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This Could Be the Business Riddle That Singapore Press Holdings Limited Has to Solve to Remain Relevant

It’s easy to be pessimistic about the future of Singapore Press Holdings Limited (SGX: T39).

Over its past five fiscal years, the company has seen its newspaper readership fall. There is a notable shift towards digital consumption of news. The end result is that SPH’s core media revenue is down over the same period. This has caused the company’s dividends to shrink as well (see table below).

sph-dividend-table
Source: S&P Global Market Intelligence

In short, the trend of SPH’s business results have been downward overall, which does not look encouraging.

But that’s exactly why I was delighted to see my fellow Fool Stanley Lim take a motley view. Stanley believes that pessimists might be overlooking the value of the content that SPH produces. Here is Stanley in his own words:

“However, Singapore Press Holdings is not really in the business of printing newspapers. It is in the business of producing news content. In that sense, regardless of how the content is distributed in the future – either through printed media or through the internet – the information that the company provides is still very much in demand.”

I think Stanley is right to point this out. But I also think that SPH has a big business riddle to solve that goes beyond content.

First what, now how?

Content is one thing, but how SPH derives revenue from its content is another matter. The core business of SPH currently revolves around circulation and advertising.

As its viewership moves online, SPH will run up against stronger competitors.

One online competitor might be Facebook. The social media giant has a wealth of information about its users. Furthermore, Facebook has 1.8 billion monthly users and 1.2 billion daily users on its eponymous social media platform. With its depth of information, Facebook is able to offer highly granular customer segmentations for advertising. It is done at a level that not many (if any) can match.

Elsewhere, search engine Google, owned by Alphabet, offers a different value proposition. If we are searching for a plumber, it is highly valuable for a plumbing service provider to have its ad in front of us at that very moment. In essence, Google is able to capture the user’s intent and offer an ad which is highly relevant for the intent.

So, where does this leave SPH?

The traditional physical newspaper model broadcasts an ad to its entire audience. Unlike Google and Facebook’s offerings, the traditional model is likely to be far less effective.

From where I stand, this leaves SPH with a big business riddle.

How is SPH able to tap on its new digital readers to offer up better advertising solutions? Would SPH be able to find a new perspective for the value of its advertising that differs from what Facebook or Google offers? Or does SPH need to move away from advertising as its core revenue stream?

In my view, these are the questions that SPH has to answer in order for it to remain relevant in the future.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong owns shares in Facebook and Alphabet.