Beyond Search: An Interview with Seznam’s CEO

Around a month ago I took a look at an internet company that seemed to be bucking all the trends.

The company had begun as the most basic of search engines, expanded its suite of products over time, and faced strong competition from some of the giants in the global internet economy, not the least of which was Google.

But what was most interesting to me was that this company was achieving something that few other technology companies anywhere in the world were achieving.

They weren’t dominating, but they were holding their own.

Seznam, the leading internet company in the Czech Republic, maintains a market share of search in that country that dwarfs almost any other comparable case in Europe. While there is no single, foolproof means of measuring search market share, comparing Seznam’s share of all search in the Czech Republic against those of the second-place players in other countries is instructive:

2^nd Place in France: Microsoft, 2.93%

2^nd Place in Germany: Microsoft, 2.92%

2^nd Place in the UK: Microsoft, 5.36%

2^nd Place in Switzerland: Microsoft, 2.56%     

2^nd Place in Czech Republic: Seznam 25.45%

All figures from StatCounter, July 2015.

In that last post I posited three reasons why I believed that Seznam was achieving – and maintaining – this incredible market share in the Czech Republic.

The first was that Seznam was an early mover – really the early mover in the country – and that they had established some traction because of this.

The second was their innovation and the expansion of their product range from a simple list of Czech language websites through to a real search engine, email, video platform, mapping software, online advertising and more.

The third reason was its focus on, and proximity to, the Czech market. Seznam wasn’t trying to be all things to all countries, but instead kept a laser focus on serving the customer it knew best and understood better than anyone else: the Czech internet user.

In combination, I argued, these factors helped Seznam establish itself, maintain its position in the market, and even out-gun its Mountain View rival in some areas. But being based outside of the Czech Republic, this could only ever be the view of an outsider and I couldn’t help but wonder if maybe I was missing a piece of the puzzle.

And so I got in contact with Seznam and organized to take my questions about Seznam’s success straight to the man in charge: Seznam.cz General Manager and CEO Pavel Zima.

From Engineer to CEO

Pavel Zima currently sits at the top of an organization that numbers more than 1000 employees, but he didn’t start off in upper management.

Instead, Zima started as an engineer, getting his hands dirty building and supporting the UNIX systems that support the Seznam ecosystem. An early hire and close friend of Seznam founder Ivo Lukačovič, he worked his way up through the ranks of the company and took control of the day-to-day operations of the firm in 2006.

Today his role involves a lot less code and a lot more strategy – he jokes that he has trouble keeping up with what’s new when playing around with code at home the weekend before – as he continued to drive Seznam forward into a future he sees as still unpredictable.

“It’s hard to say where the market will be in two years in central and eastern Europe. It’s one of the great things about working in an internet company,” he says with a smile, “because no two years are the same and the company and the market are constantly changing.”

He suggests that cloud computing and the online office will be two areas that continue to expand, but an area where he feels confident in predicting a positive market trajectory is in the growth of mobile internet.

“We will continue to see a switch from desktop to mobile,” he says, “just as we have seen over the last two years.”

Seznam is not alone in identifying mobile as increasingly important for the internet economy. Smart Insights reported that in 2014 the number of mobile internet users overtook desktop users for the first time – and it continues to rise.

Yet while the number of mobile users continues to increase, the proportion of mobile advertising has not increased in parallel. While 24% of media is consumed on a mobile device, only 8% of advertising budgets are served on a mobile device. This difference represents an opportunity for marketers and brands while also signifying the difficulties of marketing to mobile users.

It’s a difficulty that Zima acknowledges.

“It’s a major challenge for our content providers, and for Seznam, too, to sell advertising on mobile devices. The smartphone displays are much smaller than desktop displays, and you have to target your advertising precisely in order for it to be effective on mobile devices,” he says.

Yet for all the difficulties that mobile marketing and serving mobile advertisements represent, it is in mobile that Seznam has taken on the biggest players online and experienced an early, significant, and valuable win.

Meet Mapy.cz

Google has Google Maps, Microsoft has Bing Maps, and Yahoo! has Yahoo! Maps.

Finding your way around the block or around the world with the aid of a mapping service and a GPS enabled smartphone is now common practice for millions of connected individuals. Choose a destination, choose a mode of transportation, and tap to find a route: what could be easier?

Whether in Paris or Prague, this experience should be easy and seamless on mobile. However, there’s something about the mobile user in Prague that separates them from the Parisian.

In France someone might be searching for the fastest way to get from the city to Brittany or Marseille for the weekend, while, in the Czech Republic, they are likely thinking of getting out of town and, say, spend a weekend hiking the Bohemian-Moravian Highlands.

