Seznam.cz has used the recession as an opportunity for major housecleaning. In early August, the most visited Czech online search and e-mail provider switched from Google to Bing for looking up non-Czech content. By next spring, Seznam wants to launch its own pay-per-click advertising system, Sklik, and ditch its current provider, Jyxo. “It’s a strategic move,” executive manager Pavel Zima says. “Sklik generates one-fourth of our revenue, and we don’t want to be dependent on a third-party system.”
This year is not very favourable for business. Can your company feel the recession?
We can obviously feel it, but it is not as bad as you might expect. Our midyear revenues are over 10% higher than they were in the first half of last year. This is largely because we operate on the internet – the least affected medium – while also being the country’s No 1. We want to use this primacy to further increase our market share. We have been successful in taking bits of the cake from competitors.
Who do you want to take them from? Centrum.cz, I guess?
In advertising we are obviously fighting mainly domestic competitors.
Does most of your revenue come from ads, or from sponsored links?
The fastest growing segment is pay-per-click ads, as their impact is easy to measure. Yet almost all of our services are growing. Where the recession has shown is on our job site, Spráce.cz, which now has more users than before even if advertisers are now much less interested. This is a logical ramification of the situation on the job market.
Has the crunch changed the way firms advertise online?
The difference is that while companies previously ordered campaigns for half a year, today they evaluate them after just two months. We first felt a cosmetic decline in November and December. The first quarter was about 5% better than it is now. We have accepted that current figures will stay the same in the second half of the year, although no one can rule out another moderate drop.
So no recovery anytime soon?
The slowdown is clearly visible, and there will be no miraculous growth in the market this year. Next year we don’t expect any fast recovery either. We have paradoxically seen growth in our specialised services, such as [real estate site] Sreality.cz and [used-car site] Sauto.cz, despite the fact that these now belong to the most shaky sectors.
You keep hiring new staff. Is it now easier than it was last year?
It is much easier than last year or the year before. Today there are enough quality people in the market and we don’t even have to overpay them.
Mobile internet
You are working with operators to provide mobile internet. How big do you think the potential of mobile advertising is?
We have a lot of faith in advertising and internet for mobiles. In five years at the latest, we would like to get more than CZK 100 million from mobile ads. We’re already offering three types of mobile ads: PPC, Firmy.cz and banners. We are looking for experienced traders to sell banners. We realise that mobiles can make advertising unbelievably targeted, as the operator knows not only who you are, but also where you are at the moment – something our clients may find useful in the future.
Could 3G networks significantly aid the development of mobile internet?
They could. Operators didn’t rush the development of 3G because the costs are enormous and the existing network is sufficient for their core business. We and providers last year managed to make mobile internet available to all users at reasonable prices. For now, the limited connection speed and screen size force us to adjust websites for mobile viewing.
How about products such as the iPhone?
iPhone has a brilliant user environment; its only problem is it is too closed off. Still it is the fourth-most-common handset among users browsing Seznam. We offer iPhone applications including our TV software. Now we are working on others. The first to come will be Mapy.cz and Firmy.cz, for both iPhones and those running Symbian.
Online radio
How about other media? The word last year was that you’d like to have a daily paper.
We’re not working on a daily paper. Rather, we want to make the internet the No 1 medium. I think we already know how to exploit all other media to achieve that. We are currently testing an internet radio station targeted at women.
Why at women?
We want to cover topics that are discussed on our women’s site ProŽeny.cz, and we would like to play music that is close to this target group. It is a test bed of sorts. We want to launch the site later this year.
Have you considered a digital radio station?
Not yet, although I can’t rule it out: If our online radio is a success, we might try to expand into digital broadcasting. Still we would not try to compete with large stations, but merely support our website. Other stations could appear in the future to support our other content.
Any plans to expand your partnerships with the Prima TV station and with mBank?
With Prima, we keep working on our Stream.cz video site. But the time hasn’t come yet for good films on the internet. The reason is that if you buy internet rights for very good films, it won’t generate enough revenue to cover the costs. With mBank we are considering further options. Our joint mPeníze.cz service was founded last year mainly to provide online loans. But that can’t be done in these times, so it is stagnating.
Are you tempted to expand abroad?
Our strategy is to be a Czech firm serving Czech users. We may theoretically sell one of our products abroad. But expanding, say, to Hungary or Romania, that is out of the question.
How to milk social networks
The recession is an ideal time for acquisitions. Are you getting many offers?
We are, but those who are selling expect to get the same money as before the crunch, though the buyer has a completely different idea. The discrepancy between the expectations is much larger than it was last year, which makes negotiations more difficult. But the offers we’ve received don’t fit our strategy anyway.
What kind of projects are they?
They have been mainly small new networking projects. But we already cover that sphere and are not even afraid of Facebook. Lidé.cz is completely different from Facebook: It is mainly a dating site. Most similar to Facebook is Spolužáci.cz, although it focuses on individual school classes.
Is there space in this country for more social-networking projects? Sitko.cz, developed by Centrum, did not take hold in the end.
The development of social networks is hard to predict. You may have 10 identical projects and only one of them will take hold. From our point of view, these communities are very seasonal. Czechs first used [Centrum’s] XChat.cz, now they do Lidé.cz while gradually getting used to Facebook. But what will happen in a few years? We’ll see: Maybe a new project will succeed in the end.
Social networks of the likes of Facebook have long struggled to convert millions of users into money. Do you have an idea of how to do that?
When a genius comes up with a way to turn social networks into money, we’ll be the first to show interest. Right now there are users, their numbers keep growing, but a real business model is still missing. Our networking generates only about CZK 20 million per year, which is little relative to the number of visits.
Seznam.cz in Figures
Ever since Ivo Lukačovič launched Seznam.cz from his parents’ bedroom 13 years ago, the site has been a leader on the Czech internet scene. In 1996, it became the country’s first site to ever feature an advertising banner.
Seznam has recently switched from Google to Microsoft as its search provider for non-Czech content. Zima says that Bing has given Seznam the freedom to sell its own ads alongside search results.
Despite the recession, Seznam took in CZK 946 million in revenue from January to June, over 10% more than in the first half of 2008. The site draws 4.8 million unique visitors every month and provides 60% of Czech internet searches. Google is catching up, having secured one-third of the Czech search market in just three years.
