DANNY RIMER: And so the first
person I'd like to call
up is Matt from Facebook.
So Matt, if you wouldn't
mind coming to join us.
So you know basically there's
nothing bigger than Facebook in
the social networking space.
I think it's fair to say.
At an incredible explosive
rate, these guys have come on
the scene and taken over.
I think there's one extremely
important question that we
need to get the answer of.
So don't avoid it,
OK, this morning.
If I hit ignore, what happens?
MATT COHLER: If you hit ignore,
that's a good question.
So for people who don't know,
when you receive a friend
request from somebody, you can
accept it, or you can ignore
it, or you can do
nothing about.
If you ignore it,
it just goes away.
The other person is not
notified, which is the question
that some people may be asking.
And you just go on
with your day.
So it isn't really any
different than doing
nothing about it.
It just clears it
out of your queue.
DANNY RIMER: OK, got it.
All right so Matt,
let's start with you.
You're clearly, you're sort
of silicon valley DNA
as far as I can tell.
We were chatting earlier.
Your first entrepreneurial
activity was at
the age of nine.
MATT COHLER: That's right.
DANNY RIMER: So then you were
forced kicking and screaming
to actually go back
to Yale and graduate.
So tell us about what you've
been doing on the
entrepreneurial side prior to
joining Facebook.
MATT COHLER: Well it's funny I
did sort of start something
when I was just a kid.
But oddly enough I
haven't done so sense.
I joined a few startups at
the early stage since then.
So when I was in Yale, I left
in the middle and went to go
work for a company in China
that some people here who spent
time in China may remember,
called AsiaInfo which built
the backbone IP networks for
mainland China in the 1990s.
Which was an incredibly
exciting thing to do.
I was really lucky to get
the chance to see what was
happening in China in the 90s.
And I did go back and finish up
school which may have been the
biggest mistake, but so be it.
I moved out the Silicon Valley
and I joined LinkedIn shortly
after the business plan for
that was put together, before
we launched the site.
So I was there from the
time we launched the site.
And about two years after that
through the concentric circles
most of which have to do is
PayPal right now, and the
consumer internet world in
Silicon Valley, I came over to
Facebook through the guy who
put the first angel money, the
first angel investment into
Facebook at the end of 2004.
So I was very lucky to be in
the right place at the right
time more than once over the
past couple of years, and
we'll see how it goes.
DANNY RIMER: So when you
joined Facebook, there
were three, four people.
MATT COHLER: Yeah, there were
four, five full-time people.
DANNY RIMER: OK, four
of five people.
And how many are you
at Facebook today?
MATT COHLER: We're about
575 employees now.
DANNY RIMER: So I mean that's
just explosive growth.
Explain to us sort of the
reason that you think Facebook
has just taken off so
tremendously virally.
MATT COHLER: Well on the
company side, we'd love
to keep the company
as small as possible.
And that's always a goal.
On the user side of course
we'd like to make Facebook
as large as possible.
And we're very excited about
how that's been going.
To answer your question, I
think at the core it's because
we're helping to solve a need
that is very fundamental for
people, which is enabling
people to communicate and share
information, and understand the
people who matter to them in
their real life, their friends,
their family, their coworkers,
other people who are important
to one in one's real life in a
way that's never quite
been possible before.
And I think people see that
when they use the product.
And they've really
embraced that.
And it turns out to be
something that's is a fairly
universal human need.
Because we're all
social species.
We all have people
we care about.
And we want to understand
better and share more
information with.
And so I think that's really
been what's driven the
growth of the site.
DANNY RIMER: But the roots
of Facebook were clearly in
the sort of college sort
of phenomenon, right?
So it became a way of college
kids basically communicating
with one another,
dating one another.
MATT COHLER: Yep.
There was some dating
that went on.
But it was never really an
explicitly dating site.
It was always an explicitly
communicating site.
And it operates very much
the way real life operates.
In fact we really view it
just as an extension of
real life, as opposed
to an online community,
or virtual community.
In that just as in real life,
dating and all kinds of other
social activities-- and I would
include things like getting a
job in the broad category of a
social activity-- happens
through the relationship
that you have in life.
So I think that the core the
product hasn't really changed
at all since it was just
available for Harvard students.
And the same ideas drive to
product now that drove it then.
DANNY RIMER: OK.
And then there was this
incredible shift that happened
I guess sometime last year,
when in a different matter to
the other social networks, you
guys decided to basically
embrace everyone through
opening your API.
So can you tell us a bit about
sort of the logic behind that
and what it's done
for Facebook.
MATT COHLER: Sure.
So I'll start with the logic
behind it and then talk a
little bit about
what it's done.
We've always had the idea that
what we're trying to do is on
the one hand kind of a very
universal human need, but on
the other hand is something
that's extremely personal for
people, because it's about
communicating with people that
matter to you in your life.
And so we always thought about
the product and the company
really as a technology company
more than an editorial
or content company.
