Advantage Business Media is about as b-to-b as a media company can get.
Its 19 publications include Electronic Component News, Manufacturing Business Technology, Product Design & Development and Wireless Week. The Rockaway, N.J.-based company was formed in 2006 when CEO Rich Reiff and President George Fox, backed by private equity fund Catalyst Investors, acquired a number of titles from Reed Business Information.
Reiff and Fox have turned their product-focused magazines into strong Web properties. When they bought the magazines from RBI, the company's digital revenue was about 11% of its total revenue. Now that figure is 42%, and Reiff expects it to reach 50% by the end of the year.
Reiff said he and Fox have transformed Advantage Business Media with a simple formula that he believes other b-to-b media companies can follow.
First, they changed the editorial culture to adapt to the pace of the Internet. “We're not monthly anymore; we're daily,” Reiff said. Advantage's first digital focus was on producing regular e-newsletters for its brands.
Second, Advantage sold the value of its digital products, which include webcasts and online display advertising. “We were very strict about pricing,” Reiff said. “We would not allow any value-add. We would not allow selling it cheap. We sold value and gave a return on investment [to marketers].”
To implement this approach, Advantage also had to change the culture of its sales teams. Reiff and Fox merged the company's print and digital sales teams. They also replaced salespeople who did not go along with the new program.
Ryan McNally, a partner at Cataylst, estimated that two-thirds of Advantage's sales staff has joined the publishing company since 2006. He also said the revamped sales teams relied heavily on prospecting to dig up small advertisers that could afford the relatively low prices for targeted digital products and see a return in leads.
Third, Advantage has boosted its digital side margins. “Digital dollars are more profitable,” Reiff said.
McNally said Advantage has been profitable every year Catalyst has owned the company. Now, as digital revenue has surged, so has the company's EBITDA (earnings before interest, taxes, depreciation and amortization). Advantage's EBITA has doubled since 2006.
Reiff said he expects digital display advertising to be Advantage's next big growth area.
McNally said Advantage is also looking to increase its revenue from events, which currently stands at less than 5% of the company's overall revenue.
Earlier this year, Advantage acquired Continuity Insights, which operates the the Continuity Insights Management Conference, in part to develop its face-to-face business. Reiff said Advantage is currently looking for additional acquisitions. He said Advantage and Catalyst are primarily seeking b-to-b media brands that haven't fully taken advantage of digital revenues.
Even though Catalyst has owned Advantage for five years, usually about the time a private equity firm begins looking to sell an asset, McNally said he's more focused on acquisitions for Advantage in the short term. “Catalyst has no immediate plans to exit or look for the door,” he said.