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Custom-fit deal for Forbes, WPP

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A new custom publishing unit formed by WPP Group plc and Forbes Magazine Group will likely spark similar deals between ad agencies and publishing companies eager to jump into a market that currently generates at least $1 billion in annual revenue.

WPP, which vies with Omnicom Group Inc. to be the biggest advertising agency in the world, and Forbes Magazine Group formed their Custom Media Group in late April. Terms of their deal weren’t disclosed.

The group will guide clients through the entire publishing process: market research, editorial, design, ad sales, print production, circulation and distribution and Internet communications. The venture will produce magazines, newsletters, electronic publications, Web sites and annual reports for clients of WPP companies.

Martin Sorrell, CEO of WPP, said media fragmentation and the increasing costs of traditional media helped drive the deal. "There’s a growing importance to use every media channel to develop a relationship with the customer," he said. "Custom publishing is part of that."

Jim Berrien, president of the Forbes Magazine Group, said the custom publishing products would initially focus on three markets: financial, insurance and lifestyle.

"By partnering with WPP we gain access to high-level, early marketing planning with A-list accounts," Berrien said. Custom Media Group executives are now huddling with representatives from two of WPP’s advertising and marketing agencies, Ogilvy & Mather Worldwide and Impiric, to discuss prospective custom publishing clients.

WPP’s agencies, which include Young & Rubicam Inc. and J. Walter Thompson, have several of the most prestigious advertising accounts in the world, including American Express Co., where Berrien previously worked; AT&T Corp.; IBM Corp.; Xerox Corp.; Metropolitan Life Insurance Co. and Philip Morris Cos.

Sleeping giant?

Although it doesn’t muster a lot of media attention, custom publishing is extremely lucrative. Berrien estimates the industry now generates between $1 billion and $1.5 billion in annual revenue.

The market could be ripe for expansion because customer retention has become such a crucial part of companies’ marketing efforts. It costs much less to keep existing customers than to go out and get new ones, and custom publishing is a cost-effective way to hold on to customers by providing them with products they can call their own.

Debra Murphey, editor-publisher of "Publications Management," a newsletter covering custom publishing, said she expects custom publishing products to accelerate because they can cut through the clutter in a market. "If you’re a big company and your customers are deluged with information that they’re probably going to toss anyway, it makes sense for them to produce a [publishing product] that’s interesting, has great design and makes the customer say, ‘This company values me,’ " she said.

Diana Pohly, president of independent custom publishing house Pohly & Partners Inc. and co-chairwoman of the Magazine Publishers of America’s Custom Publishing Council, said she expects a new trend in custom publishing to emerge from the WPP-Forbes deal.

"You’ll see all kinds of midsize and large agencies starting to figure out how to offer custom publishing," she said. "The reason you’ll see more is that it’s very difficult for agencies to build such a unit rather than ally" with an existing publishing house. "Custom publishing’s value to marketers is that it’s a fabulous customer relationship tool," she said.

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