Annual Report 2008
Getupdated Internet Marketing AB (publ)
II Årsstämma
Annual General Meeting (AGM)
The AGM of Getupdated Internet Marketing AB (publ) will be held at 10 a.m. on Thursday, 14 May 2009 at the companies premises at Brahegatan 10, Stockholm, Sweden.
Notification
Shareholders intending to participate in the AGM should firstly be inclu- ded on the print-out or other summary of the complete share register as of Friday, 8 May 2009, and secondly, notify the company of their inten- tion to participate at the AGM by no later than 4 p.m. on Friday, 8 May 2009. The notification should be by mail to Getupdated Internet Marke- ting AB, FAO: Håkan Juserius, Brahegatan 10, 114 37 Stockholm, Sweden or via e-mail to bolagsstamma@getupdated.com. Notifications should state name, personal/corporate identity number, shareholding, address, daytime telephone number and information on potential assistants, and where applicable, information on deputies.
Proxy
Shareholders intending to participate by proxy should issue signed and dated powers of attorney for such representative. If the power of attorney is issued by legal entity, a certified copy of the certificate of incorporation or equivalent documentation for the legal entity should be attached. Po- wers of attorney and certificates of incorporation may not be more than one year old. Original powers of attorney and potential certificates of in- corporation should be forwarded by mail to the above address in good time before the Meeting.
Nominee-registered Shares
In order to exercise their votes at the AGM, shareholders with nominee- registered holdings must temporarily re-register their shares in their own name with Euroclear AB. Shareholders must inform their nominees the- reof in good time before 8 May 2009, when such re-registration process should be complete.
Financial Reporting Schedule, 2009 Interim Report, First Quarter 2009, 14 May 2009 Interim Report, Second Quarter 2009, 26 August 2009 Interim Report, Third Quarter 2009, 17 November 2009 Financial Statement 2009, 17 February 2010
This document is essentially a translation of the Swedish language original. In the event of any discrepancies between this translation and the original, the latter will be deemed correct.
Production: PRIR/hkdesign • Photography: Janne Danielsson Print: Alfaprint • Translation: Turner & Turner
Highlights of 2009 2
Annual Report—Summary 4
CEO’s Statement 6
Business Concept, Goals and Strategy 8
Corporate Milestones 9
Market 10
Operations 16
Human and Organizational Resources 24
The Share and Shareholders 26
Ownership and Corporate Governance 29
Board of Directors 32
Senior Executives and Auditors 33
Risk Factors 34
Financial Summary 38
Definitions of Key Ratios 39
Directors’ Report 40
The Group:
Income Statement 46
Balance Sheet 47
Cash Flow Statement 49
Statement of Changes in Equity 50 Parent Company:
Income Statement 51
Balance Sheet 52
Cash Flow Statement 54
Statement of Changes in Equity 55
Notes 56
Audit Report 73
Contents
2 The Year in Brief
Sales and Earnings for 2008
• Net sales were SEK 290.8 m (SEK 168.6 m), a 72% increase.
• Net sales in the Internet Media business area were SEK 235.6 m (SEK 122.1 m), a 93% increase, and net sales in Internet Solu- tions were SEK 79.6 m (SEK 50.8 m), a 57% increase.
• Operating profit/loss was a deficit of SEK – 90.2 m (SEK 20.5 m). As part of the consolidation of operations, profit/loss was charged with non-recurring items of some SEK 92 m.
• Operating profit/loss before non-recurring items was SEK 1.7 m (SEK 21.3 m).
• The Board of Directors will be proposing to the AGM 2009 that no dividend is paid for the financial year 2008.
Highlights of 2008
• A rights issue raising SEK 60.5 m before issue expenses was con- summated in the second quarter.
• The Annual General Meeting (AGM) in May elected Bengt Nilsson, founder of IFS, as a Board member.
• UK subsidiary Just Search, a leader on the important UK mar- ket, progressed very positively. For 2008, net sales were SEK 61.6 m (SEK 34.3 m), growth of 80%. Operating profit/loss was SEK 25.1 m (SEK 10.6 m), corresponding to an operating margin of 41% (31%).
• Getupdated secured a large number of major new accounts in- cluding Air France, Din El, KLM, KPMG, Ledarna, L’Oréal, Newsec, Scandic, Vasakronan and Q-Med.
• On 1 December, Dan Sehlberg became CEO and Håkan Juse- rius became CFO and Deputy CEO. Mr. Sehlberg was elected as a Board member at an EGM in December.
• Late in the year and in early-2009, a number of measures were taken to consolidate the company’s financial position, with a special focus on strengthening cash flow from operations.
• Wholly owned subsidiary Crystone AB was divested in Decem- ber for an amount corresponding to SEK 40 m.
After the End of the Year
• On 2 February, the Board of Directors decided on a rights issue raising some SEK 59 m before issue expenses.
• An agreement was reached with the sellers of Just Search imply- ing the settlement of an additional purchase price and previously overdue liabilities through the payment of some SEK 20 m cash and some SEK 18 m through a set-off issue.
