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  • 1. Connecting Business The UK business-to-business information and communication industry 2001 CONTENTS Foreword Introduction Executive summary A key industry 1.1 A pivotal role in driving business 1.2 A sector of major value 1.3 Contributing to UK export revenues Key issues: 1 Defining the industry 2 Information or communication? 3 Navigating an ocean of information 4 Business or pleasure? A growing industry 2.1 Robust growth 2.2 Evolution and change 2.3 Future performance Key issues: 5 Brand power 6 Globalisation 7 The rise of electronic business communication 8 Competition and competitiveness 9 Skills needs A diverse industry 3.1 Principal delivery forms 3.2 Company activities 3.3 Sector portraits Publishing products Business magazines Newsletters and management reports Events Exhibitions List-based products and services Direct marketing Directories Appendix Appendix 2
  • 2. Sponsors This report has been prepared by the Business Information Forum Comprising: Association of Exhibition Organisers (AEO) Exhibition Venues Association (EVA) Direct Marketing Association (DMA) Directory and Database Publishers Association (DPA) Periodical Publishers Association (PPA) UK Newsletter and Electronic Publishers Association (UKNEPA) with financial support from the Department of Trade and Industry (Dti)
  • 3. Introduction Background This report explores a key UK commercial sector – one of substantial and rapidly-growing importance, but whose significance has only recently been fully recognised: the UK business-to-business information and communication industry. It is an industry responsible for sustaining health and stimulating growth in every area of business, industry and commerce – through the supply and delivery of information. Information is, of course, at the core of commerce. Without it, it is neither possible for organisations or individuals to decide on strategy nor make rational day-to-day decisions. Business information generates the power to take decisions and thus make things happen. Its provision is thus the very heartbeat and its supply the lifeblood of industry and commerce in the UK – and internationally – driving decisions, shaping strategies and delivering success. It is a key factor in helping UK companies maintain their competitive edge in the global marketplace. In short, the industry connects UK businesses – providing the means for organisations to obtain and convey information, to promote products and services and to keep abreast of developments. It is the ever-growing need and thirst for comprehensive and quality business information of this kind that has spawned this huge – and rapidly developing – sector. Traditional sources and means of information delivery such as business magazines, newsletters and direct mail have today expanded and been joined by a growing variety of other communication means, fuelled by customer demand and technological capabilities. As a result, the sector has changed immensely in recent years – and the increasingly electronic nature of information provision is set to change the face of the industry still further. It is a lively and growing sector of the economy. While competition is robust with new players entering the market seeking niches and bringing new online products, companies are thriving on the challenge of changes in demand and enthused by the growing need for quality business information. While the future has never been more uncertain, it remains more exciting than ever. This report – and the recent survey upon which it is predominantly based – presents a timely insight into this crucial area of UK commercial life. Objectives The report is aimed at all those who have an interest in this vibrant sector of the economy. It seeks to redress any deficiencies in awareness in relation to the sector and to present a helpful portrait and analysis of this burgeoning industry. It is hoped that this report will help those in Government, the financial sector and media commentators to gain a fuller appreciation of the sector’s role, value and potential – as well as the key issues confronting it. At the same time, it is intended to provide those working within the industry on a day-to-day basis – business-to-business information and communication companies, their customers, suppliers and personnel – with a useful context to consider their own businesses, strategies and plans. Achieving these aims will help to ensure that the UK business-to-business information and communication industry remains at the forefront of this increasingly important market, which is a major driver of business, both within the UK and for the UK internationally. Structure The report is divided into three main sections: The first, A key industry, examines the scope of the sector, its size and value, and its context in the UK economy The second section, A growing industry, looks at the dynamics of the sector, its growth, its changing nature and its future prospects
  • 4. The third, and final, main section, A diverse industry, explores the principal constituent parts of the industry in more detail Within each of the sections, some of the key issues relevant both to analysis of the sector and confronting those active in this arena are examined. Sources: A major new survey To arrive at an up-to-date and authoritative assessment of the industry and its principal constituent parts, the Business Information Forum, with the support of the Department of Trade and Industry, commissioned NOP Business in 2000 to undertake a comprehensive survey of the sector. It was completed in March 2001. Specifically, the survey was designed to map the industry, identify current activity and key issues and assess the potential for future growth. As such, it was intended to update and expand the November 1998 report The UK business-to-business industry, undertaken by the Centre for Interfirm Comparison, the first serious attempt to evaluate the sector. It should be noted, however, that this used a different methodology from that employed in this latest survey – and so, while the two sets of results may be helpful in indicating general trends, direct data comparisons should not be made. It is on the findings and respondent quotations from the more recent NOP Business survey, Mapping the B2B information and communication industry (2001), that this publication largely draws – and expands. Details of the methodology and approach are provided in the Appendix, along with other sources which have been used to generate a fuller picture. Executive summary The UK business-to-business information and communication industry performs a pivotal role in the UK economy, connecting businesses and providing targeted information and effective channels of communication. The industry is a substantial one, generating significant revenues. Its current (2001) turnover is estimated to be almost £13.7bn. It is a major employer, providing jobs for more than 175,000. The industry makes a substantial contribution to UK exports. Current revenues derived from overseas are calculated to be approximately £4.5bn. A number of leading UK-based companies are major players globally. The business-to-business information and communication industry has demonstrated strong growth in recent years. Turnover for 2001 is expected to be more than 16 per cent up on that of 2000. There is widespread evidence and optimism that robust growth will continue for the foreseeable future. The principal factors which will have a bearing on further growth – and future strategies – are the impact of the internet, the state of the global economy and government legislation. The industry is an evolving one which has undergone significant development in recent years – and is set for further change in the near future. The nature of the industry has evolved in line with customer demand and technological developments – and is expected to continue to do so. A development of particular significance has been convergence – with companies originally built on particular delivery forms increasingly embracing new and various routes to market. The leveraging of brand strengths has enabled many business-to-business information and communication companies to develop new revenue streams in this way. The principal factor in the recent rapid growth of the industry – and the anticipated driver of its future development – is the electronic, particularly online, delivery of business information. In 2001 electronic delivery is expected to contribute more than a quarter of the industry’s revenue. The industry is becoming increasingly competitive – with many new companies, such as online information providers, entering the marketplace.
