Guarded optimism may be the prevailing sentiment for ad spending in the agricultural segment in 2005.
While this year was an improvement over 2003, it was still a "wild ride" for agricultural publishers, said Steve Custer, senior VP-publisher of Farm Journal and Top Producer, so it may be a while before the category truly settles into a steady growth climb.
Some of the ups and downs included commodity prices of the nation's two largest crops, corn and soybeans, going through the roof, spurred in part by a massive Brazilian soy crop failure and a general downturn in the world stock of crops.
Overall farm income reached a record level in 2003, up 48% from the previous year, and rose another 9% this year. That, of course, means farmers have more money to spend, and advertisers are looking to attract those dollars.
The economic outlook for 2005 is positive, as demand continues to rise for nonfood use of major crops. About 13% of the U.S. corn crop is now used to make ethanol, and there is strong demand for soybeans for oil-based products.
Farm equipment sales are also rising, thanks to a tax law change that allows farmers to write off basic capital equipment faster. "People just aren't cutting back like they did during the overall business-to-business recession a few years ago," Custer said. "Ad sales are up through the year, better and better over each previous quarter," he said.
On the dairy and meat side of the business, indicators look healthy as well. The USDA predicts positive increases in meat consumption thanks to protein-heavy diets. Export demand for livestock has also been rising, with countries such as Mexico and Taiwan driving the increase.
-Beth Snyder Bulik
After a very positive 2004, ad sales in the automotive category are likely to flatten in 2005. But compared with the slump of the past few years, even flat is OK.
"2004 was spectacular," said Larry Schlagheck, advertising director of Automotive News. "So I don't see budgets increasing a lot for 2005. I'd say flat or maybe some minor decreases in some areas. ... It's continued good news. I just don't see a huge growth curve."
One of the areas where spending is likely to decrease is on the automotive supplier side. Schlagheck said that at least one global top three supplier, which he declined to name, has already said it will cut its advertising by 70% next year.
The suppliers are hurting because raw material prices, especially for steel, continue to increase while automakers are getting tougher and tougher about what they want. "It's nothing for a manufacturer to rip up a contract on the spot these days," Schlagheck said.
On the positive side, dealers are still seeing healthy demand for cars despite high gasoline prices. And a record number of new car launches is expected in 2005, which should continue to spur industry ad revenue.
General Motors Corp. is expected to launch 13 vehicles. Asian automakers will unveil 23, and European automakers are expected to roll out 25 new vehicles.
While b-to-b publications don't get a lot of launch advertising, they do get some, and they also attract ads from the corollary finance, insurance and banking industries around those launch sales.
Other trends expected to continue in the auto industry include heavy rebating of new vehicles and an ongoing reliance on financing and used car sales for dealer and manufacturer profits.
-Beth Snyder Bulik
While virtually every other sector in b-to-b has suffered since the tech wreck and 9/11, the construction market has been seemingly unstoppable, especially in the residential sector. But that may be changing.
"There are some clouds on the horizon," acknowledged Peter Goldstone, president of Hanley Wood's magazine division, which includes Builder and Big Builder.
Slowly rising interest rates pose one problem. China poses another, not in terms of the usual outsourcing fears, but in competition for building materials. Demand from China is making materials scarce and more expensive. "The builders are getting squeezed," Goldstone said.
Nonetheless, Goldstone and many others in the industry do not see an imminent drop-off in building or in marketing expenditures. Through October of this year, the home and building category was up 3.9% in ad pages, compared with the same period last year, according to IMS.
"We're really bullish," Goldstone said.
Curtis Allen, president of Reed Business Information's construction data division, summarized his outlook this way: "In general, I think that residential will be less strong [next year] than this year but still at record highs. The nonresidential sector will be stronger."
Construction equipment is a key segment of the construction industry that has enjoyed a positive year, with shipments up in some heavy equipment categories by 30% to 40%. "A lot of that is China," said Rick Blesi, publisher of Reed's Construction Equipment.
