The media sector had to deal with the risks and opportunities of the digital transformation earlier than many other industries, and Bertelsmann was no exception. As a result, there are many successful digital business models across the company.
RTL Group is one of the global leaders in online video; Penguin Random House has a larger e-book offering than any other trade publisher; Gruner + Jahr generates a substantial share of its revenues with digital businesses; large parts of the business models of BMG and the newly created Education division are designed specifically to meet the requirements of the digital world; and in the services sector, Arvato is becoming the service provider of choice for various tech and IT companies.
These activities illustrate that the digital transformation of business has become crucial to success for Bertelsmann. One of the most important requirements for this is to equip executives and employees with the necessary skills to navigate the digital world. As early as summer 2013, the Group’s top management visited Silicon Valley for several days to get firsthand information about digital trends, discuss their importance and learn how to strengthen ties to the digital world. This was followed up with “boot camp” and “lounge” exchanges to gain innovative digital expertise for Bertelsmann executives and various employees. The new, improved Bertelsmann University relies increasingly on digital teaching methods to provide vocational training – on digital and other topics – to all employees, anytime and anywhere – a redefinition of the corporate learning culture meant to encourage lifelong learning. Beyond this, close ties to more than 130 digital start-ups and various other partnerships in the technology sector have also had a positive impact.
In conjunction with the digital transformation of its core businesses, Bertelsmann has made “having an established digital business model” a key requirement for investing in new activities. As a result, many of the companies acquired over the past few years have exclusive digital operations, including the education provider Relias Learning, the multichannel network StyleHaul, the online advertising marketer SpotX and others.
The upshot of all of these measures is a growing share of digital revenues. In 2016, Bertelsmann generated 44 percent of its revenues digitally, compared to 30 percent in 2011. Digital revenues come from five areas:
All of these have increased their revenue contribution significantly since 2011 and are expected to continue so in the years ahead.
“Total Video” in white lettering on a red background framed by a digital-looking heart: the presentation by RTL Group’s entire top management at the Bertelsmann Management Meeting 2016 made it clear that the Group has wholeheartedly embraced the redefinition of “TV” – and for good reason. Alongside broadcast and content, digital activities now form the third pillar of RTL Group. The Bertelsmann subsidiary now generates more than 26 billion video views per month. In 2016, the Group continued to work on better monetizing this vast digital reach. Beyond the production of innovative, original content for the digital world – e.g., by Fremantle Media digital studios including Tiny Riot, UFA Lab and Shotglass Media – the focus is on developing technology competence in the field of digital ad sales.
To that end, the Group took over the digital advertising sales house Smartclip. The €48 million investment – Mediengruppe RTL Deutschland’s largest digital acquisition ever – strengthened the Group’s position as an online video advertising sales house in Europe.
In cooperation with the programmatic advertising platform SpotX, which was acquired in 2014, Smartclip also opened up opportunities for innovation for RTL Group worldwide.
“This is the coolest thing to ever happen to the [New York City] subway,” wrote the magazine “InStyle” in praise of the “Subway Reads” campaign by Penguin Random House and the New York Metropolitan Transportation Authority (MTA). For eight weeks last year, the publishing group offered train commuters in New York City five short stories as well as excerpts on an online platform from 175 books by celebrated Penguin Random House authors. Subway passengers were invited to download them immediately and read them for free – an innovative way to reach the widest possible reading public. The campaign also provided a gateway into Penguin Random House’s steadily growing e-book offerings. At the end of 2016, 128,000 titles were available in digital across its worldwide divisions – no other trade publisher offers such a large portfolio.
Launched at the beginning of 2016, AppLike was already live in 12 countries by the end of the year. G+J’s new marketing platform expanded very swiftly last year, with double-digit growth rates in monthly user base and revenues. And this wasn’t the company’s only success in the digital business. The multichannel video network “Club of Cooks” was also successfully established and now generates more than nine million views per month on YouTube and 30 million on Facebook.
G+J also invested in its digital business through acquisitions. In France, Prisma Media took over Groupe Cerise in June and since then has been the country’s market-leading publisher in terms of video reach, with 7.5 million unique users per month.
By acquiring the technology company LiquidM in September, the G+J subsidiary Ligatus expanded its position as the leading provider of native programming in Europe.
Both the volume of successful fraud attempts and the cost of fraud per dollar are on a steady rise. Given the variety and increasing speed of the different forms of fraud, it is becoming more and more important to find effective solutions for digital business models. Arvato Financial Solutions has developed an innovative fraud management solution that covers all relevant fields of fraud (identity theft, account takeover and payment fraud). The digital fraud solution not only enables effective fraud detection along the entire customer journey, but also facilitates a customer-friendly process design. The industry-independent solution uses state-of-the-art technologies such as big data and machine learning. When the solution is used globally, it takes European data protection laws into account. Arvato Financial Solutions thus offers its customers an innovative solution that reduces all types of fraud and helps prevent attacks.
In 2016, Arvato CRM Solutions and the IT corporation IBM collaborated on further advancing digitization in customer service. For example, a solution was developed for the tourism industry that immediately and precisely classifies emails by their content, enabling partially automated processing. The system is trained, based on the cognitive technology IBM Watson, using several million past customer inquiries.
In the next step, it will be transferred to a chatbot to allow fully automated dialogue between man and machine. The advantages of this solution are that customers are given a 24/7, easily accessible source of information for uncomplicated inquiries, and customer advisors are able to focus on more complex processes.