B2B wins friends as consumer titles suffer
Trade publishing is 'where you make money' - it even makes the Internet pay.
With national newspaper revenue down nearly 10% this year, the Daily Mail and General Trust Group can seek solace in its business-to-business growth. "The non-newspaper business was 40% of our profits last year," Peter Williams, the finance director, said. "It gives us major protection when the consumer business is under pressure."
As consumer media battle against the high-street downturn and the leakage of readers and advertisers to the internet, trade or B2B media is increasingly attracting British investors. Consumers are holding on to their cash but healthy corporate coffers raised B2B revenues by 11% last year. The Internet has also been less of a threat to trade publishers whose readers will pay for useful content.
Tim Weller, new chairman of the B2B trade body, PPA Business and Professional, declares the sector is "where you make your money. If you look at the Times 100 Rich List, many more people made their money in B2B than B2C (business-to-consumer)." Mr Weller's success as founder of the B2B group Incisive Media has brought him an Aston Martin, a Leicestershire home, a London flat and a chalet in France.
B2B's resilience is winning it fans in the City. Lorna Tilbian, a media analyst at Numis Securities, said: "Every time a B2B company announces [their financial results], we upgrade. Every time a broadcaster or consumer company announces, we downgrade."
Investec's analyst Malcolm Morgan said: "The national newspapers, the regionals, the analogue TV and radio broadcasters all have structural issues. In business-to-business, profitability is pretty healthy and it's not perceived as being as structurally challenged as consumer media is. So investors tend to favour the less threatened B2B space."
The specialised nature of B2B titles, focusing on areas such as hedge funds, engineering or the law, has helped retain audiences and advertisers in the digital age. Mr Weller said: "We have a connection with a community far greater than any other media. We're the conduit between buyer and seller."
B2B publishers also offset the fall in print revenues with their expanding events businesses. These branded trade shows and conferences foster reader loyalty and give valuable feedback; they're also extremely lucrative, making £1.4bn last year.
Unlike most media, many B2B companies have successfully turned close reader relationships into major online businesses, charging for much of the web content and creating new revenue streams such as podcasts. "The business community will support something at a premium rate if it delivers real value," Derek Carter, head of Emap's B2B arm, Emap Communications, said. Fuelled by the mass take-up of broadband, B2B Internet revenues have grown 25% in the last two years.
Ms Tilbian cites Reed Elsevier, which now makes a third of its money online, as a B2B company using the Internet to its advantage. "They're the guys who harnessed the Internet, who got it first. They realised you can cut your costs and increase your revenue."
But analysts warn that the success of B2B companies hinges on which markets they target, pointing out that the over-serviced computing market is in decline, while financial titles continue to prosper.
Having recovered from a rough period in 2002-03, the B2B sector is catching the eye of investors. Private equity firms are circling, as seen by the recent €7.5bn (£5.2bn) bid for the Dutch media group VNU, publisher of Accountancy Age in Britain.
As big players such as Emap and Reed look to expand, B2B observers predict more consolidation in the industry.
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