• The Swedish Tax Agency approved Getupdated’s appeal regar- ding loss carry-forwards. Accordingly, management judges that previously reported exposure of a maximum of SEK 13.2 m is eliminated.
• Getupdated was recognized as the European leader in search marketing on the Internet by US website Topseos.com.
• The company secured an EPiServer Award as the producer of Sweden’s best Internet social medium for Visit Sweden’s ‘Com- munity of Sweden’.
• Trading in Getupdated stock was transferred to the First North Premier marketplace.
• Getupdated divested consulting operation BIS to Sigma. This transaction was conducted through the transfer of net assets as of 31 March 2009. The purchase price will be paid in phases through 2009, generating a maximum positive profit effect of nearly SEK 2 m.
Outlook
• In the year, the company judges that operating profit/loss and cash flow will progressively improve significantly, compared to operating profit/loss in 2008 before non-recurring items.
• Despite the weak economy, the company expects to achieve high growth in 2009.
• Getupdated's consolidation process is continuing in the first quarter 2009.
The Year in Brief
Key Ratios Jan.-Dec. 2008 Jan.-Dec. 2007
Net sales, SEK 000 290,769* 168,643
Sales growth 72.4% 432.6%
Operating profit/loss, SEK 000 –90,206 20,533
Operating margin –31.0% 12.2%
Operating profit/loss, excluding non-recurring items, SEK 000 1,731 21,337
Operating margin, excluding non-recurring items 0.6% 12.7%
Profit/loss after tax, SEK 000 –104,623 13,327
Basic earnings per share, continuing operations, SEK –4.26 0.84
Cash flow from operating activities, SEK 000 –19,832 28
Cash and cash equivalents, SEK 000 9,952 14,131
Net debt, SEK 000 59,035 82,551
* Including a more conservative application of the accounting policy for revenue recognition.
All figures excluding the operation divested in 2008, Crystone. Figures in brackets are for the corresponding period of the previous year.
Quarterly Sales, 2007-2008
0 20 40 60 80 100 Net sales, SEK m
Net sales 2007 Q3 Q4
2007 Q1
2008 Q2
2008 Q3
2008 Q4
2008
Net Sales by Business Area, 2008
Internet Solutions 25% (30%)
Internet Media 75% (70%)
Sales and Operating Profit/loss by Business Area, 2008 (SEK m) Business area
Net Sales 2008* (2007)
Operating Profit/
loss** 2008 (2007)
Internet Media 235.6 (122.1) 35.6 (21.6)
Internet Solutions 79.6 (50.9) 5.0 (8.1)
Group-wide –24.4 (–4.1) –38.9 (–8.4)
Total 290.8 (168.9) 1.7 (21.3)
* Incl. more conservative application of the accounting policy for revenue recognition.
** Excluding non-recurring items.
Net Sales by Geographical Market, 2008 Rest of world 3%
Rest of Europe 25% Sweden 72%
4 Annual Report—Summary
Vision
Getupdated shall be an international leader in the innovative and expansive Internet marketing and search optimization segment.
Business Concept
Getupdated offers its customers systems and services for cost-effi- cient marketing and search optimization on the Internet, resulting in increased recognition, customer loyalty and sales.
Strategy and Goals
Getupdated shall develop innovative and scalable tools and ser- vices for Internet marketing and search optimization, driving the customer’s business right through the value chain:
• Internet media planning
• Contact generation via search optimization, PPC (pay-per-click), affiliate marketing, campaign sites, banner advertising, etc.
• Optimization of the visited website
• Conversion of generated visits into concrete business transactions
• Analysis and monitoring
Getupdated’s market strategy is to concentrate operations on market segments where customer demand is growing fastest, and where the group’s offering implies clear value-added.
Operations shall be coordinated so that economies of scale are realized, and can be exploited in future start-ups on new geo- graphical markets.
The long-term goal is to utilize the scalable platform Getup- dated is building in combination with an advanced market posi- tion to compete successfully for customers’ business in a future, more aggressive, growth phase.
Market
Through Internet marketing, the Internet has evolved into a po- werful and vital instrument for advertisers to reach consumers.
eMarketer estimates that the European market for Internet mar- keting will grow by an average of 25% per year in Europe until 2011. Of the total media spend of SEK 6.9 bn in Sweden in the third quarter 2008, the Internet represented 16.3%, up 20% on the third quarter 2007. In Sweden, Internet advertising is expected to overtake TV advertising in 2009.
Internet marketing offers a range of benefits over traditional channels like TV and press, the main ones being that information can be addressed to specific Internet user target groups on a global market, and that the Internet enables an immediate response from recipients. Moreover, Internet marketing combines the creative and technology aspects of the Internet, through means including web design, web development, communication and social media,
Annual Report—Summary
creating a total solution for effective advertising. Finally, Internet marketing offers access to the simple and effective analysis of sta- tistics, such as hit and transaction frequencies.