And rather than trying to make
specific decisions for people
about how they should use the
product, we always focused on
building the tools if you will,
that enable people to make
their own decisions about what
they wanted their privacy
settings to be, who they want
to share information with, what
they want of their experience
of the site to be.
And when we thought about how
we could best extend that, and
best kind of empower that, it
occurred to us that as the user
base was continuing to grow,
there were all of these needs
that people have that can be
facilitated through this type
of a product that we were never
going to be able to
build ourselves.
And even if we try we probably
would do you know three
quarters of them wrong.
And so we said, well rather
than trying to solve all these
problems ourselves, why don't
we open this environment up and
allow the developer community
of the world to participate in
building applications and
services for these people.
DANNY RIMER: Which is
different for instance from
MySpace had been doing.
MATT COHLER: Yeah no
one had really done it
up until that point.
DANNY RIMER: And how has
it taken off since then?
MATT COHLER: It's been
really explosive.
We've been really, really
excited about the growth.
Close to 100% of users have
added at least one third-party
application into Facebook,
over 90% of users.
We have about 20,000
applications that are actually
live on the platform today.
And the growth in that
is continuing to be
really phenomenal.
We just launched in German
and in Germany about
nine weeks ago.
And we already have a over
2,000 German developers who are
starting to build applications
on top of the platform
for example.
DANNY RIMER: So these
applications, I mean is it just
sort of the cool thing to do
for a big company, sort of a
public company to say
yes, we're on Facebook.
Let's build an App.
Or are they getting value
out of this thing?
MATT COHLER: Well I think just
like in any type of environment
that has these dynamics,
there's a head and
there's a tail.
And there's all kinds of
different reasons that
people are participating
in the ecosystem, and are
building applications.
So we do see large companies
at the head, both large
application companies, large
e-commerce companies like
amazon.com that have built
applications and integrated
them into Facebook, large
brands that have built
applications and integrated
them into Facebook.
We also see an incredible tail
of developers, small groups of
people or solo individual
developers who are creating
applications some as a
business, some as a hobby, some
for personal need they have.
And collectively these things
are filling out a lot of
niches that we wouldn't
be able to do ourselves.
And there's also some really
powerful things that are
happening at the head that are
enabling vertical functionality
that we probably wouldn't have
gotten right if we tried
to do it ourselves.
DANNY RIMER: So I read
somewhere you guys have
something like 160 million
registered users and
60 plus uniques.
MATT COHLER: So we don't focus
on registered users because we
don't think it's
very meaningful.
We also don't focus on uniques
because we don't think
it's very meaningful.
The comScore unique numbers for
this past month were I think
109 million worldwide.
We focus on a number that we
call active users, which are
registered users who have
used the product in
the last 30 days.
So it's essentially the Venn
diagram intersection of unique
visitors and registered users.
That's the group we
think that matters.
And we have over 70
million active users.
DANNY RIMER: On a
monthly basis?
MATT COHLER: On a
monthly basis.
DANNY RIMER: And so where does
the money come into this?
It's a lot of users.
MATT COHLER: Advertising
for the most part.
DANNY RIMER: OK
MATT COHLER: Yeah it
is a lot of users.
Advertising for the most part.
DANNY RIMER: Yeah.
And so the advertising are
sponsorships or they're sort of
your own advertising network.
MATT COHLER: Well we can talk
about it from a product
perspective or from a
channel perspective.
So from a channeled
perspective, we have
three channels.
We have a self-service channel.
We have a partnership
with Microsoft.
And we have a direct
sales channel for large
brand advertisers.
The products that they're
selling, partnership with
Microsoft is for standard IAB
banner advertising units.
That's an important
part of the strategy.
And the direct sales channel
sells more integrated
advertising that integrates
into the news feed
and into the site.
DANNY RIMER: So you guys
have a sales team?
MATT COHLER: We do.
DANNY RIMER: And how many
folks on the sales team?
MATT COHLER: We don't
break out the numbers.
DANNY RIMER: OK, got it.
I guess you're not
public, right?
MATT COHLER: Exactly.
It's one of the rumors.
DANNY RIMER: And rumor has it
you're going to buy Yahoo!
Is that right?
MATT COHLER: I think Nasa is
going to buy a Facebook which
is then going to buy, yeah.
Yeah.
Rumor has lots of
things things.
DANNY RIMER: Thanks
a lot, Matt.
MATT COHLER: Sure.
Nice to be here.
DANNY RIMER: I'll call you up a
little later for general Q&A.
Super.
[APPLAUSE]
DANNY RIMER: Next with
us is Ramu Yalamanchi.
If you wouldn't mind
coming up here.
Ramu is the founder and CEO of
hi5, which is another explosive
social network out there.
So tell us a bit about hi5.
Ramu Yalamanchi: So hi5 is
one of the largest and
fastest growing social
networks on the web.
Some of our big markets were
the largest social network for
the Spanish speaking audience,
fairly significant
in Eastern Europe.
