B2B on the line

Business-to-business publishers are facing increasing competition from online companies, who will continue to make inroads into electronic publishing in the next three years.

This is one of the major findings to come out of a Periodical Publishers Association (PPA) survey conducted last year, which looked at publishers’ opinions of the rapidly-evolving business publishing market.

Publishers see the emergence of Internet trading hubs such as VerticalNet, Just2clicks and AccountingWeb as a particular threat, the report reveals. These companies typically have large amounts of funding and are looking to buy people and content to compete in the business-to-business market.

Tony Evans, group marketing manager at VNU Business Publications, explains: “Just2clicks is allowing people to perform business transactions over the Net. There is a potential threat from these business-to-business hubs – that people will start promoting and purchasing through them – but I don’t think there’s any need to panic.”

“It might affect us in the short-term but the ability of print to reach vast numbers of people, entertain them, and provide them with business information, will not go away.”

Evans suggests people only visit transactional websites if they want to buy something, not necessarily for the content. And even if business publishers start to see their advertisers move from selling off the page to selling online, they will still need a profile in print.

He adds: “Already some portals like Ace-quote exist in the IT sphere for people to buy their IT products online, and I dare say people are using that, but magazines have always helped promote products to their readers. Readers may end up buying those products on a business-to-business trading hub, but they’re not going to stop reading magazines.”

Evans does not discount the possibility of VNU launching its own trading hub for IT products, but for many smaller publishers, unable to afford the investment this type of e-commerce development requires, partnering with online information providers could be the way forward.

However, Graham Elton, chief executive at United Business Media (formerly Miller Freeman) and E-Business Media, its online arm, warns smaller publishers against forming alliances, believing that they would be far better off seeking funding to create their own online businesses.

He says: “A smaller publisher forming an alliance will end up being marginalised. Not only will it be missing the main opportunity, but it will find that the revenue from its content will be nowhere near sufficient to cover the costs of generating that content.”

Liz Bolshaw, head of new business development at contract publisher Citroën Wolf, says the high level of investment required for Internet development wouldn’t discourage it from getting involved in e-commerce. She says: “The big boys will always have strength in terms of investment muscle, but niche publishers score well in delivering highly-specific products and that’s where in business-to-business a number of smaller publishers have made significant inroads.

Loyal Readers

“If we have a good quality database of loyal readers for a niche title, there is no reason why we shouldn’t be able to deliver a range of services to them over the Internet.”

A number of publishers have been approached by Internet companies which want to form strategic partnerships. Quantum Business Media chief executive Richard Flaye says: “We’ve had conversations with some of them but it’s too early to say if anything will develop. We’ve got our own brand, content and independence.”

Another threat to business publishers which was revealed by the PPA report is the growing shift in recruitment advertising to the Internet. Publishers have typically responded by offering their own online coverage. Reed Business Information (RBI) has developed Totaljobs.com, for example, while VNU has Newmonday.com.

RBI director of communications Denis Hart says: “A lot of online services from publishers are off the back of a magazine brand. That was not the case with Totaljobs. It was a case of building a brand from scratch.” RBI launched a TV campaign for Totaljobs, the first time a UK business publisher had embarked on such a campaign.

Flaye believes that publishers still hold an important advantage over their Internet rivals in the key area of advertising. He says: “The area that’s clearly at risk from the Web for a business-to-business publisher is classified advertising. But if you also happen to own the leading weekly, like Reed does with Computer Weekly, you have a good head start.

“One of the largest costs with Web ventures is promotion. If you look at VerticalNet, for example, I think over 25 per cent of its costs are in marketing. If you own Computer Weekly you’re paying a fraction, maybe a tenth or less, of your competitors’ costs. And that’s a huge advantage. So the existing business publishers are better positioned to own the classified markets long-term than any newcomer.”

Clearly, as the PPA report concludes, the environment in which business publishers are working is changing rapidly, and publishers are having to take a completely fresh look at the markets they’re serving, and try to work out the best set of products to offer online.

The larger publishers, in particular, continue to invest heavily in expanding their online portfolios, and many see opportunities to expand their role beyond simply providing information.

Elton says: “We’re moving from being business publishers and exhibition organisers to being an online information, commerce and application service provider.”

E-Business Media’s online activities have included the launch of Farmgate.co.uk, an initiative that couldn’t be further removed from business publishing but which reflects the growing diversification publishers are undergoing.

Elton says: “With Farmgate, we’re helping farmers track their livestock with an application that involves putting something inside a cow or sheep. This is not publishing as we once knew it.”

“We expect Farmgate to have grown to four or five times the size of our current publishing business in five years’ time. We’re already the biggest agriculture publisher in the UK, so what we’re doing in online development is substantially more than what we are achieving in publishing.”

Core brands

The potential rewards of online activity are high, but print media is still seen as a very significant contributor to companies’ future profits and will remain the core brand in the business-to-business publishers’ product mix. The consensus is that the Net will not eclipse magazine publishing, but it will change it, particularly with respect to classified revenues and news-driven content.

Flaye says: “The more news-oriented a particular sector is and the more valuable it is, the more rapidly it will transfer to the Web. No one wants to spend a lot of time reading online, so news analysis, features and general news will still be in print for a long time, but where you’ve got news which is worth paying for, that’ll go on the Web.

“Any business publisher that’s not getting to grips with this is an endangered species. Unless publishers react appropriately, some of the business-to-business weeklies will be threatened. And guess where all the business publishers make their money? On their weeklies.”

Up-front investment

Another worry for publishers is that the business model for e-commerce activity typically requires substantial up-front investment, with a long payback period, and questions remain over whether or not publishers will ever see a big enough return to justify this investment.

With online companies like VerticalNet making inroads into publishing, at least business publishers have the advantage of an existing brand, a relationship with their readers and advertisers, and, most importantly, content. As Hart says: “Publishers are in a strong position because of the content they own.”

Together these assets form a strong barrier to any new entrant looking to compete, but partnerships, alliances and joint ventures, which are becoming the language of business on the Internet, are something all business-tobusiness publishers may have to rely on to a certain extent in future.

The threat posed by the Internet to business publishing may be compared to that posed to radio by the advent of TV. Many people thought that radio would not survive, but it has continued to prosper. Likewise, the Net will not spell the end for print, although it has already changed the publishing environment greatly.

The pot of gold for the business publishers is to get involved with a successful transactional website (like Farmgate) because if they get it right it may well be worth more than the rest of the publishing company put together.