In Europe, the largest markets for Internet marketing are the UK, Germany and France. In these countries, the trend is towards more consolidation of suppliers to enable total Internet marketing solutions to be offered. Meanwhile, investments in Internet mar- keting are expected to keep increasing. Internet marketing is re- garded as less cyclical than its traditional counterpart. When mar- keting investments are downscaled, budgets are reallocated from traditional media to Internet campaigns, which have more directly measurable results and performance-based pricing.
Operations
Getupdated is a multinational provider of business-driving services on the innovative and expansive market for Internet marketing and search optimization. The company’s offering enhances and streamlines corporate marketing and business on the Internet. The demand for Getupdated’s services is driven by the trend of com- panies utilizing the Internet as a strategic marketing tool to clarify competitive benefits, develop customer relations and drive sales off and online.
Services Getupdated offers include search optimization, ad- vertising in search engines and on websites, affiliate marketing, campaign sites, social media on the Internet, web analysis and Internet strategies.
Getupdated has some 300 employees and is mainly active in Sweden and the UK, which represented 92% of sales in 2008.
Getupdated also has a presence on the French and US markets.
Getupdated’s Business Areas
Getupdated consists of two business areas: Internet Media and In- ternet Solutions.
The Internet Media business area helps its customers direct relevant traffic to their websites. At present, some 71% of traffic comes to websites from search engines. Accordingly, Getupdated focuses on generating traffic through search engines, mainly th- rough search optimization, which means the customer’s website appears at the top of organic hit lists on Google, Yahoo and MSN, for example. Internet Media also offers various types of Internet advertising and media planning.
With the breadth of its offering, Getupdated can combine dif-
ferent services to ensure that customers gains the best payoff from
their campaigns. Few companies can match this capability on the
European market. The Internet Media business area represented
some 75 (70)% of the company’s sales in 2008.
The Internet Solutions business area helps its customers to opti- mize their Internet presence. By analyzing visitor behavior, Getup- dated can improve the customer’s website to significantly enhance business benefit. With its rigorous knowledge of the Internet, both technological and strategic, Getupdated can produce, optimize and analyze customers’ websites. The Internet Solutions business area represented some 25% (30)% of the company’s sales in 2008.
Human and Organizational Resources
Getupdated is a genuine knowledge-based company, where em- ployee skills are decisive to the company's progress. At year-end 2008, the company had 297 employees, against 275 at year-end 2007. The company’s head office is in Stockholm, Sweden, where some 170 of the group's employees are stationed. Other offices are in the US (Fort Lauderdale), France (Paris), the UK (London and Manchester) and Sweden (Kalmar, Gothenburg and Borås).
The Share and Shareholders
Getupdated has been quoted on Nasdaq OMX First North since 11 July 2007, and has Erik Penser Bankaktiebolag as its Certified Advisor. Getupdated stock has been trading on the First North Premier marketplace since 16 March 2009. Companies quoted on this marketplace undertake to observe the stricter rules regarding corporate communication and reporting that apply on Nasdaq OMX Stockholm AB. At year-end 2008, the share price was SEK 4.77 and the market capitalization was SEK 134 m.
Getupdated had some 2,504 shareholders on 16 January 2009. The table to right offers a summary of Getupdated’s share- holders as of this date.
Shareholders as of 16 January 2009
Shareholder No. of Shares
Share Capital and Vote Holding, %
Vattenormen AB
112,164,500 43.43
Varveus, Anders
21,803,311 6.44
Yates, Paul
21,510,345 5.39
Bäverbäcken Förvaltning AB 898,609 3.21
Altraplan Bermuda Limited 895,104 3.20
Berglund, Fredrik
2835,249 2.98
Kadar, Johan
2766,618 2.74
Danske Bank International S.A. 547,751 1.96
Forsberg, Fredrik
2399,966 1.43
Mènard, Cèdric
2373,677 1.33
Other shareholders 7,814,087 27.90
Total 28,009,217 100.00
1
Owned by Åke Eriksson
2
Privately and via companies
Ownership and Corporate Governance
Getupdated is quoted on First North Premier, and accordingly, is not obliged to apply the Swedish Code of Corporate Governance (the “Code”). However, the Code is an important component of the company’s corporate governance guidelines, and the company observes significant parts of the Code’s rules regarding Board ac- tivities.
Board of Directors and Senior Executives
Getupdated’s Board of Directors has six members: Kjell Ormegard (Chairman) Åke Eriksson, Johan Lenander, Bengt Nilsson, Dan Sehlberg and Paul Yates.
The senior executives of Getupdated are Dan Sehlberg, Chief
Executive Officer and Håkan Juserius, Chief Financial Officer and
Deputy CEO.
6 CEO’s Statement
The foundation of today’s Getupdated was laid in 2007 through a series of aggressive acquisitions. Since I became CEO in late-2008, the work of management has concentrated on creating stable pro- spects for the group’s onward progress. Our way forward is clear, and we are taking the necessary measures step by step. Through these prioritized activities, Getupdated will better capitalize on the strong positioning it has in the expansive and innovative Internet marketing and search optimization segment.
The Internet marketing segment is a very attractive, high-growth market, where an innovative business like Getupdated has bright prospects of achieving high growth and healthy profitability. Al- ready, the company regards itself as one of the leaders in segments like organic search marketing, social media on the Internet and web analysis, and this market remains in an early phase.
