It's about the money.
Just 15 years ago, print was the primary information channel that brought together business buyers and sellers. That powerful position entitled publishers to charge a premium. But those days are gone.
The Internet has changed the way consumers of media, in b-to-b and elsewhere, get their information, and it has enabled all sorts of new behaviors. Some of those behaviors have been fostered by new competitors born of the Internet: Google and other search engines, lead generation-driven media, bloggers, user-generated content and marketers themselves, which can now communicate directly with audiences via the Internet.
"We interview advertisers annually," said Chuck Richard, VP-lead analyst for Outsell. "When we asked them last year where the marketing and advertising spending is going, if you bundle the two, they told us 58% was on their own site. That, in effect, is competition to the publisher."
Rich Gordon, associate professor at Northwestern University's Medill School of Journalism and chairman of its new media program, calls online media a disruptive technology that's fundamentally challenging the advertising-supported media model.
"According to the history of disruptive innovation, the norm is to fail," he said. "The path to success does not mean tweaking things around the margins. It requires going back to zero and evaluating everything. If you think it's hard, you're right. Most companies will struggle mightily, and many will fail to make the transition."
A report, "The E-Media Organization: One Year Wiser," Issued in December by Outsell and Cara Erickson, managing partner of NewCoordinates, made the bold statement, "Publishers that are not yet implementing an organizational game plan that addresses the shift to e-media are operating in default mode and likely to fail."
The report was based on surveys and in-depth interviews of CEOs and e-media leaders at b-to-b media and newspaper companies and followed a similar study conducted in late 2006. Although the 2007 report found "industry executives are more grounded" as far as accepting the challenge of transformation, it also observed: "Most of the executives we surveyed still only `somewhat' agree that they have the right organizational framework in place."
Outsell predicts that online will overtake print as the dominant revenue source for b-to-b publishers in 2009. It projects that the three main revenue categories this year will be: print (37%), electronic (36%) and events (27%). Next year, it forecasts the breakdown will be: electronic (38%), print (34%) and events (27%).
B-to-b media companies are actively examining their organizations to prepare for this seismic shift.
While Media Business has reported on organizational changes as they have happened across the b-to-b media, we dig a little deeper into four specific approaches in the following profiles.
Almost simultaneously in late summer 2006, Reed Business Information U.S. and Hanley Wood announced radical reorganizations.
RBI-U.S. created a central interactive unit that not only provides free-standing e-media solutions—such as an online ad network and lead generation—but also oversees the e-media strategies of the company's previously autonomous magazine brands.
RBI-U.S. takes as its model pure-play e-media companies. Jeff DeBalko, chief Internet officer and the head of Reed Business Interactive, explained, "An online media company is different from a print media company in a lot of ways, but one of the most fundamental ways is that online media doesn't support the cost structure of print media. That tells you that you can't structure things the same way," he said. "You have to think differently."
Hanley Wood went in the opposite direction, disbanding its free-standing e-media division and creating Hanley Wood Business Media as a totally integrated, multiplatform media organization. Magazine staffs previously uninvolved in digital media were plunged right into it.
Hanley Wood is modeling its transformation on the launch of a new product, with much bigger profit margins following a large upfront investment in building a platform.
We also examined two companies that have followed an integrated approach since the mid-1990s, technology media giant IDG Communications and niche publisher Bobit Business Media. IDG and Bobit have evolved their strategies over the years, and both are preparing to take things up a notch in 2008.
Reed Business Information-U.S. seeks traction by centralizing
Tad Smith, who was named CEO of Reed Business Information-U.S. in November 2005, said he didn't think the company's "Web activities were getting the traction we wanted." So, at a midyear board meeting in 2006, he announced his decision to create a centralized Internet group—a shock to the system for many of the heads of divisions and brands who were used to operating autonomously.
Smith put responsibility for the centralized Internet group under the direction of Jeff DeBalko, who had been heading the company's eLogic Internet services division since 2003, and gave him a new title: chief Internet officer. DeBalko said his goal is "to transform Reed Business Information into an onlinecentric media company," with other media and events continuing to be part of the mix.
The new division, Reed Business Interactive, is not a central support department implementing projects the brands conceive nor a free-standing unit operating the e-media business on behalf of the brands.
"The new central interactive division has ownership of all online strategy and execution," DeBalko said. "Before I agreed to take this on, Tad had to commit that RB Interactive would have the resources and the authority to actually get things done."
That corporate commitment included a budget that allowed DeBalko to create an interactive department with some 50 positions and to invest in new technology, as well as giving RB Interactive the authority to issue mandates when necessary.
The interactive division wouldn't do it all, however. "We created a hybrid organization," DeBalko said. "There were some good things happening that we didn't want to disrupt. So we kept some resources at the divisions and brands, and layered on resources and expertise through RB Interactive to implement strategies we knew were important everywhere."
In 2007, DeBalko chose to focus on three strategies that would have the greatest impact across the portfolio: developing a more robust online infrastructure, standardizing and optimizing Internet offerings, and capturing revenue RBI was not previously structured to pursue.
