Of all the communications and media sectors covered in Veronis Suhler Stevenson's "Communications Industry Forecast & Report," the b-to-b media sector may be the toughest to analyze in terms of its health and future.
The analysis of publicly traded companies in the report, released Aug. 2, shows why b-to-b's future is so hard to anticipate. For one thing, there are but nine publicly traded companies that participate in b-to-b media in the U.S. "The problem is it's a relatively small sample," acknowledged Hal Greenberg, managing director of VSS.
Also, three of the companies-United Business Media, the Economist Group and Rogers Communications-"did not report complete data" and were omitted, according to the report. Nonetheless, VSS did see positive signs from the data it gleaned from the remaining public companies.
In the aggregate, the adjusted total revenue of the companies increased 1.4% to $4.2 billion in 2003, thanks to gains at Reed Elsevier and Advanstar Communications. More importantly, these companies showed a 25.7% increase in adjusted operating cash flow to $944.4 million.
The future performance of b-to-b magazines and trade shows is also difficult to predict because of the paucity of data about the Internet, conferences, rich data and other ancillary revenue streams.
"I think it's very hard to track where some of those dollars have ended up," Greenberg said, referring to Internet ad spending and conferences. "In time, it will be trackable, but right now it's a little bit hard to say."
The VSS report did quote American Business Media estimates that b-to-b Internet revenues increased 25% in 2003 and are expected to jump another 35% this year. But the report acknowledged "a detailed breakdown of these revenues was not available at press time." The report also pointed out that it's difficult to gauge the impact of Internet spending: "What is not clear is whether or not publishers will grow Internet advertising revenues at the expense of the print product."
Despite this uncertainty, the VSS report remains bullish about the prospects for b-to-b magazines. The sector will rebound this year with print advertising revenues expected to grow 1.8% to $9.2 billion, according to the report. VSS attributes the anticipated growth in general to stronger corporate profits. More specifically, the report cites strong spending in health care and housing market publications as well as a rebound in technology.
The report predicted b-to-b advertising expenditures will grow at a compound annual rate of 4.8% between 2003 and 2008. The rate between 1998 and 2003 was -4.9%, primarily due to the collapse of the tech and financial sectors in 2001 and 2002. But even if b-to-b ad expenditures reach $11.4 billion in 2008, as the VSS report predicts, that figure will still fall short of the $11.6 billion that was recorded a decade earlier.
"If you look at where the other [consumer-oriented] sectors are, you see that b-to-b at less than 5% compound annual growth rate is still a trailing sector," Greenberg said.
VSS has similarly bullish expectations for the trade show segment despite high-profile casualties such as Comdex. The report estimates that trade show expenditures will reach $8.9 billion this year, a 2.4% gain over 2003. The projected gain is related, in part, to an increase in business travel in the first half of this year, a trend that VSS expects to continue in the latter half of the year.
The report also predicts that exhibit space will increase by 1% this year, after successive declines in the previous three years due in part to the fallout from the Sept. 11 attacks. Overall, VSS predicts that the compound annual growth rate for trade shows will be 4.1% between 2003 and 2008, after growing at just a 1.2% rate between 1998 and 2003.
Because measurement of smaller events, whether they're precisely targeted or focused on a particular region, is incomplete, it's difficult for VSS or other outside observers to accurately gauge the health of the b-to-b event industry. What is particularly hard to estimate is the impact these smaller events will have on larger, more traditional trade shows and how that impact will affect the bottom lines of b-to-b media companies.
"Though it's not really measured here, conferences in the last year or two have been quite strong," Greenberg said. Conferences fall under the heading of "promotions" in the report (along with other promotional spending such as public relations). Greenberg pointed out that promotion, according to the report, is expected to grow at a compound annual rate of 6.9%, stronger than either b-to-b magazines or trade shows.