Advertising Age: How have ABM members been coping with the economic downturn?
Mr. Hughes: There are a couple of things going on in the industry that are kind of intriguing. There are two new business models that are being developed. The old b-to-b model was to have books in a variety of silos so that if one silo goes dark you can make up for it in other silos. That business model still exists, but the new model that sort of came on in the second half ... is to trim the portfolio and muscle up in the areas you dominate. ... I think that model is growing faster than it might have because of the economy.
The second business model ... what b-to-b people began to do was look at other assets that they had such as their databases, their ability to custom-publish, and they looked specifically and really hard at trade show aspects, extending their brands into trade shows.
The last two months of 2000 were off ... What we've got now is a downturn ... but the thing that's really saving these guys is the trade show aspect of what they do.
Now this [downturn] appears to be a little rougher than '99, so we're looking at some numbers that are probably going to show pages somewhere in the range of 7% down and spending down 7% for the first quarter ...
This year b-to-b publishers are looking at their Web sites not only to make money, but to save, so in other words they're playing offense and defense with their Web sites. Let me give you an example: Circulation costs a lot. To keep a subscription is probably a buck-fifty but to get a new subscription might be as high as $26. If you can do this online, it's virtually free.
AA: What does the rest of the year look like?
Mr. Hughes: Last year you had a lot of things where people were marketing, were pouring money into magazines. B-to-b got its chunk of it as well.
This year you're up against big numbers and you just don't have the same winds that prevailed last year. ... We're forecasting the revenues up 5% for the year and ad pages up 2% to 3%.
AA: Where are the pockets of strength now among b-to-b media?
Mr. Hughes: I do think we're starting to figure out the Internet ... What you can do with your Web sites is tell what day of the week most people are viewing it, you can tell what time of day people are viewing it, and members of ours are beginning to craft sort of breaking news when they know use is higher. It's like in radio there's drive time, in TV there's prime time. The Web is much like TV, so smart agencies are getting smarter and our guys are getting better at it. ...
The good companies are making their salespeople what they now call consultants, and it's not easy because the salespeople have got to learn and there's no one model for this, and management has to incentify because you've been selling ad pages all your life. Some companies are putting together shock troops that go out and promote the multiplicity of delivery platforms ... it's all built off the brand and the brand is the magazine.
AA: Layoffs seem to have been one of the big tactics of the first quarter. Do you think the layoffs have peaked or will they continue at this pace?
Mr. Hughes: I just know when I talk to the CEOs of these companies it's the last thing they want to do. Job freezes are one thing they're all doing. I think most of them are trying like hell to avoid [layoffs] because they don't see this [downturn] as a long-term deal. They see it turning around in the second half of the year. ... I don't think any more wholesale [layoffs will occur].
AA: The Industry Standard pulled spinoff publication Grok after just five issues and will run it instead as a supplement to The Industry Standard, which was the original plan. Business 2.0 this month will debut a quarterly business travel supplement called "Motion." Are publishers scaling back expansion plans? Are they favoring supplements over start-up magazines?
Mr. Hughes: Yes, with the exception of Ziff Davis, which is launching a new book. [Ziff Davis Media this month debuts CIO Insight, a controlled-circulation monthly targeting senior-level information technology executives.] For the most part, I think these people don't want to back away from coverage, from getting very vertical, so they're going to do this and they're going to build a base, and I suspect when the economy does pick up and they've tested it to see how it's doing-boom, they'll launch with a circ of 15,000 or 30,000 or whatever. Ziff Davis had done a lot of that along the road. You know, they're being very bullish ... [In the last year, Ziff Davis also has launched The Net Economy and Expedia Travels.]
AA: Is there an ongoing process of consolidation in the b-to-b media landscape?
Mr. Hughes: Absolutely. I'll give you a megatrend in b-to-b: Bigs buy mediums, trim portfolios. Smalls buy trimmings, become mediums. And that's the cycle. It's just that simple. ...
The only difference with the economy is it becomes either a buyer's market or a seller's market. So right now cash is king-if you've got money, like VNU, you can buy big time at great rates. ... There are a lot of deals out there, so consolidation is just grow or go. The only difference is that it was a seller's market and now it's a buyer's market. That's the dynamic shift.
AA: Thomson Corp. recently put its Thomson Financial publications on the block as the company continues to shift its focus to e-solutions in financial services. Thomson Financial CEO Patrick Tierney says the publications' revenues were heavily ad-based, and such revenue is very cyclical and tied to the economy. Ironically, the news came just before Thomson's American Banker won a Jesse H. Neal Award from ABM for its news coverage. Do ad-supported print publications have a future in the business-to-business field?
Mr. Hughes: What you do is change to meet the needs of your consumer, whether it's from an advertising standpoint or whether it's from the intellectual properties you serve up.
The Internet is merely an extension of the magazine. If you look at it as a competitor, you're wrong; it is an integral piece of what you do. If you didn't have a Web site and someone was coming in and cannibalizing your readership, well shame on you. That's just not the way to run the railroad.
But if you have your trade shows and you have your Internet and you have your brand ... it may look different but it's not going to leave the planet. ...
I think another megatrend is sharp marketing for the industry, both for dot-com and magazine. They were throwing 2 million bucks for a 30-second unit in the Super Bowl for a sock puppet, and there was no marketing, there was no brand, they didn't know how to build a brand. A brand takes time. ... Everybody uses that word "brand," but you better figure out your philosophical point of view of what a brand is.
AA: The Business Information Network, a joint venture of ABM and Taylor Nelson Sofres' CMR, provided proof of the b-to-b slowdown when it reported that November ad pages were down 6.8% and ad spending down 7.5% from a year earlier. How did December go?
Mr. Hughes: December pages were down 9.6% and dollars down 4.6%. For the full year, pages were up 3.8% and dollars were up 10.1% [topping $10 billion for 2000].
Here's what I'm hearing: November, December, January continued to go down; February continued to go down; March began to flatten; and the numbers that I've got in April are that it's coming up but it's still below last year. But it looks as though, at this point in time, that April is beginning to uptick. But when I say that, be careful-it doesn't mean it's ahead of last year, it means it's not as bad as the previous month.
AA: Who's going to weather the downturn best? Large publishers or niche publications? Print media or pure-play online media?
Mr. Hughes: Size doesn't matter except maybe for the depth of the pockets. I go right back to my mantra, which is those that are established-the No. 1, No. 2 and in some cases No. 3 book in the category that know how to extend their brands, those people will survive. It doesn't matter what their size is. ... The smart ones will continue to advertise and market themselves so that at the end of the day, when this economic hiccup is over, they'll be stronger than when they entered.
AA: ABM has said its membership accounts for more than $19 billion in ad revenue. What do you see that figure being for 2001?
Mr. Hughes: For 2001 here are the components: We're saying that the ad pages will grow from $9 billion-and-change to $10 billion, and trade shows are going up in the 8% to 9% range.
I guess that we'd probably be looking at about maybe $23 billion. Ad pages are about 50% of the action, and the other 50% is growing at a far more dynamic rate-and trade shows and the Internet, of course, albeit on a smaller basis, but growing maybe 300%. ... databases, electronic newsletters are doing quite well, there's a variety of other delivery platforms that are not being affected by this economic situation. So I think at the end of the day, we'd be OK to say $22 billion to $23 billion.
If you combine everything, it makes b-to-b media, not magazines [alone], the No. 3 media after TV and newspapers. We edge out consumer magazines. ... but there's a big difference between where [the top two] are and where we are.