Mathias Döpfner points from the window of his 18th floor office to the street where the Berlin Wall once ran. These days the view is of an ordinary city street but when Axel Springer built his Berlin publishing house here, it was right on the edge of the Russian sector.
As other German corporations abandoned the divided city the Springer monolith was proof that one western capitalist was not afraid of a fight.
In April the head of Europe’s biggest newspaper publisher by circulation admitted that “we are afraid of Google” and accused it of seeking to establish a digital superstate free from the constraints of antitrust regulators and privacy concerns.Half a century later the targets may have changed but the relish for combat lives on.
In an open letter to Eric Schmidt, Google’s executive chairman, Mr Döpfner said that the debate about Google’s power was “not a conspiracy theory for stick-in-the-muds”.
He painted a picture of Google’s power radiating from the home to encompass driverless cars and robotics, and criticised the recent settlement of the EU’s antitrust investigation of its search and advertising practices.
The concession Google had agreed with Brussels allows rival search engines a showing alongside its own results, though they must pay Google through an auction for the display of these links. This deal, the Springer chief wrote, was “protection money”.
Where Mr Döpfner led, politics followed. In May, Sigmar Gabriel, Germany’s economy minister, publicly called for the possible break-up of Google should the company be found to have abused its dominant position.
With Arnaud Montebourg, his French counterpart, Mr Gabriel then wrote a joint letter to Joaquín Almunia, the EU’s competition chief, urging him not just to push for further concessions from Google over search and advertising, but to look more widely at its business practices.
Hundreds of European digital companies – led by Axel Springer and France’s Lagardère, and calling themselves the “Open Internet Project” – have lobbied the European Commission to think again. Critics say the proposed settlement does little to foster competition in online searches.
“It is not about Google-bashing, or anti-Google, or weaken Google or things like that,” says Mr Döpfner. “That is too primitive. It is really that we need – for the prospects of the digital economy, for a healthy environment of competition – we need this debate.”
In response to the criticism, Google points out that the proposed changes to its search and advertising practices have been through two separate market tests “which enabled the commission to hear directly from a number of our competitors”. The tech company says it made significant changes to its initial proposals after this feedback.
Mr Almunia is expected to adopt the search and advertising settlement by the autumn, though he is under pressure from complainants, who have won support from other European commissioners.Last month, Larry Page, Google’s chief executive, told the Financial Times that the company would try to “be more European” in its approach to privacy issues as it agreed to introduce a mechanism to strip some personal information from search results.
On one level, the fact that Mr Döpfner is stirring up European opposition to Google’s power is remarkable. In Germany, there are few who display more missionary zeal about the transition to digital publishing. Since late 2012, waves of Springer executives – starting with the editor-in-chief of its flagship newspaper, the populist title Bild – have been sent west to learn from Silicon Valley.
Mr Döpfner says: “It’s not that we want to copy Silicon Valley, in all aspects, there are some things that you learn that you don’t want to do like Silicon Valley does it, but of course it is extremely inspiring to benefit from the most successful hub of digital innovation.”
So does he see Google as a threat to his company’s business model? At first he responds by praising the “search ecosystem” Google delivers for its positive effects on digital publishing. “Google delivers traffic. Google delivers advertising,” he says.
Traditional publishers face a fundamental question, the former journalist believes. “Do these traditional content experts successfully take over and develop the new technological platforms in order to become the digital publishers of the future? Or will the big tech companies take over the content competence of these traditional publishers?”But the head of Springer suggests that ultimately he regards the big tech companies as competitors, even though “we are tiny little dwarfs compared to them”.
In this conflict, Google is not the only rival. His competitors include Amazon, Facebook, Apple – “eBay even to a certain degree”.
He describes the clash with Google as “David against Goliath” – an ironic description given Springer’s clout in its home market. Mr Döpfner tries to play down the influence of Bild, Europe’s biggest-selling newspaper, claiming it could never change a political trend, only “de-escalate” or “amplify here and there”.
But the latest demonstration of Springer’s power came after the European elections, when Angela Merkel changed course over backing Jean-Claude Juncker for the presidency of the European Commission hours after Bild backed him in an editorial.
Written by Mr Döpfner, the editorial declared: “It is clear; Europeans want Juncker as EU President.” The German chancellor switched from openly doubting Mr Juncker to pledging him her support.
Mr Döpfner’s challenge to Google has won him enthusiastic support in Europe, but there is little sign of equivalent public backing in the US. He says that he has “tremendous support from very powerful people” in the US, but will not name them, as they have decided not to endorse him in public.
Unlike the US, Europe’s direct experience of fascism and communism has left its people fearful of the notion of the “transparent citizen”, he suggests.
Nevertheless, he thinks America’s mood will shift as Europe’s has done. “The usage of data is power, is business power and is political power. Wrong usage of data is a limitation of freedom,” he says.
In its present form, Google does not “want to do evil”, he concludes, but he worries about how it might behave in the future. “Do we know who owns, who runs, who controls Google in five, in 15, in 25 years? Do we know what the mindset then will be?”
Springer’s digital transition
Mathias Döpfner may be at odds with Google but he is no technophobe, having accelerated Axel Springer’s shift away from print.
Last year it sold regional newspapers, including the Hamburger Abendblatt, the first daily created by the group’s founder, and acquired a 24-hour news channel that will be used to supply video for its digital platforms. A paid-for online version of Bild was introduced a year ago.
The shift carries risks: the print operations it sold had a 20 per cent profit margin in 2013 compared with a 16 per cent margin for Springer as a whole, for instance.
The company’s latest annual report shows the share of Springer’s earnings before interest, tax, depreciation and amortisation from digital media rose from just under half in 2012 to 62 per cent last year. But ebitda fell by 9 per cent from €499m to €454m.
The publisher has unbundled the traditional revenue streams of a newspaper, organising the business into three divisions around paid content, marketing and classified ads.
Of the three, classified advertising was the strongest performer. Revenues were up 22 per cent on the prior year, with an ebitda margin of nearly 41 per cent.
There is speculation of an IPO for the digital classifieds business, which is a joint venture with private equity fund General Atlantic. However, rumours of an imminent initial public offering are “incorrect”, Mr Döpfner says.
