Trade Magazines: Despite downsizing, new highs

Advertising spending in business-to-business magazines is as healthy as it has ever been, and the trend will probably continue, experts say. The end of the long-term corporate restructuring favoring efficiency over size-which began in the 1980s and continued through the early '90s-has coincided with an era of general economic prosperity. The result: high profits and rampant expansion favorable to the trade ad market. Ad-spending growth in trade books reached an eight-year high in 1996, jumping 10.3 percent, with a total take of $6.5 billion, according to Veronis, Suhler & Associates. The American Business Press, integrating data from its new Business Information Network tracking service with other industry figures, says the figure topped $7 billion. Most experts agree that ad spending on trade books will continue growing at a compound annual rate of at least 8 percent for several years. "What we're seeing is quite extraordinary in terms of continued growth," says Veronis analyst Hal Greenburg. Heading into 1998, hot ad categories include the multibillion-dollar computer segment, which has grown at a compound rate of 11.4 percent for five years; automotive, which has grown at a compound rate of 10.2 percent over the same period; and healthcare, whose fortunes turned around in a major way last year, posting 12.9 percent growth after major slips early in the decade, according to Veronis. ABP adds to that list food & agriculture, which it says showed an increase of 31 percent for the first half of '97. "What pleases us most about this is the broad base of growth," says ABP president Gordon Hughes II, reflecting on how computers and technology titles far outpaced most other segments a few years back. The circulation story is less dramatic. Total circulation has been on a long-term decline for years. And recently, publishers eager to capitalize on the boom in ad spending beefed up their rate bases with controlled circulation-a move that led to even worse sags in paid circ. But the falloff is not a big problem. Circ spending, which 10 years ago accounted for more than a third of all trade-magazine revenue, will this year account for less than a fourth of revenue, according to Veronis projections. "Circulation is not a major factor," says Greenburg. "It's the efficiency of the circulation that counts-advertisers reaching their target audience." Still, higher circ means higher ad rates. Publishers have to worry a bit about predictions that growth in controlled circ will slow over the next few years because of corporate downsizing, and because most of the finite number of qualified trade readers have already been reached. So-called "pass-along" readership and demographics are beginning to become larger issues; some publishers have already turned to syndicated research firms such as MRI, according to ABP's Hughes. The current hot streak of mergers and acquisitions is likely to continue next year. Industry watchers say the dollars exchanged in several recent deals have far surpassed expectations. The temptation to sell will be high, and "consolidation" will be a buzzword for companies mesmerized by their own high profits and economies of scale. Also, more publishers will launch or acquire trade shows: Veronis says trade shows will become a $10 billion industry by the end of the decade, growing at a compound annual rate of 10.4 percent over the next five years. Amid all the good tidings, Hughes is pessimistic on one point. He had hoped to see increased interest from non-endemic advertisers in the trade press. So far, with the notable exception of American Airlines buying ad space in medical and marketing books, it hasn't happened. "We haven't gone after those ads," he says. "For that, shame on us." '98 SPENDING FORECAST: VERONIS +8.6% ZENITH NA '97 SPENDING: $7.0 bil* '96 SPENDING: $6.5 bil* *Source: Veronis, Suhler

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Trade Magazines: Despite downsizing, new highs

Jeff Gremillion

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