  • 5. A particular challenge for many companies concerns the manpower skills required as they embrace new, and especially electronic, business operations. The industry is a diverse one – with a variety of targeted information delivery channels. The principal components of the UK business-to-business information and communication industry are: publishing products (such as business magazines), events (such as exhibitions and conferences), list-based products and services (such as direct marketing services and directories), and electronic and online services (such as internet sites). A third of companies in the industry publish business magazines and journals. The 10,000 titles generate estimated revenues of more than £3.3bn. More than a third of companies in the industry provide direct marketing services, with 2001 revenues totalling some £2.0bn. Almost a third of companies in the industry produce business directories. Total turnover from these activities approaches £1.5bn. Approximately 2,200 business-to-business exhibitions and trade shows take place in the UK each year – with some 20 per cent of companies active in this arena. Total turnover for 2001 is calculated at more than £1.5bn. 13 per cent of companies in the industry publish (paid-for) newsletters and management reports. These generate revenues of £271m. Most companies active in each of these principal sectors are very positive about future prospects, anticipating growth in products and services – and online delivery – over the next two years. A Key Industry 1.1 A pivotal role in driving business Twenty Every aspect of industry and commerce requires the supply and efficient delivery of information on which to conduct business, to base decisions, to compete successfully and plan for growth and development. Business information and communication – and the “industry” responsible for this – is thus positioned at the very core of economic life. Put simply, what the business information and communication industry does is to bring relevant information to those that want it, in a form that they want – and at the same time to present relevant analysis and context for that information. It provides the means for organisations to obtain and convey information, to promote products and services and to keep abreast of developments. The key to this is essentially two-fold: targeting, which ensures relevant material goes to and is received by an appropriate audience: and interpretation which delivers commentary, analysis and context. For instance, information on a new and potentially more efficient cattle feed will really only be of value if it reaches sufficient dairy and beef farmers (via a specialist farming magazine or newsletter, agricultural show or a targeted mailing list) and, moreover, comes with appropriate commentary on its likely merits. Thus the business-to-business information and communication industry provides a network of conduits, facilitating the flow of information, enabling businesses to connect – and linking buyers and sellers. In this sense, it is very much a media industry. Indeed, some of the industry’s major players are “media” in the traditional sense – business magazines and newspapers, for example. But it also includes other channels of business communication, like exhibitions, conferences and management reports. Today’s business demands have placed a premium on the speedy receipt of up-to-the-minute intelligence and on more and more specialised information – and this, along with the now global scale of most commercial activity, has meant the favoured delivery of material electronically has joined (and in many senses, embraced) these other conduits. The following quote, drawn from the recent NOP Business survey, illustrates the point:
  • 6. “You’ve got to be up-to-date with the latest developments in the marketplace in order to stay at the cutting edge…. For instance, technology is fundamental now to underpinning the economy and if people are not aware of what the next thing coming round the corner is and are unable to develop and integrate that technology into their business, then they’re going to fall behind” With its growing network of highly efficient electronic communication channels, the industry is beginning to extend its scope to embrace business transactions, such as ordering and payment. These sorts of evolutionary developments – examined in A growing industry – coupled with the considerable diversity inherent in the sector – explored more fully in A diverse industry – perhaps help to explain why it has really only been recently that the industry has been recognised as a sector in its own right. 1.2 A sector of major value The role of the business-to-business information and communication industry and its increasing importance in all arenas of UK commercial activity is clearly reflected in its revenue generation – currently estimated to total almost £13.7bn (2001). It is estimated that there are approximately 2,000 UK-based companies which supply business-to-business information and communication products and services. Together they currently employ around 175,000 people (full and part time). The industry is thus one of significance within the UK economy – with turnover and employment (and export value) greater than the combined turnover of the much lauded UK television and radio industries and more than one-and-a-half times the combined value of the music, film and video industries. For the sector as a whole, the average company turnover is £6.8m, with an average staffing level of 88 – resulting in a contribution per employee of £78,000. While this may be useful in making very general comparisons with other UK industry sectors, the figures disguise the profile of the industry – which, in line with many other sectors, demonstrates the dominance of relatively few larger players and a host of smaller, often new, companies. Indeed, only 100 (5 per cent) of the companies in the sector employ more than 1000 individuals, while over two-thirds (67 per cent) have less than 50 employees. Placing this revenue contribution in a wider context, the UK appears to support a business-to-business information and communication industry which is more developed and important to the economy it serves than that of the US. For, although the UK business-to-business information and communication industry would appear to be only around one-third the size of its US counterpart, this is more than compensated for by the substantially larger population, business activity and economy of the US. Against this background, there is evidence of increasing awareness amongst those working within it of the burgeoning industry of which they are part: “It’s an enormous industry of huge value and significance which is – or at least has been – invisible” “Don’t forget: When you value an industry – and if you value this industry…then there’s a spin off for the economy which is largely ignored….Take exhibitions, you might say it incorporates all that invisible spend, whether its hotels or taxis or restaurants or entertainment” 1.3 Contributing to UK export revenues The business-to-business information and communication industry makes a substantial positive contribution to the UK balance of payments. A large percentage of most sectors’ and most companies’ revenues are derived from overseas sales, subscriptions and marketing budgets. The 1998 study conducted by the Centre for Interfirm Comparison calculated that, in the case of newsletters and management reports, around two- thirds of UK turnover is derived from export revenues – a similar proportion to that credited to professional journals. For business magazines, the reported figure was just under 30 per cent, while the same study revealed that 20 per cent of exhibitors and 10 per cent of exhibition visitors came from outside the UK. If these sorts of figures are applied to the sector totals revealed in this latest NOP Business survey, then current (2001) contributions can be calculated to be approximately:
  • 7. business magazines and journals £1,205m, newsletters and management reports £179m and exhibitions £293m. On this basis – and assuming roughly similar proportions of export activity in the other sectors of the UK business-to-business information and communication industry – the industry’s current export value is likely to total in excess of £4.5bn (approximately 35 per cent of total revenue). For a very large number of companies export revenues dominate: “Our UK revenues are growing, but nowhere nearly as quickly as our overseas revenues” “Roughly 75 per cent of our revenues, certainly in the recent past, have always come from outside the UK” A number of the leading UK-based companies in the industry are major players in the global communication industry. These include UK companies which have expanded overseas – and generated further substantial revenue from these activities and their foreign domiciled subsidiaries. The Centre for Interfirm Comparison estimated in 1998 that the turnover of the business-to-business information and communication activities of the ten leading companies that fell into this category amounted to more than £8.3bn. If their other activities and those of their parent corporations were included, then this figure would rise to in excess of £13.2bn. The value of such activity today (2001) can be roughly calculated to be almost £10bn and approximately £15bn respectively. The potential for further growth in export revenues is strong. As the UK information marketplace becomes ever more competitive, so companies look to grow their businesses in new overseas markets, bolstered by the ability of electronic delivery to eliminate borders and distance. After all, going online opens up UK magazines, newsletters and the like to the rest of the world. “Our customers have increasingly been international – increasingly global rather than regionally international. (Our customers) have said ‘We really should be doing something about the Indian sub- continent or Latin America or Europe, but we need more information on that’ and that’s why we have found growth” Key issues Defining the industry There is a diversity of views on the parameters of the industry – and just what should be included in the definition of the business-to-business information and communication industry. This proved to be an issue for both NOP Business when conducting the survey Mapping the B2B information and communication industry on which this report is largely based – as well as the earlier 1998 Centre for Interfirm Comparison study. The most widely accepted definition describes the industry as comprising those businesses supplying and delivering information and intelligence to those working in industry, commerce and the professions in the UK. It thus, quite clearly, covers material which is made available through specialist magazines and newsletters, via direct marketing and trade events and online. However, while it also includes the likes of general management and research reports and credit reference information, it specifically excludes bespoke and specially commissioned reports, surveys and other products for individual clients. Furthermore, the definition of electronic, online and similar services includes only those providing information for those specifically working in businesses, and excludes information such as share dealings and similar financial information, or weather reports and statistics aimed at a wider audience. The data, comments and analysis presented in this report reflect this definition and these parameters – and refer to UK-based companies only. Nevertheless, it will come as no surprise that not everyone involved with such a diverse sector would agree:
  • 8. “I’d add multi-client studies and consultancy – our turnover in consultancy is now in seven figures….The other thing which we do which is very important…is training. We are a huge training provider in this B2B service” “Exhibitions directly fuel a lot of other areas of commerce – because of the volumes of people. You know, restaurants, hotels, car parking and the like” “What about trade associations too - with their emphasis on information provision and networking. It is business information in that people share information on a peer to peer basis in this way.” “Information” or “communication”? While generic descriptions – and even definitions – of the industry frequently may vary, distinction is usually made between business-to-business “information” on the one hand, and business-to-business “communication” on the other. “Information” is essentially material that is sought and paid for by businesses, usually on some sort of subscription basis. This may be editorial news or analysis provided by business magazine or newsletter publishers, listings of contacts in a particular niche, credit information or data and interpretation provided in management reports. It is thus primarily subscription revenue driven. “Communication” describes information on products and services which is targeted to potential prospects by businesses which would like to sell such material. This includes advertisements in business magazines and newsletters, catalogues, the renting of exhibition space, leaflets delivered by direct mail and telemarketing calls. It is therefore principally driven by ad promotion revenue. Navigating an ocean of information The Henley Centre has observed “economy is all about the allocation of scarce resource, but if there’s one thing in the world at the moment that isn’t scarce, that must be information”. This is something that is certainly true of business information. “Time, on the other hand, is a deeply scarce resource”, Henley goes on to point out, with some three-quarters of people engaged in full-time work complaining that they never have enough time to get things done. Business-to-business information and communication providers perform a vital function to deal with this nightmare of information overload, both through precision targeting and by adding value through skilful selection, signposting, cross-referencing, editing and presentation. In this way, key information is delivered in a user-friendly way, and irrelevant material kept to a minimum. Many delivery forms, such as newsletters and magazines further add value by providing interpretation, context and commentary to aid the effective use of general or specific business intelligence in the marketplace. A few quotes from leading players in the industry serve to illustrate the point: “Intelligence is not merely information. Intelligence means something that someone doesn’t know or that you are taking a piece of information and adding additional information, background or perspective or insight into it. And the bottom line of intelligence is that it needs to add business value to the person who reads it” “It is the nervous system of many businesses – and increasingly so – and in this wide world in which we all operate, trying to improve the high value information that is generally useful, as opposed to swamping everyone with a mass of data, is one of the roles of business publishers and information publishers.” “If a customer wants a quick fix on what’s available, then the internet is a great enabler….but the second part of that is how you actually make sense out of all this data?” “Because there is now so much information out there, in whatever format, it has to be tailored more specifically to the individuals you’re trying to address.” Business or pleasure?
