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Internet finally fulfilling its promise

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By Marie Griffin

Even during the Internet's heyday, making a profit online was a distant dream for the vast majority of b-to-b media companies. After the bubble burst in 2000, media companies with major investments online had few options except to push "integrated" packages and feed their operational online properties with stories. For the most part, all of them kept expenses-and losses-to a minimum. Meanwhile, Internet use among their subscribers grew naturally.

Fast-forward to today. Advertising and sponsorship dollars have followed the b-to-b audiences to e-mail newsletters and Web sites, and the investments in electronic media are paying off. Just as significant, those once-elusive profits are being enjoyed by a broad, diverse group-not just the large, techie titles that were the medium's vanguard.

If 2004 was the year of the Internet comeback, 2005 is the beginning of a whole new era of growth, innovation and possibility.

"Over the past year or so, most of our b-to-b properties have gone from investment to profitability" on the Internet, said Colin Crawford, VP-new business development and operations for technology media giant International Data Group. Computerworld.com, InfoWorld.com, Network World.com and CXO Media as a group all fall into the profitable column, he added. Further, Crawford expects IDG will be getting more of its revenue from online products than from print products by 2007, only two years from now, "if our current trajectories hold."

For ALM (formerly American Lawyer Media), 2004 was the first year in which the Law.com network was profitable, said Stacey Artandi, VP-online publishing. She said all the components of the online business were themselves profitable as well.

On a companywide basis, PennWell is also making money on the Internet. "We're on our second year of profitability," said Tom Cintorino, VP-digital media, "and we had great profit growth in the last year."

TechTarget, a b-to-b company born of the Internet that has also moved into print with two monthlies, had revenue of "around $50 million in 2004," said Greg Strakosch, co-founder and CEO. "That was a 50% increase over 2003, and we expect to grow by more than 50% again and do more than $80 million in 2005," he said. He added the private company's ability to raise $85 million in new funding in 2004 "makes a very good statement about our profitability."

The growth of online revenue does not reflect a growth in advertising budgets in the technology space, according to Strakosch. "Marketing budgets are being reallocated as advertisers realize that there's been a fundamental shift-every major IT purchase is researched online. This [awareness] has been growing for the last five years and it has really accelerated recently."

"I feel the advertising market has only just come back," said Martha Connors, VP-general manager, online for IDG's Computerworld. "So, right now and for the next 12 months, we've got to put our paws into all [the ways of making money on the Internet]."

Noting that "technology is a fantastic category for the Web," Jason Young, president of the consumer technology and Internet group of Ziff Davis Media, said the company is definitely making a profit on its Internet activities, with b-to-b and consumer-oriented sites being equally profitable.

After years of losses, Ziff Davis Internet has been continuously profitable since 2003, he added, and it is now the fastest-growing group at Ziff Davis Media with a growth rate of approximately 75% in 2004. The company will continue to invest aggressively in Internet acquisitions and new products in 2005, as it did in 2004 when 30 new products were introduced, but Young emphasized that "revenue is growing faster than the investment, which means that profit is growing" for Ziff Davis' online businesses.

When asked which aspects of Ziff Davis Internet were most lucrative, Young said that Internet advertising, e-mail newsletters, webcasts, sponsorships and other activities "are independently profitable, but it's really the combination of all those capabilities coupled with our assets as a print publisher that make us successful."

For Post Newsweek Tech Media, online profits have been "a significant part of our bottom line for a couple of years," said Alec Dann, senior VP-Internet publishing. "It's been growing very, very quickly and shows no sign of slowing down. We've been able to devote more resources [to the Internet] as a result."

After the tech wreck of 2000, "everyone pulled back on Internet advertising," said Stephen Moylan, president of Reed Business Information's Boston division and chairman of the Reed Electronics Group. "In the last year, at least, people are moving back. We saw Internet revenues double from '02 to '03, and they doubled again from '03 to '04," he said. "I think we're in for two or three years of steady, sustainable growth." Separately, CEO Jim Casella confirmed that 15% of Reed Business Information's revenue came from the Internet in 2004.

Over the past four years, 101communications has grown revenue in electronic products at a 29% compounded annual growth rate, said Jeffrey S. Klein, president-CEO of 101communications, which publishes nine information technology publications aimed at specialized industries. "In '04, we grew more than 35%, and we've seen growth like that across the board," he said.

Prescott Shibles, Primedia's VP-online development, pointed out that Primedia's 70 b-to-b print titles span 20 diverse industries, from agriculture and apparel to transportation and telecommunications. Nevertheless, Shibles said, Primedia's online revenue percentage is higher than the 5% average commonly reported for b-to-b media companies. "If you look at our online growth on a quarter-to-quarter basis, we're consistently growing in double-digit percentages," he noted, with Web site advertising finally picking up. "We're not seeing a dramatic increase, but people are willing to pay a strong price for Internet advertising." Advertisers' understanding of the value of Internet advertising has significantly increased over the past year, he said.

Toni Nevitt, president-eMedia and information marketing for VNU Business Media, emphasized that the Internet cannot be used as merchandising anymore. "We don't give away the Internet," she said. "We do integrated media packages for clients so that they can broaden exposure or increase the touch points within a given marketplace, but there is a philosophy and guidance here that there is an appropriate value to all the pieces of the media mix."

Much of the growth in Internet revenue has come from sales lead generating activities such as white papers and webcasts, said Mike Azzara, CMP's VP-group director Internet business. "But we don't want to diminish the value of branding," he said, adding that CMP intends to be a full marketing services company for its customers as the current fascination with lead-generation evolves.

Large companies are not the only ones talking about making money on the Internet. At Wicks Business Information, the Internet has been profitable and "it helped keep us going through the [print] advertising depression," said Bill Glasgall, editorial director of Investment Advisor. "It's very important for a small publisher like us to figure out how to leverage our expertise online."

Even in a field such as farming, a thriving Internet business can grow. At Successful Farming, the 102-year-old founding publication of Meredith Corp., the companion agriculture.com Web site, launched in 1995, has been profitable for the last five years, said Tom Davis, publisher. The first major redesign of the site went live Jan. 17. "From the beginning, we avoided the temptation to just put Successful Farming online," Davis said. "This is an agricultural information portal." 

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