Gruppo Editoriale L Espresso: Online Positioning and Digital Strategy Milano April 22, 2013 Head of Internet Division Pierpaolo Cervi Investor Relations Manager Stefano Canu
Disclaimer» This document has been prepared by Espresso Group for information purpose only and is to be used for presentation of the Group s results and strategies.» For further details on Espresso Group, reference should be made to publicly available information, including the Annual Report, the Semi-Annual Report and Quarterly Reports.» Statements contained in this document, particularly those regarding any potential or future performance of Espresso Group, are to be regarded as forecasts and as such may involve some uncertainties.» Any reference to past performance of Espresso Group shall not be taken as an indication of future performance.» This document does not constitute an offer or invitation to purchase or subscribe any share and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. 2
Index» The Online Market» The Digital Division» The Digital Strategy 3
The online advertising market in Italy and in Europe Italy - online advertising market (1) Benchmarking - online advertising market (1) m m In 4 years market X2 2012, including search expected up 5-6% Of which Display (2) 37% 32% Online adv. on total adv. market 15% 21% 21% 36% The online advertising industry in Italy has experienced a strong growth with online adv as % of total market up from 7% to 15% Display ads is our main reference market The online advertising market in Italy (including search and classified) is still underdeveloped compared to Continental Europe (Total Europe average is 22%) (1) Source: IAB Europe report 2011 and 2007 (2) Source: FCP Internet 4
The online advertising market in Italy: Our reference market and market share (advertising and usage) Italy Online Advertising Display Market (1) Italy Online Advertising Video Display Market (1) m 2010 = Index 100 ~10% Market share ~14% Market share ~17% Italy Online Usage Key assets (2) Italy Online Reach Traditional Newspaper (2) 12 online property in Italy, among the top 4 excluding the global international players Usage growth +7% in 2012 Higher reach than traditional newspapers and TV Real time news positioning Strong in social network activities Well balanced direct vs. indirect traffic Leadership in the video market in terms of usage (1) Source FCP Internet (2) Source: Audiweb December 2012 5
The digital subscriptions market in Italy: Our reference market and market share Gruppo Espresso - Tablet Active Subscribers (1) As of December 2012 Others Local # of ipad/tablets (2) ~1M ~2.8M Penetration on ipad/tablets ~3.2% ~2.2% Not including 20K mobile La Repubblica The high penetration on ipad / Tablet devices of la Repubblica readers accounts for the fact that most early adopters are likely to be newspaper readers. However such penetration will decrease as tablets/smartphones become massmarket devices. New actions expected in 2013 to promote digital subscriptions: 1. Launch of L Edicola Italiana (digital newsstand) a consortium of six media groups (L Espresso, Rcs Mediagroup Caltagirone Editore, Il Sole 24 Ore, La Stampa and Mondadori) 2. From January, ADS is providing a certified monthly digital subscription data (like for the printed version). The rules to certify digital copies are the following: Digital copies are to be the replica of the printed version (plus additional online features) Price must be at least 30% of the printed edition (1) Excluding mobile (2) Internal estimates based on GFK data (640K in 2011 and 2.2M in 2012) 6
Index» The Online Market» The Digital Division» The Digital Strategy 7
Digital division: Snapshot Mission: the Digital Division has the responsibility to manage all Group s digital businesses, to fully exploit the brands huge potential on all media platforms and to develop new exclusively digital activities Established in 2009 with full responsibility on online strategy across all media (newspaper, magazines, radio..) About 170 staff (of which 75 journalists) First 24H coverage online-news service Fully integrated system in the new 4-screen world (TV, desktop/laptop, tablet and mobile) Head of Division P. CERVI Repubblica Local Entertainment Classified Free Real time news Premium & Mobile TV Verticals Free News Premium & Mobile Radio Movies & TV Self Publish. Gaming & Services Generalist Verticals Manzoni: A dedicated online-only National sales force (~30 accounts) plus the Local sales force (>300) 8
