Holding out Hope For the Second Half

Folio: The Magazine for Magazine Management, June 15, 2001

While first quarter b-to-b ad revenues dropped significantly, publishers say there are signs that spending will pick up by 4Q.

The ad spending drop-off that started in the fourth quarter accelerated in the first three months of 2001. Ad revenues in the business-to-business sector fell 9.4 percent compared with the same period in 2000, and ad pages plunged 10.4 percent, according to Business Information Network. While the automotive, computer and finance sectors continued to take the hardest knocks, all of the top-12 advertising categories showed ad page losses, with the exception of telecommunications, which had a slim 5.5 percent gain. "It's hard to find a silver lining here," says Gordon T. Hughes, president and CEO of American Business Media.

At first, Hughes says, most publishers were surprised that January wasn't the disaster they had braced for. Ad pages fell 8 percent against the same period last year, but spending dropped only 3 percent. Hope eventually died off in February and March, however, as benchmark categories began hemorrhaging dollars. At the close of first quarter, ad revenue had dropped 15.6 percent in the automotive sector and 14.1 percent in services/direct response. Of the 12 categories tracked by BIN, only three showed ad dollar gains.

Not surprisingly, most publishers reported flat or declining revenues for the period. "We are dead-even with last year's numbers, and we're expecting the same result in the second half of the year," says Hanley-Wood's magazine division president Peter Goldstone. "I consider that a huge accomplishment in the current market."

Others, such as Cygnus Business Media, suffered deeper losses. "We were clearly under budget for the first and second quarters," says Cygnus CFO Craig Schroeder. "But we're anticipating that things will get better in the second half of the year," he says. "We're telling our employees to keep pounding the phone, beating the streets and getting out there to meet with customers and potential clients."

Even diversified companies like Penton Media, which has a significant trade show presence, was struggling to find shelter from the economic fallout. While Penton's revenues increased 48.6 percent, to $112.7 million, the boost was due to the shifting of two trade shows, Internet World Spring and eCRM, from the second quarter into the first quarter. Publishing revenues grew just 8 percent in the first quarter, while adjusted EBITDA decreased 4.3 percent, to $6.8 million, compared with $11 million in 2000.

Despite the torpid ad climate, first quarter M&A activity for trade publications increased by 58 percent, according to Whitestone Communications, while deal value increased by 226 percent, to $153 million, compared to the same period in 2000. The increased deal value is due in large part, says Whitestone's Chris Lyons, to deals that remained to be closed from the prior quarter--for instance, the acquisition of Cahners Business Information properties. In January, Business News Publishing bought 11 Cahners magazines; in March, Advanstar acquired three automotive tides, and Randall Publishing four tucking titles. This first quarter pace, adds Lyons, is expected to slow down in the second quarter.

B-to-B Scorecard
Ad dollars and ad pages, by category: first quarter 2001 vs.
first quarter 2000
                            DOLLARS           %          PAGES
CATEGORY                   2001/2000       CHANGE      2001/2000
Finance, Business      $470,070/$541,513   -13.19%   29,083/33,743
& Advertising
Services, Direct        433,993/505,448    -14.14    29,463/33,941
Response, Classified
Software                212,620/246,859    -13.87    11,899/13,532
Manufacturing &         212,602/218,285     -2.60    18,443/19,015
Elec. Equip.
Drugs & Toiletries      209,395/241,678    -13.36    40,820/46,605
Retail                  142,989/138,797      3.02    9,924/10,674
Computers               136,434/149,782     -8.91     5,562/6,688
Home & Building         131,528/137,261     -4.18    11,791/13,014
Travel                  100,545/109,597     -8.26     4,908/5,310
Telecommunications       96,452/85,154      13.27     4,222/4,004
Horticulture &           81,597/80,663       1.16    13,231/13,429
Farming
Automotive               65,617/77,735     -15.59     3,143/3,722
TOTAL                 2,293,846/2,532,777   -9.43   182,493/203,682
                         %
CATEGORY              CHANGE
Finance, Business     -13.81%
& Advertising
Services, Direct      -13.19
Response, Classified
Software              -12.06
Manufacturing &        -3.01
Elec. Equip.
Drugs & Toiletries    -12.41
Retail                 -7.03
Computers             -16.85
Home & Building        -9.40
Travel                 -7.57
Telecommunications      5.45
Horticulture &         -1.47
Farming
Automotive            -15.56
TOTAL                 -10.40
Both b-to-b ad dollars and pages were down in the first quarter,
reflecting the ongoing economic slowdown. The finance, business &
advertising, automotive, and computer categories were
hitparticularly hard.