To capitalize successfully on this market and continue to offer our customers our unique combination of scalable system tools, tailored analysis and high levels of service, Getupdated must have a stable foundation to stand on, in organizational and financial terms. We have already made a lot of progress on our route to this goal.
A Market with Strong Drivers
The market for Internet marketing services remains highly frag- mented. It is growing fast, but is fairly small in global terms com- pared to marketing on traditional media such as press and TV advertising. Far lower contact costs, accuracy and analysis, mo- nitoring and interactive capabilities are driving customers to real- locate an increasing portion of their marketing investments to the Internet. The direct link between an advertisement or search hit to a concrete transaction makes the Internet a superior medium to all other current alternatives. To a degree, these structural demand drivers mean that demand is also counter-cyclical.
As consumers and Internet users become more sophisticated and willing to do business on the Internet, marketing on the Inter- net becomes more business-driving. Getupdated’s role is to deve- lop scalable tools and bundled services for Internet marketing that run the customer’s business right through the value chain:
• Media advice and planning.
• Contact generation through a portfolio of products such as search optimization, PPC, affiliate marketing and banner advertising.
• Optimizing the visited website.
• Conversion of generated visits into concrete transactions.
• Analysis and monitoring.
Getupdated is one of the larger players on this fragmented and innovative market. Looking ahead, its size will also offer an oppor- tunity to advance positioning when smaller players encounter dif-
CEO’s Statement
ficulties growing independently. The economies of scale are signi- ficant, and accordingly, the large multinationals have a head-start on their smaller and more local counterparts.
A Strategic Agenda in Three Phases
The group currently has a significant need for consolidation, and accordingly, management has set a strategic agenda in three pha- ses. The first phase is to create stability, and included finding a solution to the un-financed additional purchase prices that we inherited from acquisitions conducted in 2007. The solution we presented involves the consummated rights issue and set-off issue to the founders of Just Search. I would like to emphasize that we have acquired excellent companies, in several cases with offerings and positions that are unparalleled on the market. Overall, these acquisitions are now essential cornerstones in our forward-looking strategy.
We have also taken other significant measures, tightening up our internal reporting systems, conducting a critical overhaul and impairment of old accounts receivable, improving our customer contracts and collection routines, while finally, tightening the application of our accounting policies for more conservative and robust revenue recognition. Thus we have facilitated controlling, comparability and governance. These measures were reported in our annual financial statement, when the related non-recurring ex- penses were charged to profit/loss for the fourth quarter 2008.
Phase two of our strategic agenda includes a series of opera- tional improvements. At present, we are working on enhancing our operational efficiency, and reducing general and administra- tive expenses to improve cash flows. This is a segment where I see significant potential for improvement ahead. Meanwhile, we will clarify our offering and focus our efforts on those segments where demand is in high growth and good returns are on offer. The or- ganic search marketing segment is an example of a segment I re- gard as very exciting. We see ourselves as one of the leading players internationally, in a segment offering high scalability, high repeat purchasing frequency and very good profitability.
The third phase of our strategic agenda is to exploit the platform we are now building to enter a more aggressive growth phase in fu- ture. Exactly when this phase begins depends on how the market progresses and how quickly the measures in phases one and two take effect. In this phase, Getupdated has bright prospects of once again becoming a driver and consolidating the market through strategic acquisitions, over and above its high organic growth.
Getupdated’s concept runs our customers’ business on the In-
ternet from contact to transaction. We can describe our core bu-
siness as an industrialized process that delivers a big impact for
an attractive price. Scalability means our system is well suited for
introduction on new geographical markets and language regions in time.
In the future, customers will encounter an increasingly complex market with more data, more choice, new channels like video marke- ting, mobile searches and social search media.
Then, new opportunities will open for Getup- dated, as the leading innovator, to be a vital bu- siness partner for customers that want success on the Internet.
Getupdated, as I’ve got to know the com- pany in my first few months as CEO, is a com- pany with strong drivers, employing some 300 skilled and motivated people that are experts in an array of segments that strengthen and complement each other. The customer benefit is clear—evident in our high share of repeat customers, who also tend to purchase increa- sing volumes over time. These factors also give us important leverage on our existing customer base, especially in organic search optimization.
We will preserve and nurture Getupdated’s pronounced sales and performance-driven cul- ture, and simultaneously benefit from our mul- tinational coverage. Fundamentally, we’ve got an innovative, industrialized system with good scalability and low running expenses—a system that more and more customers are demanding on more and more markets.
Against the background of the current market conditions, Getupdated’s position and the expected effect of measures we have taken and planned, I expect Getupdated’s operating profits and cash flow to progressively improve significantly through the year. The platform we are now creating will give us good prospects of high, sustainable growth with good margins ahead.
Our goal is to establish Getupdated as an international leader in the innovative and ex- pansive Internet marketing and search optimi- zation segment.
