Marketing spending is down, and the prospects for a recovery this year are slim. The recession, moreover, is accelerating two trends that threaten the print publishing model to its core: One is the well-documented shift from print to digital media; the other is the movement of marketing spending from traditional, impression-based advertising to such tactics as custom media and events; direct-to-customer communications; lead generation; and online search.
This isn't news. Industry leaders have long recognized that digital media will eventually supplant print. But aside from the technology market, this simply hasn't happened in most b-to-b verticals.
According to Veronis Suhler Stevenson's “2008 Communications Industry Forecast,” b-to-b magazine spending in 2007, at almost $11 billion, was more than three times the $3.1 billion e-media business, even though magazine revenue was down 2% and e-media spending was up 26% from the prior year.
Print revenue has wobbled up and down by low-single-digit percentages since 2001, but it has been strongly profitable. American Business Media's “2008 Financial Trend Report,” prepared by Jordan, Edmiston Group, pegs b-to-b magazines' share of revenue contribution from print at 66%, compared with 15% from digital channels.
The severe downturn of the economy is battering virtually every business media company and prompting organizational shifts.
Just last month, for instance, Penton Media announced that CEO Sharon Rowlands, who joined the organization in October, had realigned the company into five larger umbrella groups and dispersed digital operations among each market- focused group.
In another recent move, Reed Business Information US announced the creation of a new Business Media division and named Jeff DeBalko president. DeBalko had been overseeing several New York-based brands and running RB Interactive as part of his role as RBI-US' chief Internet officer. The new division puts all the publishing groups but two—Entertainment and Construction—in DeBalko's hands.
“First of all, the major shift in thinking that we will affect over the entire business media division is to move from managing individual brands to managing a portfolio of brands,” DeBalko said.
While the impetus for initiating this restructuring right now is the recession, DeBalko said, it is not merely a cost-saving measure.
“The primary driver is to have consistent execution and performance across the division,” he said. “We want to eliminate inconsistencies and do what we do well everywhere. Our vision for managing by portfolio is to give us longer running room to extend the life of some of these brands. [Changing the cost structure] gives you time to figure out whether there is a longer-term growth story,” he said.
Publishing leaders such as DeBalko confide that their future requires an altered organization because the current cost structure does not make sense in an online-centric business. “You'll never get long-term growth by just moving revenue from print advertising to online advertising,” DeBalko said.
RBI-US isn't the only b-to-b media company that's challenging the sacred cows of the traditional print publishing structure.
Gregg Watt, president-CEO Watt (fromerly Watt Publishing), decided two years ago that the future of the agriculture-focused company was digital. Watt invested in two new online executives as part of a move to “develop a culture that drives new-product development,” he said. On the content side, he's taken a Web-first approach “to focus our content creators on high-value activities,” he said. Other activities, such as copy editing, have been offshored.
“We've invested a tremendous amount in infrastructure to get us where we are today. That technology is going to drive a lot of our opportunities,” Watt said. Like DeBalko, Watt said he is also “going after our customers' marketing communications budgets.” Late last year, Watt formed a company within the company to focus on custom media.
Peter Hoyt, executive director and founder of the In-Store Marketing Institute, recently renamed the privately held company that bore his name after the business it evolved into: a for-profit institute.
The In-Store Marketing Institute was formed in 2003 partly because Hoyt wanted to drive more growth out of the industry relationships formed through his flagship magazine (then called P-O-P Times) and partly because the Web was becoming an increasingly important force.
“I didn't think we could make enough just selling banner ads. We needed a better business model for online,” Hoyt said.
“The institute grew out of us want-ing to sell subscriptions to get to data,” he explained. Rather than monetizing the business information through licenses or subscriptions, Hoyt created the institute, which makes money through memberships. And Hoyt continues to have other revenue streams, including print advertising and event sponsorships.
Whether it's print, online or events, “platforms are meaningful to the degree that they create a stage that allows buyers and sellers to interact,” he said, adding that the data business “is beautifully enhanced by the Web. We're now generating revenue from white papers, Webinars and industry research.”
About economy's impact, Hoyt says this: “If gross revenue is down, it hurts, but we're still running a very efficient operation and our margins will be healthy.” M