Digital division: 2012 results and positioning Repubblica CONTRIBUTION TO RESULTS m FY 11 FY 12 Revenues 45,2 52,6 - Advertising 37,8 43,7 - Others 7,4 8,9 Rep.it is a product conceived to be fully digital with a very limited contribution (<10%) of printed contents, focusing on real time news and video (from content to be read to content to be seen ) Focus on brand extension (i.e. integration between Internet and TV), vertical strategy (i.e. D lifestyle, Finance, Sport) and partnership (i.e. Huffpost) EBITDA 12,3 14,2 EBIT 12,0 13,8 EBITDA Margin 27,2% 27,0% Revenues break down: ~ 60 % national, ~ 15% local ~ 25% other ~85% Adv ~ 15% subscriptions & others Cost break down (as of % of revenues): ~ 30 % contents, ~ 15% IT platform ~ 12% other Local New restyling with the same look and feel introduce in all the 18 local web sites with strong web traffic growth in 2012 Leadership in local community news, focusing on real time, video, sport and user generated community contents Entertainment Broad and diversified entertainment media portfolio with interesting potentials in revenues other than advertising (i.e. video on demand, self publishing) Direct cost allocation approach as % of print contents is limited Classified Main focus on job,b2b and local 9
Digital division: 2012 results vs market Jan. Sept. 12 Oct. Dec. 12 FY 12 Market +9.8% -5.3% +5.3% Espresso +19.0% +8.6% +15.6% In 2012 (especially in 4Q 12), thanks to our positioning, we strongly outperformed the market as advertisers shifted their budget to stronger brands and to websites with: growing and segmented user base high-end video display and innovative formats special events best customer services (i.e. Manzoni) Source: FCP Internet and internal data 10
Index» The Online Market» The Digital Division» The Digital Strategy 11
La Repubblica: Print vs online positioning 2012: Daily Readers/Browsers 2012: Daily pay circulation ~3,0M ~340K ~1,5M ~45K (Dic 12) Up ~85% from Dic. 11 >25% in December Print (2) FY 12 - Advertising 100%=~180M Online (5) 20% Online (1) Print (5) 80% Within La Repubblica core asset, the online business has the best product positioning and provides further earning opportunities as the number of online users/subscribers grows Print (4) Online (3) FY 12 Subscribers revenues Online (3) 5% Revenues based on monthly average number of subscribers 100%=~120M Print (4) 95% Source: (1) AWDB Audiweb Unique Browser; (2) Audipress 2012 / III readers (3) Online Active subscribers (4) Kiosk sales 2012 (5) La Repubblica advertising only 12
La Repubblica: International benchmark Online newspaper and TV Online Newspaper TV and broadcaster In countries like Germany/ Italy/France/Spain newspapers have been the first entrants in the real time news online market High domestic reach In countries like UK and USA the real time news online market has been mainly developed by the existing TV broadcasters (with the exception of Daily Mail in UK) Low domestic reach 13
La Repubblica.it: International benchmarking Online newspaper Thanks to its specific positioning Rep.it has a higher reach in its own country than most of its international peers Rep.it is a product conceived to be fully digital with a very limited contribution (>10%) of printed contents, focusing on real time news and video (from content to be read to content to be seen ) 14
La Repubblica.it: Real time news strategy Main Actions Italy Online Reach vs TV (1) Strengthening of the news video production both in terms of quality and quantity Focus on sub-brand strategy (thematic areas): Lifestyle and fashion Sport Business and finance (Bloomberg Agreement) Auto Technologies New advertising formats Main strategic drivers In Italy Rep.it is perceived more as a «real time news» online site than an «online newspaper» and has a brand awareness that is higher than the traditional TV news sites. Take advantage in the expected integration between Internet and TV (Repubblica TV is part of the Digital Division) Repubblica.it on the PC «real time news» has a separate positioning than Mobile (freemium model) and Tablet (pay model) (1) Source: Audiweb Dicember 2012 15
La Repubblica.it: Relationship with global player Social positioning (1) Traffic (1) Facebook: 1 newspaper in Italy, with over 1m fans. Repubblica Blu facebook application has 396K registered users and and 86k daily interactions ( 000) Twitter: 770k Followers Steady growth (20% CAGR) in the traffic overtime Well balanced traffic positioning with: 61% direct traffic (Repubblica.it home page) 24% search engines 8% social networks 7% other (link, partnership) Source: Nielsen SiteCensus - Feb 2013 16