As usual, however, the question for publishers in the industry is whether the sale of equipment leads to a consequent jump in marketing dollars. Blesi said pages are up slightly this year, while Web revenue, starting from a small base, has tripled compared with 2003.
Blesi said he foresees some, but not much, trickle-down in 2005. "Basically, [equipment manufacturers] can sell what they can build," he said, adding: "It's better than ever, but that doesn't mean they automatically add $200,000 to the marketing budget."
After several down years that coincided with the dot-com bust and its aftermath, the semiconductor industry is growing again. In October, global semiconductor sales of $18.79 billion were 21.8% ahead of October 2003.
However, International Data Corp. predicts that 2005 will not be as strong. "We expect a correction, not a downturn, next year, as semiconductor revenue declines by 2%. Lower but healthy economic, telecom and IT spending growth will lead the market out of the correction by [the second half of 2005] and into 2006," said Mario Morales, VP of IDC's global semiconductor research unit.
Rob Enderle, principal analyst of the Enderle Group, said the correction may have already begun. "We're kind of in the doldrums right now," he said.
The electronic engineering market has become one that requires constant and aggressive adjustment from the media players in the sector. Over the past several decades, globalization has hit the market, first taking semiconductor manufacturing and then design and specification overseas, primarily to Asia. Additionally, in recent years, marketing messaging has migrated to the Internet.
Those changes in the market have forced the closure of some magazines, such as CMP Media's EBN. The company's stalwart EE Times remains powerful, however, even if its ad pages declined 4.8% in the first 10 months of this year, compared with the same period last year.
Virtually every magazine in the marketplace has a presence overeas. EE Times has a deal with Global Sources to produce EE Times China, EE Times Korea, EE Times Taiwan and EE Times Asia. Similarly, Reed Business Information's EDN has EDN Asia, EDN China, EDN Japan, EDN Europe and EDN Australia.
With its international focus, EDN will post a strong year in 2004, according to Stephen Moylan, EDN's VP-publishing director. With print ad pages flat for the year, he said total revenue will still be up 15% because of growth in ancillary revenue streams such as the Internet. "Online is way up," he said. "It's up 100%, but it's a smaller portion of the total business. Online has doubled two years in a row."
Moylan also said EDN boosted revenue with its first ever global report, which included print, online and an event at a key trade show in Germany. "People liked that," he said. "By cutting one insertion order, they could be in all of these things all around the world."
There are few things financial services companies-and investors-like more than political and economic stability.
So with the presidential election over and an economic recovery continuing, financial services magazines expect an uptick in revenues in 2005. Two areas predicted to remain hot: advertising from upscale consumer goods companies and online revenue opportunities.
After a slow third quarter, revenues at Investor's Business Daily picked up this quarter, with increased advertising from luxury automakers, hoteliers and high-tech companies that covet high-end readership demographics, said Terri Chiodo, the newspaper's VP-national advertising director. Given the strong data on consumer spending and the high net worth of their readers, financial publications expect such consumer goods companies to continue to look for customers in their pages.
Another bright spot is the potential for Social Security reform, a priority of the president's second term. The development of new savings instruments would help the broad financial sector, said William O'Neil, chairman of Investor's Business Daily.
Separately, online advertising is expected to maintain the momentum it generated this year. "Before it was a struggle getting traditional print advertisers to go online," said Nick Ferris, marketing director-group publisher of Institutional Investor. "[Now it's] becoming more mainstream. People are seeing results."
Print ads will remain Institutional Investor's bread and butter, but Ferris is heartened by a double-digit gain in online ad revenue this year. He's also optimistic about interest from international advertisers, which see the declining value of the dollar against the euro as a reason to increase their buys.
Events sponsorship is another growing category. Attendance and sponsorship at The Bond Buyer's conferences and roundtables this year and last were "exceptional," said Deborah Jack, the publication's group advertising director.
