Digital Post Might Have Been Profitable In 2014, If Not For Unexpected Competition From Australia Post

When Computershare launched Digital Post Australia last March, it thought itself a first mover with no direct competition in the near-term.

Australia Post’s fast, aggressive action – including a months-long trademark lawsuit that the Federal Court eventually dismissed – delayed it by up to a year, Digital Post general manager Simon Hughes told Business Insider today.

“It was a bit of a surprise that competition emerged so quickly and decisively,” Hughes said. “It probably pushed us back by 6-12 months on our plans.

“Competition has shaped the way the market is behaving. If there was a market of only one player – us – it would have been a far easier sales proposition because the decision is just ‘do we turn it on or not’, from a company’s perspective.

“When there’s competition, these corporations are asking, ‘is there only room for one and what if we decide to go with one and they don’t win’. It creates a huge degree of uncertainty which delays the decision-making cycle.”

Now, about 1.5 years in, Digital Post has just over 980 businesses willing to use it to digitally distribute shareholder information and rates notices, but only around 10,000 consumers ready to receive digital mail.

Of those business customers, 977 use Computershare’s registry service and now offer to send dividend notices and documents to shareholders via Digital Post. The remaining 6 are Queensland-based super-councils, which have offered to send residents rates notices digitally.

Computershare, which owns 80% of Digital Post, valued its stake in the business at $3 million in August, down 11% from $3.34 million just 6 months before.

Hughes, who worked on mergers and acquisitions at Colonial First State early in his career, downplayed the significance of the writedown as an “accounting calculation”, adding that Computershare CEO Stuart Crosby was a “huge advocate” of Digital Post.

“We have very different internal forecasts on revenue and returns,” he said. “At the moment, our focus is getting the content in there to make the service valuable and then turning it to profit gain.

“If we just stuck to delivering mail we could see ourselves making a profit in the next couple of years. But there’s a huge number of other revenue opportunities for the business that would allow us to turn a profit far more quickly.

“Once the platform is stable and has a core critical mass of content, we would then introduce those services which would accelerate profitability and increase it in the long-term. The ultimate outcome is in the next 2-3 years, this system is far, far more than just mail.”

Morgan Stanley analysts have previously valued the Australian market for secure mailbox services at $138 million, with only one service expected to survive in the long run.

Government-owned Australia Post told Business Insider in August that it had signed on 23,000 active users since its beta launch of Digital MailBox in May.

Earlier this year, Australia Post reportedly asked both sides of Government to force agencies to use its Digital MailBox exclusively. Hughes said such a deal would be unlikely because it contradicted Australia’s “free-market philosophy”.

Digital Post had not demanded exclusivity from any of its business customers, he said, nor would it seek to eliminate competition through mergers or buyouts.

“Competition hasn’t been great for us because it’s slowed down the decision-making cycle but I think it’s good for the industry overall because it shows that there’s a real interest in bringing the best products and services to market,” he said.

“Australians like to make a decision for themselves.”

Now read: The Ship May Have Sailed On Digital Mail In Australia Because Companies Are Already Sending Bills Via Email

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