  • 9. There is some overlap between “business” information and communication and that aimed at consumers. The blurring of this boundary is becoming more widespread as a result of social and technological changes. For instance, with increasing numbers of people working from home, and the widespread rise of the so- called SOHO (small office – home office) phenomenon, it has become common for those working in business to use their home computer for both their personal and business use in tandem. Furthermore, more and more elements of society and the community are using computers and the internet – further widening potential access to business information and electronic business communication channels. This means, for instance, that many magazines dealing with computers are used both as “business” and “consumer” titles. With increasing numbers of ordinary people now owning shares and taking a stake in the commercial economy, there is also a broad-based public quest for information this arena. Of course, many information providers already deliver to this dual audience and have done for some time - for example, the Financial Timesand The Economistand some directories such as Yellow Pages. Many companies active in business- to-business communication also produce consumer products and services: Around a quarter of companies running business-to-business exhibitions also run consumer events, for instance. Finally, it should not be forgotten that every individual working in business, industry and commerce is also a consumer and a target for domestic and leisure goods and services – something reflected in the advertisement content of several broad-based business newspapers and magazines such as the Financial Times, The Economistand The Director. A growing industry 2.1 Robust growth The industry continues to be an ever-growing force in the UK economy, manifesting considerable pace – and development – over the past few years, while it is predicted to grow at an even faster rate in the future. The exhilarating speed and nature of developments points to an exciting future and further growth and importance. The relentless need for commercial information and analysis across increasingly competitive global business marketplaces has been driving the business-to-business information and communication industry in recent years – both accelerating its growth and transforming its nature. NOP estimates indicate the industry is currently growing by more than 16 per cent per annum – leaping from a total turnover of £11.8bn in 2000 to almost £13.7bn in 2001. As more than one leading industry figure has observed: “It’s a booming market”
  • 10. The industry’s robust rate of growth is evident from other sources: For instance, the survey carried out by the Centre for Interfirm Comparison in 1998 – although undertaken using a slightly different methodology - calculated the UK business information and communication industry turnover at that time to total £8.1bn. The same survey also underlined the strong levels of general growth experienced in recent years, with revenues for activities like magazine publishing and direct mail growing by more than 10 per cent per annum in the second half of the last decade – and exhibition visitor registrations doubling between 1994 and 1997. 2.2 Evolution and change The nature of business-to-business information provision and communication has seen significant changes in recent years – with those changes set to continue to transform further the profile of the industry in the future. The industry is characterised as much by its changing nature, as by its rapid growth. It is an evolution driven both by market demand – and by the technological communication revolution. An examination of the changing sector revenue structure of the industry over the past year reveals an industry which is in flux:
  • 11. While virtually every component of the industry is currently growing, some elements are contributing very substantially to the overall revenue increase. Topping the growth list – inevitably – are online and other electronic products and services such as those delivered via internet, intranet and CD ROM. Their revenue value has rocketed £800m (27 per cent) in the past year – a reflection both of the growing universal demand for information supplied in this way and of the ability to do so. Indeed, the current electronic turnover estimate of almost £3.8bn compared with the 1998 Centre for Interfirm Comparison survey calculation of £1.1bn, even allowing for the differences in methodology, speaks for itself. Most of the remainder of growth is down to three main activities – which together account for a similar proportion of the past year’s increase: Turnover in the direct marketing services sector has grown by more than £365m (22 per cent), while business magazines and journals revenues have seen a £278m (9 per cent) growth, with exhibitions enjoying a £227m (17 per cent) boost in the past year (Chart 2.1). All other activities – bar newspapers – show growth, with the embryonic, and still relatively small, business- to-business audio-visual and television categories making particular strides, with a combined £98m (48 per cent) turnover increase. “The market is definitely growing, as a result of structural change and the needs of the user: But also because of our ability to deliver it more effectively, as we get better at what we do” Thus the industry is one not just of increasing size, but of changing shape. The impact of traditional – mass – media communication has tended to wane with the rise of to one-to-one marketing, which relies more on precision targeting and detailed data on customer profiles and purchasing patterns. The capture of this information and its effective use has been at the core of business-to-business information and communication companies’ success in recent years. It has been this customer knowledge, combined with the demand by those customers for information in a variety of forms, which has also persuaded companies to expand their franchise beyond their core products and services into other forms of delivery. They have been aided in this through the use of strong core brands – and by customer perception of competence and knowledge in particular market sectors. Companies are striving to become the main source of expertise and information for selected audiences. The result: a trend towards a market-focused approach and away from the traditional product-based one. It has meant, for instance, business magazine publishers extending magazine brands into related activities
  • 12. such as direct mail, exhibitions, directory publishing and online – a trend reflected in the revenue shift chart (2.2) above. Put another way: “If you’re not very, very heavily market-focused, then you’re dead” It is for this reason that content (rather than the delivery mechanism) has become the most precious – and sought-after – commodity in the business information arena. For many, it is not just about being more market-focused, but also about nurturing and more fully exploiting their relationship with their individual clients – and their key customers in particular – to provide a tailored range of products and delivery forms. As one leading player explains: “We have had to change (our approach) to an account management relationship” A key characteristic in all this is convergence – with the traditional components of business-to-business information provision and communication moving ever more closer to one another and embracing products and services formerly restricted to one another’s core activities. It has meant, for instance, advertising driven companies moving into subscription driven areas – and vice versa. If the businesses-to-business information and communication industry was not really recognisable as a cohesive entity a few year’s ago, it certainly is more so now. A further feature – fostering growth and heralding change – relates to strategic partnerships. For, as companies migrate into a host of new delivery forms and ply (for them) unfamiliar waters, so there is a constant need for appropriate business partners, with particular competence in these new areas. This is nowhere more important than in the arena of electronic delivery, where traditional business information and communication companies are likely to lack cutting-edge technology and skills. Many external companies themselves eagerly seek such marriages, hungry for a hand on the business information data and content so much in demand by customers. Such symbiosis drives the growth of the industry and marketplace still further. For many of the leading business-to-business information and communication organizations all this has led to a new strategic approach and company creed: “We are media neutral and multimedia – we see markets and we see channels to those markets which are complementary. The biggest change for us, I suppose, is that we now think about relationship marketing and we think about how we can add value to the customer in the way that they wish and to access their market through a variety of channels. And so we might begin with a magazine, but out of that we could expect to build a range of other routes to market which are profitable, and which the customer sees as being beneficial…” The result has been the adoption of new and increasingly diverse business models throughout the industry. Many, particularly in the electronic arena, are developed for long-term strategic investment. Others for short- term tactical goals to maximise revenues. Many companies have changed their name to reflect this broader- based strategic approach: Reed Business Publications became Reed Business Information in 1996, while EMAP Communications have similarly dropped their publishing tag. Above all, the runaway, and virtually universal, adoption of electronic and online delivery has meant all traditional players in the business communication arena exuberantly embracing this means of connecting with customers. They have enthusiastically incorporated it into their portfolios – and, most important of all, have elevated it to become a key thrust of future strategy. Chart 2.2 illustrates clearly an industry in which the emphasis is moving very rapidly towards electronic delivery. Indeed, if the current estimated growth rate – which is running at almost double that for the sector as a whole – is maintained, then online and other electronic information communication is set in another year’s time to be worth almost £5bn. Electronic delivery is itself changing in nature, with CD-Rom and disk products declining at the expense of web-based information delivery. Furthermore, the nature of information provision on the web is rapidly developing too – with greater emphasis on tailored material and information complementing that supplied by other means. The roll-out of broadband communication links means immediate internet access is being brought to increasing numbers of small offices and homes, while growing internet access via the mobile phone boosts the development of electronic delivery of business information on the move.