Hiking is one of the more popular recreational activities for the Czech population. The country’s national tourist board proudly promotes hiking to visitors, encouraging tourists to partake of an activity that hundreds of thousands of Czech citizens enjoy on weekends, holidays, and vacations each year.

It’s no surprise, then, that mapping applications emerged as popular tools in the Czech Republic. Yet for a mapping application to be useful outside of the city streets it needs to be able to do a few things well.

First, it needs to allow the user to access the maps without relying on data networks. While 4G or Wi-Fi enabled internet connections might abound in the city, they are few and far between in the mountains, forests, and valleys of the countryside.

Second, it needs to offer more than just streets and automobile routes. Elements like trails and contour lines are essential for route planning, and far more useful than negotiating by crossroads that might not emerge all that often in rural areas.

The mapping application of choice for Czech hikers? Mapy.cz.

“This is something you really have to see with your own eyes,” says Zima. “The application is very fast and you have the mapping data stored in your phone.”

This local storage is an important distinction compared to competing products, including Google Maps.

“Czech mobile operators do not have the best data coverage,” explains Zima, “so when you are hiking in the forest you are very often offline. With Mapy.cz you always have your map on your phone, you can find your position, and easily navigate without relying on data.”

It’s for this reason that Mapy.cz is popular, he tells me, because it is focused solely on the local Czech telecommunications environment, the Czech landscape, and the interests of the Czech people.

A Portal Unlike Others

While Seznam is often compared to Google there is no mistaking their approaches to their home on the web.

Google is famously minimalistic:

The Seznam homepage? It’s a little more busy:

Seznam offers users a portal, and it’s a deliberate strategy from a firm that has significant interests in a variety of internet businesses.

“We are trying to diversify our business as much as possible,” says Zima. “We don’t want to be so dependent on just our search business. We are trying to improve our content services and today we have the number one news site in general news, the number one news site for tabloid news, and in sports news in the Czech market.”

Zima also explains how the web portal Seznam.cz has created has led to some real successes for the company in multimedia and online video.

“We are very proud of our internet TV production arm, Stream.cz, which is very popular. We have our own shows and we invest in our own content – this is important for our future,” he says.

Indeed, Seznam’s online streaming serials attract viewership that the company can compare to terrestrial television audiences. Some episodes have attracted 500,000 views, for example, with a good audience for a televised series in the Czech Republic is between 400,000 and 600,000 viewers.

Seznam is not the only large internet player to use a portal style homepage; Yahoo! has continued to use their busy, portal-style page despite the minimalist trend and, indeed, has experienced some real success with their portal in markets like Japan and Taiwan.

Yet while there are parallels with Yahoo!, Zima is clear in differentiating Seznam’s approach to that of others in Europe.

“Back in the year 2000 there were many Seznam-like web portals across Europe but most of these were acquired by telco operators. When this happened, the portals changed focus from their internet product to media sales and selling the telco’s own products,” he says.

Zima says that Seznam, on the other hand, never stopped focusing on improving its internet products.

“That’s the reason we have had success in search, in maps, in content services, and so on,” he maintains.

This focus on innovative products and internet services – creating things that just work for the population and worrying about monetizing them later – extends even to the names of the Seznam products themselves. Unlike some rival companies that cannot help themselves but to place their corporate identity or brand name before every product they release, Seznam names their products for easy identification by users.

“Every product name links back to a common Czech word for that service. ‘Seznam’, for example, is the Czech word for ‘list’, which is exactly what the company began as: a list of websites in Czech. ‘Mapy’, our name for the mapping tool, means ‘maps’. The name of our product represents exactly what the product is for the user,” Zima says.

Seznam, then, is a familiar place for Czech internet users – and little wonder. Zima reveals that 90% of Czech internet users visit the Seznam homepage each month, a stunning figure that speaks to both the ubiquity of the company and its many products, and also the loyalty of the Czech population to ‘their’ internet company.

What Keeps Users Coming Back?

Web-based email first emerged in the early 1990s and went mainstream with the launch of Hotmail in the second half of that decade. In time webmail options for consumers proliferated as companies fought for the email business of consumers even when that business returned entirely zero in terms of revenue – or at least revenue for email.

What was supporting this drive towards webmail was advertising, whether banners across the top of email portals, pop-ups that drove users to distraction, advertisements inserted into mail signatures for dispersal every time a user pressed ‘send, and right through to the more sophisticated advertising that exists today in Gmail accounts: ever present, but increasingly less well-defined as advertising.

Seznam’s webmail service has 3 million registered users. While this pales in comparison to Gmail’s 900 million registered users, it represents the email service of 50% of the Czech Republic’s 6 million strong online population. As with Mapy, Seznam seems to have real sticking power when it comes to webmail and its users.

