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State of the German Internet 2020

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What’s new on the German digital market, how have Germany’s digital companies fared compared with the big boys from the States and China and what chances and opportunities are there to be taken advantage of? In OMR’s newest annual State of the German Internet keynote, founder and CEO Philipp Westermeyer addresses these questions and more as he shares his view of the current digital landscape seen through the lens of a marketer.

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State of the German Internet 2020

  1. 1. STATE OF THE GERMAN INTERNET 2020
  2. 2. Welcome to State of the German Internet! Although the slide suggests otherwise, this will not be a “corona presentation.” Now, we won’t be ignoring it altogether either. Life has changed quite dramatically of late. Significant parts of the global economy are struggling mightily. So our question in the context of this presentation is: How is the digital economy doing? Let’s start by looking at the biggest platforms.
  3. 3. Source:Yahoo!Finance 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 €1.118 BIL Market Cap May 20, 2020 SharePrice They’re doing just fine. Amazon is trading at an all-time high. To underscore the ubiquity of the platform… Amazon 🚀
  4. 4. 2014 2015 2016 2017 2018 2019 2020 2021 20.34 MIL MEMBERS 9.06 MIL MEMBERS 22.3 MIL MEMBERS Source:EstimatedbyEtribes 25.2 MIL MEMBERS … we were astonished to see Amazon prime members surpassed members of the Protestant church in Germany early this year. 👑
  5. 5. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 €1.267 BIL Market Cap May 20, 2020 Apple’s current valuation is higher than ever, too. To illustrate their clout, let’s take a look at… Apple 🚀 SharePriceSource:Yahoo!Finance
  6. 6. … Airpods. If these tiny devices were a stand-alone company, their estimated revenue would equal the total worth of several brands combined. €5.6 BIL €4.6 BIL €4 BIL €14 BIL EstimatedRevenuein2019
  7. 7. The revenue generated by re-purchases of lost Airpods alone puts the business on a Champions League level. €644 BIL EstimatedRevenuein2019 Bayern Munich €716 MIL
  8. 8. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 €859 BIL Market Cap May 20, 2020 Google might at least to some degree feel the stress of a reduced marketing budget. Still, their path is from the lower left to the upper right. Google 🚀 SharePriceSource:Yahoo!Finance
  9. 9. May 21, 2019 If you happened to be seeking a job early last year, this would have been Google’s answer. Office Assistant Hamburg
  10. 10. Office Assistant HamburgOffice Assistant Hamburg Since May 22, 2019 Then Google introduced the job search box. What is seemingly not very spectacular on the surface has a huge impact in reality if you are part of this industry.
  11. 11. April 19 May 19 June 19 Dominant within 24 hours Sistrix Toolbox 🚀 Source:Sistrix Google stepstone indeed Arbeitsagentur Visibility Index
  12. 12. 2012 2013 2014 2015 2016 2017 2018 2019 2020 €566 BIL Market Cap May 20, 2020 Facebook is trading at a record level as well with Instagram becoming the main value driver. Facebook 🚀 SharePriceSource:Yahoo!Finance
  13. 13. To illustrate the dynamic, we took a look at the ad revenue of these platforms in year 2 after the first ad was sold… $0.32BIL $0.32BIL $0.4BIL $0.41BIL $0.6BIL
  14. 14. … and we found that ads on Insta stories alone – introduced in 2017 and, yes, standing on the shoulders of giants – created revenue in another sphere. $0.32BIL $0.32BIL $0.4BIL $0.41BIL $0.6BIL $7BIL INSTAGRAM STORIES
  15. 15. In total, Google, Amazon, Facebook and Apple are essentially more valuable than ever. The same holds for Chinese platforms. €3871 BIL €1033 BIL €3810 BIL €1052 BIL May 20, 2020 All Time High Feb 19, 2020 Jan 13, 2020 New All Time High May 20, 2020 Source:Yahoo!Finance
  16. 16. “Our” GIX is in good shape as well. Please note that for the sake of the comparison Axel Springer (delisted on April 6) and trivago (now valued below the € 1 BIL threshold) are still counted here. Eventually, it dawned on us that comparing German internet companies with China or the US is kind of ridiculous. To correct for this, we decided this year to introduce … May 20, 2020 All Time High May 11, 2020 €72 BIL€72 BIL XIG Source:GoogleFinance GIX
