The state of b-to-b media: Looking for a lifeline

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Last summer flood waters rose from the Cedar River and surged through Stamats Communications' offices in Cedar Rapids, Iowa. The 500-year flood devastated the city. “There was mud and water four feet high in our building,” said Guy Wendler, chairman of Stamats Business Media. Despite the flood, Stamats had a record year in 2008. But now a manmade disaster—a recession that seems to grow more virulent by the day—stalks Stamats and other business media companies. “Which is worse?” Wendler asked. “There are certainly different challenges. The thing about a flood is you know how bad it is. With an economic situation like we have now, it's the uncertainty that is the most difficult thing to deal with.” The outward signs of trouble in the b-to-b media sector are clear. B-to-b print advertising pages were down 8.9% through September, compared with the year-earlier period, according to Business Information Network figures. Additionally, BIN figures showed that trade show revenue fell 3.7% in 2008, the first decline in seven years. “Many b-to-b media companies are having a hard time getting digital revenue to grow fast enough to offset the decline in print,” said Reed Phillips, a managing partner of media investment bank DeSilva & Phillips. In response to economic pressures, McGraw-Hill Cos., publisher of BusinessWeek, cut 210 positions in its media and information business in 2008. Reed Elsevier's Reed Business Information cut 7% of its employees last month. Not surprisingly, the M&A market in trade publications was weak in 2008, with the number of deals off 46.3% and the value of those deals down an astonishing 91.9% compared with 2007, according to media investment bank Jordan, Edmiston Group. In the current climate of uncertainty, many b-to-b media executives aren't hiding their fear. “If you're not scared right down to your socks, then you're probably not doing your job,” said Robert Faletra, CEO of United Business Media's Everything Channel. B-to-b media companies are fighting back by generating revenue streams beyond print. It's the same story, told with varying degrees of urgency, that's been unfolding since the early 1980s when print stumbled and profits from trade shows saved many b-to-b media companies. The search for new revenue streams broadened in the mid-1990s and beyond when it became apparent that the Internet might have some potential. The information technology publishers—International Data Group, TechTarget, United Business Media, Ziff Davis and others—led the way in making the right moves on the Internet. These IT media companies continue to innovate on the Web and elsewhere. IDG, for instance, promised in 2006 that its online revenue in the U.S. would exceed 50% of all its revenue by 2010. The company remains on target for that goal and said that in fiscal 2009, which ends Sept. 30, its online revenue will surpass revenue from print. And IDG isn't generating all its online revenue from display ads. IDGConnect is an IT lead-generation site that includes case studies, podcasts, webcasts and white papers. “Lead generation has more than tripled over the past couple of years,” said Matt Yorke, IDG Communications' senior VP-sales and marketing. But Yorke said that IDG functions as more than a sales lead generator for advertisers. He pointed out that the company worked with Hewlett-Packard Co. to develop new ad formats such as the “carousel,” which presented visitors with a carousel of product information—for example, white papers, case studies and video—for each product displayed. He pointed out that the company has worked with advertisers to develop new ad formats such as the chatterbox, which allows visitors to “chat” with users of an advertised product. “We're blurring the line between us and an [ad] agency,” he said. Yorke added that his sales team has a culture of doing whatever can be done to help IT companies go to market in any way possible. With a laugh, he referred to the approach as “No dollar left behind.” Innovative ideas are also coveted at UBM's Everything Channel, which publishes CRN. PromoFinder is one of the group's new ideas. Located at, this search engine allows vendors to display special promotions to VARs, which can then make bottom-line decisions about which products to recommend to their customers. “It's a new product and it's online, and I think we'll make some money on it,” Faletra said. At UBM sibling TechWeb not every bit of innovative thinking is directed at online initiatives. TechWeb recently redesigned its flagship magazine InformationWeek. Although the publication reduced its frequency to 36 times per year, it now sports thicker paper and cover stock. Stories are also longer—to take advantage of what print can do better than other media formats: cover complicated subjects in-depth. John Seifert, VP-publisher of InformationWeek, explained that it's all part of the idea of “content in context.” In this way of thinking, the media format determines how the information is presented. While print is good for long-form journalism, the Internet is ideal for breaking news and interactive blogs. The Internet is also increasingly becoming a video format, and TechWeb is taking advantage of that. On its Internet Evolution Web site, the company recently posted an ambitious video about how Rwanda's government is using the Internet to foster business in an attempt to break the grip of poverty in this country known for the genocide that took place there in the early 1990s. It's not only tech media companies that are taking advantage of the Web's capabilities. Incisive Media, which publishes American Lawyer, is among the hundreds of b-to-b media companies generating increasing revenues with webcasts and webinars. Kevin Vermeulen, Incisive's senior VP-events, said that in these turbulent times Web events are extremely nimble. “Interest in asset-backed securities is not existent right now,” he said. “Those events aren't taking place.” Instead, Incisive can quickly introduce new events on current topics of interest to marketers and the people they want to reach. A hot topic, for example, is the energy industry. “We can do some events easily within 30 days,” he said. The construction industry has been hit hard by the recession; in fact, the mortgage crisis in the housing industry initiated the downturn. As a result, Hanley Wood, publisher of Builder, is in the bull's-eye of this recession. Peter Goldstone, president of Hanley Wood Business Media, said the company is investing in its top brands—in print, in person and online—in the current climate. “We're focusing on our core assets, which have the most value,” he said. “We're making sure that we invest every dollar, every available person, toward not maintaining these assets but making those assets even better.” McGraw-Hill Construction serves the same struggling market. In 2008, the company entered into a deal that placed AutoDesk's CAD software into Sweets Network, McGraw-Hill's online product sourcing database. “That integrates our content into the workflow [of architects],” said Norbert Young, president of McGraw-Hill Construction. Most b-to-b media companies have plenty of good ideas. The challenge facing them is to implement these ideas and generate additional revenue with fewer people in a down market. “There's your balancing act,” said Michael Parker, managing director of media investment bank AdMedia Partners. “As a b-to-b media publisher, you have to reduce costs, which means you have to lay off X number of people. But you have to beef up online content at the same time. That's the trick.” Even after being forced to cut 10% of his work force, Stamats' Wendler is bullish on at least two parts of his business that generate revenue beyond print: online and consulting. The company has a research and consulting business aimed at higher education. With the shrinking of endowments, many universities are “looking for answers for allocation of resources,” Wendler said. “There's a lot of demand for consulting and research projects that leads to an immediate and demonstrable return on investment.” If all goes right, Stamats will ride this storm out, just as it did the flood of 2008. M
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