September 2003

Banking on a Brand
 
In the midst of the worst tech recession in history, Hannover Fairs takes a huge gamble in launching CeBIT America
 
By Danica Vasos

 The timing couldn’t have been better — or worse — depending on how you look at it. In late 2001 and early 2002, the trade show industry was reeling from dramatic declines in attendance following the September 11th terrorist attacks. The U.S. economy hit rock bottom and was beginning a slow ascent, although few could feel its effect. The tech industry was experiencing the worst recession in its history, as businesses cut spending to make up for loses when revenues fell short of projections.

The perfect time to launch an IT show? For Hannover Fairs USA Inc., the U.S. subsidiary of Hannover, Germany’s Deutsche Messe AG, the long-term reward of establishing its global brand in the American market outweighed the risk of missing the opportunity to slide into the IT show space while tech powerhouses — like COMDEX, Internet World and PC Expo — were struggling to retain market share.

A show spin-off is risky in today’s environment. And this isn’t just any show — it’s the North American premiere of the world’s largest show, CeBIT Hannover, which runs for eight days, draws 562,000 attendees and 6,526 exhibiting companies, covering 3.82 million net square feet. Not exactly easy to reproduce.

CeBIT America, which debuted June 18-20 at the Jacob K. Javits Center in New York City, drew 12,300 attendees and 360 exhibitors covering 102,000 net square feet. While the show fell short of original expectations, it posted respectable numbers for a launch — by anyone’s standards.

Will the show succeed or fail? It’s hard to say at this point. But there’s no doubt that Hannover Fairs is committed to finding out. The company hired a team of seasoned IT show professionals, opened an office in New York City and spent more than $1 million promoting the show. With profits not expected until 2005, Hannover Fairs is taking a huge gamble on launching a horizontal B2B tech show. The well-known brand name helped convince exhibitors to participate this year, but will it be enough for the show to survive in the future?

Identifying the market
The U.S. market seemed like a natural extension for the German show, and the company had been analyzing it for a number of years. With such a strong brand, Deutsche Messe has successfully launched spin-off shows in Asia (Shanghai, China), Australia (Sydney) and Bilisim Eurasia (Istanbul, Turkey) within the last five years.
“Instead of competing with CeBIT Hannover, the spin-off events help enhance the German show,” says Mark Dineen, Managing Director, who joined Hannover Fairs in March 2002 with a 16-year history in the exhibition industry, including PC Expo (now known as TechXNY). The company has found that exhibitors who participate in spin-off events often increase their exhibit space in the German show. For example, after three years in the Asian market, the China pavilion at CeBIT Hannover has tripled its sales.
Each spin-off event reflects the needs of the technology industry in that market. “We aren’t trying to duplicate the European show,” says Dineen. “The goal is to bring to market, not transplant the existing model.” Beyond the name and the industry, there are probably more differences than similarities.

To identify the needs for the American market, they asked potential exhibitors: What do you want from a show? If you could build a show, how would you do it? In addition, Hannover analyzed all the shows in which these companies exhibit.
“Exhibitors told us they wanted an East Coast show for the B2B tech sector, offering highly qualified buyers,” says Dineen.

Exhibitors wanted IT buyers from companies with at least 1,000 employees from all of the major industries, including automotive and engineering; banking, insurance and finance; education; government; information and communications technology; hospitality; manufacturing; media and advertising; pharmaceutical and healthcare; and retail.

Initially, they got buy-in from Microsoft, HP, IBM and a handful of other tech heavyweights.

Go or no-go decision
With such a specific, yet broad, audience in mind, show management thought they could fill a niche with a new show. There are lots of tech shows in the market, but none with this specific focus. The show was to be positioned as “Critical solutions for the enterprise. Strictly business-to-business.”

And with other tech shows losing ground, Hannover saw it as the perfect time to launch in the U.S. market. “We wanted to get in under the turnaround,” says Dineen. “We wanted to start the branding process in the United States.”

Management had been in talks with Javits for several months, but in February 2002, the facility called to offer the show dates in June. Javits was a critical piece of the pie that fell into place, not to mention the fact that they would be taking the slot of TechXNY, usually held in June but bumped to September, which would naturally give CeBIT a competitive advantage because of the earlier timing.

In addition, many forecasters were predicting the economic and tech recession would be over by 2003.

Then, just one day before the official launch was to be announced in New York City, Key3Media (now Medialive Inc.) sent letters to Hannover, Deutsche Messe, Javits and others involved in the show claiming that a lawsuit would be filed against them because of a violation of a non-compete contract by former Key3 employees who had been planning to head up CeBIT America’s launch team.

With the threat of a lawsuit hanging over its head, Hannover was forced to regroup. Dineen was named Managing Director, and CeBIT America was officially announced in March 2002 at CeBIT Hannover in Germany. The company forecasted 40,000 attendees and 500 exhibitors for the show’s debut.

Selling a new show
Management set the price per square foot at $40, compared with $55 for TechXNY and $60 for COMDEX. “We wanted to set it low enough vs. our competitors, but not too low because we don’t raise our prices very often,” says Dineen. Cost per square foot will not increase in 2004.