  • 13. There are other significant changes responsible for growing the market. For instance, there has been an explosion both in new companies on the back of the revolution and, equally, in new job titles in recent years – as all sorts of organisations now have positions such as ‘head of interactive services’ and so on. “It’s almost like businesses within businesses growing and for a number of my products they’re basically the fuel behind the increase in growth in our business. God bless all these wonderful new people out there – and they buy things because, by the very virtue of what they are doing being so new, they too need information and intelligence” One other noteworthy change in the marketplace is that individual executives are becoming less involved in the direct purchase of the information they need. Thanks to the increasing reliance on intranets, things are tending to become more centralised. Every component of the industry is changing, with a growing emphasis on diversification and new forms of delivery – something explored in more detail in A diverse industry. 2.3 Future performance Virtually everyone involved in the business-to-business information and communication industry is optimistic about its future prospects – with volumes of business, revenues and total numbers employed all generally expected to increase. This is in spite of some initial fears that online businesses would be able to bring clients into direct contact with customers, thus squeezing out traditional information and communication players. In fact, nowhere is optimism and expectation higher than in the arena of online and other electronic activities. For instance, the majority of publishers of business magazines and journals, of business Directories and of newsletters and management reports predict a growth in the number of titles online within the next two years. Far from precipitating the demise of more traditional means of serving the market, electronic delivery is seen as enhancing and complementing, rather than replacing, other forms of information provision. As a result, most business magazine publishers, for example, are forecasting increases in the number of titles and growth in circulations and revenues [see A diverse industry]. At the same time, some predict a shift in broad composition of the industry: “There will probably be a focusing on a smaller number of high quality players. There will be a polarisation. You’ll get a small number of large players and a large number of small players” Nevertheless, a minority are rather more cautious about the future: “I have a worry that the more the B2B market grows, there is a bit of a glass ceiling for the whole market….I don’t believe the number of clients out there is growing at anything like as fast as the number of products and services on offer” Having said that, most previous forecasts concerning activity and expenditure in this arena have turned out to be too cautious – and there are widespread indications of a market and industry experiencing exponential growth with no real evidence of slackening momentum. It is perhaps worth noting that this is something that has also been true of the US business-to-business communication industry – where the actual growth in 1999 turned out to be double (at 7.5 per cent) the previously forecasted growth of 3.7 per cent for that year. (Source: Veronis Suhler; 2000). The strategic plans of companies concerned with business-to-business information and communication are diverse and depend very much on their position within this broad industry. For those principally involved in publishing products – magazines, journals, newsletters and directories – a prime objective over the next five years is to grow electronic titles, products and web-based material, though for magazines and journals in particular, general launch and acquisition strategies remain to the fore. “We will be launching a number of business-to-business publications. We intend to provide a more all-round service for customers. We will have significant involvement in online publishing – and expand into business- to-business contract publishing”
  • 14. The way the business-to-business information and communication industry is likely to develop – and the fortunes (and strategies) of those companies active in this arena – also depends on a number of external factors. It is the growth of the internet, new media and technology usage which hold the key to the future development of the business-to-business information and communication industry. More than any other factor, companies active in the arena feel that it is how this impacts that will determine future fortunes and strategies. This is particularly true of companies whose primary activity involves directories or, of course, online services: ”The key factor is access to computers and the internet at work – and at home – and using different channels to access the internet to make sure this infrastructure has a positive impact on businesses” “The lemming rush to the internet has stopped. People are now thinking of new ways to use new media and technology in terms of segmentation – for example, digital printing” Nevertheless, for almost as many people it is how the UK and world economy fares that will have the greatest bearing on future developments: “ If the economy were to slow…then, of course, the capacity to launch new magazines would also slow” “The two main impacts are the worldwide economy and secondly, with our European operations, the strength of the pound and the Euro and the conversion to or creation of the single currency” “Economically, the continuous expansion of the international economy will have strong impact on the success of our launches”
  • 15. For many, the likely effects of government legislation – and, in the case of directories and direct marketing, data protection legislation in particular – are regarded as of particular importance in determining how things will turn out: “The Data Protection Act could have a major inhibiting effect on all directory publishers – and greatly affect the free flow of information” Others are very clear about specific inhibitors to growth: “The fact that we are not in the single currency is of major detriment to my business….Sterling is trading at a value that is unsustainable and it is damaging our sales into continental European countries” What is very clear is that the continuing success of a broad-based industry like that of business-to-business information and communication depends on a wide range of factors. Key issues Brand power As the industry begins to move with increasing vigour – into new delivery forms, products and services, the ability to field and use strong brands is vitally important. The marketing value of brands resides not just in their ability to spawn and drive new revenue streams and deliver better margins, but also because they can forge relationships with customers, suppliers, staff and investors for long-term benefit. Brands create trust – a pre-condition to loyalty, which in turn, drives long-term income. Many brands in this arena deliver a guarantee of quality and value, providing an instant shorthand for positive decision-making. Such a brand offers a welcome oasis in the unfamiliar and bewildering internet desert, for instance. Some brands – such as the Financial Times, Reuters, or Dun & Bradstreet – enjoy recognition and value throughout the panoply of business-to-business information and communication. Others – particularly in the field of business magazines – command power in more specialist business arenas. Strong brands have enabled business magazine publishers in particular to exploit them through other formats – internet products and other online services, events and exhibitions and a host of other relevant products and services. By leveraging brand strengths in this way, business-to-business information and communication companies can both develop new revenue streams and businesses – and, at the same time, reinforce their core brand values. As a result, brands will continue to be a key driving force in the development of the industry. Globalisation UK industry has never worked in isolation – and it is becoming increasingly true that the British economy is bound up with commerce worldwide. Today, commercial barriers are at an all-time low as the global village, fuelled by increasingly universal tastes and brands, international business and 24-hour boundary-less communication becomes a reality. In this geographically converging business world, British business-to-business information and communication companies tend to start one jump ahead: English has become not just the most extensively understood language worldwide, but it has become the business mother-tongue of the world, facilitating common communication and bonding disparate business communities. For the business-to-business information and communication industry this means two things: its role – and potential – as an export earner for UK plc is considerable and likely to grow further; and, the companies involved in the sector are increasingly likely to be ones which operate on an international and global scale. “Yes, the new technology has enabled….but at the same time heightened customers’ need for reliable quality….If all data is available, then branded reputation and quality becomes more important. After all, just how reliable is this data?”