Dan Sehlberg
Chief Executive Officer
Stockholm, Sweden, April 2009
8 Business Concept, Goals and Strategy
Business Concept, Goals and Strategy
Getupdated’s Value Chain
Plan
Generate Analyze
Convert
Optimize
Plan: Getupdated’s media planners help customers select the right channel for advertising on the Internet and plan where, when, how and why they should be visible on the Internet, and at what cost.
Services: Internet media planning.
Generate: Getupdated helps its customers direct relevant traffic to their websites.
Services and products: SEO, search advisory services, PPC, banner advertising, affiliate marketing by e-mail and video marketing, and campaign sites.
Optimize: Getupdated ensures that the customer’s website is built or rebuilt in a way that optimizes the directed traffic’s conversion rate in each visit.
Services and products: developing websites, e-com- merce systems and social media based on publication tools like EPiServer and AddCMS.
Convert: increase the number of visitors converted to customers in some form, i.e. the customer does something active in every visit.
Services: web analysis and Internet strategies.
Analyze: Do users find what they’re looking for quickly and easily? Do they arrive at the transactions the customer wants? Getupdated analyzes behavior, measures results and recommends actions.
Services and products: web analysis with tools like Webbtrend, Omniture and Google Analytics.
Vision
Getupdated shall be an international leader in the innovative and expansive Internet marketing and search optimization segment.
Business Concept
Getupdated offers its customers systems and services for cost-effi- cient marketing and search optimization on the Internet, resulting in increased recognition, loyalty and sales.
Strategy and Goals
Getupdated shall develop innovative and scalable tools and ser- vices for Internet marketing and search optimization, driving the customer’s business right through the value chain:
• Internet media planning
• Contact generation via search optimization, PPC (pay-per-click), affiliate marketing, campaign sites, banner advertising, etc.
• Optimization of the visited website
• Conversion of generated visits into concrete business transactions
• Analysis and monitoring
Getupdated’s market strategy is to concentrate operations on market segments where customer demand is growing fastest, and where the group’s offering implies clear value-added.
Operations shall be coordinated so that economies of scale are realized, and can be exploited in future start-ups on new geograp- hical markets.
Operational Goals for 2009
• Clarify Getupdated’s offering and positioning internally and externally.
• Focus on addressing markets and business development on seg- ments where demand is growing fastest and where Getupdated has, or can secure, a leading position.
• Conduct operational improvements such as enhancing internal reporting systems, customer agreements and collection routi- nes, and cut operating expenses.
• Improve operating cash flow and operating margin.
The long-term goal is to utilize the scalable platform Getupda-
ted is building in combination with an advanced market position
to compete successfully for customers’ business in a future, more
aggressive, growth phase.
1985 Getupdated registered.
1998 Quotation on the former SBI list, now NGM.
1999 Eastpoint incorporated.
2001 Launch of Informant, Getupdated’s web monitoring system.
2002 Getupdated’s main shareholder Parkerhouse BV sells some 25% of the company to Åke Eriksson, Lennart Andersson and Vencom.
2004/2005 Eastpoint acquires majority shareholding in Crystone and the net assets of Invit-Net.
2005 Eastpoint acquires DK Network and Azalea WebDesign.
2006 Crystone acquires Scandic Hosting Group with wholly owned Norwegian subsidiary Scandic Hosting Group AS (corporate name changed to Crystone Norge AS).
2006 Crystone acquires Enterweb AS.
2006 Getupdated acquires Eastpoint through a reverse acquisition. Getupdated is 90% owned by Eastpoint’s shareholders, and has its corporate name changed to Eastpoint.
2006 Acquisition of Många Idéer Gruppen—MIG.
2006 Divestments of the media monitoring business and Getupdated.com.
2007 Acquisition of Affiliator.
2007 Acquisition of Många Idéer Gruppen—MIG.
2007 Acquisition of Neno.
2007 Acquisition of MediaAnalys Trisodium (51%).
2007 Acquisition of Ryce Holding/Media Operator Sweden.
2007 Acquisition of Optiwords.
2007 Change of marketplace from NGM Equity to OMX First North.
2007 Acquisition of Cross Communication Holding.
2007 Acquisition of eTrafficJams.com, Inc.
2007 Change of corporate name to Getupdated.
2007 Acquisition of SolarPlexus.
2007 Acquisition of Trive.
2007 Acquisition of Just Search Ltd.
2008 Capital base increased through rights issue.
2008 Dan Sehlberg and Håkan Juserius become Chief Executive Officer and Chief Financial Officer & Deputy CEO.
Getupdated concentrates on focusing on Internet marketing and search optimization, with the Webhosting business area divested through the sale of web host Crystone AB.
Corporate Milestones
10 Market
Internet Usage
An increasing share of the global population has daily access to the Internet, and in many countries, broadband penetration is rising sharply. Digital market intelligence provider comScore estimated that for the first time, over a billion people connected to the In- ternet at least once in December 2008. At present, the largest user bases are in Asia, Europe and North America (see diagram below).
