Dear Shareholders,
Travel business at Wirtualna Polska Holding has been like the dark side of the moon: it has been there, but few have had a chance to see it. Despite the consistent growth of this business area within WP Holding, nearly everyone associates our Group with the media sector.
Although this perception in people’s minds is not fully supported by facts, until now we have not brought about a strong turning point. We have not had our own Gettysburg, El Alamein or, if you will, Stalingrad.
Why am I writing this? If we are successful in obtaining regulatory approval, WP Holding will not only complete the largest acquisition in its history, but also, for the first time ever, our travel business will outgrow our media business. For PLN 1 billion, we will acquire a group of travel companies operating in Germany, Austria, Switzerland, Czechia, Slovakia, Romania and Hungary. For its 30th anniversary, Wirtualna Polska will change its profile both in terms of industry and geography. Most importantly, this change will come about as a direct consequence of our obvious business need, namely the need for a rapid increase in the scale of our operations.
Travel business has become globalized. Meanwhile, our achievements in this area to date have only reached the scale comparable to that of a guy in a pedal boat trying to traverse the Atlantic. What we need to do next though is to embark on a journey that is less adventurous in the sense that rather than being based on our entrepreneurial nature, it must rely on the strength of our assets. Also because, having taken a few years’ break, we would like to devote more time to our beloved media again, as our refocusing on other areas has cost us dearly.
When we ended the period of personal union between WP Holding and WP Media in March 2018, little did we know that we would have to backtrack on this decision some time in the future. However, the founders’ return to our oldest company in 2024 turned out to be a necessity.
Short-sighted thinking, narrowed down to generating revenue for a current month, quarter or year at all costs, resulted in reaping poisonous fruit in the longer run.
For it is so much easier to come up with some additional advertising formats or ramp up click-bait than, for instance, invest in AI technology and have the patience to let it pay off. In other words, to squeeze out more short-term revenue from our users instead of making sure they receive content that they really find interesting and engaging enough to stay with us for longer?
In addition to the publishing product, one of our biggest surprises was the condition of the WP Media advertising division, which was famous for its good ratings before 2018. Seven years down the road, it turned into a shadow of its former glory, like the German army on the outskirts of Moscow. There is no doubt in my mind that the decision to deliver a ‘coup de grace’ to the company’s Management Board was the right one.
Where are we today?
We are doing the obvious. Two quarters after the return of all founders, we are approaching the point where the shift within the organization from thinking about how to generate more earnings at the user’s expense to reasoning about how to deliver a better product to the user in order to improve earnings is starting to bring some tangible financial results. The use of new technologies, including artificial intelligence, is helping us measurably.
It has taken us only several weeks to prioritize AI in our advertising products (WP Booster). The deployment of AI technology in our publishing product has taken about 6 months, which is why since October the number of page views on our websites has increased by about 25%. This has been driven by a 16% increase in the number of our articles, their better quality (ratings up by 20%) and a 83% boost in the performance of our content recommender. Could it have been done two years earlier? Unfortunately, the answer is yes. But with the hard work of our whole team, we are making up for the time we have already lost. We are lucky to have fantastic people working at Wirtualna Polska Media, and their belief in the success of our organization grows stronger every day. We still have a lot to do to call out a victory, but this team already has every right to feel proud.
Recognizing the favorable outcomes of the projects rolled out to date and the strength of the market, we made a decision in the fourth quarter to double our investments in several key areas, namely AI in our advertising product (WP Booster) and publishing product (Ćma). The former improves the effectiveness of our campaigns, as measured by customer KPIs, several times over, while the latter increases the time spent on our websites by users and the quantity of their valuable page views. We have also decided to step up our endeavors and expenditures to grow our WP ADS self-service as well as our WPartner brokerage business and foreign expansion (already accounting for 20% of WPartner’s revenue), including through the acquisition of foreign advertisers.
In the travel business, the past year was also an intense one. The change and subsequent centralization process of management at the Szallas Group, which has grown over the years through acquisitions, deserve special attention. It is not without reason that a manager with extensive experience in the advertising sector has been appointed to the top position in the company. We have always emphasized that the strength of our Group stems from the combination of advertising and e-commerce capabilities. This is the only way we can build our position against the competition. Marketing is our group’s lingua franca. Meanwhile, in e-commerce, the winner is the one who makes the fewest marketing mistakes.
We are counting down the days until we are joined by the Invia Group team, consisting of several hundred wonderful professionals, including many with several decades of experience in the travel sector. We have already held our first workshop and seen the quality of these individuals with our own eyes. Our organizations have some obvious mutual product synergies in Central Europe. Also, by entering the German market, we will be able to double the scale of our business, provided that we prepare well for operating in it in terms of marketing and if we prove to be ambitious enough to capture what it has to offer. We cannot wait to get our hands on the steering wheel.
A year ago, I wrote a lot in my letter about the threats posed by global platforms. Hence, it came as a relief to see the law passed in Poland in line with the postulates of the Polish media, despite the rather clumsy lobbying efforts by our opponents. Unfortunately, the other parts of my last year’s letter remain relevant also today. It is particularly painful that Google does not provide information about the advertiser that publishers need to combat fraudulent advertisements. Such behavior is not worthy of the market leader.
This year, I would like to draw your attention to another aspect of cooperation with big tech companies. The use of cloud and AI technologies owned by American companies has been a hot topic in recent weeks. These products are at a similar stage of development to that of airplanes in the 1930s.
It would be reasonable to recall in this context that the Second Polish Republic actually exported fighter planes. Hardly anyone knows that Poland’s PZL P.11s and PZL P.24s were successfully sold to Romania, Bulgaria, Greece and Turkey. We exported more of them back then than we have purchased F-16s and F-35s combined to date.
We are pretty sharp as far as the tools in the shed go. Today, Poles and other Central Europeans working for American companies contribute greatly to the success of big tech companies and their technological solutions. But this does not mean that companies based in Central Europe are incapable of creating such solutions or that they do not already have them.
Succumbing to this modern digital colonialism is the easiest way to become dependent in yet another area for decades to come, if not forever.
Our experience of cooperation with big tech companies operating in the advertising market (which I described in detail a year ago) leaves no room for doubt as to their strategy. In the early years, they offer their services on attractive terms, only to ‘tax’ us for years to come.
Google offers to ‘only design our technological kitchen’ for our cooking pleasure. Let me make this clear for you: several years down the road, no other brand of ice maker or refrigerator will fit in there. It is the first fix of the drug, and not a free one at that.
We in Poland sponsor the development and growth of other countries’ technologies and companies instead of investing in our own. Many Polish companies, including Wirtualna Polska Holding, have their own cloud solutions which they have been successfully developing for years and which are at the heart of our Group’s technological edge.
I would be rather naive to use the term ‘domestic cloud’ in Poland to refer to solutions that have simply been purchased from suppliers and have nothing to do with our country apart from employing Polish IT specialists. Meanwhile, American suppliers include the purchase of an office building in Warsaw in their ‘investments in Poland.’
Today, 100 years after our ancestors blazed the trail in aerospace engineering, we are unable to build our own F-35 or JAS-39 Gripen fighter jets and will never be able to build them. Moreover, the foreign supplier can make a decision without even consulting us to restrain their combat capability at a time when we might need it the most. Having found ourselves in a position where we have no choice but to buy foreign fighter jets for billions of dollars and accommodate the moods of representatives of the countries that supply them to us, maybe it would be perfectly reasonable to consider a different path for the development of our own cloud and AI technologies?
Best regards,
Jacek Świderski
CEO Wirtualna Polska Holding SA