This customer focus is something that will be reinforced by Seznam Media Relations Director Irena Zatloukalová. She explains, “Not a month goes by where we we do not release a new product or an update to an existing product. Call it a redesign, a rethinking, or an update – everything is focused on improving the customer experience.”

Growing Seznam

Seznam’s focus since its launch has been on the Czech Republic but surely this cannot continue for ever. The central European country might have an emerging tech sector and be home to some exciting new startups – Brand Embassy, Geewa, and RiteTag are all based in the Czech Republic – but there is a practical limit to the size of the market.

“We are looking at opportunities abroad,” Zima reveals, “because we have to grow and the Czech market is quite saturated now. We are looking at opportunities in foreign countries, and we are even looking at offering some global services.”

“It would be a big change for Seznam,” he explains, “because we have our position today because we never looked abroad and remained focused on Czech internet users and products we could build for them.”

Zima is coy about what markets he might target in any future expansion and warns that the company is still at the beginning of any move towards a country outside of the Czech Republic. He is clear that the company cannot and will not lose its focus on its core Czech Republic customers, though outsiders can see some good reasons to look abroad, if still close to home.

The Czech Republic is bordered by four countries, each of which might appeal to Zima and his business development team.

Slovakia or Austria are both smaller markets than the Czech Republic and offer opportunities for Seznam to expand with less risk than the far larger Polish market. The behemoth next door, though, is Germany. Europe’s largest, richest, most technologically advanced nation, cracking the German market would see Seznam escape the reputation of some central European internet aberration and instead rank as a regional, even global internet power.

Cracking that market, though, is tough, maybe even impossible. Even just a rudimentary glance at the search and advertising market reveals a market that is dominated by Google: more than 95% of all-platform search and almost all search advertising is funneled through Google servers. Global players like Yahoo! and Microsoft struggle to take even 1.5% of the national search market in Germany, so what chance does Seznam have? How can they possibly separate themselves form the pack?

There might not be an app for that, but there is a word: privacy.

Privacy the Key for Germany?

The fallout from the Edward Snowden revelations and the implication of tech giants like Google, Skype, Microsoft, Facebook, and Apple in the American NSA surveillance and data collection programs made global news. Rallies and protests against the American government and the tech firms who acquiesced to requests for consumer data were held across Europe, but perhaps the anti-US tech firm feeling was not as strong anywhere as it was – and is – in Germany.

In recent months German internet users have abandoned erstwhile popular messaging applications like WhatsApp over privacy concerns, internet giants including Facebook have come under pressure to change their business practices in Germany, and even as early as last year German authorities have been cracking down on Google for its data use policies.

In short, German internet users and the German market generally value online privacy highly, are willing to pull their support from companies that do not respect privacy, and perhaps most importantly, they are willing to switch their consumer loyalties when offered an alternative service more respectful of their privacy rights.

Could this be Seznam’s way into the German market?

“Privacy is a big theme and we are still really in the beginnings of discussions in the Czech Republic about internet privacy,” says Zima, “and at the moment, in the Czech Republic, there is no ‘big fight’ between advocates of internet privacy and internet companies.”

That said, Seznam makes a point of protecting the data of its users, even winning awards for its commitment to user privacy.

“We are really very careful with our user’s data,” explains Irena Zatloukalová, “We never, ever do anything that would harm our users.”

Zatloukalová offers Seznam’s email service as a case in point.

“We are entrusted with the email of more than 3 million Czech internet users, some with three or four email accounts. We would never let anyone access that data,” she says, “and even if the police want information about an email account we demand they work through every step of the official legal process before offering a single message from one of our users.”

This commitment to privacy and the protection of user data saw Seznam awarded a national prize for the protection of user data.

Whether this point of difference on privacy is sufficient to give Seznam the leverage it would need to crack the German market is yet to be seen. Yet as consumers shift their focus towards greater privacy protections, and particularly so in Germany, this might just be an avenue for the privacy-protecting Czech company to pursue.

Conclusion

Seznam.cz is a fascinating outlier in the European technology sector. With a national market share that dwarfs any other search engine challenging the Mountain View behemoth, Seznam’s atypical business path sees it mounting a serious challenge locally, and perhaps soon internationally, too.

Will it succeed outside of its home market? At the present time it is impossible to say for sure, though signs are positive that its commitment to customer care coupled with a strategy of continuing innovation and interests in protecting customer privacy rights gives it a good chance of getting a foothold in other parts of Europe.

And if it does, then Seznam will no longer be the Czech Republic’s best kept secret but, instead, a regional challenger that the American giants need to take an even closer look at.