In countries that have made a lot of progress, Sweden and the UK for example, a significant share of all Internet users have access to a broadband connection. Over the last decade, the Internet has secured status as the obvious tool for people to search for informa- tion, communicate and shop. Both Internet usage and the number of websites has grown briskly in this period. Figures from Statistics Sweden (SCB) indicate that some 83% of all Swedish people aged 16-74 use the Internet basically every day, or at least every week.
The corresponding figure for Internet users in the 16-24 age group is 97%.
Market
The market for Internet marketing—and especially search optimization—is forecast to grow briskly through the coming years. Getupdated thinks increased marketing on the Internet is due to factors including more widespread Internet usage among consumers, cheaper and faster broadband con- nections, growing sales on the Internet and several benefits Internet marketing offers over and above traditional media.
As the Internet has grown and usage has increased, online me- dia have become an increasingly important component of overall media consumption. The Internet is in the process of overtaking TV as the primary media channel, and this has already happened in the 15-24 age group in Sweden, who spend some 125 minu- tes a day on Internet consumption against 110 minutes a day on TV consumption (see diagram on next page).
1A significant share of Internet usage revolves around information searches related to goods and services (75% of Internet users) and communication (78% of Internet users).
2Companies’ need for visibility on the Internet and major search engines like Google, Yahoo and MSN is growing with Internet usage and the expanding number of websites. In the US alone, comScore estimates that 8 billion searches were made on Google’s search engine in December last year, which on average, equates to
0 20 40 60 80 100
World Oceania
Latin America North America
Middle East Europe
Asia Africa
Population, share of global population Internet users, share of regional population Internet users, share of global Internet users
%
An Overview of Internet Users Worldwide
1
Mediabarometer 2007, Nordicom
2
Statistics, Information Technology, 17 December 2008, Statistics Sweden
Source: www.internetworldstat.com
259 million searches per day or 3,000 per second.
1The emergence of search engines has made it completely obvious for companies to encounter their customers on Internet and market themselves actively on those forums where their customers are. The robust growth of Internet usage has also created a substantial market for services and products relating to the Internet as a mar- ketplace and media channel. With increased globalization of customers and suppliers, it becomes more significant for companies to have a website that is attractive to customers and other observers, flexible in terms of changes, and that runs the customer’s business cost-efficiently.
Internet Marketing
Through Internet marketing, the Internet has evolved into a powerful and vital instrument for advertisers to reach consumers. eMarketer estimates that the European market for Internet marketing will grow by an average of 25% per year in Europe until 2011. Of the total media spend of SEK 6.9 bn in Sweden in the third quarter 2008, the Internet represented 16.3%, up 20% on the third quarter 2007. In Sweden, Internet advertising is expected to overtake TV advertising in 2009. IRM’s estimate of media advertising in 2009 indicates the advertising market contracting by 5% as a result of the recession. Meanwhile, in combination with TV, freesheets and directories are expected to increase their respective shares of media spending 2009
2(see diagram to right for the progress of Internet marketing in Europe in 2005-2011e and estimated media spend in Sweden in 2009.)
Market researchers like IRM and Jupiter research estimate that Internet marketing will maintain high growth. Getupdated thinks that increased mar- keting on the Internet is due to factors including more widespread Internet usage among consumers, cheaper and faster broadband connections, growing sales on the Internet and several benefits Internet marketing offers over and above traditional media.
The main benefits of Internet marketing are that information can be addres- sed to specific Internet user target groups for a low cost on a global market, and that the Internet medium is interactive, which means that Internet mar- keting can offer immediate response for its users and advertisers. Moreover, Internet marketing combines the creative and technology aspects of the Inter- net, through means including web design, web development, communication and social media, creating a total solution for effective advertising. Finally, Internet marketing offers a direct link between an advertising or search hit and a concrete transaction, also offering access to simple and effective analysis of statistics such as hit and transaction frequencies of products or services on different websites.
Internet marketing is based on providing communication along the vari- ous stages that lead to consumption of products and services, i.e. from initial awareness of a product or service to the consumer taking a buying decision.
Internet usage consists of various types of advertising option such as banner advertising or SEO and PPC.
Usage Time for the 15-24 Age Group, Minutes
Internet Marketing in Europe 2005-2011e (SEK bn)
Estimated Media Spend in Sweden, 2009 60
90 120 150
Internet TV
2007 2006 2005 2004 2003 2002 2001 2000 1999
1
comScore press release, 16 January 2009: ‘comScore Releases December 2008 U.S. Search Engine Rankings’
2
IRM (the Institute for Advertising and Media Statistics), ‘Media Spend Q3 2008 and 2009 Estimate’
0 50 100 150 200
2011e 2010e 2009e 2008e 2007 2006 2005
* Compound annual growth rate CAGR*: 25%
Source: eMarketer Source: Mediabarometer 2007, Nordicom
Direct mail 13.2%
Mobile 0.2%
TV 14.8%
Radio 2.2%
Movie theaters 0.3%
Internet 16.7%
Outdoor 3.2%
Daily press 26.6%
In-store media 0.3%
Freesheets 7.9%
Magazines 7.3%
Supplements 1.5%
Directories 5.7%
Source: IRM
12 Market
Market Structure, Internet Marketing
Advertisers Media planners Analysis
Search marketing
Affiliate networks
Search engines
Websites with strong brands
Websites with weak brands
Websites without brands (affiliates)
Banner networksGetupdated’s offering of Internet marketing services
The figure illustrates the selection of various Internet marketing services for reaching Internet users that visit search engines and various types of website effectively.