  17. 17. … the European Internet Index. Here, the same criteria apply as with the GIX and a broad understanding of Europe based on geography. PS: We are happy for feedback if we have overlooked candidates. Source:GoogleFinance EIX • Digital Core Business • valued > €1B • B2C Spotify Paradox Interactive Yandex Mail.ru Kindred Group CD Projekt Adevinta avast Zur Rose Group AG takeaway.com Booking.com New Work Ströer Media Scout24 Zalando HelloFresh Delivery Hero CTS Eventim Rocket Internet Pro Sieben Sat 1 United Internet Farfetch Just-Eat Rightmove MoneySupermarket ASOS Boohoo ocado May 20, 2020 €279 BIL €72 BIL €2 BIL (CH) €5 BIL (CZE) €5 BIL (NOR) €8 BIL (PL) €11 BIL (MLT) €14 BIL (RUS) €33 BIL (UK) €56 BIL (SWE) €80 BIL (NL) €66 BIL (GER) XIGE Supported by
  18. 18. We have seen that the listed digital world is doing excellent. Still, the global comparison shows some room for improvement for the European Internet! €3810 BIL €1052 BIL €279 BIL May 20, 2020 XIE Source:Yahoo!FinanceandGoogleFinance
  19. 19. As stated in our first “State of… 2017” the core value driver of these platforms is digital marketing. Being OMR we cannot help but looking at the world through a marketing lens and decode the phenomena we perceive like the marketing nerds we are. This year we hope to provide insights, inspiration, best practices, in short: value by sharing this view in a straight-forward manner… 🧠
  20. 20. LIFE THROUGH A MARKETING LENS
  21. 21. Mass Shootings El Paso – Sep 2019 Climate Change Sydney – Mar 2019 Fast Fashion Kiel – Nov 2019 In the last months, we’ve seen the phenomenon of people gathering behind ideas to protest gun violence, climate change and fast fashion to mention just a few causes. Through our marketing lens, this trend is summed up as the…
  22. 22. Consumer Led Revolution
  23. 23. On August 3 2019, 23 people were killed in a mass shooting in a Walmart in El Paso. What’s weird for Europeans — while you’re shopping for detergent and candy bars, you can also pick up guns and ammo.
  24. 24. As a reaction to the shooting and the public mourning, Walmart ceased gun sales at the cost of considerable revenue and to the chagrin of NRA supporters.
  25. 25. Sept 04, 2019 Oct 01, 2019 Nov 01, 2019 Dec 01, 2019Sept 01, 2019 Share value Walmart Source:Yahoo!Finance Listening to the call of the people was not a net negative from a business perspective — the stock market was fine with this move. 👍
  26. 26. Oatly – oat milk from Sweden - has built marketing piggybacking on the Fridays for Future movement. They launched a campaign to make it mandatory to list food’s CO2 footprint on the packaging. Unsurprisingly, oat milk has a big advantage there compared to regular milk.
  27. 27. Core to the campaign is a petition to the German parliament. Collecting 50K signatures within a month opens the door to present the cause publicly in a dedicated commission at the Bundestag.
  28. 28. Google Search Trend: oatly Sept 17, 2019 Oct 13, 2019 Final day to sign up Nov 30, 2019 Oatly succeeded, created massive PR value and peaked in Google trends and actually propelled them to a higher long-term level. Launch of Campaign Nov 12, 2019
  29. 29. An even more straight-forward example is creating your business model based on the Consumer Led Revolution. People protest the throw-away society in general and fast fashion specifically. Digitizing second-hand flea markets for re- used fashion spawned a European champion…
  30. 30. ”A Used-Clothing Marketplace Is Europe’s Newest And Trendiest Tech Unicorn“ Nov 28, 2019
  31. 31. €600 MIL €310 MIL €666 MIL Source:OMRResearch CompanyValuation,Fall2019 …and considerable number of runners-up.
  32. 32. Even if you happen to be a traditional SME, you can base your marketing tactics on this trend: This grocery store in the countryside town of Neumünster decided to stop selling fireworks and created a tidal wave of positive feedback. 🚫🧨❌
  33. 33. So, keep an eye on trends in society. They translate to single marketing measures as well as entire business models — provided you remain true and authentic.
  34. 34. The fact that we cannot help but view everything through a marketing lens is sometimes quite the handicap… When we see this famous scene from Old School with Will Ferell, we do not see a drinking game. Our minds immediately shift to thinking about marketing funnels. Really! Gather tons of leads and convert as many of them into customers — this is what we see.
