Digital strategy irony

Like most newspaper groups, Fairfax has failed to evolve to accommodate the depredations of the digital revolution. Their business model is broken, and the way forward is unclear.

The one spot of light in a gloomy future was the NZ auction site “Trade Me” which Fairfax bought for $700 million in 2006, then floated 34% onto the ASX, and a further 15% last year, raising $422 million, leaving them with a 51%, share which they are now selling for $616 million. The proceeds of the sale, are being used to pay down the debt accumulated to keep a redundant business model alive, offering an opportunity for it to change before being terminal.

Trade me was delivering profitability, superior return on funds, and an important toe in the digital water, but is being sacrificed to keep the legacy business afloat while it tries to adjust. In addition, Trade Me, along with Fairfax’s other less prominent digital assets offer the opportunity to  experiment, test, to learn how to survive and compete  in the digital environment.

The lesson in all this is that if you do not cannibalise yourself, somebody else will accommodate, and the pain of chewing your fingers will pale into insignificance against the pain of being chomped around the waist by a white pointer. The irony however is that the only digitally sustainable asset in the house has to be sold to buy some time, but leaves the business without any significant cash generator in the digital space.  At least Fairfax shares rose yesterday, so directors are probably happy this morning.

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
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