Websites can be divided into three categories based on the strength of their brands, depending on the degree of recognition of websites among Internet users and how visitors find them. Internet media providers tailor their Internet marketing methods according to what the advertiser wants to achieve and where visitors are.
Search Marketing
Search marketing are methods to enhance a website’s position on search engines. Search marketing can be divided into two segments:
PPC (pay-per-click) and SEO (search engine optimization). Tradi- tionally, PPC has represented a greater share of search marketing.
At present, these two segments are of comparable size measured as the share of advertisers that use search marketing in their In- ternet marketing budgets.
1Getupdated expects SEO to become larger than PPC because the pricing of search words is increasing
simultaneous with high organic rankings becoming an increasingly important competitive edge.
Search marketing has expanded fast in recent years, largely due to the controlling and monitoring opportunities it offers. For ex- ample, Jupiter Research estimated growth on the Swedish market at nearly 25% in 2008. IRM estimates that the market for search marketing was some 26% of the total market for Internet marke- ting in Sweden in 2007 (see diagram on next page).
Jupiter Research estimates that investments in search marketing in the Nordic countries will grow by 12 to 15% yearly over the co- ming three years. This means that investments in search marketing will be 40-50% higher in all the Nordic countries in 2012 than in 2009.
2(see diagram on next page).
Pay-Per-Click
Pay-Per-Click (PPC) means buying a site for advertising adjacent to
or above organic hit lists, where companies pay for each click gene-
rated to their website. Advertisements can be tailored and optimized
for display for relevant search words in the search engine. Google
represents a significant share of the search advertising market, and
has been driving market development for a long time. Getupdated’s
competitors in PPC include Keybroker and Relevant Traffic.
1
Nate Elliott, Jupiter Research 2008
2
‘Search Marketing in the Nordics’, September 26, 2008, Lead Analyst Nate Elliott, Jupiter Research
0 1,000 2,000 3,000 4,000 5,000
2007 2006
2005
12%
23%
26%
Total Search
0 2,000 4,000 6,000 8,000
2012e 2011e
2010e 2009e
Sweden Norway
Denmark Finland
The Swedish Market for Internet marketing, SEK m
The Nordic Market for Search Marketing, SEK m Source: IRM
Source: Jupiter Research
Search Engine Optimization
Search Engine Optimization (SEO) is the segment of the market for search marketing that addresses companies that want to optimize their websites to rank as high as possible in search engine and organic hit lists. SEO is based on designing website content and increasing link traffic to and from the site to improve visibility. Thus SEO increases the number of relevant visitors to the site, creating more opportunities for transactions. Getupdated is a leader in SEO based on its number of employees and customers. On the Nordic mar- ket, Getupdated’s competitors include Guava and iProspect.
Banner Advertising
Banner advertising is that component of Internet marketing most reminiscent of traditional advertising because it consists of graphical, often animated, ad- vertisements on websites where advertisers pay for the banner for the period it is displayed on the site. The difference with traditional advertising is that the largest players on the market are search companies with global networks, so banners can be located on websites where they have the potential of reaching the intended target group on a global scale.
Market players in banner advertising include large search companies and smaller enterprises with more local networks, like Getupdated, which offers a localized and more tailored service. Banners can be viewed as a component of more extensive campaign production because they can increase traffic to a company’s website, improve marketing of products or services and make brands visible. TradeDoubler competes with Getupdated on the market for banner advertising.
Affiliate Marketing
Affiliate marketing is a developed form of banners located in a network of strategic collaboration partners. By matching advertisers with the right website owner, the advertiser reaches its specific target group, and thus, more potential customers. Both the advertiser and the website where the advertisement is published gain from this partnership because commission is payable to the website owner when an advertisement is published each time a visitor clicks or orders a product. Simultaneously, visit and purchase frequencies on the advertiser’s website also increase.
Affiliate marketing is a market that has been in high growth, tracking the number of advertisements and advertisers on the Internet. Affiliate marketing is a cost-efficient way for advertisements to reach out across a wide range of websites to many Internet users. However, the market growth for affiliate mar- keting has reduced in recent years, in favor of search marketing.
Affiliate marketing is based on enabling a company to tie in a lot of affiliates
that undertake to display advertisements on their websites for a performance-
related payment. This means there are economies of scale for companies that
can offer large affiliate networks. The market for affiliate marketing is currently
intensely competitive. Multinational players in the segment include Trade-
Doubler, Deal Group Media and ValueClick. Affiliate marketers also encoun-
ter competition from the major search engines like Google, MSN and Yahoo.
