So what is the state of b-to-b media? Despite weak growth in a strong advertising market, the performance of b-to-b print can still be termed a turnaround, and there are at least 10 reasons to be cheerful about the future.
Print ad pages have stabilized.
TNS wasn't alone in noting the modest growth in b-to-b ad pages. American Business Media's Business Information Network figures, compiled by IMS: The Auditor, showed that ad pages totaled 563,731, an increase of 1.44% from 2003. Ad revenue increased to $6.6 billion, a jump of 3.83%.
"We're still looking for a rebound in tech and hoping that that comes through," said Reed Phillips, managing partner at media investment bank DeSilva & Phillips. "I don't think it's come through as much as people had hoped."
There was a time when print ad pages were the best indicator of the sector's strength. No more. With the rise of Web advertising, e-mail newsletters, events and rich data, b-to-b media companies no longer rely as heavily on print for revenue, which brings us to the second reason to be cheerful.
Brand extensions are effective.
Penton Media provides an example of how traditional b-to-b media companies have diversified their revenue streams, especially over the past five years. Publishing revenue still accounted for 67.5% of the company's $212.7 million in revenue in 2004, followed by events (24.1%) and online (8.3%). But events and online registered double-digit revenue growth while print declined 2.9%.
Penton Media CEO David Nussbaum said the company has emphasized online revenue since he took over last year, placing Eric Shanfelt in the role of Internet guru and encouraging the launching of new sites. "The great thing is that we did all that and it's proving successful," Nussbaum said. "It's one thing to have a good idea and not see the results, but we've seen the results. We're hopeful it will continue to accelerate."
Today, most business media companies adhere to the mantra "in print, in person and online." Some are even taking their brand extensions a step beyond b-to-b and moving into the consumer realm. Advanstar Communications, for instance, has launched DIRTsports, a consumer magazine affiliated with its trade publication Dealernews.
Private equity remains bullish on b-to-b.
With examples such as Hanley Wood, which a Veronis Suhler Stevenson private equity fund acquired for $260 million in 1999 and may sell this year for $700 million, private equity players are lusting after strong b-to-b properties. The point is there's still money to be made in b-to-b media.
Mike Wood, CEO of Hanley Wood, believes private equity is good for the sector, saying it's where the talent goes to make big money from buying and selling media properties. "The talent is flowing into private equity," he said.
Private equity is also backing top talent, such as Cameron Bishop at Ascend Media (J.P. Morgan Partners); Robert Krakoff at Blantyre Partners (Blackstone Group); and Andrew Goodenough at Highline Media (Spire Capital Partners).
The M&A market continues to simmer.
After a few stultifying years, the b-to-b media M&A market returned with a fury in 2004 and remained somewhat steady in the first quarter of 2005.
In the exhibitions and conferences arena, the number of deals increased from seven in last year's first quarter to nine in the same period this year, and the value of the deals increased 16.7%, from $96 million to $112 million, according to media investment bank Jordan, Edmiston Group. In the b-to-b magazine sector, the number of deals increased from 11 to 12, but the value of the deals fell 48.3%, from $676 million to $349 million.
The bottom line is that there are strong properties out there, and investors-whether they're private equity funds or strategic players-are willing to pay top dollar for good businesses. Investcorp's $350 million purchase of Source Media (formerly Thomson Media) is proof of that.
The Internet booms again.
Not only did Internet advertising grow faster than b-to-b magazine advertising in 2004, Internet ad revenue was bigger than b-to-b magazine ad revenue last year, $7.4 billion vs. $5.2 billion, according to TNS.
That's the bad news. The good news is that over the past few years, b-to-b media companies have gotten a handle on the Web and are themselves partaking of the Internet's largesse through webcasts, e-mail newsletters and other interactive formats.
Put another way, the good news is that marketers haven't abandoned advertising; they're just emphasizing one medium over another. Pat Kenealy, CEO of International Data Group, has pointed out that when ad dollars evaporated from tech publications a few years back, not all of that money was gone for good. Some of it migrated to online businesses such as CNET Networks, which posted $291.2 million in revenue for 2004.
And to offset the threat posed by search engines such as Google and others, some b-to-b media companies-such as Watt Publishing Co. and Thomas Industrial Network-have developed their own industry-specific search engines.
International opportunities abound.
The migration of business overseas isn't all gloom for b-to-b media. There are opportunities on the other side of the ocean.
Kenealy's IDG is held up as the gold standard among U.S. b-to-b publishing companies establishing beachheads overseas, particularly in China. The company is revered enough that other media companies turn to it for advice and aid. For instance, Reed Business Information U.S. announced last year a deal to publish Variety and other magazines in China with IDG's help.
Other companies, such as PennWell Corp. and Ziff Davis Media, are finding that licensing their titles internationally provides high-margin revenue streams.
Digital editions have cost-cutting potential.
While they've been likened to eight-track tapes, a doomed technology if there ever was one, digital editions are making inroads. Between December 2003 and December 2004 the number of digital editions audited by BPA Worldwide more than doubled, from 46 to 101.
Publishers, of course, like the technology, which produces a digital replica of a print edition without the three p's-paper, printing and postage.
Many believe that downloads of digital editions are minimal. But new research from 101communications indicates that digital subscribers read the publications almost as often as print subscribers do.
Advertisers, as yet, have not warmed to the format, but publishers are hoping they may be swayed by new research and the opportunities for interactive advertising.
New sectors spawn new publications.
Historically, trade publishers have been adept at starting new titles in burgeoning markets. The tradition continues with Penton, for instance, launching Business Performance Management in the wake of Sarbanes-Oxley. BusinessWeek launched SmallBiz last year to take advantage of advertisers stepping up efforts to reach small-business executives. Similarly, TechTarget launched CIO Decisions to give advertisers the opportunity to communicate to midmarket information technology executives.
Selling rich data is catching on.
The traditional model in b-to-b publishing is controlled circulation. Readers receive content for free, and advertisers provide the revenue by paying to reach this aggregation of readers.
Lately, however, many business media companies have altered their businesses to generate revenue directly from readers. VNU with Nielsen Media Research and McGraw-Hill Cos. with Standard & Poor's have long sold rich data to users, but now smaller companies are looking for rich data.
Mercor Media, for instance, bought consulting firm Zweig White last year in part to begin using its construction magazines to sell consulting services to readers. And Hanley Wood acquired Meyers Group, since renamed Hanley Wood Market Intelligence, to sell construction industry data to readers. "We'd never been in the position to sell anything to [readers] who think so highly of us," Wood said. "Most of our money came from advertising. Now we can sell data to readers."
B-to-b media can deliver what marketers want.
What do b-to-b marketers want? That varies, obviously, from marketer to marketer, but some consistency exists. First, they want measured return on investment. Second, they want targeted opportunities with little waste. And, finally, they want integrated marketing plans.
B-to-b media deliver all three. From the days of bingo cards, trade publications have delivered proven return on investment. Today, that lead generation has largely moved to b-to-b Web sites.
"They understand that we have to drive ROI and that we need to have measurement in place to understand what that return is," said Kelly Konis, exec VP-managing director at Carat.
And with the Web, events and print, b-to-b media companies offer integrated media-and have for years.