Seznam tops billion crown profit for first time in 2014

Czech search engine Seznam has shown in its 2014 results that it has fine-tuned the formula for extracting earnings from its core Internet activity and web servers. But questions are still raised whether its relatively small local market is not too much of a handicap.

Photo: Kristýna Maková

According to some Internet experts, the Czech search engine and web server company Seznam should not even exist. It should, they say, have succumbed to the worldwide trends in the Internet market which sees most local players steamrollered under by the likes of Google.

But Seznam has confounded its doubters and what’s more says it is holding its own and remains the first choice search engine for Czechs ahead of Google, though Seznam does admit that Google has closed the gap.

And Seznam announced some impressive figures in its 2014 results on Wednesday. Turnover accelerated by 7.5 percent, twice the level of 2013, to total 3.129 billion crowns. And operating profit ahead of tax also came in over the one billion crown mark for the first time ever, at 1.136 billion crowns to be exact.

The basic message appears to be that Seznam has got its Internet advertising revenues model right. Its flagship advertising tool is the so-called Sklik. This ensures that selected adverts appear during searches but the advertisers only pay if users actually click on the ad.

Turnover for Sklik adverts rose by 20 percent in 2014 with the income raised resulting in more than 40 percent of overall profits. Display ads accounted for around a third of overall sales, and here revenues were around 10 percent higher than in 2013. The final piece of the Seznam earnings cake is the income generated by its range of specialist servers covering everything from car and house sales to job vacancies.

Analysts say that another of Seznam’s secrets of success is that it has been happy to remain a big fish in a small pond rather than sought to step up to the much bigger global Internet market. Its investments in new technology have been honed at meeting its immediate needs but not to revolutionise the market. Even so, it has widely praised web and mobile map applications and it seems to be dealing with its former weakness that stemmed from many mobile applications being tailor made for Google but not for it.

But the analysts caution that Seznam’s ambitions and scope for expansion are limited by the size and importance of the Czech Internet sector. However fast the sector grows, the sales model is focused on one country and in such a scenario however good it gets it will always be trailing the likes of Škoda Auto which has 100 times the turnover.