-Mary Ellen Podmolik
Food & Beverage
While the low-carb craze has taken hold of many Americans, it's also made its mark on the food and beverage industry. According to Stagnito Communications President Harry Stagnito, the fixation on low-carb and low-fat foods helped strengthen the industry this year, which bodes well for the next.
"There's been a pent-up demand for growth because people weren't spending as much money since 2001," said Stagnito, whose company publishes The National Provisioner and Refrigerated & Frozen Foods. "The low-carb craze came up this year as an opportunity to take advantage of capital expenditure."
Food manufacturers and retailers took advantage of that opportunity by boosting ad pages. General Mills and Kraft are creating organic divisions, and General Mills recently announced all its cereals will now be "whole grain."
Dan Bagan, publishing director of Supermarket News, is among those in the publishing industry responding to the healthy food trend. In October, the magazine launched a supplement, SN Whole Health, targeted at mainstream food retailers. "There's been this type [of publication] for decades, but none have been marketed to mainstream food retailers," Bagan said. "Everything has to do with the retailers. They drive [the market]."
Bagan and others believe that industry retailers have aided the market this year. Publishers predict there will be a rise in ad pages in 2005, though it will be a measured increase.
"There will be some remnants of that low-carb trend, but it won't have nearly the same effect next year," Stagnito said.
The consolidation trend in the industry continues to concern publishers of food industry titles. Bagan said that as food and beverage manufacturers merge their businesses, publishers have to show that their publications can be used to strategically communicate to customers.
"Consolidation is a factor," Bagan said. "It's obvious [that] when there are less manufacturers, you have to make a strong case for your trade publication. But it is a longer-term concern for trade publishers. It won't have a drastic effect on 2005."
If it's hard to reach health care professionals in 2005, there's a good chance it's because they're at a conference where they're learning about the latest regulations, techniques and medications, paid for in part by advertisers.
While traditional advertising continues to be strong for specialist health care titles, publishers say the real growth will come from conferences and online events sponsored by their clients.
"It's easier to get $100,000 out of a client for a program than an ad," said Bob Osborn, president of Dowden Health Media's professional division. "Clients spend a lot of money in education, and we're trying to tap into that."
A strong performance by managed care companies this year led to a 54% gain in ad pages in Advanstar Communications' Managed Healthcare Executive, but what has Publisher Dan Corcoran especially excited is the interest in events. He said he's received numerous RFPs from advertisers in recent months, inquiring about opportunities to partner with the magazine on live events and electronic communications.
"Webinars are going to be looked at as nontraditional advertising vehicles like trade shows," Corcoran said. "Travel costs are outrageous. It's too easy to conduct a tailor-made presentation to a prequalified audience."
Most titles also expect an uptick in ad spending from the pharmaceutical industry. The ads, publishers say, will be a combination of brand building and defensive positioning. "Certainly, there's a drumbeat of negative press against our client base," Osborn said. "But whatever pressure is being borne by our clients, it will be offset by huge increases in demand because of the patient population."
Jobson Publishing saw an increase in advertising in its neurology titles following the approval of new drugs to treat depression and bipolar disorder. "The drug companies are very competitive, and they're out there trying to reach out to these markets," said Rich Buchwald, director of marketing and research for Jobson Medical Group.
But at the same time, advertising in Jobson's general primary care books will be "flat if not down," as pharmaceutical companies opt to send their message directly to the consumer, Buchwald said.
-Mary Ellen Podmolik
The manufacturing sector, which became a pawn in the presidential election because of outsourcing and lost jobs stateside, could use some good news. A recent poll of manufacturing executives conducted by Penton Media's IndustryWeek provides some.
For instance, the survey found that 52% of respondents plan to increase capital equipment spending in the next year, and only 11.8% plan to decrease it. Similarly, 41.6% of respondents plan to increase information technology spending, but only 8% plan to reduce it.
"Capital expenditures are up for the second year in a row in machine tools and in big equipment as well as in information technology purchases," said Teri Mollison, group publisher for Penton's manufacturing, supply chain and metals groups.