Places like Portugal were the
number one social network.
And countries like
Thailand as well in Asia.
DANNY RIMER: OK and so if I
were going to think of MySpace
or Facebook, what's the
differentiator here?
Ramu Yalamanchi: So from the
time that we started hi5
we really focused on an
international audience.
We actually launched the
service in late 2003,
beginning of 2004.
And international was
our interest, and for
a couple of reasons.
One, we saw the internet
users in the U.S.
starting to flatten out.
It was single-digit percentage
growth year over year.
And second, we looked at the
web and we said wow, what
are the different ways that
people communicate today?
What are ways we can enhance
personal communications?
And looking internationally,
and thinking of new ways to
connect people were
primary interests.
And that's what drew
us to looking abroad.
DANNY RIMER: Got it.
And in terms of financing,
how did that come about?
Ramu Yalamanchi: Yeah,
so we have kind of an
interesting story.
We started the company with
about a quarter million
dollars, stayed under the
radar for a number of years.
Got the company profitable back
in October of 2004 all on
advertising, and all on
advertising internationally.
And so you know, it was just
this last year that we
raised about $35 million
in equity and debt.
DANNY RIMER: And it's pretty
amazing that you guys were
profitable from day one.
So what was the necessity
of this fund race?
Other than VCs like me banging
on the door saying you
really need our money.
Ramu Yalamanchi: That's right.
DANNY RIMER: And
then the value add?
Ramu Yalamanchi: Besides those
two reasons it was really to
expand further internationally.
I think when we first started
the company and for a long time
into the company, the way we
would invest into the future is
we would look and say you know
here's how much money we made,
or here's how much money we're
going to make in the next
quarter or two quarters.
And that's basically the
horizon for how we can
look at the business.
And so having capital to look
further out and take a longer
look view the business was
the primary reason that we
went out to raise money.
DANNY RIMER: Got it.
So you're number one in
Thailand, you're number
one in Portugal.
Ramu Yalamanchi: Mexico.
DANNY RIMER: And Mexico.
So you've raised this money.
So obviously you have a
ton of people in those
local countries.
Ramu Yalamanchi: We
don't actually.
So we have about 100
people in the company.
And they're all actually based
in the U.S. One of the things
that we've been able to do is
leverage our users in our
community to help us figure out
what are the local nuances
that make our product
attractive in markets.
DANNY RIMER: So this is
clearly a phenomenon, right?
The fact that you know Ramu and
hi5 are able to be in 26
countries without one single
person in those countries sort
of gives you a sense of the
strength, the power of
the internet, right?
So you know this actually
happened in the Skype
phenomenon as well.
Where all of a sudden we saw
that we were growing just at
an enormous rate in Denmark.
And we had no one in Denmark.
I mean the penetration of
Denmark was something like 12%
of the actual population.
So of course the natural thing
to do was to set up an office
in Denmark, you know staff
in Copenhagen, have a logo.
Actually it only started
declining after that.
So I guess you know the
question that I have is when
you think of expansion, what
are the benefits of having
someone local for you?
Why wouldn't you just continue
to cater to them from abroad,
and it sounds like let your
users or your power users help
you get through those markets?
Ramu Yalamanchi: Yeah I think I
think the key benefits for
business like ours, the two big
things I would think about.
One is really from a sales
and marketing perspective.
So today we have about half a
dozen or more partnerships
around the world where we
leverage companies like
Portugal Telecom, ARBOmedia,
Sanook in Thailand.
And they represent
our inventory to the
local marketplace.
One of the benefits we could
get by actually having a local
presence is to be doing a
better job and supporting them,
allowing them to sort of get a
consistent message of hi5 to
all the different advertisers.
The second is really having a
combination of both a user
approach to helping us evolve
the product, and actually
having people from hi5 in the
market to make sure that we're
getting consistency in things
like how we do research.
DANNY RIMER: OK.
But I mean jury is out as to
whether that's worth it or not.
Ramu Yalamanchi: That's true.
DANNY RIMER: Just checking.
Ramu Yalamanchi: We've
been able to grow--
DANNY RIMER: Just checking.
Ramu Yalamanchi: --in
so many markets.
We're the number one social
network in 26 countries.
And we've done that with just a
single office in San Francisco.
DANNY RIMER: So how many
of these social networks
can we have, right?
You guys are at a
massive scale.
Ramu Yalamanchi:
Forty-four million.
DANNY RIMER: And Matt was
talking about-- 44 million--
Matt is talking about Facebook
numbers, 109 million.
So how many of these
can there be?
Ramu Yalamanchi: It's
a good question.
I see social networks a
little bit like more similar
to network television.
I think it can support
potentially a couple
networks, or maybe two
or three in a market.
And I think if you look across
the globe, there's a number of
countries that within the top
five sites there will be more
than one that's actually
a social network.
DANNY RIMER: Ok now give us
a sense of is MySpace very
similar to hi5 for instance?
Or is it different?