  35. 35. However, as the bargaining power of platforms caused leads to become quite expensive there has been a new buzzword in town: The Flywheel! Instead of continuously buying leads, it’s better to focus on getting your customers to stay within your company’s ecosystem and monetize on a habitual basis. Flywheel FLYWHEEL FLYWHEEL Flywheel Flywheel
  36. 36. Flywheel FLYWHEEL FLYWHEEL Flywheel Flywheel Arrival of the Flywheel
  37. 37. The rental car business is a constant fight between companies whose fundamental difference is the color of their logo. Almost every car rental customer needs to be re- purchased each time they would like to rent a car.
  38. 38. Sixt has created an app as the default destination for all urban mobility needs— from car sharing, taxi hailing, scooter renting or the classical car rental business. It combines own and third-party offerings.
  39. 39. Recently Sixt CEO Alexander Sixt told us that the creation of a flywheel was intentional and – even though some elements are not making money – €1.7 MIL revenue is generated daily through the app. Revenue per day €1.7 MIL
  40. 40. When we take a look around in our children’s room, we find comfort in the fact that some things have not changed drastically since we were young. That’s how Lego used to look by the way.
  41. 41. Lego struggled in the early 2000s and decided to innovate. The company invented the Ninjago brand, not only selling blocks, but a lot of content and products around the brand. Lego created a flywheel.
  42. 42. Source:StatistaRevenuein€ 2019 €5.2 BIL 2011 €2.5 BIL You might be right if you said that this is no news for marketing pros. Still, we believe it is worthwhile noting that Lego has seen its revenue increase drastically since the launch of Ninjago in 2011.
  43. 43. We would have loved to present more flywheels but — full disclosure — we haven’t found many of them. This may be on us but it also shows an opportunity to go and create convincing flywheels. If you manage to put one together, we’d be happy to cover your flywheel next year! 🙌
  44. 44. The next trend we believe is worth taking notice of is not actually recent — but now plays an important role in marketing. A few years back experiences, like watching the NBA playoffs in person, were shared, discussed and liked publicly on Facebook (with a good deal of data tracking thrown in there). Nowadays similar events are primarily posted in private messenger groups.
  45. 45. Case in point: When CEO Philipp met up with German actor, Til Schweiger, to record a podcast, he shared the unique moment across mul$ple WhatsApp groups. Basically, Philipp’s digital activity takes place on WhatsApp — as is the case for many people out there. Unfortunately for marketers, this acitivity is invisible and beyond the scope of data tracking capabilities. We coined the trend...
  46. 46. 💬 The Rise of Dark Social
  47. 47. We were happy to see quite a few SMEs who have successfully adapted to people’s messaging habits for one-to-one communication. Rolf, our Chief Report Editor, found the help he needed on a motor for a set of blinds in a one-to-one chat.
  48. 48. When our Editor-in-Chief, Roland, was on the market for legal insurance (for undisclosed reasons), he found the consulting and sales processes took place in a personal chat as well.
  49. 49. 15h 50min This is Hannah, she is part of our sales team and half the age of Rolf and Roland. Her digital habits are quite different. She basically lives on Instagram.
  50. 50. Actually she uses Instagram as a messenger tool and digital stand- in for store fronts. So when she’s looking to get her nails did, she finds the nail salon Isla Berlin on Insta and is able to instantly make an appointment there. Facebook Shops was launched in May so this development will only amplify further. You need to ask yourself if and how well your business is adapted to the communication habits of your target group.
  51. 51. A shared experience (which escalated in the age of corona) we’ve been keeping an eye on is scrolling through Netflix.
  52. 52. 54321 The challenge of picking out the right movie or series on Netflix is so universal that the top-5 choices by minutes watched in 2018 are old syndicated series with household names. When in doubt you choose what you are familiar with. Source:Nielsen/AdweekMay2019
  53. 53. 54321 This explains the premium paid, e.g. for Friends, in the streaming wars. Through our marketing lens, this trend is summed up as… Source:Nielsen/AdweekMay2019 WarnerMedia paid $85 million per year for five years ($425 million total) 2019
  54. 54. Too much Choice
  55. 55. We’ve been dreaming more than ever of going on vacation. Most of us probably do not dream of zillions of choices that need to be made to get to our dream destination: flight, rental car, accommodation, attractions, etc.