But she's not as bullish about the prospects for an increase in marketing spending. After years of sluggishness, the machine tool industry, for example, is running at near capacity. "First, they're asking, `How am I going to fill my orders?,' and that's not immediately translating into advertising programs," she said. "It's almost a double-edged sword."
At Reed Business Information, Group Publisher John Royall has seen the logistics and material handling magazines he oversees turn in a strong second half of the year. Part of the reason is that manufacturing and warehouse facilities are boosting capital expenditures, and much of that spending is going toward retrofitting existing facilities, according to a survey conducted by Royall's group.
"Barring any sort of major shock to the system, I would say going into next year that, yes, we're confident," he said.
John Langhenry, publisher of Reed Business' Plant Engineering, said he expects a 2% to 3% rise in marketing expenditures with his magazine, Web site and other ancillary revenue streams.
Mollison's take on 2005? "When it comes to advertising and marketing, we expect business to rise a little but not a lot," she said.
Despite the advantage of being recession-resistant, the packaging industry and its trade publications have witnessed slow growth the past three years in step with the economy, according to Packaging Digest Editor in Chief Mary Ann Falkman. But that is already starting to change.
At last month's PACK EXPO show, which is held every two years, "the mood was better than it has been in the last few years," Falkman said. "We will see a modest upturn at the beginning of next year."
In May, Packaging Digest launched a print supplement in conjunction with Control Engineering, titled Automation & Controls. Packaging World is planning to launch two digital publications in January, "Healthcare Packaging" and "Shelf Impact!"
With the 2003 Wal-Mart mandate regarding Radio Frequency Identification and new regulations from the Food & Drug Administration regarding ingredient labels, the packaging industry is busy creating new products and implementing the latest technologies.
"There's always a need for new packaging innovations," said Joe Angel, VP-publisher of Packaging World, which has seen 15% to 20% growth in revenue this year for its print and digital offerings.
While Angel is concerned about vendor consolidation and postal and paper cost increases, he said packaging security issues will "drive new dollars" and that publishers need to make sure some of those dollars are put into advertising.
"The challenge we have as publishers in our business is selling the value of print branding and Web interaction and research," Angel said. As manufacturers search for ways to meet the demands of RFID and labeling rules, publishers need to continue serving the needs of advertisers.
"This is one of the more interesting times I've spent in packaging," Falkman said. "So many new things are entering the scene-lots to sink our teeth into."
The numbers tell the story for the technology sector. In 2000, computer ad pages started a fast and furious decline, falling 23.08% from the previous year, according to Business Information Network figures compiled by IMS: The Auditor for American Business Media. BIN ad page counts showed that a similar decline in the computer category occurred in 2001 (-25.43%), 2002 (-20.22%) and 2003 (-17.32%). Through October of this year, technology ad pages fell 6.4%, compared with the same period last year.
In the past year, the corporate information technology market has stabilized and begun to grow again. The November Tech Poll from International Data Group's CIO magazine showed IT executives expected tech spending to increase 8.4% over the next 12 months. Security is a key area driving this renewed spending.
The question is whether this increase in spending will translate into a boost in marketing dollars. Industry observers say that marketing expenditures have already bounced back, even if ad pages are still decreasing. Web properties-such as CNET Networks, TechTarget and Google-have quite dramatically taken ad dollars away from print.
The landscape in this Internet-savvy industry has changed so much that ad page counts barely tell half the story about a publication's health anymore, as big dollars have moved online. "When I talk to our publishers around the world and I ask, `How is revenue?' I'm not asking, `How is display advertising doing in the U.S. market?"' said IDG CEO Pat Kenealy.
Chris Dobbrow, Ziff Davis Media's senior VP-integrated media services and publisher of eWeek, echoed that sentiment. "It's no surprise that our online business is growing at a much faster rate than our print business, even though our print business is up," he said.
