Custom Publishing Grows Up

American Demographics, July 1, 2002

On average, says Mike Hurley, director and publisher at Hearst Custom Publishing, a large-circulation custom magazine can run $3 to $4 per copy, with the cost inversely related to circulation. More than half the custom magazines on the market are published 3 to 5 times a year, while almost a quarter are published over 11 or more times annually. And the average circulation is about 18,000, with some 6 percent having circulation above 100,000.

With circulation numbers like those, custom publishers have also woken up to the opportunity to sell ads in their pages, making it even easier to launch new titles. Cisco's IQ, for example, includes ads from consultants such as computer services company Cap Gemini Ernst & Young and luxury goods like Roger Dubuis watches.

Yet while Crunch proved you can, in fact, use outside advertising to pay for the magazine outright, advertising typically offsets only part of the cost. Fluent's Kelly notes that no more than 25 percent to 30 percent of pages should be dedicated to advertising, and that even then, ads will offset only 20 percent to 40 percent of the publishing costs. Yet that could further add to the legitimacy of the magazine, he reasons. "[Advertising] can reinforce the notion that it's a magazine, not a catalog," says Kelly.

Lest they think they can stuff their custom magazines with advertising and pay nothing to produce them, however, publishers must take great care in choosing the right advertisers and advertisements. In essence, custom publishers are entrusting their brands to their advertisers, much as mainstream magazines do. But considering the expense in publishing a magazine, the marginal cost of advertising must be weighed against the effects on the brand, Hurley emphasizes.

If custom magazines are becoming just like mainstream magazines, then why all the fuss? It all comes down to the mailing list used to distribute them. Companies generally know the customers who've bought their products, thanks to the rise of customer relationship management (CRM) and all the data gathered on buyers during the product life cycle. As a result, they have a solid sense of the audience's tastes, likes and dislikes, and can easily translate that into content that's tailored to them. It's no surprise, then, that custom magazines are particularly well suited as customer retention vehicles but rather inefficient as direct marketing tools.

"There's a symbiosis happening between the evolution of CRM and the way companies develop relationships," says Kelly. "We can segment customers to a degree of one today, but the customer doesn't want only one way to communicate with a company, but rather wants a dialogue."

Yet for all their promise, custom magazines present two major challenges for the magazine business as a whole. First, they threaten to siphon off money from advertising budgets. According to Publications Management, publishing budgets at major companies rose to 13 percent of the total spent on marketing, communications and advertising in 2001 from an average of 11 percent in 2000 - even as advertising budgets were shrinking. Inevitably, that will translate into less advertising dollars, some industry watchers note. Publishers like Hearst, which put out both mainstream and custom magazines, insist the effect need not be detrimental. "I don't see any real erosion in advertising business," says Hurley. "These things can coexist, and it doesn't come down to either doing a magazine or running ads."