Diversification: Spreading the Risk

By Rachelle Crum -- Tradeshow Week, 4/3/2006

When tradeshow owners blow out the candles on their birthday cakes and make a wish, many might hope for an instruction manual on profitably managing their show portfolios: "This year, may I divvy up my shows into just the right number of markets."

Instead of looking for an answer from the universe, other executives know there's already a guide readily available — a history book. And some specifically turn back to the chapter on 2001 and 2002.

Those years brought the convergence of the dot-com bubble burst, a media recession, global economic weakness and a struggling post-Sept. 11 travel industry.

Many tech shows, most notably COMDEX, simply gave out. Others saw record attendance lows because of participants' travel concerns. Some business-to-business firms invested too heavily in the tech sector (à la Penton Media and the now-defunct Key3Media) and found themselves with useless shows and unnecessary staff on their hands.

One lesson all this taught some show management firms: Don't put all your eggs in one basket. But others saw the wisdom in avoiding the clutter of an excessively diverse portfolio, and instead are concentrating on retaining their leader status in their respective industries.

Dmg world media CEO Mike Cooke said his company is "constantly learning, primarily from our own mistakes, but we are happy to learn from others as well."

Fortunately for him, dmg was one firm that didn't struggle much after Sept. 11. At the time, the Toronto-based firm (now headquartered in San Francisco) already had a robust home and garden show portfolio, which continued to go strong during the downturn, Cooke said.

"Our model has certainly served us well," he said. "Post-9/11, when most B-to-B tradeshows were struggling, our consumer shows kept the growth going within our business."

Additionally, Cooke added, "the diversity of being an international company, working in many different countries, as well as in various business sectors, also helps us to spread our risk."

Last year, dmg further expanded its portfolio, although not necessarily into new markets. Among others, the firm acquired ad:tech from JD Events; the St. Petersburg Suncoast Home & Garden Show, St. Petersburg Suncoast Home & Remodeling Show and the Tampa/St. Petersburg Home & Patio Show from Florida State Trade Shows; and Bathrooms & Kitchens Expo from Quantum Business Media. It also acquired Expressions of Culture, producer of SOFA Chicago and SOFA New York, and iMedia Communications.

With the exception of ad:tech, all these acquisitions were "boltons," Cooke said, adding sales and market share to the company's existing home, garden, art and antiques sectors.

"We don't just enter any market," he said. "We tend to acquire shows where we already have some market expertise."

Ad:tech, on the other hand, presented a unique opportunity for dmg "to enter the tech sector, because we saw that this sector was once again entering a high-growth phase," Cooke said. "Our strategy was not to compete with other businesses in the horizontal tech market, but to instead find events that were supporting particular industries or niche markets with technology. Ad:tech and iMedia Communications fit this bill perfectly."

Another firm that has benefited from diversifying its portfolio is appropriately named Diversified Business Communications.

President and CEO Nancy Hasselback said that in 10 years the company has grown its portfolio from three industries with eight products to 27 industries (including food, construction, medicine and technology) with 90 products.

In 2005 alone, the Portland, Maine-based firm acquired Complementary & Natural Healthcare Expo from U.K.-based Bluewater Events, and Super Floral Show and the Administrative Professionals Conference from Gainshare Media.

Its varied shows have "allowed us to grow," she said. "Each brand grows, as you add more industries. We've benefited from that kind of growth across the board."

Like dmg, DBC benefited from having an overseas presence. For example, Hasselback said, the firm took its seafood shows and created a concept for the European market. In 2002 it established one European show, the Mediterranean Seafood Exhibition/Seafood Processing Mediterranean.

Delving into new industries, Hasselback said, is an important component of DBC's growth strategy.

Yet its acquisitions don't put the company outside of familiar territory. The Complementary & Natural Healthcare Expo extends the firm's business in natural and organic products, and the floral show will help the firm leverage relationships with supermarkets, which it already had a reach into with its many food shows.

The Administrative Professionals conference, which falls into DBC's project management and business analysis division, is another example of a show that fits into DBC's diversification strategy, Hasselback said.

"(It) was a good, solid growing event that shares a similar format with project management," she said.

Dmg's and Diversified's success notwithstanding, there are contrarian strategies. For instance, Hanley Wood Exhibitions has heavily invested in its one sector of expertise. The Dallas-based firm (purchased in 2005 by J.P. Morgan Partners) focuses on helping the building and construction industry grow through its products.

"Hanley Wood is first and foremost a company that serves the building and construction industry," said exhibition division President Galen Poss. "Our publications and our tradeshows in almost every case are the leaders. If you can be the key deliverer of products and services to a particular industry, then you can be successful."

The firm also has divisions in marketing, market intelligence and e-media, but it operates more than a dozen shows in the building and construction (mostly), automotive, landscaping and home recreation industries. One of the largest, World of Concrete (No. 21 on the Tradeshow Week 200) in January saw a 13-percent increase in total attendance. Another, the combined Intl. Pool & Spa Expo and Backyard Living Expo, had its largest showfloor in 2005.

In addition to being a B-to-B media company, Poss said, Hanley Wood "would also be considered a significant player in the building and construction industry. We take a very integrated approach to the marketplace."

But even Poss would agree there are perils to this strategy. "If the housing industry goes south," he said, "then we're going to have to deal with that."

However, he noted, "It would be almost impossible for this industry to not have amazing growth." The demands in the building and construction industry are all in favor of it "staying strong in the future," he said.

Hanley Wood is so confident in the industry that it is looking to double its products over the next five years.

"And the goal is to remain within the building and construction sector in doing that," he added.

Nevertheless, Poss isn't against diversification. "You can diversify and be strong," he said, adding that "clutter, as opposed to value," results if you don't also dominate the markets you're in.

Hasselback agreed. "You need to gain industry expertise across different industries. That's the challenge. You can't go into an industry without knowing anything about it."

Even with DBC's several 2005 acquisitions, Hasselback added, "there are many that we decided would not be a good fit."