Opera finds success focusing on news, developing markets

Frode Jacobsen, chief financial officer of browser maker Opera, says the company has both profits and potential.Opera

• Opera is a distant also-ran in the web browser market.
• But the company is profitable and growing, noted Frode Jacobsen, Opera’s chief financial officer, in an interview with Business Insider.
• The company has found a niche in the developing world and with a new news reader, he said.

In the web-browser market, Opera is an afterthought at best.

The company’s browser software has about 2% of the market in terms of usage, trailing far behind not just Google Chrome, the market leader, but Apple’s Safari and even Mozilla’s Firefox. Few give it a chance of displacing those leaders.

But if you ask Frode Jacobsen, Opera’s chief financial officer, browser share doesn’t really matter all that much — if it’s even accurate. Despite only catering to a small share of the internet market, the company, whose shares debuted on the Nasdaq on Friday, has built a growing and profitable business with lots of potential, he said.

“Our business model is very scalable,” Jacobsen told Business Insider before ringing the closing bell on Friday. “What we are happy with, in terms of our financials, is we’ve managed to combine growth with profitability.”

Investors seemed excited too. In their first day of trading, Opera’s shares rose $1.11, or 9%, to close at $13.11.

Opera has been around longer than most of the companies that launch their stock on the Nasdaq. It was started in 1995 and released its first browser in 1996, near the beginning of the first internet boom. It became a public company in 2004 on the Norwegian stock market and remained publicly traded until two years ago, when it was acquired by a consortium of Chinese companies which restructured it.

The company has long been an innovator in the browsing market, pioneering browser tabs and search bars. But it’s long struggled to find an audience for its software beyond a small niche of fans, at least in the developed countries.

Opera’s big in the developing world

What critics are missing, though, is that Opera has had great success in emerging markets, Jacobsen said.

The company tuned Opera Mini, its mobile browser, to be efficient with data. Web pages are routed through Opera’s servers, which compress them before sending them on to users’ phones. That allows them to load quickly and reliably, even over bad network connections, and helps users minimize the amount of bandwidth they consume.

That’s an important consideration in developing countries, where the cost of data is often high, Jacobsen said. As a result, Opera Mini is the leading mobile browser in many countries in sub-Saharan Africa and in parts of Asia, he said. And Africa is the company’s “top priority,” he said.

“Our offering on mobile … speaks to such large population today,” Jacobsen said.

He continued: “Essentially what we are doing is building on our footprint and brand in emerging markets where we are strong.”

Indeed, Opera estimates it has about 322 million monthly active users of its browsers, about 100 million of which are in Africa, Jacobsen said. As internet penetration and data usage grows in emerging markets, Opera expects to grow alongside, he said.

Opera makes more than browsers now

But browsers aren’t the only business the company is in these days. Last year, the company launched Opera News, an artificial intelligence-powered news-reader service. That service, which uses AI to figure out which articles to recommend to users, has quickly gained traction with consumers.

In March, little over a year after it launched, it already had nearly 95 million users, according to the company. The service started on the web, but earlier this year, Opera launched a corresponding app that, by March, had 3.6 million active users. The average Opera News user spends about 32 minutes a day on the service, Jacobsen said.

The company started selling ads on the service in the third quarter last year and is already seeing a windfall from them, he said. In the first quarter this year, Opera’s advertising revenue jumped 72% from the same period last year to $12.9 million, thanks in large part to the new ad business from its news service. The additional revenue helped the company swing a $6.6 million profit in the period from a year-earlier loss.

Those ads “have had a pretty massive impact already,” Jacobsen said.

The company has some big competition

To be sure, Opera’s success may be fleeting. Apple and Google are putting lots of effort into their own news reader apps. And those apps have the advantage of being backed by the two major smartphone operating system vendors. Apple includes Apple News with every iPhone shipped.

In the browser market, while Opera’s had success in developing countries, that too may not last. It’s quite possible that as internet penetration increases in developing countries and connectivity improves, they will evolve in similar directions as the developed world, where the browser market is dominated by the big brands.

Jacobsen acknowledged it’s likely that the browser market will head in that direction in emerging markets. In developed countries, consumers tend to use whatever browser comes with their operating system. Only around 20% choose to use something different, he said. But by offering users features that meet their needs, Opera believes it can be the top choice among those who switch away from the default software, he said.

“We have a browser that’s different from the default ones,” he said. That strategy, he continued, “has been really successful.”