CEO Survey: B-To-B Renewal
While the spectre of 2001-2004, four of the most difficult years in b-to-b publishing, still looms in the minds of CEOs, the category continues to solidly gain in revenue and is seeing increased profitability, according to the 2006 Folio: survey of b-to-b magazine CEOs.
The second annual survey provides a revealing and comprehensive look at the current state of b-to-b publishing and what CEOs are planning for 2006 and beyond. They discuss how revenue has grown over the last year, how revenue streams have diversified;or in some cases, how they haven't yet;how profitability is improving and what they are most intensively focused on this year.
For the most part, b-to-b publishers appear optimistic this year as they begin to realize real revenue from what were just pie-in-the-sky opportunities a few years ago. Many are projecting significant revenue growth in 2006 and perhaps more importantly, greater profitability (and not just due to tight-fisted cost savings).
Nearly 70 percent of respondents experienced revenue gains in 2005 and expect overall integrated revenues to improve by nearly 10 percent in 2006. Thirteen percent of respondents said that overall revenue decreased in 2005 (compared to nearly a quarter of respondents last year who said revenue dropped in 2004). "We increased revenue over the prior year in the face of multiple new competitors," one respondent said. Another cited a 70 percent increase in overall revenue while a third enjoyed 33 percent growth in ad page revenue. Nearly 25 percent of respondents said their company generated $20 million or more in 2005, while 15 percent said they generated between $2 million and $4.9 million.
Print advertising slipped as a percentage of the entire revenue pie, although it remained the largest part by far at 62.6 percent in 2005. Events accounted for slightly more revenue in 2005 than 2004, up from 8.4 percent to 8.7 percent. And while the industry is filled with tales of publishers seeing high double-digit growth from online, as a percentage of total revenue, online increased to just 6.3 percent, up from 5.1 percent.
A look at the fastest growing revenue streams in 2005 tells a different story. Thirty-five percent of respondents said online was their fastest growing revenue source, up from 34 percent in 2004. Ironically, considering the drum beat to move away from print, 34 percent of respondents said print was their fastest growing revenue stream in 2005, while events took 25 percent of the vote and data/market information sales took 11 percent. "My biggest disappointment is watching the magazine industry give up sometimes on magazines," says one respondent. "They don't want to fight the battle against other media."
While there were no real changes in the ranking of the top three priorities for b-to-b publishing CEOs between 2005 and 2006 (revenue growth, increasing market share and revenue diversification), there is slightly less emphasis on revenue growth and more on revenue diversification.
However, while many b-to-b CEOs publicly acknowledge the need to diversify their revenue streams, in reality they haven't made much progress. Forty two percent of respondents receive NO revenue from online sources, while 53 percent receive no revenue from trade shows and 63 percent receive no revenue from rich data. "It's 2006 and roughly half of the respondents have not diversified or have not monetized their additional revenue streams," says Stephen Davis, vice president and group publisher of SRDS and chairman of the American Business Media Publisher's Committee. "What are they waiting for?"
As revenues increased, publishers have kept costs in check and profits have markedly improved. More than twice as many respondents said they achieved profitability of 30 percent or more in 2005. Last year, 34 percent of the recipients were either not profitable or had profit margins below 5 percent. This year that group is down to 22 percent.
Overall mean profitability improved from 10 percent to 13 percent. The largest number of respondents said they fell into the 15 percent to 19 percent range of profitability in 2005, compared to 20 percent in 2004 who said they were in the five percent to nine percent range. "The significant increase in profitability will likely result in the stronger players opening up their wallets a bit (via staffing, acquisition and/or new product development)," notes Davis.
Sixty-nine percent of respondents say distribution costs shot up in 2005, compared to 55 percent who saw an increase in 2004. Staff salaries grew for 66 percent of respondents, compared to to 61 percent in 2004.
While publishers are touting new growth initiatives, they need the resources to deliver. One respondent cited a big disappointment in 2005 as "the failure to grow internal resources enough to support sustained revenue growth."
Looking at 2006
Over the next year, publishers aren't just expecting print to stabilize but many believe it will be a driving force at their companies. Sixty-nine percent of respondents say they expect increased revenue from new print advertisers, while 55 percent say they expect more revenue from existing print advertisers.
Last year, b-to-b publishers listed their fastest growing revenue streams as print, events, online and rich media. This year the order is online, print, events and rich media. Online media is expected to generate new revenue for 67 percent of respondents while 44 percent will be looking to events. Thirty-two percent are looking to data/market information sales as a source of increased revenue. As more b-to-b publishers experiment with paid content, 31 percent of respondents say readers will be a source of increased revenue.
Nearly 80 percent of respondents say they are expecting a revenue increase in 2006, with 6 percent saying revenue will be up by 30 percent or more. The largest number of respondents (42 percent) say they expect revenues to grow between 10 percent and 29 percent. However, a significant 22 percent think revenues will grow between five to nine percent, while 18 percent say they expect revenues to be flat compared to 2005.
"Business development" and "Executing overall direction" were identified as the top two challenges for b-to-b publishing CEOs in 2006. Sixteen percent identified sales as the biggest challenge, while 15 percent said topline growth is the biggest issue they face. Another 12 percent said it's profitability. Just four percent said financial management is their biggest challenge and none selected "Establishing overall direction." "On the revenue front, CEOs seem to be shifting their concern from 'if' to 'how' in that there is now more confidence that more sales and topline growth is available (increasingly, they reside in online and Internet plays)," says Davis. "As such, business development and execution issues are now the top two challenges that CEOs face."
Forty-four percent of respondents say they expect to develop a new ancillary service in 2006. Twenty-nine percent say they plan to make an acquisition of another company, while 27 percent they are looking to sell all or parts of their company this year. But as publishers scramble to introduce online products, just five percent of respondents plan to launch a new magazine.
In 2005, 15 percent of respondents said their total compensation was between $100,000 and $149,000. Thirteen percent said they earned between $150,000 and $199,000, while 12 percent said they earned between $200,000 and $249,000. Interestingly, seven percent of respondents said they earned between $300,000 and $499,999 in total compensation, while six percent say they earned between $250,000 and $249,000. Of that group, salary accounted for a mean of 74.9 percent of their total compensation, followed by bonuses at 15.4 percent.
In 2006, 60 percent of respondents say they expect a change in their total compensation while 29 percent say they expect it to remain about the same as it was in 2005. Just three percent say they expect a decrease.
Forty-five percent of respondents say they expect an increase in their salary while 39 percent say they expect it to stay the same. For bonuses, 39 percent of respondents expect an increase. The survey sample of 974 was selected by Red 7 Media and Readex Research from all FOLIO: subscribers with executive management job titles (owner, president/CEO, or senior management) who classified their company's primary focus as either B-to-B publishing or a mix of B-to-B and consumer publishing on the FOLIO: subscription form.
Data was collected via mail survey from February 24 to April 4, 2006. The survey was closed for tabulation with 310 usable responses;a 32% response rate. To ensure representation of the audience of interest, results have been filtered to include only those who indicated their organization is involved in b-to-b publishing. The margin of error for percentages based on these 262 respondents is 5.2% at the 95% confidence level.