  • 16. The rise of electronic business communication A key factor in the rapid growth of business-to-business information and communication – and the anticipated driver for its future development – is the demand (and supply) of material electronically in the UK and worldwide. It is anticipated that 2001 will see a £800m (27 per cent) growth in this form of business-to- business delivery. The vast majority of UK businesses are digitally wired up and using online connections on a daily basis. A recent DTI study ( Business in the Information Age) estimates that 81 per cent of all businesses are connected in this way. But it is the speed of this adoption which is quite phenomenal – with the number of wired businesses rising by more than 22 per cent in the past year. Quite clearly, it will not be long before virtually every business can be contacted and make contact in this way. Online marketing and electronic messaging are already relatively widespread according to the DTI survey – 66 per cent of UK businesses have a marketing website, for instance. Of these, 79 per cent publish most of their marketing material on this, with 40 per cent updating this information on at least a weekly basis. Online activities of a more interactive nature – such as ordering and payment – are, however, not yet so widely used, though some 27 per cent of UK businesses do currently trade online. Nevertheless, driven by their need to remain competitive, most businesses yet to embrace ecommerce intend to do so in the near future. For the UK business-to-business information and communication industry the implication is clear: Delivering online is a must. A number of companies are already involved and most intend to grow this area in the next two years: 40 per cent of business magazines have at least one title online and 60 per cent predict a growth in titles online in two years’ time; 55 per cent of newsletters/management reports have at least one title online and half predict a growth in titles online in two years’ time; and 56 per cent of business directories have at least one title online with 64 per cent predicting a growth in titles online two years hence. Nevertheless, there are a number of voices of caution. Many business-to-business information and communication companies’ electronic-delivery business plans are not seeing the kind of returns originally expected and are finding it tough to secure profitability in this arena. In particular, customers’ enthusiasm for transactional ecommerce has been slower than expected in coming. “ecommerce in all areas hasn’t really happened to anything like the extent we imagined it would do” There is widespread evidence that at present, the internet is being used extensively by customers to research and decide on business products and services – the final, transactional part of the process being completed via more traditional channels. Findings from other surveys do suggest that in certain sectors – such as directory and database marketing – this is far more widespread (see A diverse industry). Most companies in the sector thus tend to see the internet as a useful marketing tool – providing more comprehensive and detailed information than many traditional communication channels can do, as well as driving subscription revenue. However, web advertising is a different thing altogether, and few see any meaningful revenues in this arena. “The web doesn’t lend itself to traditional advertising: It’s a bit intrusive and doesn’t add value…It gets in the way and really annoys you” A managing director of a leading business-to-business information and communication company puts electronic delivery in context in this way: ”It is an immensely important new route to market, but because it is essentially less accessible, less portable and less visible than traditional methods of using and obtaining information, it will, in some senses, be secondary for a lot of people in a lot of circumstances – and so it will be an added value but a complementary route to market” Competition and competitiveness An industry experiencing such rapid growth – and development in new areas – is bound to be one which engenders growing interest and competition. For all players, this dynamic of dramatically increasing competitiveness has become an important challenge. Almost three-quarters of companies currently active in the industry believe competitiveness has increased over the past five years – with almost a half believing it has increased greatly. “There are more management reports. There are more events. There are more electronic services. There are more magazines. There are more and more ways in which you can get information and intelligence” The reasons are down both to supply and demand:
  • 17. Supply: Starting up companies and gaining entry to markets is lot easier now than ever before. To begin with, technological and cost barriers are far less than they used to be, thanks to the development and universal use of computers. In particular, the increasing use of the internet – coupled with the profitability and very visible expansion – in the industry has resulted in many new, external operators setting up shop in competition with the business-to-business information and communication market’s traditional players. In many cases, electronic providers are wooing traditional companies, approaching them to form strategic partnerships and to sell or lease content to them – and poaching key staff! There are, for instance, challenges to established companies – felt particularly in the business magazine arena – from so-called “vortals”, vertical trade communities, and from web companies with large horizontal recruitment sites. These are examined in more detail in A diverse industry. “There are a lot of people jumping on the publishing bandwagon. Internet publishing comes into it somewhat – the availability of the internet and increased ease with which people can produce material” The impact is considerable in most activities – but most marked in areas such as directories. Less so where it is less easy to attain key attributes such as established brand values and physical organisation, such as in the case of exhibitions. Demand:At the same time, the sheer demand for more and more business information inevitably gives rise to – and also stems from – increased competitiveness in the industry. However, it is more than just this: Most established companies in the sector have increasingly come to rely more on revenues derived from the supply of information as traditional advertising and marketing budgets become a thing of the past. The result, a tougher – and more intense – trading environment, with more and more players seeking to achieve profits from information supply. But this intensely competitive situation is further compounded because business customers are becoming used to being able to obtain substantial amounts of free information from the web and elsewhere. Thus maintaining premium prices for business information – and sustaining profitability – has become a major challenge for all concerned.
  • 18. Skills needs For a sector experiencing rapid growth, with companies increasingly moving into new areas of activity and plying uncharted waters, then a management and workforce with the skills to enable development, to sustain business and plan for the future is clearly a pre-requisite for success. Yet for many traditional players in the business-to-business information and communication industry, this is a particular challenge as their operations embrace new, electronic technologies. Indeed around a quarter (24 per cent) feel they do not possess the manpower resource they really need to meet their business objectives – a figure broadly in line with other national skills studies commissioned by the DfEE.
  • 19. In the case of newsletters, management reports and directories, the number of companies identifying this skills gap rises to more than a third, while for direct marketing and business magazines – and, more obviously, for electronic and online companies – it is generally less of a problem. Heading the list of wanting skills are those that are technology-based – general IT, internet and web-based expertise: “Because we are opening up a new industry, employees will need to develop their skills over a period of time, crossing over traditional events to online with new media understanding” But sales and marketing skills are also a particular issue – especially in relation to new multi-media practices and strategies. “There are problems with new media marketing skills, due to the whole area of new media marketing being so new, no one knows how to do it properly. There aren’t enough professionals about, so you have to learn as you go along” Different sectors within the business-to-business information and communication industry do, however, tend to require different levels of skill. As the managing director of a leading multi-platform company puts it: “What level of knowledge information do you need to have about the market to be successful in it? Well, you could get away with being an exhibition organiser and score four, just about. To be a magazine publisher, you would need to score six and a half. To be a newsletter publisher you would need to score seven and a half. And to be a digital or information business and to be involved in the value chain you have got to be scoring something like nine. Actually 10 would be good: Remember, ten is what your clients would score!” To secure these kinds of skills levels, a good deal of recruitment takes place from the relevant markets themselves – and many players have a blend of staff, for instance from an engineering background as well as from, say, a publishing background. A diverse industry 3.1 Principal delivery forms The industry – and the companies active in this arena – are characterised by considerable diversity, perhaps one reason why widespread recognition of the industry and its value has been a long time coming.
  • 20. For most people, the components of business-to-business information provision and communication which perhaps come most readily to mind are likely to include business magazines, journals, newspapers and newsletters, electronic and online services, direct marketing, exhibitions, directories and catalogues. But there are – as we have already seen – several other significant strands: newsletters, conferences, management reports, credit reference information, TV and other audio-visual materials. A handy way of appreciating the scope and the key elements of business information provision and communication is to group the variety of products and services into five broad categories: Publishing products These are editorial-rich and largely hard-copy publications and services which include: • business-to-business magazines/professional journals • business newspapers • (paid-for) newsletters and management reports Events These enable face-to-face information gathering/dissemination and interaction and include: • business exhibitions and trade shows • business conferences and seminars List-based products and services These rely particularly heavily on the creation, provision and use of lists and include: • direct marketing services (including list rental/database marketing) • business directories Electronic/online services These largely on-screen and computer-based products and services make use of electronic delivery and encompass: • internet sites • intranet and other online services Other products and services This catch-all category includes a diverse range of other business-to-business information products and services, including: • catalogues • dedicated business TV and other AV material • credit reference agencies • market research/statistical and consultancy reports In addition, there are a number of other activities – often carried out by specialist companies – which also fall within the broad definition of business-to-business information provision and communication such as business-to-business awards and sponsorship. Business-to-business information and communication channels provide conduits for every sector of commercial and professional activity in the UK. Generally speaking, the larger the sector, then the more lines of communication there are, penetrating every specialist niche within the broader categories. At the same time, revenues derived from different segments of business and the professions also give a clue to the relative importance of each area in business-to-business information and communication. A look at the business magazine arena illustrates the point particularly well:
  • 21. 3.2 Company activities While most companies operating in the business-to-business information and communication arena tend to have a core activity in one of the above principal delivery form categories, most organisations now tend to provide more than one form of delivery – while some offer several. Electronic and online information services are the most widespread products and services offered by business-to-business information and communication companies in the UK – with 57 per cent currently active in this area. More than a third of companies (37 per cent) publish magazines, while a similar percentage offer direct marketing services. Substantial numbers of companies also produce directories (31 per cent) and rent – and broke – lists (27 per cent). Yet there is a need to look beyond these broad figures to see the significance of what is happening. Companies originally built on particular delivery forms are increasingly embracing new routes to market. This process is particularly marked where there is a strong core brand, as in the case of many business newspapers and magazines. As a result, in recent years, the portfolio of individual companies’ activities has tended to grow, encompassing additional forms of marketplace delivery. Today, a large number of players in the business- to-business information and communication industry offer a variety of complementary products and services – reflecting their goal to dominate the vertical markets of their choice. Nevertheless, while more and more companies are involving themselves in a wider range of communication methods, for many their primary product remains their spiritual and business core. Thus, while more than half (57 per cent) of companies are involved in electronic and online, this form of information delivery represents the core business activity for only just over a quarter (28 per cent) of these – 16 per cent of the total.
