REPORT ON GERMANY: Make the net pay - Germany’s regional media owners have joined forces to give advertisers a coherent online solution. Robert Gray reports

Germany is the most developed internet market in Europe and one that continues to grow rapidly. Recent market research from GfK found that one in five Germans between the ages of 14 and 59 use the net.

Germany is the most developed internet market in Europe and one

that continues to grow rapidly. Recent market research from GfK found

that one in five Germans between the ages of 14 and 59 use the net.



This follows a 40 per cent growth last year, to around 8.5 million

Germans using online services, with companies such as Deutsche Telekom’s

T-Online and AOL/Bertelsmann leading the way in connecting consumers to

the web.



But despite the fast-swelling ranks of cyberspace surfers, it remains

difficult for media owners to make money from their online properties.

Revenue from banner advertising on German websites last year was

estimated at just DM50 million (pounds 17.3 million) and the projection

for 1999 is about DM150 million.



In July 1996, six major German publishers, having discovered how tough

it was to generate enough online ad revenue to make internet versions of

their regional newspapers viable, decided that the best way forward was

to combine forces. The group, which includes the giant Gruner + Jahr,

created a sales network called Online Marketing Service (OMS) in which

all were equal shareholders.



Although the publishers’ individual websites remained separate entities,

the creation of OMS allowed for ads to be sold across all of them,

making the medium more attractive to advertisers seeking to reach an

aggregated audience across Germany. Ad revenue is divided between the

publishers based on the percentage of total impressions each has

generated, impressions being the number of times a web page with a

particular ad on it is shown to a consumer.



’The founder companies came to the conclusion that the national ad sales

market needed a critical mass of impressions,’ Peter Schmandt, the OMS

chief executive, says. ’Today we are well known in the market. One

publishing house alone would not be able to sustain such a sales

force.’



The economies of scale offered by OMS have persuaded other publishers to

become involved. There are now 24 OMS shareholders who between them own

34 online regional newspapers.



Online penetration is nowhere near as good, but it is moving in the

right direction. In February this year, the 34 online properties shared

almost five million visits between them. These visits generated around

16.5 million impressions. The number of visits and page impressions for

each participating site in the previous month are displayed by OMS on

its own website (www.oms-kombi.de).



’We had no alternative to OMS,’ says Wolfgang Hubner, chief executive of

new media at Medien Union, an OMS shareholder which owns two small local

titles that have gone online: Rheinfalz-Online in Ludwigshafen and Freie

Presse in Chemnitz. Medien Union also has a minority stake in the larger

Stuttgarter Zeitung/Stuttgarter Nachricten publications.



Hubner adds: ’At the beginning we recognised that the big advertisers

were looking for the biggest and most important platforms. No publisher

was able to fill those requirements alone.’



Schmandt claims that the aggregation of the OMS titles provides the

’largest homogeneous content offer’ on the German market, ahead of the

online version of the news magazine, Focus.



This is undeniably attractive to advertisers looking to reach a national

audience online. About 100 advertisers have bought space so far,

including Lufthansa, Deutsche Bank, the insurance group, Allianz, BMW,

IBM, Microsoft, Siemens, the retailer, Karstadt, and Beck’s Bier.



Ad space is sold on a cost per thousand (CPM) impressions model. OMS

quotes a CPM of DM40 (pounds 14) for a standard banner ad (468 by 60

pixels).



Schmandt says OMS turnover has fully met the revenue targets set by its

shareholders. Turnover for 1998 was DM1.6 million (pounds 554,000) and

the aim is to double this in 1999. OMS employs five staff at its

Dusseldorf headquarters and six sales reps dispersed across other major

German cities.



’OMS is the right approach for the online field. You need a kind of

syndication,’ Andreas Jud, managing director of the Hamburg-based

new-media consultancy and buying agency, Millemedia, says. ’It saves

calling every single publisher. I think the printed versions of the

newspapers should also think about such strategies.’



In this vein, Germany’s local radio stations have a similar collective

sales operation, RMS, and this shared approach seems to be paying off

for both buyers and media owners.



Millemedia has booked campaigns through OMS for Allianz and the consumer

publisher, Milchstrasse, to promote its magazine Tomorrow. Jud says the

campaigns have been successful at generating response, describing the

cost per click-through level as ’good’. He also praises OMS for the

quality of data it supplies to help Millemedia assess campaign

effectiveness.



All the partner publishers are still free to sell advertising locally

for their websites. Any disagreements between the partners in OMS have

been forestalled, Schmandt says, due to the hard work of a six-strong

decision-making board. However, Hubner thinks that more turbulent times

lie ahead.



’I expect the advertisers to become more interested in cherry picking,’

Hubner says. ’I fear they will be interested in the biggest services in

the biggest cities. The smaller parties in the group would be left out

of this. This is the biggest problem we have to tackle.’



OMS continues to grow as more publishers seek to join. What its current

partners will have to decide is whether to allow more small titles in,

or to restrict future offers of membership to titles that command

sizeable audiences.



But if these issues can be overcome, OMS should thrive. One of its

future objectives is to set up ’national brand names’ for classified

advertising in the areas of motoring, recruitment and property. If OMS

teaches us anything, it is that local media can compete for advertising

revenue on a national footing if publishers are prepared to set aside

their differences and co-operate.



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Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).