Last mover advantage or just last man standing?

Friday, 17 May 2019

Stuff and NZME have taken opposite views on paywalls for news.

OPINION: Trade Me delisted last week.

Twenty years after Sam Morgan switched on a secondhand server stashed at his old man's work, Apax Partners paid $2.56 billion for the online classifieds business. Last week's delisting closed off a decade of listed existence for the iconic business.

A Norwegian executive Anders Skoe is the new chief executive charged with the next chapter in the company's life. Skoe currently heads up finn.no, a home grown Norwegian classifieds business that has a remarkably similar profile to Trade Me.

I spent 11 years at Trade Me, initially as chief commercial officer and later on as chief operating officer. As employee number eight I was lucky enough to watch up-close the infant terrible of the classifieds world go from being irreverent challenger, to market dominator; and Morgan go from precocious geek to seasoned businessman.

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The first 10 years were particularly intoxicating as we delivered three year growth trajectories of over 1000 per cent. We were fortunate in catching four fair winds in the 2000s, which powered that growth.

The first was strong leadership with mantras of 'does it make the boat go faster' and 'don't be a dick'. The second was a small team – we had 50 staff when Fairfax bought us for $750 million in 2006 – who were execution junkies. The third was a technical platform that delivered pages fast in a dialup world, reliably and with a deceptively simple user interface.

The last was first mover advantage in terms of being the only local player with a pure digital offering. Trade and Exchange, Fairfax and New Zealand Herald all had online offerings. But their online listings were simply repeats of their hard copy listings from the previous weeks.

Mike O'Donnell says Stuff might benefit from being the 'last man standing' by not putting its content behind a paywall.

The traditional classifieds players simply could not afford to cannibalise their print edition revenue. As a result if you responded to one of their online ads, then the item was probably long gone. Meanwhile the online description was frustratingly brief because the advertisers were charged by the word. Lastly there were no photographs.

We came out with a model where items were free to list, stayed live until they sold and had room for 1000 words and 20 photographs. Meanwhile the auction mechanism created a marketplace dynamic which gave sellers better prices than a newspaper classified could.

While we had first mover advantage, we were paranoid Ebay would wake up and squash us like a bug. So we kept our foot to the floor with the aim of passing 500,000 live listings by 2005.

In fact it was 2006 when Ebay finally came calling, and realised they were a few years too late. They knew we'd taken first mover advantage and built something they'd struggle to beat. So we became friends instead, working together in areas like trust and safety.

The concept of first mover advantage came to mind last week as I had my first experience of NZME's New Zealand Herald paywall.

Until two weeks ago, the only paywall for local mainstream news had been the NBR; charging $35 a month or $350 a year. However with the fudge factors of corporate subscriptions, shared logons and bulk deals the exact number of paying NBR online subscribers is a bit murky.

The New Zealand Herald's digital subscription for premium content costs $5 a week or $199 year but is free to subscribers to daily newspaper subscribers. The premium access features content not just from the NZME family of content creators but also selected content from mastheads like the New York Times, Harvard Business Review and the Financial Times.

NZME has a stated target of converting 10,000 of its 500,000 registered online users for free content to the premium paid content. Sounds tiny but is probably bullish.

Managing editor Shayne Currie was blunt about the launch saying it was 20 years too late. What he meant was that outlets like the New Zealand Herald and Stuff have been feeding into the proliferation of free online news content and making it available to the walled gardens of social media for too long.

Initially this freebie was given in the hope that traditional print revenues would remain solid, but increasingly because in the war for online visitors any barrier to consumption will drive your unique browser stats down; stats that drive the amount you can charge for advertising.

Fast forward 20 years and its just not feasible to continue to give content away when your commercials are wobbly and the outlook is worse.

But it brings big risk. Key among them is that news consumers will refuse to pay and stick with the last and largest of the free commercial news websites Stuff.

In my eyes it's a perverse antithesis to the Trade Me experience, where first mover advantage was key.

In this case it seems there is a last mover advantage.

If consumers continue to flock to free content, being the 'last man standing' brings with it solid competitive advantage. Just so long as you can migrate that advantage to commercial sustainability. I just hope that happens.

Mike 'MOD' O'Donnell is a professional director, writer and advisor. His Twitter handle is @modsta and he's previously worked for NZ Herald, Fairfax and Trade Me. While this column is his personal opinion for full disclosure he is also a director of Radio New Zealand.