Just as 2000 was winding down, several media companies made changes to brace for 2001, which will see the economy cooling down and the competition for ad pages heating up:
Red Herring Communications cut 32 jobs, or about 10% of its staff, last month. The move came less than two months after 25 other workers at the corporate parent of Red Herring were let go. Red Herring Publisher Ted Gramkow also departed; the company is now actively recruiting his replacement.
The Industry Standard pulled spinoff publication Grok after just five issues. Grok will now run, as originally conceived, as a supplement in The Industry Standard.
Fuse was cut by Imagine Media Inc. two days after its premiere issue was polybagged with Imagine’s Business 2.0.
Gruner + Jahr USA Publishing, with full coffers from German owner Bertelsmann AG, spent upwards of $500 million to buy Fast Company from publishing and real estate magnate Mort Zuckerman. Gruner + Jahr CEO Dan Brewster will likely look for synergies between Fast Company and sister publication Inc., which Gruner + Jahr acquired last summer for $200 million.
Upside Media split into three separate divisions—print, online and events--to give stockholders the ability to pick and choose which kind of media to invest in.
The uncertainty in the marketplace has also sparked rumors—furiously denied by both parties--of a possible merger between The Industry Standard and Business 2.0.
Although many media companies have recently cut back on either people or products, Ziff Davis Media Inc. took the opposite track, launching in September The Net Economy, a biweekly magazine targeting top business and technical management professionals at Internet service providers. The Net Economy launched with a controlled circulation of 70,000, which was raised to 75,000 with the new year’s first issue.
Slowing down, not drying up
Nevertheless, the advertising gravy train these and other technology-related titles have come to rely on is certainly slowing down—and for the long haul. A recent study by media investment banking firm Veronis, Suhler & Associates L.L.C. projects ad expenditures in the b-to-b sector at $17.1 billion in 2004, growing at a compound annual rate of 6.4%, compared with a compound annual rate of 8.1% from 1995 through 1999.
In 2001, the key question will be how many of the top publications, not too mention the second-tier titles, in the new economy space can survive.
"Our sector will feel the crunch," said Michael Friedenberg, publisher of CMP Media Inc.’s InformationWeek, which in December boosted its circulation from 400,000 to 440,000. "It’s going to come down to being No. 1 or 2 in your market, with everyone else chasing the scraps."
David Bunnell, Upside Media Inc. CEO and founder of PC Magazine, PC World and MacWorld, said some of the "fringe" publications in b-to-b may now be at risk. "The big companies can cut back, reposition. We can do a lot of things since we have money in the bank."
But Jason McCabe Calacanis, founder, CEO and editor of Silicon Alley Reporter and Digital Coast Reporter, scoffed at the suggestion that niche publications operating in the b-to-b space are now vulnerable. "Niche publications are best suited to provide value [during a downturn]," McCabe Calacanis said.
"The people who are really in trouble are some of the bigger publishers who only represent the dot-com boom," he added. "We’ve never ballooned over 200 pages. So if we can keep the magazines in the 100 to 150 page range, well be just fine."
The monthly Upside magazine will see a 20% reduction in ad spending in the first quarter. But despite the retrenching, Bunnell remains bullish. "Ad revenue for the new economy books was up about a combined 900% in 2000. Putting that into perspective, it’s still a huge market," Bunnell said. "I don’t see the doom and gloom that everybody else sees. The new economy magazines aren’t 100% dependent on dot-com advertising. A lot of the [pages] are filled with ads from consumer companies and mainstream financial institutions. Besides, marketers have to advertise when there’s an economic downturn."
Not so, said Martin Walker, a magazine industry consultant. "Marketers should know better [than to advertise during a downturn], but unfortunately, many of them don’t." Walker also stressed the ripple effect. "It’s not only the dot-com companies, but an awful lot of venture capital firms and tombstone ads that are running after the dot-coms" that may go away, he said.
The race is on
New economy magazines are now scrambling to broaden their reach among advertisers.
Hilary Schneider, CEO of Red Herring Communications, said that even during peak ad spending on print during second quarter 2000, less than 20% of the magazine’s advertisers were pure-play Internet companies. Recently, Red Herring, which will boost its paid circulation to 350,000 from 325,000 sometime this year, put on its ad schedule Saks Fifth Avenue, Hugo Boss and De Beers Diamonds.
"Advertisers and their budgets, are a little shy right now, but things should pick up in the second and third quarters," Schneider said, although she conceded Red Herring’s first quarter’s ad pages will see a drop-off compared with the same period last year.
Bill Price, a spokesman for Lucent Technologies Inc., a wholly owned subsidiary of AT&T Corp., said Lucent has no plans to alter its ad schedule and will continue to run ads in both the traditional business magazines as well as the new economy titles in the first quarter, including Fortune and Red Herring.
Like Red Herring, The Standard has expanded its advertiser base with the likes of Johnnie Walker Red, Alaska Airlines and BMW, according to Associate Publisher Jon Chalon. Asked if the market can maintain the current number of titles, Chalon echoed comments made by other new-media publishing executives: "One may drop out, or a bunch might be added. It all depends on the path to profitability among the dot-coms. The bigger story now is how traditional business implements the Internet."