Buying Zap would make Axel Springer major force in Israel

Ilan Zachi Photo: Rami Zarnager

The combination of Zap with Yad2 will give Axel Springer extra capabilities in the field of advertising.

In the digital era, an inseparable part of today's advertising industry, a great deal of money is spent on areas perceived as boring - searches and indices. This is where Axel Springer is now taking one more step towards becoming a data empire in Israel.

In order to understand what Axel Springer is now doing, we will attempt to delineate the financial dimensions of the area in which he is now operating. It is difficult to know just how much money is involved in the search segment, because the companies, mainly Google, do not disclose how much revenue they are getting. It is estimated that Google, through its advertising in search engines and the derivatives from it, accounts for NIS 600-700 million of the digital advertising total of NIS 1.5-1.7 billion in Israel (the types of advertising are the result of a search but the their application is on content websites). With all due respect to the fancy brands, over 60% of this money comes from what is called the "long tail": hairdressing salons, websites, electrical shops, and the like. Google's big advantage, which its local competitors on the content websites lack, is the know-how accumulated in its systems about the surfers' shopping plans. This know-how is translated into the advertising information streamed to the surfer, which is supposed to result from an understanding of what he intends to do. In advertising, knowledge is power, and Google has a lot of knowledge.

Axel Springer is a company that sprang from traditional media. Despite its late entry into the digital sphere, however, a large proportion of its revenue in recent years has come from digital, mainly from online classified ads. In mid-2014, Axel Springer acquired Yad2 from the Walla! website for NIS 800 million. In recent months, the group has been negotiating with Apax Partners for the acquisition of Zap.

Apax is asking for NIS 400 million, and sources close to the deal believe that despite Axel Springer's enthusiasm, it will eventually pay a lower price for Zap - around NIS 300 million.

The market believes that after the deal is completed, it will be a type of merger between Yad2 and Zap, or at least a unification of management and at the data level, because the combined data obtained from both systems is very valuable, at least with respect to shopping intentions. Today, when someone wants to buy something, it doesn't matter whether it is an electrical product, a plumbing service, or an overseas trip - he or she searches for the information on the site that will give him or her the most information.

With all its content sites, the Zap group, when you boil it down, is an index with strong anchors. Websites such as Doctors, Mitchatnim (weddings), Zap, and Rest provide very relevant content and a lot of traffic for their potential audience.

Yad2 provides slightly different information, and specializes in secondhand sales, from apartments and cars to subscriptions to fitness rooms and sofas. This is supplementary and related information, however, and through combined analysis of the information, it can be deduced not only who is moving to a new apartment and who is looking for a plumber, but also who has children, who needs a doctor, and who is getting divorced.

Such information is obviously very valuable if used professionally, and the company that owns both of them has the potential to not only improve and increase the advertising passing through it, but also to sell the data to other commercial concerns, for example advertising and media platforms.

If the activities of the two concerns are combined, a single group will be created with a great deal of power and knowledge. "Axel Springer is taking over the index field in Israel, and creating a monster of index and data," a senior source in the sector who insisted on remaining anonymous told me yesterday. The source described the emerging deal as one that fits like a glove, adding that Axel Springer would become the leading data provider in Israel.

"They have the potential to compete head-to-head with Google and Facebook in the quality of the data, although it is different data - data only from shopping, which can compete with those of Amazon, if and when they enter Israel." It is believed that the activity will be managed from a single place, but as of now, there are two companies and two CEOs: Zap group CEO Ilan Zachi and Yad2 CEO Yavin Gill-More, who is playing a key role in Axel Springer in Israel and worldwide.

The market believes that Gill-More, who is regarded as a talented manager with a great deal of experience in the relevant field, will be the manager after the merger. It can be assumed that Zachi will not remain in a situation in which someone is above him. At the same time, in contrast to others in Zap, Apax's intentions of selling were certainly not strange to him from the beginning, and for him, bringing the company to a sale at a handsome profit is success.

The consequences of the deal will be felt mainly in performance-based advertising, which may be unglamorous, but is no less interesting from a business standpoint. This is a market with few players: Google, 144, and specialist websites, such as Easy and Auto, which operate on much lower scales. Axel Springer is growing stronger in a market in which there is a lot of cream and few players that can eat it, so on the face of it, business potential exists, and the right combination will probably take place. From there on, it is merely a question of management, and based on the record, Axel Springer has already proven that it knows how to manage this field very well.

Published by Globes [online], Israel Business News - www.globes-online.com - on December 28, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Ilan Zachi Photo: Rami Zarnager
Ilan Zachi Photo: Rami Zarnager
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