There was a time when newspapers were thick with classified advertisements. A major money-spinner for publishers, it would be fair to say you would have to be mad to take on an entire industry. But that’s just what Junk Mail Publishing did when it introduced free classifieds to South Africa, and in so doing it has completely dominated the market. “Junk Mail turns the classic classifieds business model on its head,” says Felix Erken, managing director of Junk Mail Publishing. “In the old days, you would pay R50 to advertise something; but what if the item you wanted to sell was only worth R50? Junk Mail turns that around by giving the advertiser the opportunity to list his goods for free. Revenue comes from the potential buyer, who pays to view all the ads, effectively creating a marketplace and giving the buyer choice,” he says.
It’s a ballsy business model, particularly given the sheer dominance of the newspapers in the medium. Junk Mail is not unique to South Africa: “The business model has its origins in the 1970s in Canada. It was proven worldwide, but had never been tried in South Africa until we got going,” Erken says. With his experience and involvement in the Auto Trader publication, Erken got to know the owners in the early days of the publication. “I liked the concept of taking on the establishment.” Introducing a classifieds paper turned out to present some thorny and unique challenges. For one thing, people were simply not used to advertising for free. “We had to ask people for permission to carry their adverts. For two years, we had to canvass for every advert.” Then there was the issue of distribution, crucial to the success of the nascent publication. “Junk Mail is a relatively expensive paper and very time sensitive. It is there to meet the needs of the bargain hunter; if you haven’t snapped up the bargains by Friday [the paper appears on a Thursday], someone else has.” Trouble was, newspaper distribution was controlled by the newspapers, which were not happy with an upstart eroding their classified revenues. “We did something that no other independent publication does: we started our own
This turned out to be more challenging than initially anticipated. “Had we known how difficult and complex it would be, we may never have tried. Back then, though, we naively thought, ‘Why not?’” Erken says if Junk Mail Publishing thought it had cojones starting a free classifieds paper, it needed much bigger ones to take on distribution. “Distribution needs people, warehousing, vehicles, routes – it is a logistics nightmare.” But, undaunted, the company made its start, initially in less formal outlets because proprietors have to agree to let you put your publication in their store. Today it is the country’s fourth biggest distributor, taking over 100 titles into some 10 500 outlets nationwide. “Distribution has become a revenue generator for us,” Erken confirms. Junk Mail has consistently innovated for success. When the Internet appeared as a potential new marketing channel, Junk Mail was there. “It was easy to see the potential, but people were going crazy, forgetting their original value propositions.“ Others thought it was a fad that would simply pass and swept it under the carpet. Within the turmoil, Erken kept a steady hand on the Junk Mail ship: “We decided to embrace the Net to protect our market. If it didn’t work, the loss would be minimal.” The decision to go online turned out to be prescient, and consistent with Junk Mail’s business model. “We remained true to our value proposition of letting the buyer pay to view the ads and successfully combined print publishing with the Web.” Today, Junk Mail Publishing employs about 800 people. But complacency, says Erken, is probably its biggest threat. “Ongoing success depends on continuous innovation and awareness of market currents. Anyone with a PC is a potential competitor, from the one page sheet ads, to the knock-and-drop newspapers and the mainstream newspapers. Staying the King of Classifieds depends on being aware of all these threats and managing our business model to be better than them.” Contact: +27 12 342 3840, www.junkmail.co.za
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