The three big infrastructure investments went to Web analytics, new inventory management and ad serving, and technology "to tie all our systems together so we can get more real-time information about our online business," DeBalko said.
In the first stage of RB Interactive's standardization and optimization program, DeBalko and his team developed a premium Web site model. "We identified elements that really drive performance—whether it's traffic, or revenue or user engagement—and applied them across the board. Now we measure our business against those performance metrics," he explained.
The first site with the premium model launched in January 2007, RBI had more than 30 sites using the template a year later. The balance of the roughly 50 total sites in the portfolio will be redesigned this year.
Smith said: "When the Internet group launched the premium site template to replace the hodgepodge of Web sites that represented our brands, many editors and publishers fought the rollout. Today, nearly all of our sites reside on the new template, and publishers and editors are thrilled because the results in traffic, customer engagement and customer appreciation are exciting."
The third strategic goal, growing revenue, had three components of its own. One was the launch of the Reed Partner Network last June. This ad network broadens RBI's reach by including sites outside of Reed and allowing advertisers to expand their reach at a cost-effective CPM. "That went from zero to a multimillion-dollar business for us in '07," DeBalko said.
The second component was lead generation. "Although we had done some lead generation around the portfolio, we didn't have a focused effort and enterprise strategy," DeBalko said. "So we created an organization that does nothing but focus on lead-generation revenue growth, which by the end of 2007 was ahead of 2006 by over 100%."
To go after smaller advertisers, the "long tail" that Reed's field sales model would never reach, DeBalko started an inside sales organization.
In all three areas, "we drove significant incremental revenue and learned a lot in the process," DeBalko said. `We're expanding each one of them in 2008."
Taking online pure-play media companies as a model, RB Interactive is focused on measurement.
"We've created some very complex scorecards to measure everything we do," Debalko said. E-newsletters, for example, generate advertising revenue, but they also play a key role—more important in some cases—in driving traffic to Web sites. To include both aspects, RB Interactive created a metric called RPM—revenue per thousand page views. "With that metric, we can assign a dollar value to every page view that's created from a newsletter referral."
Hanley Wood removes silos and delegates responsibility
Hanley Wood was a pioneer on the Internet, launching its first magazine site, Builder Online, in 1996 and developing an e-commerce site called eplans.com in the late 1990s. In the early years, the free-standing Hanley Wood e-Media division managed all the company's online activities.
By early 2006, though, "we had the gut feeling we were missing opportunities," said Peter Goldstone, who was president of Hanley Wood's magazine division at the time. "So to validate that feeling, we went out and did a consulting project to get third-party feedback on the strategy we thought would be best implemented here, which was a more integrated approach to the market."
The consulting firm evaluated the organizational structure, talked to customers and interviewed CEOs and other thought leaders from a list of peer companies. "They recommended that we break down the silos and make everyone accountable and responsible for building up our brands regardless of media channel," Goldstone said.
That summer, the e-Media division was officially disbanded, with e-media and print functions coming together within a new organization called Hanley Wood Business Media, with Goldstone as president.
Because the e-Media division had been producing editorial content and selling advertising for all the sites, the magazine staff members didn't have hands-on experience in e-media during their tenure at the company. Now they were being asked to participate in all operational aspects of sites that had been running without them for years.
With the former president of the e-Media division leaving the company, "the first thing I had to do was to go out and recruit some great new people," Goldstone said. Andreas Schmidt, former VP-marketing for AOL, was brought in as executive director of e-media. Alec Dann, former senior VP of Internet publishing for Post Newsweek TechMedia, was named general manager-magazines online.
At the same time, the sales and editorial teams needed to be integrated.
Each of the five e-media sales experts joined an existing group of publications. "I gave each one of our major groups an e-media expert to help guide and train the salespeople and move the needle on e-media," Goldstone said.
The e-media sales managers, known as ESMs, receive commissions on every e-media sale in their respective divisions, while the integrated media sellers get commissions on everything they sell, regardless of medium. "In many cases, it's double commission," Goldstone pointed out. "We usually do that for launch efforts."
Goldstone sees e-media economics, at this early stage, as similar to a magazine launch. "When you launch a new magazine, it takes three to five years for it to reach maturity," he said. "I think the same holds true of the Internet. Initially, you have a lot of upfront costs, but once you build the platform, you should be able to drive much bigger profit margins."
On the editorial side, the print editors—now in charge of Web sites as well—were given additional money to use as they saw fit, based on the talents and career aspirations of their teams.
"Every magazine group got additional funding to hire e-media editorial resources and to help train their people. We added more than a million dollars of head count dedicated to editorial delivery," Goldstone said. "We weren't going to rob resources from the print side to invest in the e-media side."
The investment in technology includes a new content management system and an editorial work flow system. "The big project for us in 2008 is the CMS rollout, getting all 30 sites up before the end of the year," Goldstone said.
As part of the ramping up of its online efforts, Hanley Wood Business Media's IT staff "has at least doubled" Goldstone said.
"We made a huge investment in people and technology over the last year and a half," Goldstone said. "I think we have most of the people and most of the technology in place in 2008, and the return on investment should start to flow through in 2009."
