2006 Preview: B-to-B Optimistic While Consumer Side Idles
By Matt Kinsman
For the first time in years, confidence seems to be rising on the b-to-b side of the industry while consumer magazines as a category;bruised from circulation scandals, mired in a newsstand quagmire, and reeling from the implosion of several high profile launches in 2005;seem unsure how to take the next step.
B-to-B's newfound confidence is based online and rightfully so, assuming publishers take a smart approach rather than falling in line with the "print is dead" crowd. At the American Business Media Top Management Meeting in November, many of these themes were discussed in eloquent detail, including blogging, vertical search, monetizing e-media brands and more. ABM CEO Gordon Hughes predicted online revenue to be up 20 percent in 2006. "Online [is] the real workhorse," Hughes said. He also predicted print advertising to be up four percent to five percent in revenue and just two to three percent in pages.
However, online is still a long-term opportunity. While publishers such as Technology Review and CXO Media are currently recasting their strategies to make online their lead vehicle while print becomes a premium brand, most b-to-b publishers outside of the tech publishing space are seeing less annual online revenue right now than they generate in a handful of print issues. Readers are being conditioned to expect online content for free and despite advertisers' insistence on online packages, few are paying a premium for it. Both issues will have to be dealt with before online can make the jump from promising revenue stream to significant revenue stream for companies beyond the tech publishing space. "We'll undoubtedly make mistakes but as long as we can respond quickly and change the way we're managing things, that's okay," says Technology Review publisher Jason Pontin.
On the bright side, b-to-b publishers are being more selective and more realistic about online opportunities. While b-to-b has embraced digital magazines far more than the consumer side (23 of the top 25 digital magazines by circulation are b-to-b, per BPA Worldwide), it's starting to see digital more as a marketing and support tool rather than significant moneymaker. "We gave up on digital editions a year ago," says Jim Chrzan, publisher at Summit Publishing. "Building your own magazine and loading the content you want, I do believe in that."
Meanwhile, lead generation and vertical search are emerging as key revenue drivers. "B-to-b is driven by leads," says Todd Christenson, publisher at Hearst Business Media. "Three years ago we wanted impressions, last year we wanted clicks and now we want leads."
"Several million dollars were being taken out by search that we didn't have a chance to compete for," adds Steve Slackis, director of sales and product development at Watt Publishing. "Now we can."
2006 will be the shakeout year for the blog. The numbers of "official" blogs will rise, they'll probably be lumped in with digital magazines: An effective awareness driver but not a revenue generator. "I'm not so bullish on blogs," says Stephen Moylan, president of Reed Business Information's Boston division. "My bosses are saying ï¾‘blogs, blogs, blogs,' but I see this as more b-to-c, not b-to-b."
Consumer Titles Seek New Model
Despite calls to action, there is unlikely to be any major changes on the consumer side of the business in 2006. New Magazine Publishers of America chairman and Hachette Filipacchi CEO Jack Kliger says the future of the magazine industry hinges on two points: Marketing the product and proving the effectiveness of magazine advertising. Kliger has blasted current magazine metrics as antiquated and out of step with other media. "Circulation-based metrics are irrelevant to proving advertising effectiveness," Kliger says. "There is too much focus on ratebase rather than distribution. Every other medium deals with audience, we deal with circulation. Why should a magazine advertiser care if a magazine is paid or non-paid?"
City and regional magazines have been one of hottest categories and that's likely to continue despite the the influx of new titles, including launches by newspaper publishers. "The first challenge is not to grow too fast or extend too far that they are caught napping if and when a change in economic circumstances occurs," says Jim Dowden, executive director of the City and Regional Magazine Association. "Second, of immediate concern is the plethora of new competition that has risen largely as a result of current success. New regionals are popping up all over like bees after honey. Even to established city magazines with strong editorial and strong presence in the market these new [products] present competitive challenges."
Few Blockbuster Deals Left
After the blistering pace of mergers and acquisitions in 2005 expect a slowdown (at least in total dollars if not volume) on the M&A side in 2006 as the number of buyers greatly exceeds the number of sellers. According to a survey conducted at ABM Top Management by AdMedia Partners, 62 percent of respondents characterized themselves as buyers while 22 percent identified themselves as sellers.
It's unlikely the market will see blockbuster deals such as the $650 million sale of Hanley Wood and $350 million fire sale of Gruner & Jahr to Meredith. And the overwhelming number of buyers doesn't mean people will pay through the nose; consider TechTarget opting for an IPO in 2006 after testing the waters for a buyer willing to pay $600 million and the collapse of the $900 million Advanstar sale.