Gordon Hughes II: Riding Out the Storm

Before the credit crisis in the United States became the spark that led to a downturn in the worldwide economy, the publishing industry already had begun to experience its own cataclysmic shift.

The days when print ads were a reliable, growing source of revenue for magazines had ended, and the shift online was as fast and furious as publishers could take, forcing many business-to-business media companies to play catch-up. Most still are playing catch-up.

As the head of American Business Media, an organization that represents B-to-B media companies, Gordon T. Hughes II has had to help his members adjust to the ever-changing environment.

ABM has had the dual task of guiding its members through the current realities of finding new revenue sources, particularly online, but in face-to-face marketing as well, at the same time it was helping the industry cope with the worst recession in decades. In January alone, B-to-B ad pages dropped more than 25 percent, followed by February, which saw another drop of more than 30 percent. Until recently, events were the saving grace, but show attendance as of late has been anything but consistent.

All is not lost, though. According to Hughes, there is a way out of the quagmire for B-to-B media companies, but a little imagination is going to be required. He recently spoke with TSW Senior Editor Rachel Wimberly about what companies need to do to survive.

Question: The business-to-business media world has changed quite a bit recently. Has the ABM’s mission changed with it?

Answer: We serve media members who are in print, in person and online, and that distinguishes (us) from probably every other organization in that we serve those three masters. But, we also represent our members’ interests on Madison Avenue for advertising revenues; we represent them to the Beltway, talking to and lobbying on behalf of our members in our industry; and then, of course, to Wall Street. These fellows can invest in supermarkets or supertankers or us, and we like them to invest in us, so we speak to them.

Q: What is the biggest challenge facing the B-to-B market right now?

A: We have two issues in front of us: One is immediate, like now, and the second is not far down the road, and we’re coming at it.

The first one is the economy … these kind of issues happen every seven to 10 years. … I think that this one, unlike the normal situation, is something that comes along every 100 years.

The second is (that) B-to-B tends to be the first to be dragged into the economic malaise, and we tend to be the last to come out of it. This is discretionary spending, if you will, for the average person. Smart people advertise in a down economy because they gain share, but most people do not and, therefore, (there) is a precipitous drop caused by the lack of advertising and marketing.

Q: We all know print has suffered for a while, and face-to-face, for now, has flattened out. What will be the saving grace for B-to-B companies?

A: Really, where the growth is – and there still is growth – is through the Internet. I think that the model of in print, in person and online is what will really save the B-to-B companies.

There (also) is something new going on. The new model … is called content optimization, and that is less dependent on the vagaries of advertising (by) utilizing the deep well of knowledge (companies) have in the silos (they) cover and finding models to monetize it. That is probably our future.

Out of all the ABM members, … I’d say 20 percent right now are doing that, and it’s not just the big companies.

Q: Do you think the other 80 percent of ABM members who are not involved in content optimization are at least making the necessary steps to shift online?

A: I do believe that the majority of that 80 percent are making sincere efforts.

I think low-hanging fruit would be digital newsletters, because you charge for them and you can put advertising on them, so there’s two streams of revenue. … That’s really hard for guys who’ve been controlled-(circulation) guys to get, but they’re getting it.

I will go out on a limb: By 2013, you will see the Internet revenues surpassing ad pages, much as events surpassed ad pages back in ’07.

Q: But, so far, growth in online ad revenue is not making up for the loss in print ad revenue. How do you close that gap?

A: I think you’ll see two streams of revenue for online. You’ll be paying to get the information, and you’ll be seeing ads. Three years ago, you never would have thought you would see an ad on the front page of The Wall Street Journal, and you do now. It’s just part of life.

I’m at an age where I used to get TV free through an antenna on my roof. Today, I pay for that content, and I see ads on it. It’s nothing new here. It’s just who’s going to be brave enough to start doing it? The Christian Science Monitor is now doing it. They killed (the newspaper) off the printing presses, and it’s online.

Q: So are magazines going to be obsolete soon?

A: This is where we are going. Now, when I say that, I do not for one instant think that magazines are going to go away. But I do envision the day, and it’s probably around 2013, which isn’t that far away from today, when the magazines, which in 2000 were 50 percent of the revenues (and) today are about 38 percent of the revenues, will drop to 20 percent of the revenues.

(But) the magazines are still the brand, and the brand is still the quality-control factor and will be for a while.

Q: How important are events in a B-to-B company’s portfolio?

A: I believe that digital and face-to-face will become a powerful one-two punch. Face-to-face will come back, whereas ad pages will be slower. Face-to-face will continue a very nice robust growth, and (it) will work handsomely with digital applications. It’s like dating online: Pretty soon you have to meet him or her. They’re just made for each other.

Q: How many events does ABM have?

A: We’re changing our business model. Our meetings have primarily been held in New York, some in Chicago and our annual meeting would go somewhere between the West Coast and the East Coast.

We have just created, this year, a series of regional meetings. Those regional meetings are (in) Los Angeles, San Francisco, Chicago, Cleveland, Boston, Washington, D.C., and New York. We’ve created regional committees, with a regional governor, and they are half-day events. We probably get 100 people.

Along with that … we have our annual meeting, and we have Digital Velocity, which is a series of three events (though) ... we’re making them all digital events. … We’ll be doing nine or 10 of those a year. (We) also have the Events Summit that will take place.

Q: How are the events doing?

A: We are probably doing about 50 percent of what we normally do, and we have not canceled anything.

Someone asked if we were going to cancel our annual meeting, and I said, 'We’ve had them since 1906 ... we went through the Depression and two world wars, and I’m not going to cancel them.”

Q: January ad pages dropped more than 25 percent, and February ad pages are down significantly as well. At what point will there be a signal that things are starting to turn around?

A: I would look for three (consecutive) months where (the numbers) don’t drop. We had about 30 CEOs at a dinner before the (Jesse H.) Neal Awards, and … we (asked), 'When do you think this economic meltdown is going to end?’

The worst guess was second quarter ’11. The most optimistic was third quarter ’09 and most people came to the consensus of first quarter ’10. … I think ’09 is just a total train wreck, and I’d look for it to flatten out, not to continue to drop … probably the fourth quarter of ’09 and the first and second quarter of ’10. ... Then, I would start to look for it to continue to grow in ’10.

Q: What are ABM members who are doing well now doing right?

A: There is a part of me that says those companies that I know are now taking chances and developing things so that when they come out of this they are going to come out of it really strong. ...

It’s so rough right now, now’s the time to take chances. You aren’t going to do well no matter what you do, so you might as well experiment and see what you can create so when it does turn around.

I really applaud those companies that are doing that.

Q: What kind of role do you think social networking is going to play in the B-to-B media industry?

A: I’m very excited by that. I think social networking has so many different applications, and we here at ABM are utilizing it. I just started my Twitter thing. We started with blogs years ago.

All of our committees and councils have their own social network(s). We have our own social networks on LinkedIn and Facebook. We’re big believers in that. We hope that by us doing it here our members will emulate that.