Naspers rides tech wave to riches

WHAT do you do when your business is threatened with oblivion?

WHAT do you do when your business is threatened with oblivion?

A vivid comparison was recently laid bare: one was the leak of a confidential memo assembled for the leadership of The New York Times that revealed, in gruesome detail, the plight of the company. The other was an earnings report that caused the stock of Naspers to nudge towards its all-time high and hit a market value of about R440-billion, or almost 100 times what it was worth in 1994.

By contrast, shares of The New York Times trade for about the same nominal value as in the mid 1980s.

It is a tale of two different strategies.

In 1997, the management of Naspers and The New York Times were each confronting the dawn of the internet and the insidious challenge it posed to the idea of a "paper of record", expensive printing plants and truck fleets and the conceit that all-important news could be contained in one place.

Naspers decided to ride rather than fight the technology tide; The New York Times chose otherwise.

Today, both companies have fairly new CEOs, but whereas the head of The New York Times has to deal with the consequences of 20 years of ruinous decisions, his counterpart at Naspers has been dealt a royal flush. The New York Times CEO inherited a company that missed not just one but two media revolutions - television (mastered in a spectacular manner by Rupert Murdoch) and online (mastered by Koos Bekker, then-CEO of Naspers).

Between the 1990s and mid-2000s, The New York Times spent about $2-billion on assets that later melted down, including the Boston Globe (bought for $1.3-billion) and About.com, bought in 2005 for more than $400-million and later sold for $300-million. In 2000, The New York Times had revenues of $3.6-billion and operating profit of $635-million. Last year, its revenues were $1.6-billion and operating profit $158-million.

Bekker took a different tack.

Naspers became one of the early internet service providers in South Africa, but Bekker's defining move - and the one that sets him apart - was his decision to put online first by starting, investing in or buying companies that were born on the web. The best known, and by far the most profitable, was Naspers's $32-million purchase of about half of Tencent, which at that point was the operator of China's most popular internet messaging service.

Before retiring as CEO, Bekker outran and outwitted the world's old-style media companies as he turned part of Naspers into a fast-moving finance house.

The result: Naspers is now the largest internet company outside the US and China.

Naspers's progress is in stark relief to the plight of The New York Times, laid out in the leaked 97-page memo that concludes with the breakthrough idea that the organisation should "consider a task force to explore what it will take to become a digital-first newsroom".

Understandably, the Times's task force was busy trying to come up with ways to arrest the online audience decline. But that is less than half the battle.

The Times's report did not address how an internet property, dedicated to broad-based news and information, can ever generate a lot of money. Without solving that riddle, there is no path to prosperity.

Moritz Works at Sequoia Capital Global Equities, which holds shares in Naspers© LinkedIn