  • 22. Almost a third (31 per cent) produce directories, but only 6 per cent of the total are primarily business directory publishers. Once again, while 27 per cent of companies are involved in list broking and rental, just 5 per cent of all companies regard this as their premier activity. Direct marketing is also a popular spin-off for many, with one in two of companies concerned with this activity having their core business in another area of business-to-business information and communication. Examining how many companies operate in one, two, three or all four of the principal delivery form categories underlines this increasingly diverse approach to marketplace delivery.
  • 23. Indeed, only 40 per cent of companies in the sector are involved in just one of the above four main categories – with the activities of around 60 per cent of organisations embracing at least two. It is particularly commonplace for companies to operate in both the list-based products and services category and the electronic/online arena. The multi-platform approach is made more apparent by the fact that 11 per cent provide products and services in all four of these major categories. 3.3 Sector portraits In the pages which follow, the three traditional core activities comprising the industry – publishing products, events and list-based products and services – are explored more fully, through detailed portraits of the principal products and services within each of these: magazines, newsletters, exhibitions, direct marketing and directories. Together these five sectors account for some two-thirds (almost £9bn) of the turnover of the industry – more than 87 per cent if the contribution of electronic and online, which is rapidly being integrated into each of these areas, is excluded.
  • 24. Publishing products Business magazines Until recently, the business-to-business information and communication industry has been largely dominated by traditional business magazines. Even today, business magazine publishers still tend to command a pivotal position in the business-to-business information and communication landscape – by successfully exploiting their brands and encompassing other forms of delivery. Around 700 companies – one in every three in the business-to-business information and communication industry – publish between them some 10,000 magazine and journal titles and generate estimated revenues of more than £3.3bn. Total turnover is on the up – rising by an estimated £278m (9 per cent) over the past year. Substantial numbers are employed by companies publishing business magazines – some 29,000. Revenue per employee is thus approximately £114,000 per annum. For most of these companies, the publication of business-to-business magazines constitutes their primary activity, although not for around one in four. Most companies in this arena are specialist publishers of business-to-business magazines and professional journals. Some three-quarters (76 per cent) publish only titles serving business or professional markets. While most publish less than 10 titles, a significant minority (5 per cent) produce more than 50 – boosting total volumes enormously. The largest publishers of business magazines in the UK are Reed Business Information, EMAP Communications and CMP Information. A high proportion of business magazines’ content is now available online. 40 per cent of companies report that all of their titles supply at least some editorial in this way, with a further 8 per cent indicating that more than 50 per cent of their titles do so. The majority (70 per cent) of magazines are circulated free of charge, usually on a controlled circulation basis, which means that readers have to qualify under the publisher’s terms of control. The result is a highly targeted readership selected for its relevance to advertisers. In general, the larger the publisher, the larger the total circulations.
  • 25. The recent NOP Business survey suggests revenues derived from copy sales contribute approximately £650m – around 20 per cent of total revenue. Advertising-based revenues account for approximately 65 per cent of the total (some £2bn) – the vast bulk of which derives from display advertising. Nevertheless, as traditional advertising budgets have tended to become more elusive, the publishing sector has been moving away from the delivery of mass, controlled circulation products and investing more and more in quality products, securing key, quality recipients. As one leading business magazine publisher puts it: “We re-invented ourselves by moving up the value chain by providing high-value material and subscriptions because we realised being there in the murky waters of the display market when the going got tough wasn’t a good place to be – so what you see in our business is a definite migration up-stream” Indeed migration has very much been the watchword of business-to-business magazine publishers over the past few years – a migration driven by a recognition of the value of their brands, content and relationships and, on the back of this, an extension into new forms of delivery as diverse as exhibitions to electronic. Today electronic products currently bring in a further 5 per cent revenue to the sector. A survey of business- to-business information publishers (Business-to-business media: opportunities for growth) published in May 1999, underlined just how substantially business publishers are encompassing a wide range of delivery and distribution methods:
  • 26. An update to the survey – presented in May 2000 – confirmed a massive increase in the impact of electronic delivery media on the future structure and product mix of those magazine publishers’ businesses. The survey found that all publishers had websites and that these were increasingly being used to deliver content and information in a dynamic and interactive environment. These developments are widely regarded as complementary and not cannibalistic: “The net seems somehow to enhance people’s interest in the printed page, rather than reduce it…The relationship between being at a screen and having a magazine is completely different. People love their magazines…it is almost like a friend. No one has ever described their PC as being a friend.” Against this evolving background, business magazine publishers are strongly confident about the future prospects for their sector. Most predict an increase in the number of titles and rising circulations over the next two years – while some 60 per cent anticipate further increases in the number of titles with editorial content delivered online. Newsletters and management reports The demand for regular updates of specific specialist news, analysis and information also drives a further important, but largely subscription-led, publishing arena, that of paid-for newsletters and management reports. Paid-for newsletters and management reports are published by approximately 13 per cent of companies in the UK business-to-business information and communication industry – and contribute a total revenue of £271m. An estimated 12,500 individuals are employed in their production. Yet newsletter and management report publishing is only the primary activity for a fifth of these companies – with many magazine publishers and direct marketing operations having extended their franchise into this area. Just under half (48 per cent) sport a portfolio of between two and ten titles, while a further 36 per cent publish between ten and fifty. Most (72 per cent) publish exclusively for the business-to-business market.
  • 27. More than half (55 per cent) of the companies involved now publish a least some editorial online. The result: some 22 per cent of business-to-business titles now have content presented in this way. But, as in the case of magazines, electronic delivery is not expected to extinguish the demand for paper-based products: “We see a massive reluctance for people to do without the paper. They like having the electronic as well, but they’re not prepared to give up paper yet” Much of this is not just down to customer preference, but to the nature of the information itself – and particularly whether it is editorial-rich or data-rich: “Newsletters were supposed to be killed by the internet. But…there are two different types of user - those that want it in the briefcase to read on the plane or whatever (they don’t want to go searching for it, even if it is on a very well structured intranet).The other side is... our reference based material – very in-depth, you’re going to go to that report when you need it – and the best way to manage that is an electronic format or under ‘Search’ rather than leafing through 300 pages of a loose leaf binder” “The greatest change taking place is in market research and statistical reports, because of the way we have carried out and delivered the research. We have moved from a communication-based business to a database-based business” There is widespread expectation that the next two years will see growth in the number of titles with editorial content online. Around half (49 per cent) of the companies operating in the sector anticipate an increase of this kind, For many, strategic partnerships with online hosts are a way forward in this arena: “Alternative channels are becoming very important to me. Particularly the online hosts – because they have a much greater reach than I could ever hope to have….We’ll do the research, but sell via the online host” The highly specialised nature of newsletters and reports is reflected in their exclusive circulations: More than half (58 per cent) go to less than 10,000 individuals, while in excess of a quarter (26 per cent) count their circulation only in hundreds. Taken together, however, the total circulation figure for this publishing genre is an impressive 11m.
