structure or issues where your judgment comes in but you have to be modest about your contribution.

GILL MOODIE: It’s very hard for us to tell from South Africa but who are Naspers’ competitors in the digital arena in emerging markets? Are they niche players or is there another Naspers  out there?

KOOS BEKKER: Not in emerging markets. We’re by far the biggest. Europe is pretty useless but the centre of excellence in the internet is basically the West Coast of the US, all the way from Seattle right down to San Diego. Korea is a world leader in games. Japan leads in things connected to the cellphone. They are far ahead in anything to do with the internet and the cellphone. And then the Chinese are now the biggest internet market in the world and they’re becoming very good  and very inventive.
So we’re the biggest in the emerging markets but we pale in comparison to the Googles and the other big American giants.

GILL MOODIE: Would you guys be interested in acquiring anything more in China then?

KOOS BEKKER: We can’t, because Tencent is active in several parts of the internet world and we don’t want to compete with Tencent. We can’t find anything in China that doesn’t conflict with Tencent.

Click here to see a handy diagram of Naspers’ company structure and here to download the latest interims (I’d recommend the analysts’ presentation and you will have problems with Firefox so rather use Internet Explorer).

Click here to read my Moneyweb column on the magic Tencent formula.

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The Daily Dispatch in East London is truly doing the most innovative web journalism in South Africa and, yep, you may say I’m biased as I worked there (twice) and am married to the ed but, guys, you have to check out their latest offering: “The struggle continues”.

The Dispatch does it again...

This time around, the paper took a group of Rhodes students and put them to work with video cameras and notebooks on the streets of East London for a week to find out more about the other half: the street kids, the folk who go through your rubbish, the artisans. There’s blog diaries, video interviews, slide shows. It is all so interesting and so easy to navigate as there are no long tracts of text yet it give you a real insight into the lives of these people. Really compelling. I loved the slide show of the street kids – with pics taken by the kids themselves with a disposable camera.

Finding out that the guys who go through your rubbish bags are part of an organised though informal recycling scheme was fascinating. Hence forth, I’ll be putting out all my plastic bottles separately for them to pick up more easily.

And all done on a shoestring on WordPress, the free blogging platform — no million-rand CMS in sight.

Well done, guys — Jan, Rudi, Sino, Tegan, the spouse and the students, whom you can tell are very comfortable with multimedia. They also look like they had loads of fun. As Anton Harber said of the last Dispatch online project (on RDP housing in the province), this is the future of journalism and it makes me proud that the little old Dispatch is the pathfinder.

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The new-look Times Live.

Kudos to The Times — now rebranded Times Live — for not treating pesky bloggers such as myself like a bunch of skates (which, of course, we are). At 7.30am this morning a statuesque blonde turned up at my house (in far flung East London nog al) with a cute little times Live T-shirt and a press release for their revamped website.

I had a quick peek at the new look website yesterday and saw loads of negative comments but people are often like that when faced with a redesign as they get irritated with having to find their old favourites in new places. Apparently, there’s new content and new writers on the new site so I’m off to have a good surf now.

Personally I’m of the view that websites should revamp every year or so — it’s all part of the fun of being online.

So, pesky bloggers and Netizens, I’m interviewing Elan Lohmann, the Avusa online manager, about the new site later this week so let me know if there’s any questions you’d like me to put to him. I do wonder of the wisdom of changing the domain name even though there’s an alias. I checked out the Google page ranking yesterday of Times Live and it came up 0 out of 10. The Times is 7 out of 10. Oopsie! Even little old Grubstreet is 2 out of 10.

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Tell your average hack that they need to get on top of multimedia and you’ll see their shoulders sag under the weight of the internet age, which has brought so many new technologies and styles of journalism to master.

I’ve been there myself, stewing and thinking: "Gawd, I just figured out how to retrieve that e-mail I should never have deleted and now there’s another new thing I have to learn.  Just keep piling on the stress, why don’t you."

Once upon a time all you needed was your pen and notebook when you went out on a story. When you got back to the office, there was your phone (next to the ash tray) and Atex terminal.

These days we have BlackBerrys, 3G cards, wireless networks and laptops. On our laptops we have RSS feeds streaming in and TweetDeck pinging away in its cute subterranean fashion  while we blog, submit comments on other blogs, e-mail, tweet, hop over to Facebook and surf the Net on three different browsers.

Just when you’ve got the hang of this, the boss (who, truth be told, probably doesn’t really know what a blog is) tells you you’ve got to learn how to use a digital camera, shoot interviews and then edit them into pithy two-minute packages in addition to your nailing down and writing the print story.

But then along comes a compelling web package, such as the Daily Dispatch’s investigation into gutted and derelict RDP houses in the Eastern Cape and you realise that this is not so hard after all….. TO READ MORE, GO TO MY WEEKLY MONEYWEB COLUMN ON MEDIA THAT IS PUBLISHED EVERY MONDAY

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This just in, as they say in TV. Avusa has announced to staff that Elan Lohmann has been appointed the company’s online general manager. This means that Elan, who’s been heading up Media 24′s online department, is going back to his roots.

He started with the Sunday Times’s fledgling web team yonks back practically straight out of university. I hope he’s milking them for loads of dosh seeing as he’ll be giving up the cool Cape lifestyle and Avusa’s not known to be the most innovative online outfit on the block.

Speaking of innovation, Gregor Rohrig, who is also well regarded in Web Land, has been made the head of of the Avusa iLab, its digital innovation hub.

Previously Gregor was responsble for project management and research at the iLab. Maybe with Elan and Gegor running the show, Avusa will get with the programme.

Avusa’s digital business contributes 23% of its earnings, according to its latest annual results that came out last week. Read the Business Times story here on Avusa’s annual results and interview with CEO Prakash Desai.

Click here to read Elan’s own thoughts on the move at his blog.

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The prize for the quickest and smartest off the block for the online news media covering the state of the nation address goes jointly to IOL and The Sowetan.

As of 1.30pm today, IOL broke the speech down into a package of manageable stories (plus the full text of the speech) very fast while the Sowetan put up the best pics gallery of Parly fashion.

I’m more than willing to confess the red-carpet parade piques my interest as much as signals on future policy shifts in the speech. Thanks, guys, I spent most of my Parly catch-up on your site. You get the Tall Horse prize from Grubstreet. And my favourite outfit? Ngconde Balfour’s wife (she doesn’t get a name in the gallery) while Lynne Brown was living rather too large in turquoise. I also notice Worker’s Pain Champion Zwelinzima Vavi was looking dapper in executive blue.

News24 also broke down the speech in manageable parcels quite quickly and their new design allows for a nice big pic of Zuma, which is what you want when you’ve got a big breaking story. The Times was a bit underwhelming and their pics gallery wasn’t half as comprehensive as the Sowetan’s — and then there’s that buffering business. Guys, until that Seacom cable is up and running, please downsize your multimedia. I’m working on a wireless network and even I have problems. Business Day is yet to get something up, which is disappointing as I thought their website revamp of the past two weeks might mean injecting some vooma into their breaking news content.

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