Caution Ahead

I t's been a long recovery slog for the business-to-business industry, requiring more patience than analysts first anticipated. Since the dot-com bubble burst four years ago, B-to-B titles haven't had much to look forward to, given that the industry traditionally recovers last among media categories. However, year-end 2003 figures show trade media experienced growth for the first time in three years. American Business Media recorded an increase of 0.7 percent to $7.28 billion in ad spending revenue over 2002. Gains were essentially flat. Although auto, retail and services categories grew by double digits, they were countered by continued double-digit decreases in telecom and computers, according to ABM Business Information Network. Even though figures were lower than anticipated, analysts mark the year as a significant turnaround and a harbinger for increased growth by year-end 2004 and 2005. As Veronis Suhler Stevenson reports, the minimal gain in 2003 indicates the market has stabilized after declines in 2002 (9.1 percent) and 2001 (12.4 percent). PricewaterhouseCoopers projects 2004 year-end growth in ad spending at 2.5 percent to $7.46 billion based on increased expenditures in business, healthcare and home/building titles as well as a rebound in technology books. These magazine categories have already shown promise this year. Through June 2004, BIN posted an ad revenue gain of 1.1 percent to $3.2 billion. Industries recording the most growth were finance/business, telecommunications, computers and drugs/toiletries. Boosts in retail, home/building and automotive were less evident because these industries began their comeback last year and have been steadily growing.Gordon Hughes, ABM president and CEO, contends that the second half of 2004 will be stronger. However, others are skeptical. "We came out strong but began trailing off in the third and fourth quarters," says Dan Belmont, president of Carat Media's business and technology group. He explains that the technology industry, including computers, telecom and software titles, "began conserving money in the second half."As for next year, PwC forecasts that as corporations finally see growth after a few years of cost-cutting, there will be more investment in advertising, besting 2004 ad revenues with a 7.2 percent increase to $8 billion. Continued growth in financial, home/building and healthcare publications is expected to fuel the overall B-to-B industry, says Veronis. By 2008, PwC predicts ads will rise 6.6 percent annually to $10 billion, a figure that is still below year 2000 spending. While advertising is expected to increase, Veronis anticipates circulation to decline, although not as much as in 2003, when B-to-B paid circulation fell 12.6 percent, leading to a 3.7 percent overall decline. Veronis forecasts year-end 2004 numbers to decrease 1.2 percent due to continued contraction of paid and non-paid circulation. Since B-to-B ad revenues remain low and unit circulation continues to shrink, the industry has focused its efforts on diversified business models that encompass other revenue generators such as trade shows, electronic offerings, custom publishing and rich data. For example, this year Ziff-Davis Media's PC Magazine created Essential Guide to Your Digital Home, with Intel as lead advertiser. The special issue gives the company new revenue opportunities that can be packaged with other titles and a more customized publication they will distribute at DigitalLife's expo Oct. 14-17 at the Jacob K. Javits Center in New York.PwC predicts that business magazines will increase their use of the Internet as a revenue-generating tool. ABM's Hughes agrees. His company tracks and surveys 2,000 member Web sites and newsletters. "The biggest growth in B-to-B is in online offerings," he says. "Internet ad sales are up 25 percent over last year. The strength in the B-to-B industry is in its Web sites. They're critical to the readers for fresh information. And advertisers get a target audience online." Online company offerings now include expanded print content, subscription access to rich data and analysis and online newsletters, all of which can garner single sponsorships. "We're seeing the need for more creative ways to connect to customers," adds Carat Media's Belmont. To reach those creative solutions, he says, "Digital is a way of life." Trade shows are rebounding faster than advertising. Veronis projects a 2.4 percent increase to $8.9 billion in 2004 trade show spending. However, Belmont concedes that expenditures within trade shows have shifted: "More money is being put in event marketing—not to trade shows but to customized private events. Custom conferences are an opportunity for more creative interaction." Hughes points out that the model of offering multiple shows in several major markets has weakened, and many have been canceled this year.Despite success in new revenue trends, the prolonged and meager recovery has engendered more caution than optimism. "In 2004, companies spent ahead of the market," says Belmont. "But we came in to 2004 too optimistic, so my fear is we're going back to the 2003 model, spending behind the market. I'm afraid the industry will remain tentative, that next year will be just as cautious as the last." Aimee Deeken is an assistant editor at Mediaweek.

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Caution Ahead

Aimee Deeken

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Aimee Deeken