IDG redefines itself as Webcentric info company
As a multiplatform business media company, IDG Communications has emphasized decentralized brands and the integration of online, print and events within each of those brands.
Within that set-up, though, top management has tightened the reins just enough to make sure the business units make Web publishing a priority and use some shared resources to spur their online efforts.
Last March, Patrick McGovern, founder and chairman of IDG, told blogger Mark Glaser of MediaShift: "We've made an interesting redefinition about what business we're in. Now we're a Webcentric information company, and we have ancillary activities like print publications and events."
To override the tendency of some publishers to cling to print revenue, McGovern has been making it clear for the past few years that "your Web site is your primary business, and you can do print if it has a clear and useful purpose," he told Glaser.
IDG Communications CEO Bob Carrigan told Media Business, "Pat McGovern and I have been extremely clear with everyone that we're going to invest in digital and event businesses, and manage print for profit."
It is a core philosophy at IDG to align "dedicated teams against brands and audiences" or, in other words, to maintain each business unit's autonomy. But that approach is no longer applied to technology. "For at least four years, it's been part of our strategic direction to try to use common platforms when we upgrade or relaunch sites," Carrigan said.
This strategy is particularly important when a system is too costly for any one unit to bear, such as the lead-generation system IDG has mandated. "If you want to do a good job with lead generation, you better have a tool that enables you to clean leads, score them, output them to your clients' CRM systems," Carrigan said. "Those are applications you need, but no one is going to develop them on their own."
IDG makes a major distinction between shared platforms and centralization. "We don't want to get to the point where everyone has to put their projects in a queue and wait for their projects to get done. We believe in smaller, more nimble organizations," Carrigan said.
For example, IDG is building a new multimedia lab in its Framingham, Mass., offices to produce video, audio and webcasts. "There's no central team that produces video. People from Network World, people from Computerworld and people from CIO will use the same facility," Carrigan said. He also expects the sharing of the lab to encourage shared learning.
Another key strategy is to make sure everyone gets a chance to get involved in online activities, Carrigan said. "I see organizations with one group doing online and another doing print, and they wind up divided into `us' and `them' camps. We try to get everyone involved with online, and that includes our salespeople, our editorial people, our audience development people and so forth."
Then, rather than having people with print backgrounds try to reinvent the wheel online, "we bring in some key people who've worked in a pure-play environment," he said. "We have found the interplay of smart, experienced, people with a willingness to learn, coupled with some new talent, is a powerful combination."
Bobit upgrades content tools and retrains staff
Ty Bobit, president-CEO of Bobit Business Media, went to Pepperdine University for an MBA in the mid-1990s. "I wrote my thesis on putting b-to-b magazines up on the Internet in 1995," he said. "That gave me the impetus to make sure our company moved forward with this."
Bobit Business Media serves small niche markets—car, bus and truck fleets; law enforcement; and nail salons—which were not early Internet adopters.
In light of this, Bobit took a long-term approach. "We wanted to be in a leadership position when the time came for the migration from print to digital," he explained, "but our philosophy was always to proceed cautiously."
This philosophy served the company well after the dot-com bubble burst, and Bobit was able to keep his entire staff employed. "I think we've come out stronger because of that," he said.
From the start, Bobit laid the foundation for many disciplines the company still follows.
"We believed we needed to put different content on the Web than the stories from the magazine, and we always had the editors writing for both print and online," he said. Sales also was integrated early on.
When Bobit saw that the long-anticipated shift from print to online was actually happening, he got ready to take his Internet business to the next level. In January 2006, he hired Christine Oldenbrook as director of marketing and e-media to lead the effort.
Oldenbrook's first step was to assess the team. "I looked at the tech group not only to see what talent we had but also what we needed," she said. She subsequently added people but would like to hire more. "It's a very tough market in Southern California" because people with Web skills are in such high demand, she noted.
Oldenbrook also reviewed the technology infrastructure and saw that the content management system needed a major upgrade. The new system will make Bobit's content more search engine-friendly and provide more user tools "so that the editors and salespeople don't have to depend on the Web team to get things done," she said.
The new CMS begins rolling out this month with the simultaneous relaunch of the five sites in the automotive fleet group. The revamped sites will have blogs, forums and other social networking features. "Our goal is to drive more traffic deeper into the Web sites," Oldenbrook said.
Instead of restructuring the organization for online, Bobit Business Media is providing much more training for its existing staff.
"We've always spent a lot of time training our salespeople," Bobit said. "Now we're scheduling monthly sessions that are dedicated to a particular aspect of selling on the Web, such as creating newsletters, writing better proposals or selling different types of ad units."
While the editors have been responsible for print and online content all along, "they're being asked to do more now," Bobit said. "Web 2.0 is an area we're really pushing in the editorial trainings because the more content the editors can get their users to create, the less they will have to do."
The company already has had a huge success with user-generated content on the Web site for Nails. Its Nail Art Gallery, which allows users to post photos of their nail artistry, is getting 4 million page views a month. "Those are consumer site numbers," Oldenbrook said. "It's a phenomenon."