  • 28. Unlike business magazine publishing, the largest slice of income (40 per cent) is derived from subscriptions, with traditional advertising – excluding inserted material – bringing in only 18 per cent of revenue, a similar figure to that derived from electronic products in this area. Margins tend to be relatively low – although consolidation has improved yields and profitability. “The profitability and margins are much higher now than they were a few years ago because we’ve concentrated on where the core strengths are” A common feature in the newsletter and report publishing arena – and favoured by more than half (57 per cent) of players – is that of multiple subscription deals (or site licences) permitting corporate recipients to obtain multiple copies at a discounted rate. More than three-quarters (76 per cent) see an increase in the number of newsletters being made available by this means within the next two years. In most cases, publishers’ revenues have benefited significantly as a result of adoption of these sorts of deals. “..very positive growth. We saw a 15-20 per cent increase over the last two years and we would not have done if it wasn’t for the (enterprise licence) scheme” With the emphasis on the provision of finely-tuned specialist knowledge and interpretation, getting individuals with appropriate skills is a particular problem for companies in the newsletter and management report arena: “Recruitment is next to impossible. We have enormous difficulties getting people with the skills needed to research a fairly complex subject and then put that information back out in a comprehensive, easy-to-read manner” Yet, with revenues expected to be up by 9 per cent (£23m) in the current year, there is substantial optimism concerning future prospects in the sector. More than half of newsletter publishers anticipate growth in the number of titles in the coming two years. A similar proportion see circulations increasing, with a minority forecasting quite significant rises:
  • 29. “I think it’s incredibly healthy and I think we have come through the period where the media would have you believe all this information was out there and it was free….I think clients are realising that if it’s of value, then you do pay for it. And if it is of value, they are happy to pay for it. So the growth is there” Events Exhibitions The unparalleled advantages of showing and seeing products and services personally, coupled with the ability to discuss their merits, has driven the growth of exhibitions and trade shows. And in an era of electronic detachment they can prove a particularly useful and attractive lure for the business community to meet and talk in person. They are also a particularly effective way of trawling for new customers and tracking down new suppliers. Exhibitions and trade shows are run by about 20 per cent of the companies active in the business-to- business information and communication industry. Many (40 per cent) of these companies are specialist exhibition organisers, for whom this is their primary activity. Although, largely because of the brand strengths which they possess, magazine publishers are equally active in the exhibition and trade show arena. “It’s become a more competitive market because there are more players coming in from different areas. We’ve got, for example, publishers who will enter exhibitions (and vice versa) because the two media are complementary….because whatever format people want information in, they want to be in a position to provide it” It is estimated the sector directly generates revenues of over £800m per annum – plus an additional spend of £775m as a result of ancillary activities such as stand construction*. It directly employs in excess of 7,000 people. It is a growing area of activity – with estimates of total turnover rising from less than £1.4bn in 2000 to almost £1.6bn in 2001. This 17 per cent annual rise is equivalent to some £4.4m a week in extra revenues.
  • 30. Most of the events organised by companies in this sector (more than 71 per cent) are solely directed at business audiences – and in all, it is estimated that 2,200 of these business-to-business exhibitions and shows are organized each year. This represents an average of around 5 or 6 per company – and an average overall revenue of approximately £720,000 per event (of which an average £370,000 derives from direct revenues). Most companies (66 per cent) are responsible for less than half-a-dozen such events each year, with 29 per cent running but a single show. While most are annual, almost half of the companies involved organise at least one bienniel event.
  • 31. * Explanatory note: Additional exhibitor spend Sales data collected by NOP for the 2001 Mapping the B2B information and communication industry survey represents the exhibition space rental revenue collected by exhibition organisers. Exhibition industry research indicates that space rental represents 51 per cent of the cost of an exhibitor’s total expenditure. The remaining 49 per cent is divided between various other costs associated with exhibiting, not least of which is the cost of stand construction. Despite the plethora of business information and communication platforms and, in particular, the rise of electronic business communication, exhibitions remain a vital way of connecting businesses and exchanging information, not least because of the powerful social – and commercial – need to interact, meet and talk in person. Nevertheless, as a result of the widespread electronic supply of information, the way exhibitions are used is changing: “I think people will attend exhibitions for slightly different reasons. Five or six years ago, you got masses of people picking up carrier bags, collecting sales brochures and the rest of it. You don’t need to do that now you can sit at your desk. Therefore, the people that are going to attend tend to be more serious… Everybody’s there for a specific purpose” “Delegates will vote with their feet….there is no brand loyalty as such…..And every hour out of the office, for most people has to be justified” “Web businesses are, as we all know, from a financial point of view, not really useful – but in the longer term they will be complementary…People will access websites to ensure what they need to see. You will know exactly what he’s interested in and (he will know) what products are available – before going on site” Exhibitors too are approaching things differently: “As far as exhibitors are concerned, I think there’s a trend to becoming more sophisticated in terms of setting objectives and measuring against those objectives” Yet there is a shift towards electronic activity and a corresponding reduction in reliance on traditional methods – at least as far as marketing goes: “A large part of our registration process now happens electronically. About 80 per cent of our delegates register on the internet” As in other business-to-business information and communication sectors, lack of skills is a substantial problem: “You ask any exhibition company the biggest problem they face – and they’ll tell you: ‘people’. ….We all lost a lot of people to the web start-ups”. “Speak to any exhibition company and they’ll have a hundred ideas sitting in the pipeline but they can’t get them out the door because they haven’t got the people to do it” The sector is one which is particularly susceptible to ups and downs of the economy and its future prospects depend very much on steady economic growth. “Although it’s not a corporate business, it tends to be quite significant and does, to a certain extent, track the economy. If a recession hits, it doesn’t hit you the same year – it hits you a year later” Nevertheless, current growth is mirrored by widespread optimism about the next two years, with more than half of companies involved expecting growth in this arena. 20 per cent anticipate a considerable growth in the number of events.
  • 32. List-based products and services Direct marketing Direct marketing covers a plethora of commercial activities and channels of communication from direct mail to telemarketing and the production of contract publications for commercial clients. Yet they all have one powerful attribute in common – the ability to target with precision. More than a third (37 per cent) of all companies involved in the business-to-business information and communication industry are engaged in direct marketing. For half (49 per cent) of these, it is their primary activity – although another 20 per cent are principally magazine publishers. With a turnover of £2bn per annum and a complement of more than 33,000 employees, it ranks alongside the business magazine publishing and electronic and online services as a principal bastion of the business-to-business information and communication industry. Direct marketing is an arena of activity enjoying healthy growth – with revenues rising at an estimated £1m per day over the past year, from a total of under £1.7bn in 2000 to an anticipated figure of more than £2bn in 2001. This represents a current annual rate of increase of 22 per cent (£365m). Some companies seem to be doing particularly well: “We’re showing in excess of 200 per cent growth year on year – and have done so for the last five years… That’s not only in terms of turnover, that’s also in terms of profit” While most (73 per cent) companies are commercially involved in direct mail, this contributes only about 9 per cent of total revenues overall. Nevertheless, certain companies do generate large revenues from direct mail – some 4 per cent receiving more than £5m per annum from this source. The principal revenue generators in this area of activity are, however, database marketing and telemarketing which together contribute almost two-thirds (65 per cent) of sales – although, interestingly, around half of the companies in the sector are not engaged in these particular areas. Not all activity in this arena is focused on the business-to-business marketplace – although for around half of the companies involved this represents the entirety of their activities, and for only a minority does business- to-business marketing represent less than a quarter of total revenue.
