The deal calls for B2BWorks’ 50-strong sales force to represent the Web sites of such VNU properties as Sales & Marketing Management, Business Travel News, Supermarket Business, Adweek and Architecture in exchange for an undisclosed equity stake in B2BWorks.
B2BWorks has swapped equity stakes for the right to represent media properties before. It has struck similar deals with Advanstar Communications Inc., PennWell Corp.’s pennNet subsidiary and Primedia Inc. With VNU in tow, B2BWorks has completed four of a total of six such deals it plans to cut. The final two publishing companies are expected to surface by April.
"VNU is a big fish in b-to-b publishing, even though it is migrating to market research," Hansen said. "This deal should make it easier for B2BWorks to strike alliances with CPG [consumer package goods] companies. B2BWorks has essentially locked up a big piece of the b-to-b Internet advertising market."
Is that piece enough to sustain B2BWorks and its competitors? Jim Nail, senior analyst with Forrester Research Inc., thinks so. Online b-to-b marketing will reach $2.9 billion this year, with $1.7 billion coming from advertising banners, he said.
"We are in essence a trade media consortium," said Bill Furlong, B2BWorks president-CEO.
Jeremy Grayzel, VNU eMedia president, did not return telephone calls seeking comment on the deal.
B2BWorks will represent inventory from VNU’s Bill Communications Inc. and BPI Communications Inc. titles for a period of two to three years.
The deal boosts by 20% the inventory B2BWorks’ sales executives have available. It also gives the company a bigger presence in vertical industries where it had little inventory, including retail, business travel, food and beverage. With the addition of the VNU sites, B2BWorks will represent more than 500 sites across 60 vertical industries.
The deal comes at a time when business-to-consumer ad networks founder. Engage Inc. last week announced it will cut 550 employees—half its staff. 24/7 Media Inc. has cut staff and lost its CFO. And DoubleClick Inc. says it will cut between 100 and 150 jobs and recently lost out on a proposed merger with NetCreations Inc.
While banner advertising rates have slipped in the consumer space, often selling for less than $10 per thousand, B2BWorks is trying to bolster rates in b-to-b.
"Despite the carnage on Wall Street among b-to-c advertising networks, we’ve grown right through the last three months at a steady growth rate and are bullish on the next two quarters as well," Furlong said. The company will increase the $18 million in funding it has already raised through a final venture capital round in 2001, and plans to be profitable within the year, he said.
Today, B2BWorks generally charges between $50 and $120 per thousand page views for targeted banners and $100 to $250 for a thousand e-mail. In some vertical markets banner prices routinely reach $500 per thousand. When B2BWorks launched in May 1999, b-to-b ad rates were no greater than $55 per thousand page views, Furlong said.
"The general business media has yet to discover that b-to-b rates aren’t going down, but up," Furlong said. "The nature of vertical industry marketing is that it takes a high premium to reach [prospects]."
VNU is in the process of divesting many of its consumer magazine titles, as it reinvents itself as a b-to-b publishing and marketing research company, said Chris Hansen, advertising and marketing services analyst for Bank of America Securities L.L.C.
The key for B2BWorks and others will be to stretch beyond banners to gain a share of the affiliate programs, e-mail marketing and other forms of Web advertising that make up the remaining $1.2 billion, Nail said. That’s because banners and other forms of marketing will eventually flip-flop in importance, he said.
"In a lot of these industries, the b-to-b segment is a small group of people who are buyers or specifiers of a particular service or component," Nail said. "E-mail is really an ideal way to reach the 5,000 people in the country who buy left-handed, blue widgets. It is much better than advertising in The Wall Street Journal."
B2BWorks is already stretching beyond the banner. In October, it signed a deal to broker e-mail lists created by NetCreations and to use the company’s software to build e-mail lists with each of the publishers in its network. Earlier, it launched an effort with American Business Media to create a standardized way for b-to-b publishers to collect information about their viewers.