"For b-to-b overall, I believe there is only one thing to watch in 2008: the economy."
The quote above is from Paul Mackler, CEO of HMP Communications. And he’s not alone in his vigilance of economic health in the coming year. B-to-b CEOs across the industry are watching the economy closely as it tops their list of priorities as many close out another year of flat to declining revenues from their largest business segment-print. That print has generally struggled to maintain flat to single-digit revenue growth while remaining, by far, the largest contributor has some executives concerned and more determined than ever to rally their events and online segments to make up the difference.
With its advertising base tied so closely to broader economic performance, the b-to-b market is particularly sensitive to the ups and downs of the economy. "If you look at b-to-b advertising spending, it tends to track with some macro economic indicators like a lot of things that are tied to the economic health of the country," says Neal Vitale, CEO of 1105 Media. "So that’s where there are some trends that would be disturbing if you think the economy is going into a downturn."
And the thread that print’s been hanging by may have snapped in 2007, with publishers unable to maintain its stability going forward. "After a couple years of ‘relative’ stability in print-flat to down single digits-I am expecting next year we will see a much bigger decline in print on average across the industry as economic issues with certain markets will likely lead to a pull-back in some of the larger advertisers," says James Ogle, CFO at Cygnus Business Media.
More worrisome for Ogle is the idea that online may slow its meteoric rise as the segment comes into its own. "Certain publishers that have seen dramatic online growth have been able to cover certain ‘sins’ in print but as the online business is starting to mature, growth rates of 40-plus percent will not be as common. The recent ABM release stated an average of 18 to 22 percent growth online in 2007. I do not anticipate the industry average being much more than that in 2008 unless publishers are creative and delivering innovative products."
However, a turnaround for print may be on the horizon after all. Don Pazour, CEO of Access Intelligence, thinks marketing dollars that have pulled out of print may be on their way back as budgets swing back to a more traditional mix. And Access Intelligence seems to be benefiting already as it builds momentum into 2008: The company, says Pazour, was off 10 percent the first third of 2007 compared to same period 2006, 4 percent for the second third, and even or better for the last third of the year. So, overall, b-to-b publishers may see print dollars trickle back in 2008.
Looking forward, HMP Communications’ Mackler stresses the importance of contingency plans. "As part of our budgeting process, we always create a contingency plan that anticipates and helps to mitigate uncertainty," he says. Cygnus’ Ogle is keeping a laser focus on pricing in the face of rising production costs. 1105’s Vitale notes this is a good time to review your operations and make sure your costs are aligned to best exploit future growth. "I think a lot of our business remains print focused and we have staffs and circulation plans built around traditional b-to-b print publishing," he says. "If you think about where the business might be going then you might find that you need more resources devoted to online content development. And that involves different numbers and different types of people. The question goes to where you develop resources."