La Repubblica.it: metered pay-wall options High The introduction of a metered pay-wall system is an option that supports in-depth news vs. real-time contents. Focus on online-only contents (i.e. real time, video) 1 2 Today Tomorrow 3 Today, less than 10% (vs 100% of NYT) of the La Repubblica printed contents are available online (i.e. real time news positioning) Soft" metered pay-wall approach is the benchmark (i.e. NYT introduction in 2011 with 20 free articles a month, now down to 10 articles) According to Press+ (provider of pay-wall tools): 10% 50% % of printed contents available in the desktop/laptop version 100% Traffic loss from implementing paid model has ranged from 0%-20% of page views and 0%-7% of monthly unique visitors. No publisher has reported any decline in advertising revenue. This is because most publishers do not sell all of their available inventory 1 Focus on photos videos, everyday day life, showbiz and gossip 2 Focus on real timenews and comments with video and rich-info bundled 3 Focus on politics and in-depth contents (i.e. opinion) 17
La Repubblica.it Mobile and Tablet application: positioning and strategy Mobile (m-site / App) Mobile is positioned as a «freemium» product (subscription to fully access all contents) Tablet (App) Tablet is positioned as «pay» with replica of the print version + additional features) Main data and strategic drivers (1) Main Data Mobile generating 8.5% of La Repubblica users (1) Pay: ~20K subscribers. Automatic renewal approach. Only ~20% buying with itunes Pricing (Avg): itunes 1Week 1.99-1Month 4.49-1Year 44.99; Strategic drivers Testing of a freemium model with subscription to access newspaper and /or original contents 205 premium articles per week included Combined > 1.6M downloads (+66% YOY) >58% Apple, 20% Android, 22% other mobile platforms (BB, W8, Symbian) Main Data Pay: ~45K subscribers. Automatic renewal approach. Only ~30% buying with Itunes Pricing (Avg): 1Week: 4,49 1Month: 19,99-1Year: 179,99 VAT and sales cost Product: multi access: Tablet Mobile PC including inserts (i.e. D) Strategic drivers Tablet version mainly a replica of the printed version (maintaining a similar user experience) + additional features (video, photogallery etc) + Special edition at 7 PM ~0.39 euro per day net of Bundle strategy Bundle package available: Repubblica & Local Newspaper Repubblica & Espresso Repubblica & Espresso & &Local Newspaper Repubblica & Tablet device (1) Dec 2012, (2) Nielsen Site Census mobile 18
La Repubblica.it: Verticals - Restyling D (lifestyle and fashion vertical) Wedding Horoscope Cooking Health 2012: 165K Unique users (+24%) New D March. 13 Jan. 12 May. 12 Jul. 12 Sept. 12 D is the Group lifestyle and fashion vertical with: 1.7M monthly users (165K daily) 32M monthly page views (1.1M daily) Very strong social network positioning (over 2M likes for cooking section, horoscope and fashion and beauty pages) Medium-high target Position # 4 in Italy in the reference market with an English version available (1) Source: Audiweb December 2012 March 2013 total restyling of the website (together with the printed version) with: Target: Improved contents (increase of devoted journalists from 4 to 12) Introduction of new sections (now up to 9) Improved services (i.e. video tutorial, experts comments, look simulation tools) Social and community focus Becoming market leader in the lifestyle and fashion verticals Must have for the fashion and luxury advertisers Leverage the strong made in Italy fashion and lifestyle contents in order to develop the site internationally (i.e. partnership) 19
Local: online is a big opportunity Online (PC, Mobile Tablet) In 2012 restyling of all sites with the same look and feel (brand GE Local) La Sentinella La Provincia Pavese 18 Daily Local Newspaper Il Piccolo Messaggero Veneto La Nuova Venezia Alto Adige Il Mattino di Padova Trentino La Tribuna di Treviso Corriere delle Alpi La Gazzetta di Mantova Mobile (m-site / App) Within 2013 roll-out for all 18 sites of a dedicated mobile site and app La Gazzetta di Reggio Il Tirreno Il Centro La Gazzetta di Modena La Nuova Ferrara Manzoni Local sales force (>300 sales agents) La Nuova Sardegna La Città di Salerno Tablet (App) Within 2013 roll-out for all 18 newspapers of a version with full functionality 20
