Letter of the CEO – 2023

26 marca 2024

Dear Shareholders,

Wirtualna Polska invests PLN 150 million every year in developing its own technologies. For the first time, in our nearly 30-year history, we have decided to share with the market the products on which we have built our success to date. In addition to further developing a brokerage service called WPartner, we have decided to provide competitors with our own publishing and advertising platform, WPlatform. 

Why now?

In the year of the outbreak of the war in Ukraine, Wirtualna Polska Media recorded record viewing figures. The past 12 months we are ending with only a token increase (+1% in revenue), even though we sold ads 20% more expensive, due to an 18% drop in viewership from the 2022 records. It is a shame, because if we hadn't run out of space, it would have been a good year for our advertising business.

The most important thing, however, is that we have drawn conclusions for the future. We have done this so that we would never again run out of space on which to execute our clients' campaigns. Even if this space does not belong to us. I believe that WPartner and WPlatform will become an important place for joint business development of local publishers in the coming years.

Why are we expanding cooperation with local competitors?

Vasco da Gama did not circumnavigate Africa alone. The need to build a local alternative to global platforms has never been so clear. The year 2024 will see big changes in the online advertising market, triggered by new restrictions on the most popular browser in our part of Europe - Google Chrome. For small publishers, this is a turning point in thinking about the domination of global players, in particular Google, which, step by step, has been cleverly taxing more areas of their business for years. Its search engine has so far been the most important source of traffic to their sites. Today, Google is already for many small publishers both an ad broker, the owner of the largest platform for selling and buying ads on the Internet, the owner of the tools for selling and buying ads on that platform, and the dominant provider of the tool for broadcasting ads on their sites. 

Every domination breeds abuse. According to Google, a fair auction is one in which it opens all the bidding envelopes and only then quotes its price. That is, the largest player in this market, unlike all others, does not want to participate in the fair rate-setting process that publishers carry out on their advertising space. With disarming candor, they say that if a publisher does not use their tools, they will substitute their advertising demand, but only on a "last look" basis - the right to decide after seeing the highest bid. This is an obvious distortion of the idea of an auction. And now, in addition to the above, while "increasing the level of privacy protection for Chrome users," they want to have a second, self-run auction, in case they lose the first one, the one run by the owner of the advertising space...

Google's appetite isn't even held back by the fact that websites for users will take noticeably longer to load... That is, the standby argument, perversely used by our Californian friends in other situations.

Small publishers understand that by feeding the crocodile, what they only achieve is that they will eventually be eaten themselves. What is more, this addiction carries many risks - such as the possibility of advertisements for questionable or outright fraudulent products appearing on their sites. It is reprehensible that Google refuses to provide publishers with information about who it orders advertising for during the auction process (even though it has it) and thus prevents publishers from independently and effectively defending themselves against advertising scammers. No one else does it, because no one else has a dominant position and would simply be turned off by publishers. But who can afford to turn off demand from Google?

The fact that Gizmodo wrote about in May 2018 has grown into a symbol - the famous motto "don't be evil" is no longer so prominent in Google's code of ethics. It is time to say it out loud: also with us - under Google's velvet glove lies an iron fist.

Is this an opportunity for us?

Yes. To date, there has been no viable alternative in Poland. Wirtualna Polska wants to build it, together with the largest local publishers.

On the initiative of the presidents of the largest Polish portals, the Union of Employers of Digital Publishers was established. The first industry organization formed primarily for joint representation in relations with global platforms. Contrary to the name, it's not just about the interests of employers, but also the interests of the several thousand workers employed by union members.

Wirtualna Polska will soon offer additional support to this young organization by putting under its supervision the service it has built to identify users in a third-party cookie-free environment for advertising purposes. This will allow improving the efficiency of running advertising campaigns on the space of all participants. 

What can we offer the market beyond technology?

The demand from our e-commerce businesses. The strength of Wirtualna Polska Holding is that it has both advertising and e-commerce businesses in one group. Without this, it would not have been possible, for example, to improve advertising efficiency so significantly, tripling (Q4 2023 to Q4 2022) WP's share as an online sales generator with TOP40 customers. This is thanks to a product called WP SalesBooster, our holding’s reason for pride. Understanding the needs of advertisers is a direct result of having companies with identical marketing needs in the group and the ability to reverse engineer global intermediaries' solutions and improve their own advertising products.

Especially relevant here is our travel e-commerce segment. One could briefly say that we are doing something right in it, since it grew by 117% last year. This is, of course, a cocktail of many activities, not just our natural marketing competence. Some of them have their origins still in Covid. It was then, at a time of revenue shortfalls, that the travel world divided into those who could not afford to invest in the future and those who could afford it (and wanted to do it). We, luckily, belonged to the latter group. Today we are reaping the benefits. We are also supported by market trends, such as the rising level of digitization of society and the increasing affluence of Eastern Europeans.

What is the future of the travel part of our business?

We have more than 25 years of experience in online advertising and only 10 years in online travel. Christopher Columbus began his voyaging career by trading in sugar on Madeira and we are at a similar stage.

Just like in the advertising business, we need to win against global competitors. This is how we build our business models so that we can fight effectively at an incomparably smaller scale. In practice, this includes taking on more risk, albeit limited geographically, one that is easier to manage and that global platforms cannot afford. This also means working on the product and strengthening cooperation with suppliers. We are an important partner for them, enabling them (as in our advertising business) to reduce their dependence on Google (in some tour operators exceeding 50% of online sales) and defend against the expansion of its travel counterparts. The scale itself, however, cannot remain at the level of a few countries, but at least entire regions. This means further acquisitions and an unwavering belief in the presence of land beyond the currently visible horizon.

Best regards,

Jacek Świderski

CEO Wirtualna Polska Holding SA