Where are those differences?
Ramu Yalamanchi: I would say in
terms of how we look at the
world versus how MySpace looks
at the world, MySpace
seems to take a very
media-centric approach.
And they seem to say that
here's content that's on
MySpace, or here's content from
News Corporation, and we're
pushing it to our users.
We take more of an organic
approach where what we
facilitate is a way for users
to interact, to communicate on
the site, to be expressive
in very simple ways.
But all the content gets
generated from the
community itself.
DANNY RIMER: So it sounds
a lot like dating to me.
Ramu Yalamanchi: A little bit.
Well in terms of the use cases
I would say that the number one
reason people use a service
like hi5 is to actually stay
connected and to see what's
happening with their friends, a
very simple way of finding out
what happened last weekend,
or what just happened on
that trip that you took.
And in terms of what people
were doing in the past, if we
look at a country for example
like Mexico, recently we were
looking at the 15 to 24
demographic, which is a very
high-use audience on hi5.
And one of the things that
we noticed is that in
the last year hi5 grew
something like 81%.
All of the different mail
services were flat or
actually fell a little bit.
So it seems like hi5 is
actually being replaced
or replacing what people
were doing before in
things like E-mail.
DANNY RIMER: So what's the
end game for you guys?
Do you want to go public?
Do you want to buy Facebook?
What's the story?
Ramu Yalamanchi:
All of the above.
So no, in terms of just what
we're doing with the business,
you know we've raised
capitalists last year to
continue with our mission of
just getting big in more
countries, building the
services out further.
I believe that social networks
will actually become the
top sites in every market.
And that leads us to be coming
a starting point for what
people do day in and day out.
Since we're in so many
different emerging markets, one
of the interesting things that
happens as a result of that is
that hi5 becomes a lasting
brand in consumers minds.
DANNY RIMER: So the girls in
the last session were talking
about spending two hours on
Stardoll, two hours a day is
what it sounded like, which
is a hell of a lot of time.
OK so how much time are
folks spending on hi5
on a daily basis?
Ramu Yalamanchi: When they come
for a session it's somewhere
between 15 and 20 minutes
is what people spend.
DANNY RIMER: OK so they're
checking in, checking their--
Ramu Yalamanchi:
They're checking in.
They're looking at--
DANNY RIMER: So if it is sort
of a dating platform, or next
generation dating if you will,
which actually in the sort of
early days of hi5 that's what
you guys were coming out of,
or thinking of building.
Why not build a
subscription model?
Why advertising?
Ramu Yalamanchi: So the initial
business that we did was
actually before we evolved into
hi5 we looked and match.com-- I
think this was in 2003-- and
built a service that was
a competitor to Match.
And we learn a bunch
of things from that.
So one of the things we learned
is that you know in terms of
acquiring users the cost wasn't
a whole lot different than in
the market like the U.S. But in
terms of actually monetizing
users internationally, things
like credit cards and a bunch
of the markets that we're in
don't have the kind of
penetration as they do in the
U.S. And so that was one of the
reasons that we kind of lead to
building a service in terms
of what hi5 is today.
And also we looked at
advertising to monetize.
DANNY RIMER: OK.
So you're in the Valley,
you're an entrepreneur.
If you look at the next sort of
group of entrepreneurs coming
out the door, how many of them
are going after this social
network opportunity?
Ramu Yalamanchi: I think it's a
really interesting phenomenon.
With the launch of platforms
with both open social and the
Facebook platform, I think it's
interesting to see what
entrepreneurs are doing today,
versus what they might have
done something like
ten years ago.
So I moved out to San
Francisco, in the Silicon
Valley right when I graduated
out of University of Illinois.
And the only choice you had
was to go and start your
own company, and you know
potentially to have to
raise capital to do that.
Today you can go and
build an application.
It's a much lower risk way to
actually start entrepreneuring.
You can do it when
you're in college.
It's in some sense, lower risk.
And you know we see a number of
developers on the hi5 platform
actually making enough money
to sustain themselves.
So I think there's almost a
more lower risk way to enter
into becoming an entrepreneur,
and sort of grow that into
something much bigger.
DANNY RIMER: Super.
That's why Index is setting up
actual offices in dorm rooms in
all the colleges in the U.S. We
came to the same conclusion.
Thanks a lot, Ramu.
Ramu Yalamanchi: Thank you.
[APPLAUSE]
DANNY RIMER: Great.
So you'll come back later.
OK.
Next is Stefan von
Holtzbrinck, chairman of
the Holtzbrinck Group.
It's great to have Stefan.
He rarely agrees to this.
So we're going to take
advantage of interviewing him
and finding out how more of a
traditional media has migrated
into the digital world.
So Holtzbrinck in relative
terms to Facebook and at hi5 is
actually-- and Stardoll even--
is actually fairly complex
and is a much order of
magnitude of business.
So could you give us a sense
of what makes up the group?