Local: online is a big opportunity ( 000) Italy Usage Growth (1) Traffic growth mainly related to news CAGR ~30% Main data and strategic drivers Main Data In 2012 restyling of all sites with the same look and feel introduced in all the 18 local web sites Strong usage growth in 2012 (1). 13 out of 18 local web sites grow more that 30% yoy Leadership in local community news Growing (+38%) digital subscriptions (~10K) Journalistic approach: Leadership in local news News Not Journalistic approach: External information, UGC, community Strategic drivers Fostering leadership in local community news with focus on real time, video, sport and user generated community contents Introduction of new local sections (i.e. ongoing roll out on all 18 local sites of a new brand trovaserata with focus on local events, cinema, sport, restaurants) Further area of development are local classified and obituaries Local Sport Local Life (1) Source: Audiweb December 2012 21
Entertainment: Overall strategy Online radio Online reach of over 70K daily unique users (+18% vs competitor ) and >1m download for the mobile application Entertainment 2013 Movies and TV guide Leader in movies and cinema contents (with 3 million monthly unique users, a community with over 200,000 users' reviews, database with over 1 million pages, complete coverage of cinema screenings). 2010 launch of MYMOVIESLIVE!, and in December 2012 of MYMOVIESWIDE! (VOD) Community 2010 Multimedia 2005 Information 2004 Services 2003 Database 2000 A vertical entertainment site with a reach of 130K daily unique users and 24mln monthly page views Gaming Social gaming (fantasy soccer) with a community of over 300K registered users Self Publishing Social self publishing platform with a community of almost 200K registered writers and over 20K published books) Broad and diversified entertainment media portfolio with interesting potentials in revenues other than advertising (i.e. video on demand, self publishing) (1) Source: Audiweb December 2012 and internal data 22
Partnership: Huffington Post and Bloomberg Joint venture between AOL (51%) and Gruppo Espresso (49%) online from 25 September 2012 In just a few months Huffington Post Italia is already perceived as an influential source of information: Regular daily unique users > 100K and already higher than some other traditional newspapers web sites. Strong social network positioning (over 100K Facebook fans on Facebook, 40K Twitter followers) adding considerable content to the website. Bloggers community is also expanding, now with more than 300 participants In 2011 re-launch and restyling of the Repubblica.it economy and finance section in cooperation with Bloomberg Daily unique users (avg) (1) ( 000) ( 000) Daily unique users (avg) (2) 111 150 +35% (1) Source: Audiweb (2) Source: Nielsen Site Census Oct'10 -Sept' 11 Oct'11 -To date 23
Strategic Priorities and Key Actions Strategic Priorities» In the long term, growth perspectives are unquestionable as the Italian market is still underdeveloped» Market share is the real focus and the main challenge» The key drivers to success will be: Larger scale/leveraging on strong brands Ability to integrate Digital DNA and skills with the traditional core know how Convergence between written information and video (i.e. from content to be read to content to be seen ) Real multiplatform convergence (web, mobile, tablets, smart TV) Vertical strategy on specific segments Big Data Content monetization strategy Local: System approach Content production will be split between traditional newsrooms and new production units Introduction of new models in advertising collection Adding pure digital activities International partnership (bidirectional) 2013 Key Actions: Restyling of Repubblica.it with further focus on video, contents (digital and from print), usability, engagement and user profiling Continuous focus on verticals (i.e. D launch in March, Repubblica Entertainment in Q2) Introduction on all platform (including PC) of new modular payments form adapted to users needs and profile Leveraging leadership in local community news with focus on real time, video, sport and user generated community contents Further focus on the revenue other than advertising (i.e. video on demand, self publishing) Building further partnership opportunities (i.e. Huff Post) and small scale M&A (i.e. Mymovies) 24