E-commerce: Doom or Goldmine for Traditional Media in Indonesia?

As part of an extended series of industry-focused breakfast events across Asia, Solidiance organized an exclusive breakfast roundtable meeting on the 26th of July 2016 in Jakarta to discuss on key issues faced by the traditional media in Indonesia.

Changing customer expectations and behavior towards media, as well as the era of digitalization, have led to numerous business model shifts in traditional media. Rapidly increasing numbers of internet users in Indonesia, growing middle class, the rise of millennials (the generation born between 1981 – 1997 predicted to make up 75% of the global workforce by 2025), coupled with urbanization, all attribute to digitization, creating a dramatic impact on consumer’s expectations towards the media, the way they consume it, and how their familiarize themselves with the use of technology in the digital world.

While most of traditional media companies are adjusting their business models to cope with today's digital era, some have already started the re-allocation and restructurization of their forces. Few early adopters like detik.com, viva.co.id and kompas.com have created massive changes in the media landscape in Indonesia, giving rise to social media outlets that have led to the overflow of content and information.

Key Takeaways

1. Key challenges for digital transformation faced by traditional medias
   What has become the main challenge in Indonesia’s media industry – and that goes to the majority of all global media publications with advanced digital channels – is the monetization of online traffic. Whilst online channels are able to capture extensive data through analytic tools such as number of views, audience rate, demographic information, etc – it does not really result in economic growth of the business should they fail to leverage them for valuable advertisers and partners. Figuring out how to drive business changes and create avenues of growth while increasing revenues through these ‘online traffic’ is indeed not an easy task.

   Digital advertisement is no longer a ‘safe haven’ for publishers and medias nowadays. Online audience behavior is something to be cautiously assessed as digital ads are growing more and more ineffective in attracting more traffic and engagement that advertisers and brands are seeking. The number of ‘likes/followers/fans/shares/views’ that digital ads feed on will eventually just mean statistics without proper conceptual understanding and strong analytical skills.

   Moreover, the overflow of information across the world wide web intensifies the competition landscape among digital platforms. The race has now shifted towards who is able to provide the most relevant, customization, and personalized content for each audience group.

   The digitization of media has also driven change in how/who creates the content. The rapid growth of social media use has enabled users to create, curate, publish, and share any piece of information to a greater audience, combined. This kind of magnitude results in the changes of the competition landscape within the digital area. Medias no longer compete only among themselves. Instead, they are now competing with tech giants e.g. Facebook, Twitter, LinkedIn, and others who are progressively transforming into news publishers with strong audience base – especially as they try to further disrupt the industry with new tools to better monetize on their products (e.g. Google → AMP, Facebook → Instant Articles, etc).

2. Needed: business model revamp and content financing scheme
   Today’s traditional media companies and e-commerce players are tangled up with the enormous amount of what technology has to offer. The old business model is no longer effective as the traditional demand VS supply scheme does not work in the digital landscape. Whilst the old model indicates that the increase of supply means a notable rise in capital cost, in the digital world, more supply is equal to minimum cost increase or even no increase at all. The difference between the two would be a flawed concept to be applied to the digital landscape.

   On the other hand, news as a product of journalism is becoming a good in itself with the aim to be sold as a price. As such, news is becoming more and more of a commodity than ever. The commodification of news makes it more difficult to distinguish news from other outlets – when all news seems similar, a distinct, custom voice and information becomes valuable. If general information is treated as a commodity, then any news sources that differentiate their content from the others will have an increased value, which people are willing to pay money to read. Mind you, most of the online news product in Indonesia at the moment is available for free.

   In response to this, media companies can actually take it to their advantage by bringing higher quality content and journalism standards to the audience. The notion of gaining more viewingship by feeding the readers an overflowing river of information, regardless of its quality, has got to stop. The commodification of news and content needs to end, and stronger focus on quality of information has to be more popularized. Once good quality content comes into frame, the subscription model can be implemented with the audience being charged for what they read.

   However, good content does not come without any cost for publishers and medias. Ways of financing digital content and journalism in Indonesia vary, including diversification of services and product optimization to extend sources of income. KataData, an Indonesian news platform, works with a variety of brands offering a new way to provide information through infographics. Some other medias choose to slowly shift towards content marketing / native ads / sponsored content as a new revenue stream, which involves zero bias and offers more journalistic value for brands.

   In other cases, direct community engagement pointed out by Femina Group has helped them extend loyalty and drive personalisation through the use of their digital platform and social media channels, which ultimately enables content intimacy with customers. At the end of the day, content still proves to be of power, and digital media is just another platform that can bring business and its customers closer together.

3. Opportunity for growth and profitability: digital media and e-commerce
   Digital media companies in Indonesia are beginning to integrate their services with e-commerce, where it pushes for brand awareness and transaction simultaneously. Others choose to diversify business portfolio by acquiring tech start-ups or utilizing the company’s existing capabilities to open up a digital business that can later on sell its service. One example is Emtek’s acquisition of BukaLapak, one of Indonesia's top online marketplaces to company value and spur growth.

   In other cases, media industry's core competencies are a perfect fit for supporting back-end operations of e-commerce business. For instance, sales and marketing initiatives using content and building traffic may serve as lead generation for e-commerce customers to the current printed distribution chain, which can later on be transformed into a profitable e-commerce distribution network.

   When it comes to gauging the opportunity for growth and profitability of digital media and e-commerce, the measurement unit still relies to the number of revenue and profit it creates as well as the period of return on investment (ROI). Venture capitals in Indonesia admit that in comparison between the two, the digital media offers more stable opportunity in a longer term as the platform has been proven to provide positive cash flow – but only once the then-traditional medias have successfully implemented a new business model adjusted for digital transformation.

   E-commerce, on another hand, is admittedly a risky path – although commonly equipped with robust user base and revenue growth – especially considering its basic assumption of shorter ROI (5 years) that has not been able to be validly proven in the Indonesian marketplace.

   After all, experimenting on a variety of innovative small-scaled business models is paramount to sustain growth. Once a business model fits, aim to enhance and improve it by personalizing the content to user preference.

4. The future of digital media : technology, storytelling, personalization
   The ineffectiveness of digital advertisement, commodification of news, and overflow of information out there call for quality content tailored specifically to audience’s needs and preference. Publishers and medias nowadays not only need to rethink what content they produce, but also how they provide it. One suggested solution is to shift towards “storytelling” method of news production. This can be further enhanced through the advancement of technology in which the way multimedia enables different kind of stories to be told through not only text, but also pictures, videos, even virtual reality (VR) and augmented reality (AR). Higher interactivity this new technology offers may change audience behavior in the way the consume media, driving the increase of user engagement and traffic.

   Personalized content is also becoming ever-so-important with the commodification of news that blurs quality content and clickbait pieces out there. By adjusting the way content is delivered, the need of each niche market segment would be more addressable and eventually profitable for the business. At the end of the day, the future belongs to those who choose to focus on their customers (audience/users) and are willing to reinvent their business models based on what the current technology and digital landscape have to offer.

About Solidiance

Solidiance is a corporate strategy consulting firm with focus on Asia with offices in 12 offices in: China, India, Indonesia, Lebanon, Malaysia, Myanmar, Philippines, Singapore, Thailand, UAE, and Vietnam. Solidiance advises CEOs on make-or-break deals, define new business models and accelerate Asia growth. Solidiance's expertise is on e-commerce, media, digital content, telecom, and mobility.

www.solidiance.com

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