While the business opportunities are greater, so are the risks of making one or two wrong bets. That's why b-to-b executives are consulting their corporate crystal balls, trying to gauge such things as whether ad-page growth will continue to trail that of other portfolio components and whether demand for face-to-face events will continue its breakneck pace.
Another big question concerns online properties: If sponsorships are completely sold out, where and how can good inventory be expanded? And as postal rates continue to soar, how big a wager should companies place on digital editions of their magazines, whose quality continues to improve but which remain dogged by uncertain reader acceptance and difficult audit qualification issues?
"Customers are becoming more sophisticated about how they buy media, especially electronic media," said David Nussbaum, CEO of Penton Media. "They want more integrated deals across the board with more sophisticated marketing components, and it's our job to provide them. It's not just about print anymore."
This is reflected in American Business Media's Business Information Network numbers. Although first-quarter 2006 tallies showed an overall ad-page decline of only 0.14%, many individual titles have experienced much steeper falloffs. Even so, print advertising still accounts for the lion's share of revenue at most b-to-b media companies. But it's hardly growing.
That's the bad news. The good news is publishers are finding that much of the revenue that is being lost by print is being spent elsewhere in their organizations, at least within the ones that offer multiple media platforms.
Rather than abandoning print, b-to-b marketing executives said they're becoming more adept at using it as an integral part of larger marketing packages. In some ways, print serves as an entree for companies that may later upgrade to bigger packages using more parts of a media company's portfolio.
At other times, it may work the opposite way. "The development of our online properties is actually helping us to sell print sometimes," said Cameron Bishop, president-CEO of Ascend Media. "That's been a bit of a pleasant surprise." For now, the company is banking upon continued strong print-ad support in its medical equipment markets.
Much of next year's budgeting emphasis will be on further developing media alternatives to print so that marketing revenue stays in the fold. "Print certainly has its place, but it probably won't get as big a share of wallet as it has," said Steve Weitzner, president-CEO of CMP Technology, whose flagship titles include EE Times and InformationWeek. This opinion is mirrored by other media executives, whose planning attention is centered on the largest areas of growth: events and digital.
Spotlight on events
Following a prolonged slump after the terrorist attacks of Sept. 11, 2001, events which International Data Group Chairman Pat McGovern once famously said delivered the best margins in media, better than online are once again where the action is. With demand rising and margins healthy (in many cases, 25% and higher), publishers are putting more of their eggs in this basket. About 85% of American Business Media's members have trade shows.
Indeed, a recent survey by Harris Interactive, commissioned by ABM, underscores the power of trade shows (see story, page 4). Seventy percent of those surveyed said they purchased or recommended the purchase of a product or service directly as a result of advertising/promotion at a trade show. The survey of 588 executives in the 21 advertising categories tracked by the Business Information Network also found trade shows prompt executives to seek additional information on a company's Web site (77%), by talking to a sales rep (73%) or calling a toll-free number (40%).
"It's really important now to go to market with a tripod of offerings in print, online and events," Nussbaum said. "And your events portfolio needs to be diversified among conferences, expositions, road shows and seminars." Already this year, Penton's Tech Conferences unit has expanded a Windows IT Pro offering into Europe. Separately, Windows IT Pro also introduced a Microsoft Corp.-sponsored road show to Portugal, Norway and South Africa.
Events are also a growing piece of the pie at Ascend, which earlier this year acquired the Food Safety Summit to complement its 12-title Stagnito Communications food and beverage group and which also runs extensive continuing medical education programs through its medical division. Bishop said events helped account for the fact that revenue in the food and beverage unit from non-display advertising sources rose to 25%, up from 15%, in the last two years.
One challenge for the still-growing Ascend is to get up to speed quickly in the events marketplace. The company has sometimes worked with strategic partners, particularly in its gaming division. While there are clear benefits in terms of expertise and getting to market rapidly, Bishop said, "there's also a trade-off with the revenue split." He said that's one reason Ascend bought the food safety event, which provides enough scale (2,200 attendees and 250 exhibitors) to serve as the basis for a newly formed in-house events unit. Bishop said Ascend is still in the strategic planning stage of its 2007 budgeting process, but that he expects events to become a more important part of the stream.
At SourceMedia, which Investcorp bought from Thomson Corp. in 2004, Chairman-CEO James M. Malkin said events are a "foundational" part of the company's strategy of developing and expanding communities of mutual interest in financial services industries. "Right now, we're getting 10% to 12% of our total revenue from events," he said, "but we expect that figure to grow. And we'll be investing to grow it."
Events are crucial to SourceMedia, Malkin said, because they serve two vital company goals: presenting authoritative information in specialized financial markets while also helping to keep readers abreast of regulatory changes, which are in constant flux. Banking and financial services technology, also changing rapidly, is another subject that SourceMedia mines extensively in its events programs. "Our customers are spending more on custom events, and so are we," Malkin said.
But while Malkin plans on expanding SourceMedia's events portfolio, he doesn't intend to do it just by acquiring events companies. He said SourceMedia has passed on buying events organizers with no intrinsic place in the financial services market. Instead, he prefers to focus on new line extensions from existing SourceMedia brands core titles include Accounting Today, American Banker and The Bond Buyer or acquiring companies that already have strong existing or potential events properties in the markets SourceMedia already serves.
CMP has extensive events programs catering to three distinct high-tech communities: developers, channel resellers and end users. Weitzner said all continue to perform well and are likely to get sustained budget support in 2007. (Corporate budgets are not yet complete, and CMP, like many companies, declined to share specific dollar figures.)
Weitzner said one of the principal values of successful events is that they help offset, and in some cases negate, the revenue loss from declining print advertising, which has fallen steeply in some high-tech markets.
"Marketers tell us that nothing quite provides the one-on-one selling forum that face-to-face events do," he said. Thus, CMP which has made several key events-related acquisitions in the past 18 months is likely to continue expanding its portfolio in the coming year, especially with smaller, more tightly focused conferences and seminars, and with international events.
Digital media plays
As important as print and events are to the bottom line, it is in digital media that publishers are betting their biggest stakes. Perhaps the best evidence comes from SourceMedia, which Malkin said is investing the equivalent of one year's EBITDA growth in new technology that will revolutionize its content management processes. The system will also meta-tag digital data to provide market intelligence about how, when and for how long readers use its digital materials.
The goal, Malkin said, is to enhance multiple usages and distribution of the information SourceMedia produces. He said the outlay is part of a doubling of capital expenditures, as the company's new owner invests in areas of corporate infrastructure that may have been under funded in recent, leaner years.
Online content management is also about to change at Ascend, whose annual revenue climbed more than sevenfold, to $130 million, after three late-2004 acquisitions. The company is in the last stages of installing a new content management system and recently hired five new employees in e-media. Ascend CEO Bishop said he's anticipating new e-revenue streams coming online in the next year.
Besides the obvious benefits of using the Internet for targeted content distribution, many b-to-b media companies are using digital media to advance their integrated marketing solutions programs. CMP, for instance, is developing sophisticated lead generation and tracking programs, and both CMP and Penton, among others, are investing to retrain sales staffs in the fine points of selling multiple-media programs.
As executives look forward to 2007, it isn't all just about budgeting dollars and cents. There are philosophical issues, too.
"In this era of free online news aggregators, it's a real strategic challenge figuring out how to pay your journalists," Malkin said. "We sell authoritative, branded content prepared by specialists, but it's hard adjusting to changing reading habits. It's a tough dilemma."