The story of how an apartheid pariah became a $66 billion media Goliath

ecommerceIf you were asked to name the world’s ­fastest-growing e-commerce company behind Alibaba and Amazon, it’s a pretty sure bet that names like eBay and Japanese giant Rakuten would spring to mind.

But the answer – as measured by ­year-on-year growth in monthly average desktop visits – is South African ­company Naspers.

Few Australians would have heard of Naspers, or know of its roots as a publisher founded to provide a voice for nationalistic Afrikaners after the Boer War defeat. But it just might ­provide a ­perfect example of how a ­modern media company can adapt to the digital world.

naspers graph

Source: Naspers 2015 interim results

Before it began re-inventing itself as an internet, e-commerce and pay ­tel­evision business in the early 1990s, Naspers (short for Nasionale Pers, ­Afrikaans for “National Press”) was a strong supporter of white minority rule and cruel ­apartheid policies.

Its first newspaper was Die Burger (The Citizen) and the paper’s first editor, Daniel François Malan, was a clergyman and ultra-conservative politician. In 1948, Malan led the National Party to victory over the more moderate United Party in white-only parliamentary elections, becoming prime minister. Later he would lay the framework for apartheid.

These policies were supported by Naspers until the release of Nelson ­Mandela in 1990.

Koos Bekker

But it was only in 1997 that Naspers sought to publicly sever its ties with the past (though you won’t find any mention of this in the history section of its website). That was also the year it appointed Koos Bekker, a graduate of Columbia University as chief executive.

Bekker, who had pioneered pay ­TV in South Africa (now called DSTV), led the ­company into the digital age.

In 2001, Naspers made its most sig­nificant ­investment when it paid just $US32 million ($39 million) for a 46 per cent stake in China’s Tencent ­Holdings, which was at the time the ­operator of unprofitable instant messaging ­platform QQ.

Today, Naspers has a market ­capitalisation of around $US66 billion, thanks mainly to its 34 per cent stake in Tencent, which has grown into a Hong Kong-listed mass media giant through mobile chatting applications like WeChat, which has more than 470 million subscribers.

Dozens of e-commerce investments

Off the back of this, Naspers has invested in dozens of other e-commerce and internet ventures targeted at ­emerging markets like India, Russia, ­eastern Europe and Latin America, with fast-growing populations and ­rising internet use.

Naspers has a 29 per cent stake in ­Russian online portal mail.ru, and owns global online classifieds business OLX, which receives 11 billion monthly page views, and online payment system PayU.

Of the $US6.5 billion in revenue Naspers raked in for the six months to September 2014, more than half came from its online investments and activities, with pay TV responsible for a third.

The company still prints newspapers, although print accounted for just 10 per cent of total revenue.

Chinese internet censorship

While the story of Naspers’ ­re-invention is the stuff of legend and the envy of struggling media companies the world over, questions have been asked of its role in policing China’s harsh online ­censorship regime on behalf of Tencent.

China was recently ranked third worst country in the world for internet freedom by US independent watchdog Freedom House.

Naspers chief executive Bob Van Dijk , who replaced Koos Bekker in February 2014 when he retired, has responded only by saying that Naspers complies with the laws of the countries in which it operates.

This prompted South African Sunday Times business columnist Rob Rose to note: “When the Chinese government says it fancies trawling through your ­servers, you probably lift your skirt.”

None of this is likely to trouble Naspers’ biggest shareholder, the South African government – through the Public ­Investment Corporation – which recently inked a free trade agreement with China.

As for Bekker, he elected to receive Naspers stock options rather draw a ­salary, leaving him with a $US2.5 billion fortune (the Naspers share price has risen more than fifty-fold since 2001).

No wonder the expression “You never lose with Koos” has become popular in South African business circles.

A version of this article first appeared on afr.com

True “bargains” are only found online

trolleys

It’s hard to see how some “bricks and mortar” retailers will survive the relentless growth of online sales.

And sometimes its hard to argue against it.

A couple of weeks ago my car remote died. No amount of tinkering, application of blue tack or fidgeting with batteries and tiny metal gadgetry could get the thing to work.

So I headed off to Highpoint Shopping Centre in search of a new one – they sell them at those kiosks, where they also repair watches and cut keys.

The affable guy behind the counter quoted me about $110 for a brand new remote and said the best price he could do was about a $95 if he included a 10% discount voucher, which he placed in my hands.

It seemed quite a lot for a little gadget so I said I’d think about it and left, thinking I might get a couple of other quotes.

In the Moonee Ponds arcade, the guy behind the key cutting counter quoted me  $130 and I thought, “Yeah right mate” and left.

Of course it always pays to look online – specifically eBay.

Typing in a few key words into the search bar, I came across an online store selling a brand new remote for $68 in one of those “this is not really an auction – “Buy it Now” deals, including free shipping.

car remoteSo I did some checking as you should always do when shopping online and discovered that they’re a “bricks and mortar” locksmith in Five Dock, Sydney – with an address, phone number and very high seller rating – and so I bought it.

It came in the post four days later and works like a charm.

I walked around basking in that strange warm, enveloping glow that happens when your research has paid off and there’s a couple of extra bucks in your bank account as a result.

It also got me thinking about retailing, specifically – are consumers being taken for a ride every time they buy something in a mall?

After all, I got the gadget for roughly half the price of what it would have cost me to buy it in Moonee Ponds and about 30% less what I was offered in Highpoint, even with discounts thrown in.

Of course, bricks and mortar retailers have to factor in things like rent – which can be very high – the cost of holding stock, staff wages, insurance and many other things which is partly why they charge more.

I say “partly” for good reason.

Recently I came across an article about the float of the Dick Smith electronic stores by the Australian Financial Review’s retail writer, Sue Mitchell.

She writes that Dick Smith chief executive and turnaround specialist Nick Abboud has established a “new sourcing office in Hong Kong and is now sourcing direct products for Dick Smith’s growing private label range”.

“The private label products are cheaper than international brands but gross margins are around 80%,” writes Mitchell.

What this means is that a Dick Smith $396 television is only costing the company $79 before factoring all those other costs I’ve mentioned above.

Even when you tally up those costs, Dick Smith is making a healthy profit on each item they sell under their own brand and continue to do so even after offering as much as a 50% discount.

Clearly not all retailers operate on such wide margins, but still food for thought the  next time you see the words “sale” and “discount” pasted across every shop in your favourite mall.