BtoB Media Business - February 2010 - (Page 7)

FEATURE The State of B-to-B Media BY SEAN CALLAHAN As large publishing companies jettison advertising-supported products, smaller firms are moving to the forefront R eed Elsevier wants out. So does Nielsen Co. ¶ These big companies are exiting the trade publishing business, abandoning the advertising-supported media model. Reed Elsevier recently sold Broadcasting & Cable, Multichannel News and TWICE, and plans to unload most of its Reed Business Information US unit. Nielsen jettisoned Billboard, The Hollywood Reporter and other Nielsen Business Media trade publications, and plans to sell most of its other print properties. “It’s actually kind of an exciting time,” said Frank Anton, CEO of Hanley Wood. “Entrepreneurs can look at the big growth markets going forward, and, starting from scratch, they can invest in companies that, right out of the gate, are in tune with electronic media and stake out a niche in those promising markets.” These large publishers may have lost confidence in b-to-b media’s future, but smaller ones such as e5 Global Media, which recently bought the products Nielsen divested, have a decidedly different view. As print’s primacy recedes, the economies of scale sought by big b-to-b media companies don’t offer the advantages they used to. Instead, as the Internet continues to evolve, smaller, more nimble companies are increasingly able to take better advantage of new interactive opportunities— such as the one offered by mobile devices, including Apple’s new iPad. And as marketing services becomes a stronger revenue stream (see story, page 10), companies with deep expertise in a single market become more valuable to b-to-b marketers. Yet even as those big companies continue their exits, there are some that remain bullish on the sector. THE GOOGLE EFFECT Nonetheless, as an industry, business media is shrinking. In the first half of 2009, b-to-b magazine revenue totaled $3.8 billion, down 26.5% from the first half of 2008, according to American Business Media’s Business Information Network data. In the same time frame, trade show revenue declined 18.6% to $4.6 billion. Most disappointing was that digital revenue, what the sector was counting on as a growth engine, also declined, totaling $2.1 billion in the first half of 2009, a drop of 3.0% from the year-earlier period. Many reasons are given for the contraction. Google and other search engines have enabled a new kind of targeted advertising, a market that b-to-b media companies had cornered up until a few years ago. “Google has basically destroyed this business,” said Ted Bahr, president-publisher of BZ Media. Additionally, the recession has hurt advertising, particularly print advertising. Marketers are spending more money on developing their own Web sites. Research firm Outsell calculated that this spending totaled about $60 billion in 2009. And, in a related development, 59% of marketers plan to spend more on custom content this year compared with 2009, according to a study of 259 marketing professionals conducted by custom content company Junta42. These trends have combined to hurt the revenue of trade publishers of all sizes. Nielsen Business Media saw its revenue contract 28.5% in the third quarter of 2009, and its parent company, Nielsen Co., took a $180 million charge related to the impairment of goodwill and intangible assets of the business media unit. Similarly, Reed Business Information’s revenue declined 17% in the first half of 2009, and Reed Exhibitions’ revenue plummeted 22% in the same period. Large, publicly traded companies tolerated the cyclicality of their ad-supported products when the busts were followed by booms that delivered big profits. In the current environment, however, it’s unclear if a boom is going to follow this particular bust—especially given what seems to be a permanent diminution of print advertising. These declines in magazine revenue mean that the economies of scale in buying paper and printing—a key driver in how big, publicly traded companies generated profits from owning a variety of unrelated trade publications—have largely evaporated. Similarly, as trade show revenues decline, shared back office functions don’t deliver as much to the bottom line. “There were huge scale advantages in the business in having shared infrastructure for those two things, magazines and events,” said Chuck Richard, VP-lead analyst at Outsell. Large, private companies in b-to-b media, many of which are owned by private mediabusinessonline.com | February 2010 | Media Business | 7 http://www.mediabusinessonline.com

Table of Contents for the Digital Edition of BtoB Media Business - February 2010

BtoB Media Business - February 2010
Contents
ABM Seeks Successor to Gordon Hughes II
Current Conditions Favor Smaller Publishers
Digital Marketing Services a Bright Spot
Sales & Marketing
Production
Audience Development
People
Benchmarks
Hopeful Signs of a Media M&A Rebound

BtoB Media Business - February 2010