14 Market
Internet marketing in Europe, 2006 Internet Marketing Spend in the UK
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000
2012e 2011e
2010e
2009e
0%2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Internet marketing, UK Growth
SEK m Growth
Source: eMarketer
France 13%
Netherlands 6%
Italy 5%
Spain 4%
Sweden 3%
Other* 13% UK 36%
Germany 20%
* Denmark, Belgium, Austria, Finland, Greece, Slovenia, Croatia, Norway, Ireland, Portugal and Switzerland.
Video Marketing
Before the appearance of broadband, video marketing was not a realistic alter- native for reaching broad target groups. Now, however, most companies and households have access to broadband. This has triggered explosive expansion of the customer base in recent years. The success of video sites like YouTube demonstrates the huge impact of video on the Internet. Three out of four Internet users regularly watch videos on the Internet. Now, video marketing is the digital Internet medium that is growing fastest. eMarketer estimates that advertisers will spend USD 7.9 bn on video marketing on the Internet globally in 2012.
Geographical Progress
Those markets representing the highest share of Internet marketing in Europe are the UK, Germany and France. In these countries, the trend is towards greater consolidation of suppliers to be able to offer total Internet marketing solutions. The UK is the most developed market for Internet marketing, and in 2006, represented 36% of total Internet marketing in Europe, while Swe- den was at 3% (see diagram to right).
Investments in Internet marketing, and search marketing especially, are ex- pected to keep increasing in Europe. The UK, the largest market in Internet marketing, is estimated to grow by between 10 and 17% yearly from 2009 to 2012. These can be considered high growth figures, because the UK is the most mature market for Internet marketing worldwide. Thus there is good potential for high growth on Getupdated’s other geographical markets.
Internet marketing is regarded as less cyclical than traditional marketing.
When marketing spend is downscaled, a reallocation from traditional media to Internet campaigns occurs, which have more directly measurable results and performance-based pricing.
Search marketing represented 44% of total Internet marketing in Europe in 2007, while for the Nordic countries, the corresponding figures were between 32% and 37%. Search engines are now investing more in developing search marketing in minority languages like the Nordic languages. Search engines are also focusing more on local searches because Internet users in the Nordics and elsewhere search more locally than on the major markets. Thus there are better prospects for higher growth in search marketing in the Nordic countries than the rest of Europe over the next five years.
11
‘Search Marketing in the Nordics’, September 26, 2008, Lead Analyst Nate Elliott, Jupiter Research
16 Operations
Operations
Getupdated delivers an innovative package of products and services with specialist skills across several mission-critical segments for a corporate presence and marketing on the Internet. The company’s operations are built around optimizing websites to direct traffic to the site and increase visitor conversion rates on each visit. Examp- les of specific services Getupdated offers are SEO, advertisements in search engines and on websites, affiliate marketing, campaign sites, social media on the Internet and web analysis and Internet strategies.
71% of all Internet users come to websites after searching in search engines.
1Accordingly, Getupdated focuses on generating traffic through search optimization, which means the company helps its customers get top rankings in organic hit lists on the ma- jor search engines’ websites.
Getupdated has a large customer base, extending from major multinationals to smaller local enterprises. The group has some 300 employees in Sweden, the UK, the US and France. In 2008, Getupdated focused mainly on consolidating its operations after the company’s high organic and acquisition-led growth in 2007.
Getupdated’s Business Areas
Getupdated conducts operations through two complementary bu- siness areas: Internet Media and Internet Solutions. Internet Me- dia is active in Internet marketing with scalable, traffic-generating services such as SEO, PPC, different types of advertising and In- ternet media planning. Internet Solutions delivers services with the aid of web analysis and specific strategies designed to create busi- ness opportunities from the traffic generated to a website through Web development, web design, e-commerce and social media on the Internet.
In 2008, 75% of net sales were generated from Internet me- dia and 25% from Internet solutions. Some three-quarters of the company’s sales were sourced from Sweden, with the rest of Europe and the US making up the remainder.
2Getupdated is a multinational player in the innovative and expansive market for Internet marketing and search optimization. The company’s offering enhances and streamlines corporate marketing and business on the Internet. The demand for Getupdated’s services is driven by the trend of companies increasingly utilizing the Internet as a strategic marketing tool to clarify competitive benefits, develop customer relations and drive sales off and online.
Net Sales by Business Area, 2008
Internet Solutions 25% (30%)
Internet Media 75% (70%)
Sales and Operating Profit/loss by Business Area, 2008 (SEK m)
Business Area Net Sales
2008* (2007) Operating Profit/
loss** 2008 (2007)
Internet Media 235.6 (122.1) 35.6 (21.6)
Internet Solutions 79.6 (50.9) 5.0 (8.1)
Group wide –24.4 (–4.1) –38.9 (–8.4)
Total 290.8 (168.9) 1.7 (21.3)
* Incl. more conservative application of the accounting policy for revenue recognition.
** Excluding non-recurring items.
Net Sales by Geographical Market, 2008 Rest of world 3%
Rest of Europe 25% Sweden 72%
1
Nielsen Media
2
Before group-wide items and excluding the divested business area, Webhosting.
18 Operations
Internet Solutions 25%
Internet Media 75%
Internet Solutions 25%
