Not even the most successful internet company has been spared the
effects of the downturn in the online economy. Despite its prominence,
Germany's leading internet service provider, T-Online, has had its share
of problems,compounded by internal unrest. Last summer, T-Online's
chairman, Wolfgang Keuntje, quit the company after a strategic split
with his Deutsche Telekom bosses.
According to Jupiter MMXI's analyst Olivier Beauvillain, T-Online's
long-term prospects require it to make major strategic acquisitions -
along the lines of last year's Terra Lycos deal, Wannadoo's acquisition
of Freeserve, or the proposed dollars 850 million tie-up between Tiscali
and France's LibertySurf. 'If the European ISPs are to compete
effectively with US rivals like Yahoo!, MSN and AOL, they must
consolidate. That way they can amortise marketing and editorial costs
across a bigger market,' Beauvillain says.
Before he left T-Online, Keuntje evidently shared this view, arguing
that 'our greatest competitors are likely to be other incumbents looking
for new markets, (just) as we are'. Under his management, T-Online
acquired Ya.com in Spain and built a presence in France, Austria and
Switzerland. It is known to be keen to make a move in Italy.
Undoubtedly, T-Online's competition is intensifying. In March, AOL Time
Warner's chairman, Steve Case, said his company planned to increase
international revenues from 17 per cent to 50 per cent of its business
over the next decade. A lot of growth will come from 'strategic
investments and substantial acquisitions' in Europe.
Keuntje's replacement, Thomas Holtrop, quashed rumours that T-Online was
planning a new-media alliance with either Axel Springer or the Kirch
Group. The key, Holtrop said, will be non-exclusive agreements with
media content providers similar to relationships between broadcasters
and production companies. 'The net is developing as a mass-media
business and nothing will stop this,' he says.
Holtrop knows that the immediate goal is profitability rather than
growth for growth's sake. He has abolished flat-rate internet access for
analogue and ISDN subscribers (a loss-making venture) and plans to offer
subscription and pay-per-use services from the first quarter of next
The jury is out on Holtrop's move away from flat-rate access. While
T-Online will save money, it may lose subscribers to AOL Deutschland,
which still offers flat rates.
Germany's traditional media players have been slow to act in the online
arena. Exceptions are the publishing giants Axel Springer and
Bertelsmann, which are pursuing aggressive growth strategies online.
Axel Springer's strategy is to transform itself from being 'a German
print publisher to (become) an international media company'. In December
last year it announced plans to invest DM300 million in new media via a
newly formed subsidiary, AS Venture.
Although AS is primarily concerned with the exploitation of Axel
Springer brands, it hopes to acquire equity in independent new-media
operations in return for cheap ad space in its traditional media
portfolio. Springer has also positioned itself as a market leader in the
sale of online ad space. In addition to selling its own websites, an
Axel Springer subsidiary, Interactive Media, markets ad banners for
Infoseek Deutschland and T-Online (though Holtrop plans to take ad sales
Given its publishing activities, Bertelsmann is an obvious beneficiary
of new-media distribution channels - so much so that it has even been
mooted as a possible purchaser of the ailing Yahoo!.
Bertelsmann sells books and videos through its BOL.com site and plans to
expand into music, where its BMG subsidiary is a major rights
Bertelsmann was the largest online advertiser in Germany last summer,
according to Forrester Research.The company's online strategy was
muddied last year when Terra, the online arm of the Spanish telco
Telefonica, acquired the US search engine Lycos (making it the
third-ranked web portal in Germany through Lycos.de). Bertelsmann is an
equal partner in Lycos Europe, but whether its long-term goals match
those of Terra Lycos remains to be seen. Last year, however, Telefonica
and Bertelsmann signed a dollars 1 billion content deal to develop
downloadable media and e-commerce services across digital platforms.
Pierre Naggar, the European research director at Real Media, is
optimistic that the medium-term picture for online ad revenue in Germany
is positive - despite growth being hampered by eastern Germany, which is
going online slowly. 'There is short-term uncertainty in the online
market - backed up by fear of a global economic recession. But I expect
there to be a recovery in confidence before too long,' he says.
Traditional advertisers aren't replacing dotcoms on the web: 'They're
still hesitant about spending marketing budgets online,' Beauvillain
Germany is one of the biggest internet markets in Europe. With 11.99
million home internet visitors in January 2001 and a total online ad
spend of 204 million euros last year (source: Jupiter MMXI), it vies
with the UK as the region's largest online economy. Currently, the UK
has 12.84 million home users and a market value of about 224 million
euros. Between them, these two territories account for 45 per cent of
Europe's 943 million-euro online ad market.
Germany's online market is growing rapidly. Despite persistent gloom on
the world's stock markets, it added 700,000 unique users in the last
quarter of 2000.
The major German-owned ISP is the Deutsche Telekom subsidiary
The high-profile play by a telco mirrors France, Italy and Spain where
leading ISPs (Wannadoo, Tiscali and Terra) are also owned by telecoms
companies. According to Jupiter MMXI, T-Online.de currently reaches 52
per cent of all digital media users. All of its major rivals are
US-owned companies with the exception of ISP Web.de - a pure internet
player which reaches 3.4 million unique visitors a month (28.4 per cent
As a rule, T-Online and Web.de users spend more time online than users
of rival sites such as Yahoo! (31 per cent reach), MSN (26.5 per cent)
and Lycos (26 per cent). This is one reason why T-Online takes the
biggest share of local ad revenue. In 2000, T-Online made 110 million
euros from e-commerce and advertising (although it is worth noting that
half of this revenue came from Deutsche Telekom ads).