  56. 56. Some digital agencies, like Tourlane, have found a way of addressing this struggle. Basically, you tell them where you want to go and what kind of holiday you want and they are taking care of the details to save customers time and nerves. Even though the travel market is under pressure, these kinds of digital asset light models will prevail and flourish.
  57. 57. Another example is found on the mattress market. We talked about Casper in our "State of … 2017" presentation. But the company that is, at least for now, the winner of the mattress war (in Germany) is the one company which is…
  58. 58. 2016 €43.7 MIL 2017 €126.7 MIL Revenuein€ … basically offering customers no choice: Bett1, which translates to Bed1, making it one of the weirdest, yet still perfect company names we've come across. Published revenues are slightly outdated but what we hear is that is that they kept on improving.
  59. 59. Being invited to a diner party might put the pressure on to bring the right wine out of seemingly endless options. If you happen to be like Philipp (i.e. you have no clue at all about wine) you might fancy the solution of Kiel-based wine merchant Schneekloth.
  60. 60. Naming the wine by the food to pair it with empowers Philipp to make a solid choice and be a confident guest at the diner party. One purpose of marketplaces is offering choice. Offering less and more- convenient choice can be your competitive edge.
  61. 61. We have one trend left. We are asked to rate everything on and offline. Through our marketing lens, we call this…
  62. 62. The Trust Struggle
  63. 63. Let’s take a look at this query for a keyboard: YAMAHA PSR-S670
  64. 64. You can find it for more or less the same price on Amazon, MediaMarkt (the legacy retailer in Germany) and Thomann, a niche player. The question is: Why does Thomann still exist?
  65. 65. Actually Thomann is the global market leader for music supplies. €850 MIL 2019: Revenue
  66. 66. We believe that a reason for this is trust through content. A big part of the relevant content are peer reviews. Thomann generates a larger number of reviews…
  67. 67. … with considerable more detail and depth. They are a centerpiece for an enthusiastic and loyal community around the brand.
  68. 68. By real customers 🚫 🚫 Verified 😐😐 Verification method disclosed 🚫 🚫 Text mandatory 🚫 Transparency regarding the requirements of the reviews and the method of verification are keystones ensuring the quality of the reviews.
  69. 69. Direct banks are doing better in this comparison… Banks are basically getting beaten up on review platforms. The reason: People expect a bank to perform flawlessly. The only reason to voluntarily write a review is a bad experience. Direct BanksTraditional Banks
  70. 70. … but the market is outperformed by N26 — a German challenger bank — in terms of the number of reviews and results. Given that they have the same problem as anybody else — how do they do it? 🏆
  71. 71. One important marketing hack was to simply ask all customers via e-mail. In doing so, they activated the silent majority of satisfied customers…
  72. 72. … and gained a significant number of positive reviews while their campaign was running. Between Jul 17 – Feb 18 90%
  73. 73. Our last case is a real basic hack based on the Trust Struggle. This necklace was advertised on Facebook with two creatives only differing in the text. The second one is a quote from an Amazon review. Sponsored We dream in jewellery ✨ Sponsored "I’m a big NEW ONE Fan and will always be! Super fast delivery and very pretty jewellery 🌟🌟🌟🌟🌟"
  74. 74. The “five stars” are so embedded in our perception that just seeing them in the free text segment led to a considerable uplift in sales. If there is just one take-away from this presentation: Please think about your review strategy! Sponsored We dream in jewellery ✨ Sponsored "I’m a big NEW ONE Fan and will always be! Super fast delivery and very pretty jewellery 🌟🌟🌟🌟🌟" +20% Revenue
  75. 75. The Trust Struggle The Consumer Led Revolution Arrival of the Flywheel Too much Choice The Rise of Dark Social These trends might provide an anchor and inspiration for your marketing: LIFE THROUGH A MARKETING LENS
  76. 76. BIG THANKS TO OUR PARTNERS KLAR AUGENOPTIK
  77. 77. Fleming Peter Francesca Veit No agency - Kreativagentur Scott Peterson Martin Gardt Philipp Westermeyer Rolf Hermann Michael Wanker Nina Schliefer No agency - Kreativagentur Christian CohrsRoland Eisenbrand Torben Lux TEAM 2020   👑Eike Dehning dhng Consulting THE OMR

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