“The CeBIT brand name got us in the door, but it was still a very hard sell in this environment,” says Kathy Wilson, Vice President, Sales, who worked for CMP Media for eight years, mostly in publishing sales, but also in exhibit sales for PCExpo for about nine months before joining Hannover.

“On the tech side, trade shows are the first to go — even before print,” says Dineen. “Print is national, while trade shows are seen as regional.”

To sell the new show, Wilson spent the summer of 2002 hiring six reps: three reps for key national accounts and three for regional accounts. The team began making sales calls — in person and on the phone — in September 2002. The exhibitor database was developed from the other CeBIT shows. The exhibitor prospectus was printed and mailed in November 2002.

Although they had verbal commitments from about 15 exhibitors before the show was officially launched, the first major exhibitor, HP, didn’t officially sign a contract until December 2002. And by February, the show had only a handful of committed exhibitors.
“At that time, our German owners came to the office and told us we had until the end of March to sign up 200 exhibitors,” says Wilson. “It was a key turning point. It really fired up the staff, and we hit the goal.”

The No. 1 objection from exhibitors: “Why should I gamble on a first-year show, with no proof and no history,” according to Wilson. “We stuck to our story — focusing strictly on B2B and highly qualified attendees.”

Acquiring attendees
“The CeBIT brand helped us on the exhibits side. But not many attendees were familiar with the name,” says Bill Sell, who joined Hannover in August 2002 as Vice President, Brand and Content Development. (Key3 filed suit against Sell in September 2002, claiming that Sell violated his non-compete. The lawsuit is still pending, but no suits have been filed against the other parties involved.)

Building a strong database was key, given the highly targeted buyer that exhibitors were promised. While the exhibitor database was deep, CeBIT America started at zero when it came to attendance. And it quickly became apparent that qualifying by corporations of more than 1,000 employees would not bring in the attendance they had hoped for. The number was dropped to 100 or more employees.

Sell focused on developing partnerships for content and building databases. One of the first key partnerships was with CNET Networks, a well-known online publisher. CNET developed an extensive conference program. In addition, CeBIT had access to about 500,000 CNET subscribers, qualified by professional titles in information and communications technology (ICT) and/or ICT buyer potential; their company profile of 100 or more employees; and their vertical market industry.

CeBIT also partnered with ZDNet, Builder.com, Network World, The Gartner Group, Wall Street Technology Association, Bear Stearns, NY eComm, Tech Corps. and Linux International on programming. “A partnership is a success if we get one more attendee or one more exhibitor or one more journalist,” says Sell.

In addition, Sell invited leading Fortune 500 companies to hold meetings in conjunction with the show. They would receive a fully equipped meeting room and conference program discounts. Only one company, Pfizer, took them up on the offer. The company had 58 employees at the meeting who attended the show. “Next year, we want to have deeper engagement with the vertical markets,” says Sell.

Like most other shows this year, attendees were slow to register. “In the last three weeks, attendance tripled,” says Sell. For next year’s show, they’ll start with a database of 40,000 attendees and prospects, compiled from their efforts this year.

Lessons learned
“There was simply too much content,” says Dineen. “We can’t be all things to all people.” During one time slot, there were more than a dozen sessions running concurrently, and about 65 sessions over two days of conference programming. Next year, they’ll decrease the number of sessions.

Also, more of the marketing budget will be spent on direct mail, and less on e-mail, says Dineen. “Even though this is a tech industry, prospects often didn’t open e-mails because they get so many. The first impression is lost if they never open the e-mail.”
What worked? “The audience quality was good, even though it wasn’t big,” says Dineen. Most exhibitors were pleased with the customers they saw on the floor, but they still complained there weren’t enough.

“The people who stopped at our booth were the right people,” says Roxanne Jurtschenko, Director of Strategic Communications and Marketing for Casio Inc. “But we were disappointed in the volume of traffic.”

The press coverage was very good for a first-time event. Unfortunately, few exhibitors were launching new products. That will definitely be a key area for management to focus on next year.

What’s ahead?
In 2004, the Computer Event Marketing Association (CEMA) will head up the CeBIT America advisory board. “This marks the first time an independent third-party association has been chosen to lead the advisory board of a commercial industry forum,” says Dineen. The 15-member board will work with show management to define event program plans, structure and content, as well as have voting input into all aspects of the show’s structure moving forward. The Hannover show has backing from a similar German association, and it has helped the show grow tremendously over its 20-year history.

But CeBIT America will face stiff competition from COMDEX, which has launched a $1 million advertising campaign as its owner emerges from bankruptcy. And management is sure to be closely watching the turnout at TechXNY, which will be held this month in New York, and the Computer Digital Expo, the new Jupitermedia show that’s scheduled for October.

The good news: Business spending on high-tech equipment and software has risen for five consecutive quarters, up 11.8 percent during that period, according to Fortune magazine.

Most experts would agree the industry can’t support all these shows, and only a few will emerge when the dust settles. Will CeBIT America be one of them? That depends on its performance — and profitability.

“The initial start-up costs were high,” says Dineen. “The company doesn’t expect to make money this year or next. But they do by the third year.” Where do they want to be in five years? “Right now, the goal is 400,000 net square feet and 50,000 attendees,” says Dineen.

Danica Vasos is Editor of EXPO. She can reached at 913-344-1303 or e-mail:dvasos@ascendmedia.com