A strategy and business model assessment of Euroinvestor. A Danish financial media for private investors

Abstract

The global media landscape is undergoing drastic shifts. Over the last couple of years, the industry saw advertisement revenues decline due to the emergence and domination of the large American technology companies. Media users and advertisers can now easily search and find news content beyond the platforms provided by media companies. On top of that, media companies are no longer in charge of the technological infrastructure, and commercial standards they use for providing content to their own users. Global players such as Facebook, Apple, and Google now determine significant parts in the commercial value chains of media companies. In addition, the business models and value chains that have grown historically in have vanished thanks to new technologies. Strategy analysis, formulation, and business model innovation have never been more important topics in the industry than today. For this in-company project, hosted by DPG Media, performed by Bo Cleyman, Elisabeth Goossens and Peter Mohay, and academically supervised by Prof. Dr. Kurt Verweire, the students of Vlerick Business School were assigned a project for Euroinvestor. The company is part of Berlingske Media, the Danish holding company under DPG Media. Euroinvestor is an advertisement funded financial news media that targets private investors. It is a small, but rapidly growing financial news media that targets private investors. Until now the growth of the company has increased yearly in pageviews and unique visitors. The company’s recent boom in traffic is caused by a surge in individual traders, who now have access to commissionfree online broker apps, governments stimuli, and lots of downtime during the pandemic. Nevertheless, the company’s financial results are disappointing. Euroinvestor had a negative EBITA margin of -40%, which translated in a negative result of - €381.000 in 2020. The Belgian management team is eager to learn whether Euroinvestor has more potential in terms of revenue growth and profitability. During the in-company project, it is the assignment of the students to break down the problem and find root causes of the poor performance of Euroinvestor. Additionally, it is requested to investigate opportunities to improve its performance. The students formulate the research question as follows: “Is it possible for Euroinvestor to increase profitability to 30% with €1 million in EBITA within the next three years through strategy and business model improvements?” The project was divided into two periods. The first period took place in Belgium. During the time in Belgium, the students took the opportunity to conduct a thorough strategic market analysis using Michael Porters (1979) Five Forces framework to analyse the Danish media industry. This analysis was executed through both primary and secondary data collection. To complement the findings from the literature review, primary empirical insights were collected by way of industry expert interviews and focus groups. Furthermore, the company’s annual statements were analysed, and several internal stakeholder meetings were arranged to clarify remaining questions about Euroinvestor’s strategy and business model. In Denmark, multiple internal stakeholder meetings and feedback moments were organized, as well as regular update meetings with the DPG Media steering committee with the aim of developing a realistic and ambitious 3-year business plan. The strategic market analysis showed that in Denmark the advertisement revenue excluding the revenue earned by Google, Facebook and LinkedIn declined in 2020. Furthermore, advertisers have numerous alternatives to advertise on as entry barriers are low. On the other hand, the target market increases as the digitalization and the pandemic have caused a surge in private investors. Consequently, the students did literature studies on alternative revenue sources in the media industry as well as investigate and interview other companies within the financial media industry to find out more about successful business models. It appears that affiliate partnerships and subscriptions show to be the most promising alternatives. For the strategy evaluation of Euroinvestor, the students applied a framework of Vlerick Business School. This framework states that winning companies should have a unique and focused definition of four building blocks: Whom do we serve? What do we offer? What is our value proposition? And what is our value proposition? It is concluded that in order to become more successful, a more detailed, elaborated, distinctive and focused understanding of these blocks should be described. It is crucial for a company to make sure that the quality of the strategy is high for execution to be effective. Consequently, those building blocks were redefined. The target group is segmented into three different subgroups: the passive, casual and active private investor. The total potential market size is estimated to be 1.300.000 people. The students observed that these different groups have different needs that need to be satisfied. Regarding the product offering, the students concluded within the financial media industry it is necessary for Euroinvestor to offer a deep selection of specialized products of very high quality. The value proposition of the company should be in offering qualitative products and connectivity with and among its key customers. And finally, a pivot in operating model is recommended towards a more customer intimate model., Finally, a business model is developed that translates the new strategy of Euroinvestor in a concrete three-year business plan. Business modelling is about how you organize your activities and resources both internally and externally to make money. For this reason, the business plan was structured into the three revenue streams: advertisement, affiliate partnerships and subscription revenue. These revenue streams are necessary to make the company more profitable. For each revenue stream a detailed description of its products, strategic fit, operational requirements and financial implications are presented. Within the advertisement revenue model, it is advised to elevate the quality of the website by investing in a better user experience and user interface, better tools, and new content. Two affiliate partnerships are proposed and described in detail. Finally, the subscription package is presented. This package includes model portfolios, Euroklubben, weekly workshops and seminars, and access to a Euroinvestor audio library. In terms of financial projections, in the business plan it is estimated that Euroinvestor would increase its total revenues to €3.280.600 in 2024, which is 63% higher than the base case. The revenue split in 2024 will be: 71,9% advertisement revenue, 3,7% affiliate partnershiprevenue, and 24,4% subscription revenue. Finally, its profitability margin will increase to 30,89% in 2024, which is 24 percentage points higher than its budgeted 7% margin for 2021. This equals an EBITA of €1.013.297 in 2024. To conclude, this document includes a thorough market and company analysis that can be used as a guideline for Euroinvestor’s future activities. Additionally, it can be used a source of inspiration an information to enter the financial media industry.