The B2Bs: Shedding Some Pounds

Folio: The Magazine for Magazine Management, Jan 1, 2004 by Laura Rich

Byline: Laura Rich

For the b-to-b publishing business, 2003 was a year to forget. Even as the stock market recovered and the economy showed real signs of life - GDP growth jumped to 8.2 percent in the third quarter, a rate not seen since 1984 - the b-to-bs did not see the upside. U.S. ad and media spending grew 2.7 percent, estimates Zenith Optimedia. But business magazines had only 1 to 2 percent growth in the fourth quarter and probably ended the year up just 1 percent, according to American Business Media.

The good news is this trend: The fourth quarter looked great compared with what came before. The year opened strong, with a 4 percent rise in revenues in the first quarter. But the war in Iraq made for a sour second quarter, with Business Information Network reporting a 1.94 percent plunge from the year-earlier period. July was the year's lowest point: Its 42,168 ad pages in b-to-b magazines marked a 10 percent drop over the previous July. Ad spending for the month was $613.9 million, 7.9 percent less than July 2002.

The turn began in September, when revenue dropped just .5 percent and pages fell just 2.2 percent. Over all, the year was expected to end just barely higher, with 1 percent to 2 percent growth over 2002, according to American Business Media.

Because advertising dollars failed to walk through the door, b-to-bs continued their three-year-old cost-cutting jihad in 2003. And when they could do so at a reasonable price (which wasn't often), they cleaned up balance sheets by shedding unwanted items. In the last quarter of 2002 and the first quarter of 2003, VNU cut 140 positions in its North American operations. The cuts were felt at Adweek and Mediaweek, among others. More jobs were lost - 37 of them - when Point of Purchase was reduced to a quarterly insert in Display and Design Ideas in March. Elsewhere in VNU-land, the 120-year-old Editor & Publisher is going from a weekly to a monthly and beefing up its Web site.

Primedia's Media Central unit, the brainchild of media mogul Steven Brill and former Primedia CEO Tom Rogers, was dismantled. American Demographics, Folio: and Circulation Management were groups with marketing titles in Primedia's Business Media and Magazines Group. Cable World was sold to PBI for an undisclosed amount. The Simba newsletters were sold to R.R. Bowker and Kagan Research, a cable-industry market researcher, in on the block.

A Year to Forget - 2003 Ad Pages and Revenues

Although deal flow did not revive in '03 - the Jordan Edmiston Group reports that just 35 transactions, versus 47 in 2002 - there were some notable sales (See Outlook on M&A, p. 35)

Despite the grim overall numbers, there were some signs of rebirth. Several media companies went ahead and launched new products, including Penton Media, which unveiled the quarterly Business Performance Management in June. CMP Media rolled out a new conference series, the Call Exhibition.

Gordon Hughes, president and CEO of American Business Media, says the Web was the year's bright spot. He points to a pickup in circulation for online newsletters and a revamping of Web sites. That produced a 25 percent jump in online billings, he says. Though it's not a big enough tide to float all b-to-b boats, it helps.

So does a stirring in the tech sector, which accounts for about 20 percent of b-to-b advertisements. A pickup in ads by tech companies helped put the total up by an estimated 2 percent to 3 percent in the fourth quarter, and advertisers expected to keep on spending in the new year.

Still, the sentiments of many b-to-b executives is summed up by Doug Manoni, president and CEO of Wicks Business Information: "I am looking forward to putting 2003 and the two years before that behind us."