STEFAN VON HOLTZBRINCK: Yes I
think maybe at best in the
context of community and
networks, I think that the
company comprises for
example of nature.
And what we do there is
we put the scientists in
the middle of a network.
We make sure that it's going
to be a trusted network
with the editor who
move around the world.
And then we promote his or
her work across the world.
That's one example.
The other example is we are in
education, in higher education
in the United States.
And with Bedford and Martin's
and Worth, Freeman.
And so what this is all about
as to help the teachers to
create their networks
with the students.
So what used to be a textbook
publishing is going to
be a network publishing.
So to create a network to help
them test and assess the
students, and in the
end to pass the exams.
Then for example we also
do book publishing.
Picador, Pan MacMillan.
In Germany it's
[? Robald Fisher. ?]
So we published also the one
who's coming next Salmon
Rushdie later on.
So if you look at the
implication of how important
the internet is to us, I don't
believe that in the future any
book publisher can do good
business if he's not
prepared for the internet.
So you need to know how
to create a community
around your readers.
For example, we are just
launching with the
help of Cory Doctorow.
He is one of the Boing Boing
bloggers on a network on
tor.com which is a science
fiction book company
that we do own.
And that's going to
be a global venture.
And last month but not least we
are in the newspaper business.
And with all sorts of
issues around the network.
And I assume we're going
to talk later about
that in more detail.
So as you can see it in the
end, I don't think that a
publisher who hasn't got
the passion to create a
network-- has used always to be
that way since many centuries.
Of just looking back at what
Gordon Brown said yesterday, if
you're a 500 years institution
you don't have to worry until
you come to the 500 years.
So Gutenberg was
just 500 years ago.
So I think the publishing world
is pretty much concerned.
And I think it's dealing
with all those issues.
DANNY RIMER: All right so
roughly I know you're
a private company.
But if you could give us a
sense of sort of your annual
revenue and how it breaks down
between press, and book
publishing, and online, and how
that online component
is growing.
STEFAN VON HOLTZBRINCK:
OK all these figures are
available on our website.
But I'll give it for
those of you who haven't
had a look at it.
So we have 2.5 billion
as our whole size.
And stuff breaks down 50/50
Germany, the other 50% are
divided in 80 countries
over the world.
Predominantly in those 80
countries are certainly the
U.S. which generates 40% of
our international revenues.
And in terms of the divisions--
and we're a highly complex
company-- so you can say it's
one quarter, it's the
book publishing.
And half, let's say over 1/3
is educational and science
publishing, 1/3 is newspaper
publishing, a little bit more.
And over 10% is internet
revenues, pure
internet revenues.
DANNY RIMER: Got it.
Now you have a venture arm.
And that venture arm also ended
up investing in a company that
you guys ended up buying in
the social networking space.
So tell us a bit about sort of
the logic behind the venture
arm, and then a little more
about the acquisition.
STEFAN VON HOLTZBRINCK:
Yeah I think venture tells
about venture capitalists.
It's an adventure.
And I think you can't sit
there and make no risks
in the internet world.
And so the venture opp for us
was the idea to play according
to the rules of the internet
since we had very good
experience early on.
For example, one thing which
came to us by adventure.
I mean partially on all that is
here, we launched it out of a
broken business which was
actually a job site that we
didn't manage to get
up and running.
But we took that technology
and we converted
into a dating site.
So since this business with
growing very well and other
activities as well, even during
the crash in the year 2001 and
2002, we found that building
those businesses
very important.
But how do you do that if
you're a traditional company?
So we said we must radically
change our views.
It's also, you need an entire
differential approach to
what's the management.
You can't have the word
cannibalization popping up
within your organization
all the time.
So we formed this new unit.
And we were funding them with
the beginning was few monies.
But since we had very few
dropouts, and those guys--
I mean [? Constantine ?]
[? Woburn ?]
is here-- have done a really
good job in monitoring almost
a thousand business
plans every year.
So we finally got to the point
that it was worthwhile
investing more and more money.
So like it was by chance for
example, we got into boll.com
in Holland which is the biggest
Amazon-like book distributor
online in Holland.
DANNY RIMER: Got it.
And then studiVZ is sort
of the Facebook of
Germany if you will.
That was an investment.
Is that correct?
STEFAN VON HOLTZBRINCK:
Yeah that was.
Also we're lucky.
There's always the saying
you should already start
living afterwards to
be on the safe side.
So the venture arm was very,
very clever in making a very
quick investment that
came to our table.
And [UNINTELLIGIBLE]
brothers, they
presented it to us.
And so within five days-- and
that's also the speed that you
need-- we closed the deal.
We didn't even sign.
We've agreed and closed
the deal to buy I think
15% in the beginning.
And then we were watching
about everything that
was happening there.
And I think for the most
part in those area-- I
mean for Germany we're
not in the west coast.
So technological-wise to cope
with all the traffic that was
coming up, et cetera, et
cetera, a huge undertaking,
a huge endeavor.
And those guys who are doing
it really well, the founders.
