How Media for Equity Deals are Changing Retail Competition in Germany

With the decrease of traditional media reach, big German media companies such as SevenVentures (ProSiebenSat1) or Ströer Media AG have been seeking new ways to participate in the growth of innovative digital concepts. All while staying competitive in a constantly evolving environment.

This is why so-called media for equity deals have gained in popularity. In fact, it has become hard to keep track of media investments and ownership of one’s favourite online shop. By taking a closer look, it is remarkable how German online retail landscape is changing as a consequence.

The motivations behind those media for equity deals appear to differ greatly, ranging from pure profit maximisation to building integrated growth models or even to no obvious motivation at all.

Whilst pioneer ProSiebenSat1 has collected stakes in the early phases of digital start-ups for some time now, the media conglomerate has further adapted to include more established businesses. In this way, the media company has recently become a shareholder of Otto Group’s online subsidiaries AboutYou and myToys.

Such partnerships look like a win-win situation as the media company is able to compensate decreasing ad spend with the growth of investments (if all goes well) and the target is getting access to a broad audience on very favourable terms.

It looks like a good strategy for both sides, but the question is, if this development puts independent companies under pressure as they have to compete with start-ups having easy access to potential new target groups. After all, big media presence offers high reach and provides much better and more convenient branding options.

On the other hand, channelling media power in this way also leads to relatively higher market prices due to the artificial scarcity. This means that the media reach may be priced higher than its actual value and retailers can be forced to adjust strategy to keep the quality of brand campaigns high.

Particularly for international brands, this specific German market situation commands a closer look on the part of decision makers. A centralised, passive strategy appears to be relatively risky or put differently, an active and adaptive marketing channel management for the German market may actually pay off.

© BBR Associates GmbH, 2018