  • 33. In line with other sectors of the business-to-business information and communication industry, direct marketing is increasingly embracing electronic delivery forms, though, as elsewhere, these are expected to complement rather than replace traditional delivery channels: “When it comes to targeting with accuracy, it (the internet) is notoriously unreliable on the basis that the average person has three e-mail addresses anyway. Which one is current? Which one is active? Who knows?” Strategic partnerships are becoming increasingly common to facilitate effective routes to market – not only in terms of accessing technical and electronic know-how, but particularly in the case of overseas activity, where, for instance, in the case of direct mail, the intricacies of infrastructures and postal systems require specific, local knowledge. Put bluntly: “Europe, for most organisations, certainly within direct mail, is quite a challenge…It’s difficult enough to get a handle on what we do here, let alone how it works in Spain or Germany or France…Unless you walk in with somebody who knows what the hell they’re doing, then you’re going to come a cropper” Regulation remains a spectre for many in the sector, however – with fears that privacy pressures, particularly in the areas of telemarketing, direct mail and database construction and marketing, will bring sets of rules which will scupper the buoyancy of many areas of direct marketing activity. For almost everyone, self-regulation is the preferred route: ”From my point of view, the only major problem that this industry could have, is enforced regulation by parties who don’t know what the hell they’re doing. Surely it’s far better we regulate ourselves, because we’ll regulate in a way which is good for the industry, but doesn’t impinge commercially” Most companies active in this area anticipate a continuation of the strong growth displayed by direct marketing activity. They point to the widespread and general trend to move marketing spend from above- to below-the-line budgets and to the quantifiable response increasingly required in today’s environment of accountability: “Organisations, when they sit down…and talk about where they’re allocating their budgets: Direct marketing is an integral part of that now. Ten year’s ago, it wasn’t” Directories Directories – both in traditional and electronic forms - have enjoyed considerable success in recent years, as the demand for comprehensive and up-to-date published lists throughout the commercial economy has grown. Thirty-one per cent of companies operational in the UK business-to-business information and communication industry produce business directories. For one in five of these, it is their principal activity. For
  • 34. the majority, however, directories represent an extension to other core delivery methods, especially magazines and journals and online services. It is a sector which contributes almost £1.5bn in revenue, while those involved in the production of directories between them employ over 20,000 – giving a turnover per employee figure of around £75,000. Most companies involved produce only a few business directories – indeed, more than a third (35 per cent) publish just one, with only 15 per cent turning out ten or more. This pattern is also reflected by the size of establishments in this sector: Most are small. A survey by Kingston University in 2000 indicated that no less than 91 per cent of companies active in this sector employ less than 50 people. The vast majority of players in this arena specialise in directories targeted at businesses, although one or two larger directory publishers produce some for the consumer market. While the sale of directories generates the vast majority of revenue in this arena, many publications take advertising to boost income. In fact, nearly all (83 per cent) companies in the sector publish at least one directory which carries advertising. Today, the majority (56 per cent) of directory publishers deliver at least some of their content online – something particularly true of larger companies. Yet less than a third (31 per cent) of publishers do this for all their titles. This is something that seems set to grow, however, with approximately two-thirds (64 per cent) of companies predicting an increase in the number of directories produced online over the next two years.
  • 35. It is perhaps worth comparing this with the findings of the 2000 Kingston University survey, which reveals 84 per cent of companies in this sector reported having a website at that time, while all firms expected to be using the Internet for information purposes within 2001. The survey also indicated that half the companies active in this sector were already embracing ecommerce – a proportion expected to rise to 78 per cent in 2001. In line with other sectors of the business-to-business information and communication industry, business directories’ future is very much bound up with the impact of electronic delivery and UK – and increasingly, world – market fortunes. “If I look at my sector, the drivers of change are globalisation and technology. Most of the things that are challenging this business, both positively and negatively, come out of that” The sector is one which has seen steady growth over the past few years – with revenue from advertising alone doubling in the last decade. It is a pattern which is widely expected to continue: 2001 revenues are predicted to have increased by £120m from £1,344m in 2000 – an increase of some 9 per cent.
  • 36. Mapping the B2B information and communication industry A survey undertaken in 2001 by NOP Business Appendix Summary methodology The research survey adopted a three-pronged approach: • a survey of companies that offer the particular B2B products and services which were in the remit of the project • secondary data – an exercise whereby any performance data from the ‘key players’ in the industry who were not interviewed was added to the survey data • in depth interviews – with key companies to gather some expert opinion on the future health and progression of the industry and add some ‘colour’ to the reporting. The main products/services within the B2B information and communication industry were defined as: • Business to business magazines/professional journals • Business exhibitions • Business directories • Direct marketing (including list rental and database marketing) • Electronic information services including CD Rom, Internet, Intranet services • Business conferences • Newsletters • Catalogues • B2B TV/B2B audio and visual services The survey included companies that: • were not totally B2B dedicated (they may have a consumer element) • provided one or a number of B2B products/services (for instance exhibitions, directories and/or publications) Research was undertaken at an establishment and not a site level. This meant contacting head offices or single sites. Contacts for the survey came from two sources: • head offices/single sites from Business Database • member lists from Business Information Forum organisations After the contacts were loaded the fieldwork began. Apart from a data collection exercise, the survey itself was used for ‘cleaning’ up the list of contacts. This screened data then went into universe estimation. The length of the interview very much depended on how many products/services were offered by any one company. The average length was 24 minutes. Interviewees were very senior managers, either the director of business services, business development managers or MDs. In terms of the structure of the interview, it was largely driven by the need for data on three levels: • Section a – screening questions relating to what products and services were offered by UK operations and the current number of UK employees (mapping) • Section b – current/future turnover and employees (employee growth) in each of the products/services offered (sizing) • Section c – specific questions geared around five of the key product/service areas (magazines, newsletters, directories, exhibitions, and direct marketing). Mainstage fieldwork took place in February and March 2001 (a pilot had taken place in January). The results are based on a total of 415 interviews. Additional information was obtained from a series of in depth interviews with leading executives in different sectors of the industry to probe current key issues. NB: It must be stressed that the data relies on estimation, both from the survey and from secondary research.
  • 37. Appendix 2 Principal sources Mapping the B2B information and communication industry NOP Business May 2001 Business in the information age Department of Trade and Industry Oct 2000 (US) Communications industry forecast Veronis Suhler July 2000 Business-to-business media: Opportunities for growth Roy Greenslade May 2000 Magazine handbook PPA Jan 2000 UK exhibition facts (Vol 12) Exhibition Industry Research Group 2000 The UK business-to-business industry The Centre for InterFirm Comparison Nov 1998 More information Further details can be obtained from members of The Business Information Forum, an informal association of the six principal UK business-to-business information and communication organisations comprising: Association of Exhibition Organisers (AEO) Shelley Radice 113 High Street, Berkhamsted, Herts HP4 2DJ Tel: 01442 873331 Fax: 01442 875551 Direct Marketing Association (DMA) David Robottom Haymarket House, 1 Oxendon Street, London SW1Y 4EE Tel: 020 7321 2525 Fax: 020 7321 0191 Directory & Database Publishers Association (DPA) Rosemary Pettit PO Box 23034, London W6 0RJ Tel: 020 8846 9707 Fax: 0870 168 0552 Exhibition Venues Association (EVA) Bill Richards 115 Harrington Road, London SW8 2HB Tel: 020 7627 8633 Fax: 020 7627 8287 Periodical Publishers Association (PPA) Michael Bortolotti Queens House, 28 Kingsway, London WC2B 6JR Tel: 020 7404 4166 Fax: 020 7404 4167 UK Newsletter & Electronic Publishers Association (UK NEPA) Karen Hindle 1st Floor, Chelsea Reach, 78-89 Lots Road, London SW10 0RN Tel: 020 7376 5060 Fax: 020 7376 5060 Acknowledgements The Business Information Forum is grateful to: The Department of Trade and Industry (DTI)
  • 38. for its financial support of the NOP Business survey Mapping the B2B information and communication industry on which this publication is based. Particular thanks to Dr Guy Standen, Chris Matthews and Susan Moore for their assistance and support. Department of Trade and Industry, 151 Buckingham Palace Road, London SW1W 9SS Tel 020 7215 5000 Fax 020 7215 1370 email: NOP Business for their contribution in producing the Mapping the B2B information and communication industry report . Particular thanks to Judy Morrell, Karen Lane and Danny King. NOP Business, Ludgate House, 245 Blackfriars Road, London SE1 9UL Tel: 020 7890 9181 Fax: 020 7890 9222 email: Peter Dear for compiling and editing this publication. Peter Dear, HFC, Hill Farm House, Burrington, Umberleigh, Devon EX37 9NF Tel 01769 520214 Fax 01769 520214 email Esprit Creative for designing and printing this document. Esprit Creative Ltd, 1 Risborough Street, London SE1 0HF Tel: 020 7620 2556 Fax: 020 7620 2560 email: Stockbyte Images on 19, 26 and 42 courtesy of Stockbyte.