I mean coping with it, I mean
in comparison, it's as big as
German Telecom those days.
t-online.com.
And but then of
course sometimes the
server broke down.
And people were hacking
into the system.
What we found out by doing this
and monitoring it, that the
activity rate the next day the
system went back up again
was just phenomenal.
I mean all people went online
back as if all the flaws that
the system had showed
didn't matter at all.
And so since we saw this
enormous activity growing, then
finally we felt very well set
to make the final decision when
it came to 100% it
was on the table.
And we paid a good
price for it, I think.
And in the end--
DANNY RIMER: From a venture
standpoint or from a corporate
standpoint, a good price?
STEFAN VON HOLTZBRINCK:
From both parts.
I think the venture guys
are happy because they're
incentivized to also.
I mean even those guys were
making money on the internal
transaction of the deal.
That's our rule.
And and of course, the
other ones as well.
So everyone I think
is really happy.
DANNY RIMER: And how is it
worked inside of Holtzbrinck?
Has it continued to grow?
STEFAN VON HOLTZBRINCK: I mean
the one key in the internet
world is that you need creative
CEOs at the top, and a
good technology officer.
And the rest is
decentralization.
So our group, we have
a very small holding.
There are only 40 people in
Stuttgart, sort of controlling
or trying to cope with the size
and the breadth of everything.
And then so we give a lot
of room to develop the
company from within.
I think the worst we could have
done is we come there and you
integrate it into some kind of
corporate structure
and culture.
I think that's it's going
to be dead by then
within a few weeks.
DANNY RIMER: Had you done that
and learned from your mistakes?
Or that was your instinct?
STEFAN VON HOLTZBRINCK:
No it was always.
I mean that's something
that came from my
father and my brother.
I think it's always this kind
of highly decentralized.
For example in the newspaper
we never did any kind of
political campaigning.
And in our group, the men and
women at the top are the men
and the women who are on stage.
That's why I don't give
rarely interviews.
And it's only to give applause
to the team worldwide
more or less.
DANNY RIMER: Got it.
And so your appetite for
actually getting more involved
in the internet spaces is very
significant, both in terms of
what you're doing with your
traditional holdings as well as
looking for other
opportunities.
STEFAN VON HOLTZBRINCK: I think
quite deliberately we said some
years ago-- I mean it's not
that long ago, 2006-- I mean
you see the fundamental
change which I described it
every one of our units.
And so we said we want to
achieve 25% in the internet.
And that's given the depression
of revenues that you face
compared to newspaper
revenue for example.
That's quite an ambitious goal.
But if you don't set it, and
live up to it and if you don't
provide the funds for it,
you're not getting anywhere.
So you have to take the risk.
But I feel that if we don't end
up making 25% in the next few
years we have missed out on
a lot of opportunities.
And also if you look at the
fundamentals of the traditional
business, I think as a group
we under incur some risk.
DANNY RIMER: And so how do you
sort of reconcile the
valuations that you're paying
for these highly unprofitable
businesses versus sort
of the strength of your
traditional business?
How how does that happen?
STEFAN VON HOLTZBRINCK: I think
the most important part is that
you can show a certain
success rate.
I think if the other people in
the group would feel hey we're
paying for a lot of loss-making
units, after a certain period
of time they'll say OK, we have
to produce all the cash
they spent otherwise.
By the way, we only spend
50% of our investments
in new media.
And the other 50% go back still
into the traditional media.
But looking I mean I could say
that we have at least three
parts within our portfolio
which would cover all of the
costs of all the 50 ventures
that we have undertaken, each
one of those in the last ten
years by divesting them.
And that shows that's
the strategy.
And I feel quite
comfortable was right.
DANNY RIMER: OK.
And with respect is
studiVZ, what is the idea?
Are you going to take on
Facebook in multiple countries?
Or do you just want to focus on
Germany, and make it impossible
for Facebook and
hi5 to come in?
STEFAN VON HOLTZBRINCK: I think
for Germany, I mean germany
is our major market.
And I think Germany is first.
And I think so far we're
doing pretty well.
I think the take-up rate in
studiVZ hasn't seen any
dents in the recent months.
So 25,000 people everyday
subscribe to the site, ten
million plus these days.
I think we are working on
significantly improving also on
the technological side so that
we have no open flank towards
being taken over by someone.
DANNY RIMER: So if you hold
Germany as the turf for
studiVZ, you'll be very happy?
STEFAN VON HOLTZBRINCK:
Absolutely.
DANNY RIMER: OK, OK.
Got it.
All right, good.
They understand what's
coming up their way.
Good.
Thank you very much, Stefan.
STEFAN VON HOLTZBRINCK:
Thank you.
[APPLAUSE]
DANNY RIMER: Next up
is William Lewis.
WILLIAM LEWIS: In fact I'm
bringing up my jacket here,
because it's got my most
important possession in it,
which is not my Blackberry,
it's my ticket for the game
in Moscow tomorrow night.
