Axel Springer on the Right Track as Digital Passes Flagging Print

By David Knight |

Walking out of the lift onto the top floor of the Axel Springer hochhaus in Kreuzberg is always an interesting experience. Built in the 1960s in an antagonistic location right alongside the Berlin Wall, the building is the beating heart of a major international media concern which has an obsession with all things digital.

That includes a drive in the past few years away from its traditional strengths in the print media and into the digital world, efforts which have largely surpassed those of its competitors. And the company is already enjoying the fruits of its labour – for the first time, profits and revenue from digital media are larger than any other sector of the Springer empire, with digital revenue topping €1 billion, as the printed word goes in the opposite direction.

The views out across Berlin from the 19th floor – enhanced by a beautifully clear day – were largely ignored by the journalists who gathered there on Wednesday to hear CEO Mathias Döpfner deliver the group’s 2012 financial results. His stated aim, repeated several times, is to transform Axel Springer into the leading digital media company.

And to that end the numbers are thus far encouraging. The digital media segment generated revenues of €1,174.2 million, an increase of 22 percent over 2011, with earnings before interest, taxes, depreciation and amortization (EBITDA) up 53.6 percent to €242.9 million, something which the company puts down to consolidation effects and double-digit organic growth.

A Shift in Policy

Indeed, the past few months have seen a shift in policy on the part of Axel Springer, away from investing in later-stage startups and towards early-stage companies which they can support and nurture – from afar, of course, they insist – to help drive the digitalisation from within. Recent acquisitions and investments include TunedIn and hy! Berlin, at whose January event Döpfner outlined the three pillars which will lead the way to digital success – content, marketing and classifieds.

The first of those currently consists of the powerful and highly-developed online portals of titles such as Bild and Die Welt as well as businesses like kaufDA and Smarthouse. Revenues in this sector grew 27.8 percent to €387.4 million, while in marketing – consisting of the Zanox Group – income was up 4.4 percent to €456.6 million.

The third pillar performed especially well. The activities of SeLoger, Immonet,, StepStone, Totaljobs and saw a 48.9 percent increase to €330.2 million.

These results compare to slightly stagnating figures for the other three main segments of Axel Springer’s activities. National newspapers, national magazines and international print all saw decreases in annual revenues and EBITDA. It’s a process which is being repeated across the Western world and has left many media owners scratching their heads.

Döpfner has been leading the digital charge for years, and in a statement released before the press conference, he said: “From this strong position, we will pursue the digitization of our business with even more speed and vigor. We intend to accelerate the digital transformation of the entire group, in order to further bolster our position of digitisation pioneers. We intend to accelerate the pace of innovation, further increase the efficiency of capital employed, and shape the fundamental structural transformation of the media industry.”

The Leading Digital Media Group

There is still room for traditional business models, he added, despite their heading in the wrong direction: “Although our print media will continue to make an important contribution to the success of our business for a long time, our goal is clear: We want to become the leading digital media group.”

From a startup point of view this has been obvious in Springer’s increased presence on the scene as well as its mission to Silicon Valley, where three leading executives have been based for some months and linkups with Pixlee and the Plug and Play accelerator have been agreed.

But that presence, Döpfner argued, was more important in the effect it can have on the people there; he gave the example of a 17-year-old app developer from whom, he argued, Axel Springer could learn more than the other way around.

The Axel Springer building previously stood as a reminder to those in control on the other side of the Berlin Wall that they couldn’t have things all their own way – Western TV was transmitted across the Iron Curtain from its roof, and an escape tunnel was once dug into East Berlin from the cellar. Nowadays, it is a sign that, so far at least, the company is committed to its proclaimed vision of a digital-driven future. It was here, in a Berlin which was just starting to really groove again post-reunification, that was founded in 2001; not in Hamburg where the newspaper’s print staff had sat for decades. In 2008, they were the ones who came to Berlin to join their online colleagues, not the other way round.

Yet Springer faces the same problems as the other corporates desperately trying to cut themselves a slice of the startup pie. Can it really keep all these young, innovative teams at arm’s length and offer them the support they need without too much interference? The mood amongst the upper echelons at Springer is certainly positive, and one senior official told Silicon Allee that while the line combining corporate responsibility and allowing enough entrepreneurial freedom is a tight one, it is nonetheless one they fully intend to stick to. Time will tell.