The magazine sector was quick to grasp the online opportunity. This is
not so surprising given the high-profile role that weekly current
affairs titles such as Focus, Stern and Spiegel play in Germany.
In keeping with the magazine's entrepreneurial track record, Focus has
displayed the most aggressive online strategy. Its print title now sells
in excess of a million copies a week. It has overtaken both of its
established rivals, Spiegel and Stern, which expected to see off the
upstart with little trouble. In the online realm, Focus.de boasts
707,000 unique visitors a month (5.9 per cent reach). This compares with
350,000 for Stern.de and 405,000 for Spiegel.de.
Axel Springer's major activities have centred on electronic magazine
spin-offs from its red-top newspaper, Bild. Its portfolio now includes
magazine and web versions of Sport Bild and Auto Bild. The heavy male
skew of these Bild spin-offs is balanced by investment in Planet
Allegra, an online site for young women. There are also sites called
Familie & Co and Finanzen.
Two years ago Axel Springer also linked up with Bertelsmann to launch
specialist magazines. This joint venture is now actively building online
portals. One of the most successful to date is the science portal Link,
which registers 14 million page impressions a month.
Radio is going through a mini-boom, according to Radio Marketing
Services - which markets airtime on behalf of 80 per cent of German
commercial networks. Kristian Wentzell, who pitches the medium to
UK-based agencies on RMS' behalf, says: 'a 30 per cent rise in
listenership coupled with an unjustified price hike by the big TV
networks has made the radio story much more compelling.'
Although radio is a 6 per cent medium in Germany (comparable with the
UK), it does not boast the sort of strong quasi-national networks
controlled by UK players such as Capital, Chrysalis, GWR and Emap, and
there has been less transference of national brands online.
Those that have gone online are popular with regional listeners, RMS'
interactive sales executive, Ann-Charlotte Lange, says. 'People in
Germany are very loyal to their local radio networks,' she says. 'Their
websites feature a diverse mix of information and entertainment news
from the local area.'
RMS markets a package of 19 radio and music-based websites to
advertisers, including leading regional private stations such as FFH
Frankfurt, Radio Hamburg and Radio SAW in eastern Germany. 'Apart from
Bavaria, we can offer clients an online opportunity that covers most of
the country,' Lange says .
As in the UK, the radio sector pitches itself as complementary to new
media in terms of usage and demographics. Online radio networks are
growing, Marcus Ronig of MediaCom Germany's new-media subsidiary, Magic
Response, says. He cites Chart Radio, Das Ding, Das Webradio,
Internetradio.de and Cyberchannel as examples.
ZDF was slow to adopt the net compared with the BBC. But, by January
2001, it had made up some ground - attracting 665,000 unique visitors
(still less than Focus.de). Germany's other public broadcaster, ARD, is
hamstrung by its regionalised structure. Nevertheless, one of its
powerful regional constituents, Cologne-based WDR, had 450,000 unique
visits in January.
Kirch Gruppe controls the digital platform PremiereWorld and the
free-to-air networks Sat 1 and Pro 7. It could be a serious web player
by combining the technological capabilities of its digital platform with
the promotional muscle of its TV network, but so far it hasn't.
The big development in the relationship between TV and the web came when
the commercial network RTL2 aired the first series of the Endemol
gameshow Big Brother last year. That generated 200 million page views
and 25 million video streams. A second series scooped 150 million page
views and 20 million video streams. Even when the show isn't on air,
500,000 fans log on.
Endemol Entertainment's Marco De Gast says Big Brother (left) was the
Big Bang in terms of the way 24-hour webcasting and TV work
'Broadcasters are now much more aware of the way online can create a
powerful mix of community, news and video streaming.' Endemol is now
working with RTL on four TV/online projects (Big Brother 3, Buzz,
Hairdresser and Big Diet). Rival network Sat 1 has responded with Taxi
Orange and Girl's Camp, while Lycos and T-Online have carried Big
German's leading newspaper publishers were slow to populate the net.
However, they are now making up for lost time, Jupiter-MMXI's Olivier
Beauvillain says. He has observed substantial investment from Axel
Springer's national tabloid title Bild is one of the biggest media
brands on the web - but has slipped in recent months. In November 2000
it attracted 538,000 unique users, according to Jupiter MMXI. But by
January 2001 this figure had fallen to 431,000. Springer has also taken
Computer Bild, the upmarket daily Die Welt and the weekly Euro am
Sonntag online. Welt.de has built up a strong presence with 189,000
unique visitors a month (1.6 per cent reach).
The upmarket title FAZ (Frankfurter Allgemeine Zeitung) has been slow to
move into this area - which some observers blame on FAZ's complex
management structure slowing down strategic decision-making. That said,
online expansion plans are due to roll out.
The leading financial daily Handelsblatt has made aggressive moves
It first entered the new media space in the mid-90s and recently
redesigned its website to be more user-friendly. Although it attracts a
decent volume of traffic, observers complain of a lack of integration
between Handelsblatt's newspaper and its online sister. By contrast, the
rival business title FT Deutschland is perceived as having got the
The German print industry is largely composed of regional monopolies -
which partly explains conservatism about the web. The Berlin market is
fast emerging as the new-media capital of Germany. It is no accident
that three of the top ten news and information sites in Germany are
Berliner-Morgenpost.de, BZ-Berline-de and Berlinonline.de, nor that the
first two belong to Axel Springer.