The Catalyst

Folio: The Magazine for Magazine Management, April 1, 2000 by Elizabeth Gardner

The b-to-b publishing world is alive with online experimentation--a lot of it resulting from a wake-up call named VerticalNet.

The rush is on among trade publishers to establish business-to-business electronic commerce. Print publishers are staking claims in the digital world in order to beat their traditional print competition online and to ward of advances from Internet companies that are entering their space fast.

Take Advanstar, which has struck a deal with PurchasePro, a maker of b-to-b electronic commerce software. They'll create 20 vertical marketplaces on the Internet to complement many of Advanstar's 100 print titles (such as Landscape Management, Hotel and Motel Management and Paperboard Packaging). Advanstar also took a small equity stake in PurchasePro, and the two companies will share all transactional and advertising revenue from the online marketplaces.

Then there's New York-based Cahners Business Information's Manufacturing.net (a.k.a. Manufacturing Marketplace)--originally a hub for the Web sites of 22 of the company's titles--which has full e-commerce capabilities up and running. "We realized that if we were going to call ourselves a marketplace, we'd better be one," says publisher Jerry Steinbrink.

Cahners also recently launched an online-auction joint venture -- ironmall.com--with business auctioneer uBid.com, to serve the heavy-equipment market. Plus, Cahners is providing content from several of its magazines to e-commerce site Suppliermarket.com, and has taken an equity stake in PartMiner, an e-commerce concern that sells electronic components. And Cahners' new chief executive, Marc Teren, was formerly CEO of Washington Post/Newsweek Interactive.

Tom Kemp, CEO of Cleveland-based Penton Media, which owns titles such as Boardwatch and Industry Week, predicts there will come a day when his company's revenue stream is turned upside-down because revenues from electronic commerce will be the single biggest revenue source, and magazines and trade shows will exist primarily to support Web-based sales.

Primedia, owner of titles such as New York and Telephony, has its own business-to-business Internet company, IndustryClick, which operates FOLIO:'s sister Web site, MediaCentral, as well as many others that complement the print titles from Intertec, Primedia's trade-publishing arm. Tim Andrews, formerly CEO of Dow Jones Reuters Business Interactive, took the helm in January. IndustryClick acquired DigiBid, an online auction house for the entertainment industry, in October.

KICK-STARTING ONLINE BUSINESS

All this might not be quite so frantic if it weren't for VerticalNet, the highly visible Internet start-up that's vying to become a major site for business-to-business e-commerce. A big part of its strategy is to target the turf of trade magazines by featuring news, features, and reviews geared to 56 vertical markets (with more added monthly), mostly produced by trade journalists lured from print careers. On the ad side, VerticalNet offers "storefronts" where advertisers can tell their product story, gather leads, and in some cases even close a sale on the spot--all for about the price of an ad page in a monthly. VerticalNet has already built up considerable buzz and investor money, including a $100 million investment from Microsoft in January and a February 1999 IPO that raised $56 million.

Meanwhile, trade magazines, attempting to figure out fast how they can compete effectively on the Internet while protecting their print brands, are slowly coming to realize that if they don't use the Net in bold and risky ways, they may not have print brands left to protect. Trade publishers have all kinds of assets: respected names, credibility with their readers (the same people VerticalNet is trying to snare), and advertiser relationships that can go back decades. Many are accustomed to bringing buyers and sellers together at trade shows, not online arenas.

But they have baggage that VerticalNet and its brethren need not contend with: unwieldy corporate structures, editors and publishers who may regard the Internet with deep suspicion, and top managers who expect any new venture to stay within a budget that doesn't outstrip the total revenues of the company--and to turn a profit within a planned timeframe. And they haven't benefited from buzz in years, if ever. But online b-to-b ventures are forcing them to make action plans fast.

"In many ways, VerticalNet is one of the best things that's happened to our business," says Dan Ramella, Penton's president and chief operating officer. "It's created excitement about business-to-business companies that hasn't existed in the past."

Advertisers' demand for accountability in e-commerce transactions is also causing traditional print publishers worry. Trade publishers have never asked their advertisers for a piece of any sales that result from an ad-- or indeed, had any accountability for whether those ads resulted in sales. Now there's a fundamental shift in the relationship, with advertisers demanding healthy click-through rates and transaction results that they can track electronically. This could be a major threat to editorial credibility. The revered wall between editorial and advertising, ever in need of shoring up, could crumble completely if a company's fortunes rest on a "Buy This Now" button next to a product review. "There's an inherent conflict of interest in writing about products that you're selling," admits Steve Rosenfield, a consultant who headed business development for Ziff-Davis during the embryonic days of ZDNet. "Being a magazine publisher isn't anything like being in the selling business."