So we can't be too long.
I must say I was up very early
with my son this morning.
And he said, Dad you must
be psyched about today.
I said absolutely.
I can't wait.
It's my biggest ever thing.
I'm flying to Moscow.
He says, Dad are you crazy?
You're going to be YouTube
for the first time.
But I'm focused for
this morning on this.
DANNY RIMER: OK.
Clearly.
Clearly.
Maybe, is your son available?
Because we like interviewing
young youth here.
WILLIAM LEWIS: Yeah I saw that.
That was good, yeah.
DANNY RIMER: OK.
Great.
Well tell us a bit about how
you came to the Telegraph
Group and what you were
doing prior to joining them.
WILLIAM LEWIS: OK, so I've been
a journalist for 18 years.
I worked in a couple of other
places like the Financial Times
with Christa, who I think
was here, and is here today,
both in the UK and America.
DANNY RIMER: We call
him FT.com by the way.
WILLIAM LEWIS: Oh do we?
OK right.
OK.
I worked a couple of newspapers
at News Corporation as well.
And I came to the Telegraph
Group about two and a half
years ago when we began quite a
radical change program to try
and take a newspaper group, a
very traditional newspaper
group which was founded in 1855
and try and turn it into really
a digitally focused
organization which tries to
answer on a daily basis the
following question: can you
produce both newspapers, the
daily and the sunday
newspapers, to the same or
higher quality on a daily
basis, but also the same time
confidently march into the new
digital arena and display our
wonderful content in all the
devices and distribution
mechanisms we've been hearing
about this morning.
DANNY RIMER: So that's
obviously a challenging
question, right?
Especially since once you go
online, you're exposing
yourself to much larger
international audience than
what you might do in print.
So how has that evolved?
WILLIAM LEWIS: Well it's
been fantastic actually.
It wasn't a
deliberate strategy.
We set out to really focus
on the UK customer.
And we have about six million
monthly unique users the UK.
Then as we were hearing about
earlier, if you devise an
organizational structure where
you're following in the
customer, you stop being
a producer interest
dominated organization.
And you say that if there's an
earthquake in China, you don't
have to wait until tomorrow
morning to read it
in the newspaper.
We will give you our best
journalists writing about
it in as near real time
as we can possibly.
A funny thing happened
which is that we began to
attract customers from
around the world.
And we last month did 18.6
million global unique users,
a majority of whom were
from the United States.
It wasn't deliberate.
But it's become a wonderful
global event for us.
DANNY RIMER: Is that
a particular story
that motivated it?
Or actually that's just what
happens month over month?
WILLIAM LEWIS: It's
just what's happened.
It's happened with our
political coverage.
It's happened particularly
with anything around
the security theme.
It was obviously a first
particularly in the U.S. for
people who write about events
that affect the U.S. that's
aren't in the U.S. media
prism if you like.
They're coming in a
slightly different way.
And that's been a
fantastic thing for us.
And the most important thing
about that is not just the fact
that people around the world
able to enjoy off what we
would say wonderful content.
But also they join in debates.
And it's become a
global community.
So a fascinating thing is
happening in our mind,
with particularly English
language content.
Which is that it is globalizing
in the same way as the-- if you
go back to various other
industries of financial
services industry-- globalized
many years ago to where it is
now, we have a feeling that the
same thing is happening
with English language
content industry.
DANNY RIMER: So you talked
about community here.
Which obviously brings us back
to the social networking theme.
So are you developing social
networking capabilities
within your online sites?
WILLIAM LEWIS: Yeah.
So we got something called
MyTelegraph which has
20,000 registered users.
It's a kind of insight
into middle Britain.
DANNY RIMER: Can I just
pause you for a second.
So 20,000, we've got
109, we've got 60 plus.
So why?
Why not just syndicate it
out to all those different
social networks?
WILLIAM LEWIS: So it's
a twin track, really.
I mean actually the most
important thing, we're very
clear what we're good at.
We have wonderful people
who we employ to create
world-class content.
And we have a fantastic brand.
The rest we kind of realize
we're not that good at.
And we work with brilliant
people like Facebook, like
Google, like Digg, to try and
get our stuff out there.
We're not shy about it at all.
We say please help us
bring this to the world.
We have our own little event
which is for us to show that
our brand isn't just a
traditional media brand.
It's also an enabling brand.
If you want to house your stuff
under our brand and that makes
you feel good, and you feel you
want to join with other
like-minded people, who
are we to stop you?
So it came really from the
customers saying, how can
we express ourselves
under your brand?
DANNY RIMER: But it's
not really a big focus
of your online push.
In other words, it's more
important to get the content
out there than to try and sort
of compete with your own social
network Telegraph readers.
WILLIAM LEWIS: Absolutely.
The most important thing was to
interrupt the one-dimensional
work flow to ensure there was
multiple points during the day
where we're delivering content.
That's been the first base.