One sector of IT spending, government, is growing at a particularly brisk rate. Anne Armstrong, publisher of 101communications' Federal Computer Week said the growth is coming largely from defense and homeland security spending. David Greene, president of PostNewsweek Tech Media, which publishes Government Computer News and produces the FOSE trade show, said the company has launched a new quarterly publication, Government Leader, to compete with Government Executive, published by National Journal Group.
With its planned launch of CIODecisions magazine, slated for April 2005, TechTarget is betting that another arena is poised for IT growth: the midmarket.
Over the past three or four years, the pain of the telecommunications industry has only been surpassed by that of the technology sector. Spurred on in part by the dot-com boom, telephone companies invested heavily in fiber optics and other infrastructure enhancements through 2000.
The result of these overly optimistic capital expenditures? "For a while we've had a long nuclear winter," said Mark Hickey, group publisher of Primedia Business Magazines & Media's telecom properties, which include Telephony.
As the industry changed almost overnight, telecom giants struggled to find their footing. WorldCom found itself in an accounting scandal. Venerable AT&T Corp. announced plans to de-emphasize the consumer market and focus on the enterprise sector. And Lucent Technologies found its share price battered as it consistently missed its guidance.
In this kind of tumult, marketing expenditures were the first budget item cut and the last thing on anyone's mind. Of telecom marketing executives, Hickey joked, "There have been people hiding under their desks, saying, `Don't fire me."'
Telecom ad pages plunged every year from 2001 through 2003, according to Business Information Network figures compiled by IMS: The Auditor for American Business Media. Pages dipped 35% in 2001, 48% in 2002 and another 22% in 2003.
Although the industry appears to be recovering, the rebound is slight. "Without strong revenues and cash flows it's hard to imagine [capital expenditures] picking up in any substantial way," said Bryan Van Dussen, a telecom analyst with the Yankee Group.
Van Dussen said he doubts a strong marketing expenditure increase is in the wings.
Hickey, however, is seeing growth on the marcom side. "I would say that it's having a modest recovery," he said. "We're looking in 2005 for modest growth in print advertising and stronger growth in online activities."
That optimism for next year comes on top of 2004, when Hickey said print revenue grew in single digits and online revenue grew in double digits.
IMS figures show that telecom ad pages were up 4.9% through October of this year compared with the same period last year.
Over the past three years, the travel sector has been among the hardest hit of industries.
First, 9/11 brought travel to a standstill. Then, as a recovery appeared possible, SARS struck. Next, the Iraq War scuttled many travel plans. And now, historically high petroleum prices threaten to snuff out the glimmer of a recovery.
Beyond these external events, the travel industry has grappled with internal change. The most prominent of these trends are increasing Internet bookings, the decline in the number of travel agents, and the struggles of United Airlines and other large carriers.
The problems with the airlines haven't hurt b-to-b media in the travel sectors as much as might be expected. "The airlines aren't our core and haven't been for some time," said Scott Pierce, exec VP of Advanstar Communications' travel group, which includes Travel Agent Magazine. "The growth will come from hotels and destinations."
The travel industry posted ad page declines from 2000 through 2003, according to Business Information Network figures compiled by IMS: The Auditor for American Business Media. It appears that 2004 will be no different: Through October of this year, ad pages were down 8.7% compared with the same period in 2003.
Nonetheless, as evidenced from the recent Thanksgiving weekend travel figures, the industry is returning to pre-9/11 levels. The question now, as always, revolves around whether increased traffic will lead to boosts in marketing spending levels.
"First the industry has to get healthy, and then we have to get healthy," said George Hundley, president-CEO of Northstar Travel Media, which publishes Meetings & Conventions.
Hundley and Pierce said signs in the industry point toward growth in marketing spending in the coming year.
Hundley said his company's key properties-Meetings & Conventions, Travel Weekly and Travel Age West-are healthy. Of the three, only Travel Weekly will post a decline in revenue, albeit a slight one, for 2004 compared with 2003, he said. He expects all three magazines will generate revenue gains of 4% to 6% in 2005.