Life after Koos Bekker: where to next for Naspers?

There’s a quote from outgoing Naspers chief executive Koos Bekker buried right at the end of Sunday’s City Press article that tells you an awful lot about the man. In a note to staff, (as the newspaper points out) his humility is stark: “We screwed up frequently, but we had a great deal of fun and I couldn’t imagine another job that would have fitted my limited talents better, that would have given me more pleasure.”

Bekker is acutely aware of his limitations. Perhaps that’s why he’s decided to step down now? But it hasn’t been the smoothest and most well-telegraphed of handovers.

It wasn’t supposed to be this way. Antonie Roux (head of its internet businesses) was the heir to the Naspers throne. His unexpected death in June 2012 upended the original well-thought out and considered succession plan. Roux, more than anyone, shaped the group’s transformation into an internet giant.

We were promised details on the new succession plan at the group’s August 2012 AGM. At the time, chairman Ton Vosloo confirmed that Bekker would stay on for an additional year (beyond his second five-year contract term) to March 2014.

In September last year, the group took the out-of-the-ordinary step of pre-announcing an announcement on the future of Bekker: “The board will deliberate on the issue and we’ll make an announcement by November when we release our results.” The spokesperson for Naspers went on to tell BusinessTech. “The board could decide to renew it (contract) if he is available or opt for another successor.”

In November, nothing, save for a dull reference buried in the results statement: “Messrs Ton Vosloo (non-executive chair) and Koos Bekker (executive director and CEO) have agreed, at the board’s request, to stay in their present positions.”

In response to a question about staying on again at the board’s request, Bekker told me in November that: “I still enjoy the job, in our field every morning something new happens, so I thoroughly enjoy it at the moment”. It didn’t strike me as an answer, as if Bekker was being deliberately vague. (I’m going to miss speaking to Bekker every six months).

Not announcing anything in November, and instead early on a Saturday morning in February is unusual. This is important. Perhaps Bekker was “no longer available” (see Naspers’s statement in September). Perhaps the Naspers board (five MIH directors replaced three directors with print media expertise barely four months ago!) was divided on who should be appointed? Perhaps Bob van Dijk needed some convincing? Perhaps it was all of these things? There’s definitely no need to look for smoke or fire, but it’s worth pointing out that the succession was not nearly as smooth as previously planned.

(Of course, there’s still the matter of Bekker’s potential tax liability on his R21bn-odd in Naspers shares, but that’s a topic for another day).

Busting the myth

There’s a myth — wrapped up in a lot of hype — about Bekker’s success in spotting and capitalising on China’s Tencent. Yes, Bekker was in charge when Naspers bought its 46.5% stake (since diluted) in Tencent, back in May 2001. The world (and Tencent) was a very different place over a decade ago. Its main product at that point, QQ, was a desktop messaging client, not unlike ICQ or MSN/AOL/Yahoo Messenger.

Tencent’s success over the next 13 years was built on the back of its ability to react to the sweeping and fundamental changes which happened in the personal computing and internet markets (and boosted by the early scale it achieved): the shift to mobile (and smartphones), ecommerce, subscriptions, games (and gamification), virtual goods, social networking, globalisation. Tencent’s strategy and execution has (to date) been successful in each of these spaces.

Again, it’s worth mentioning that the market (and analysts) didn’t reward Naspers’ investment in Tencent until very recently: late 2012 (and into 2013). In the roughly 18 months since, Tencent’s share price has more than doubled from around HK$250 to HK$580. Over the same period (and helped by significant rand weakness), Naspers shares have also more than doubled from the mid-R500s to nearly R1300.

Today, Naspers’ 34% stake in Tencent is worth R517bn, equal to 97% of its total market value on the JSE. (Its investment in Mail.ru (29%), all its other ecommerce and internet businesses worldwide (there are hundreds of them) plus its MultiChoice pay-TV and legacy media businesses in South Africa and Brazil are only “valued” by the market at R16-billion.)

Embracing failure

So yes, Bekker can hold up investing in Tencent as perhaps his greatest accomplishment as CEO. But press him on that and he probably wouldn’t.

Luck? Maybe.

To answer this (or, more correctly, to not answer it), you need to understand how Naspers approaches investments. For every success, there are probably a few dozen (or hundred) failures. After all, Bekker himself told Memeburn in 2011: “We’ve made more mistakes than anyone else. What we typically try to do is get into something and ‘fail fast and cheaply’. We have also failed expensively. We created the second biggest ISP in Beijing in 1998 and we lost the battle there. We eventually lost US$80-million and had to fire people and close it down because of mistakes we made. We’ve failed quite a lot but if you’re going to fail, get into the market quickly, fail quickly and learn from it.”

Antonie Roux, echoed this, telling Brainstorm Magazine in 1999: “We made some very expensive mistakes in China in the beginning. We lost a lot of money. But we didn’t want to compete with well-funded Silicon Valley start-ups and believed emerging markets would eventually yield greater value.”

Naspers has been shrewd in how and where it made investments. It largely avoided English-speaking markets (and deliberately so), even emerging ones. Re-read Roux’s quote above, the answer’s there.

So, it has made mistakes. Plenty. Not just in China. A handful of ill-fated pay-TV forays into far-flung markets. Failures in South Africa too.

Ironic that Naspers is (so far) incapable of replicating its worldwide e-commerce success in its home market.

— Hilton Tarrant (@hiltontarrant) February 21, 2014

 

The recipe has worked exceptionally well over the past three decades, take mature business producing lots of cash and invest heavily in the next big thing. So from newspapers to pay-TV
(and mobile – selling MTN too early), then from pay-TV to internet and ecommerce.

Remaking Naspers (again)?

But what’s next? There’s enormous pressure, unspoken, perhaps, and from the market, for Naspers to find the “next” Tencent. Just like there is for Facebook to find the “next” Facebook. Bekker knows this. He spent 2007 on sabbatical, and the results over the past five years have vindicated that decision.

Reading between the lines, Bekker knew it was time for fresh blood. He described Van Dijk in more than one interview this weekend as the “best ecommerce man in the world”. The fact that Van Dijk is 41 is significant too. There were, perhaps, a few ‘safer’ choices.

Bekker knows Van Dijk needs space from April; he’ll be stepping off the board to give his successor as much as he needs.

So, will Van Dijk rock the boat? There’s an awful lot of value trapped in Naspers at the moment. Maybe that will need some attention? Could the fact that Naspers remains listed on only the JSE be a hindrance? Or does it prefer the relative anonymity that offers? Further internationalisation? Or is it okay with the havoc rand-volatility presents when it reports financial results? What will he do with Media24, which houses its traditional media businesses? They’re hardly core anymore.

Doubling down on ecommerce? That’s a given.

And mobile? Mobile is already far bigger than the “internet”, it’s not simply an extension of the web. Mobile presents entirely new possibilities.

Will Naspers keep throwing billions at a wall, hoping some of it will stick (and unearth another Tencent or Mail.ru in the process?) Can it afford not to?

I can’t help but wonder why the Naspers board selected a Dutch-national to run an emerging market internet, ecommerce and media group. The perspective of someone who’s run ecommerce businesses in the Netherlands, Germany and Scandinavia – all developed, Western European markets – is going to be very different from someone who’s lived and breathed emerging markets…

Surely the next Naspers chief executive could’ve come from China? Or India? Or South East Asia? Or Eastern Europe? Or Africa?