The second base it where we are
now, is to be fully focused
on distributing our stuff
wherever we can get it.
In any community just to say,
we think you'll enjoy this.
And we have a proven track
record that people around
the world would enjoy this
content and benefit from it.
It would add value to them.
The third bit is we're chipping
away creating our own little
thing which is around
the enabling concepts.
DANNY RIMER: And is this all
as a result of sort of print
advertising declining?
Or what's the motivation here?
WILLIAM LEWIS: I think the
motivation was twofold.
Certainly there is an issue in
the traditional print world
where the death of the
newspaper is much overstated.
We have a wonderful newspaper
product both of every
single day the week.
And that's going to be around
in our mind forever and ever.
No, but clearly the numbers are
going down in general terms,
and the newspaper
is not going up.
And that would seem to
be the case for the
foreseeable future.
So you're driven
partly with that.
But let's not muck around here.
There are fantastic
opportunities.
It's like entering a
whole new, what we would
call here a tuck shop.
It's just a wonderful thing to
finally take, to be able to say
all this content we create can
be taken to the world by these
new distribution mechanisms.
So it's more the excitement
of it rather than
the need to do it.
DANNY RIMER: So I mean the
logistics behind printing and
newspaper, getting it out on
the shelves, I don't
even know how to.
I mean I don't know what
time things start.
WILLIAM LEWIS: Good, yeah.
That's good that you
don't know that, because
it gives me a job.
DANNY RIMER: Yeah,
there you go.
No I mean it must
be a complete.
So what happens to
the logistics arm?
If you could just get away from
the print industry, even though
it's been sort of the
bread and butter.
You'd do that?
WILLIAM LEWIS: No
absolutely not.
DANNY RIMER: Because you
want to keep your job
or because economically
it doesn't make sense?
WILLIAM LEWIS: I don't know.
That's kind of a
loaded question.
I suppose the reason we do it
is because we have 870,000
people a day, which equates to
more than too many people who
love and read our papers.
Who am I to say, to reward your
loyalty by saying we're going
to take away the thing that
you enjoy reading every day.
Our job is just to work harder
to ensure we can produce the
newspapers, and also
march confidently into
the digital world.
So we say to our guys,
just get on with it.
The newspaper is here.
For as long as the customers
want the newspaper, it is here.
And in no way can we even
think about shutting it down.
We wouldn't want to.
They're very, very
loyal customers.
DANNY RIMER: So if you nail the
digital side of the business,
could the Daily Telegraph be a
much bigger sort of online
business than it
is historically?
WILLIAM LEWIS: Yes.
I think the growth projections
we have that will occur--
DANNY RIMER: Because of
the internationalization?
WILLIAM LEWIS: Yeah and partly
because obviously in the UK as
you'll have found out from
being here, people
are mad for it.
I mean we are as a nation
probably more up for new
distribution mechanisms in
a way that more any other
country in the world.
So there's a real core of
people willing to access
content on their mobile phones,
Blackberries, whatever devices.
So we feel very confident
about that future.
The issue for us is managing
now to just this next bit
of the change process.
So we've redone the plumbing,
if you like, when we've
moved into this new house.
And now we've just painting
the walls and making it
looked really lovely.
Once we've got to that
stage, I think we will
have got to third base.
DANNY RIMER: OK.
And then when you think of
competition-- so you know there
are all these sort of
traditional players that are
migrating the same way you are,
or are either ahead of you or
behind you-- are they the focal
point from a competitive
landscape standpoint?
Or where do you
spend your time?
WILLIAM LEWIS: OK well we spend
our time-- not to be trite
about it-- but we spend
our time on the customer.
DANNY RIMER: Sure, fair enough.
WILLIAM LEWIS: So this thing is
growing so fast to the idea
that we wake up in the morning,
as we did in the traditional
newspapers, and have a picture
of the enemy on the dart board
and throw a dart at
it is kind of gone.
We're obsessive
about the customer.
DANNY RIMER: Can you tell
us who that is, or no?
WILLIAM LEWIS: Well it
would have been a number
of people actually.
Not you, so that
would have been OK.
But now we are in the mindset,
our organization is to
grow it for the customer.
So following the customer.
If the customer as we heard
from hi5 is in Portugal or
in Denmark from Skype,
go to the customer.
Don't set up an office
there by the way.
Do it out of London.
Maybe put some resource there.
But TV is a very good example.
I mean what's happening in our
industry is the traditional
distinction between text
and video is fusing.
And the Holy Grail is to
develop a content site, or
stream of content that
merges but text and videos.
So we now are in the very
strange, that we would see
our-- without being too
high-falutent about it, we
would see our main competitors
being people like the BBC or
CNN where both of whom are
trying to use video and text to
enable the customer to him or
herself decide how they
find out about a story.
Who am I think so you can
only really know about the
Chinese earthquake in words.
Who are the BBC to say you
can only do it in video.
You have to provide both
and let them choose.
DANNY RIMER: OK.
Thank you very much.
