November/December 2006
B2B MEDIA Trends & Forecast

Annual report predicts business-to-business magazines, not trade shows, will lose marketshare from gains by e-media

By Kelly Lanigan

While spending increased in all three business-to-business media sectors — which includes magazines, trade shows and electronic media — e-media posted the highest gain and is expected to reach $2.4 billion in 2006 and expand at a compounded annual growth rate (CAGR) of 21.4 percent from 2006 to 2010, according to the Veronis Suhler Stevenson (VSS) Communications Industry Forecast 2006-2010. Spending on trade shows, which has been outpacing b-to-b magazine spending since the beginning of the decade, is forecasted to surpass magazine spending by 2009.

E-media spending rose 27 percent to $1.87 billion in 2005. Trade show spending increased 6.3 percent to $9.71 billion in 2005, while b-to-b magazine spending increased 4 percent to $10.7 billion in 2005. B-to-b magazine and trade show spending is expected to continue to increase by single digits this year, but e-media spending is expected to continue its exceptional growth at 28.1 percent in 2006.

From 2000 to 2005, U.S. spending on b-to-b magazines is down, posting a CAGR of -4.3 percent, and spending on trade shows has remained relatively flat, growing 1.6 percent during the five-year period. However, e-media has increased at a CAGR of 28 percent from 2000 to 2005. E-media, which made up only 2.4 percent of the b-to-b market in 2000, accounted for 8.4 percent of b-to-b media spending in 2005 and is expected to gain even more marketshare from 2006 to 2010. But the good news is the annual report predicts b-to-b magazines, not trade shows, will lose marketshare from gains by e-media.

Trade show forecast
After spending decreases in 2001 and 2002, trade shows and exhibitions are continuing to post spending increases. The VSS forecast attributes the 6.3 percent growth in spending (totaling $9.71 billion) in 2005 to events in the healthcare, retail sports, travel and entertainment, construction, retail and home furnishing industries.

Fees, sponsorship and advertising at trade shows increased 7.7 percent to $2.18 billion in 2005. VSS credits the increase to integrated media, as exhibitors are spending money on show Web sites, trade show dailies and other ancillary media.

Exhibit space increased for the second consecutive year, up 3.2 percent to 383.4 million square feet in 2005, and the average price per square foot rose 2.6 percent to $19.64. The rate increases helped drive the 5.8 percent increase in total spending on exhibit space, bringing the total to $7.53 billion in 2005.

The growth of spending on exhibit space demonstrates that b-to-b marketers value face-to-face marketing despite the growing presence of voicemail, e-mail and other electronic communication, according to the forecast.

Large trade show producers reported growth in 2005, with Advanstar and VNU both reporting double-digit growth for their largest trade shows. As a result of raising prices, the for-profit companies that run retail sports, travel and entertainment trade shows saw their revenues growing faster than square footage. However, the healthcare sector had difficulty raising its price per square foot.

Trade show spending growth was slowed somewhat in 2005 by Hurricane Katrina, according to the forecast. Eleven of the top 200 annual trade shows are held in New Orleans, six of which were scheduled between September and December 2005.

Trade shows face a degree of uncertainty due to possible events that could restrict travel, and new trade show formats could pose a challenge to traditional events. For example, new collaborated market events connect buyers and sellers in a smaller room than trade show exhibit halls and offer one-on-one meetings. But the growth in the number of trade show facilities will increase supply and help keep exhibit hall rental rates down and margins up, according to the forecast.

Trade show spending is forecasted to increase 6.2 percent to $10.31 billion in 2006 and grow at 5.8 percent CAGR from 2005-2010. The projected $12.13 billion spent on trade shows will outpace b-to-b magazine spending — projected at $11.97 billion — in 2009, for the first time in history.

E-media forecast
As a result of relatively low prices, lead-generation opportunities and the ability to measure ROI, e-media spending increased by 27 percent to $1.87 billion in 2005 after 25.9 percent growth in 2004. Not surprisingly, e-media, which accounts for the smallest marketshare among b-to-b categories at 8.4 percent in 2005, is increasing at a much faster rate than trade shows and b-to-b magazines.

In 2006, e-media spending is expected to increase 28 percent to $2.4 billion, bringing its marketshare to 10.1 percent. With a CAGR of 21.4 percent from 2005 to 2010, e-media is expected to account for 16.3 percent of the b-to-b market by 2010.

E-media advertising is expected to generate more revenue than e-media content. E-media advertising is forecast to rise to $1.95 billion in 2006 and will grow at a CAGR of 20.7 percent to $3.94 billion in 2010. At the same time, e-media content will reach $445 million in 2006 and rise at a CAGR of 24.2 percent to $982 million in 2010.

With the success of e-media, many magazines are turning to a digital format. Some are replicating their print content for the Web, while others are being designed exclusively for Internet readers because printing, paper and postage costs are eliminated with online readership. Most e-media companies are generating profits from a combination of controlled circulation, advertising and paid reader subscriptions.

B-to-b magazine forecast
Although b-to-b magazine spending increased by 4 percent to $10.70 billion in 2005, it represents the smallest increase of the three sectors. Contributing to the increase, advertising spending increased 5 percent to $8.79 billion in 2005 — the fastest growth in five years.

Advertising spending was driven by growth in the business, banking, insurance, financial and legal, media and entertainment, and architecture, engineering and building categories. Health and life sciences also fared well, posting a 5.5 percent increase in 2005 to $883 million in spending. The architecture, engineering and construction category increased 7.2 percent to $667 million in 2005 and is expected to continue to grow 7.8 percent in 2006.

Energy and natural resources advertising grew 10.9 percent to $156 million in 2005, due in part to high oil prices and corporate profits, according to the forecast. The category is expected to increase at a CAGR of 8.5 percent from 2005 to 2010.

Only four categories — retail, electronic engineering and manufacturing, transportation, logistics and aviation, and IT and telecom — posted declines in b-to-b magazine spending. Information technology and communications generated $1.24 billion in advertising spending, down 5.6 percent. The category is expected to continue declines in 2006.

The telecommunications sector is expected to be hit the hardest in 2006 as a result of SBC Communications’ purchase of AT&T Corp. and Sprint’s acquisition of Nextel. While the dot-com crash contributed to the decline in print advertising in this category, the continued movement of marketing dollars to e-media is also to blame.

Overall b-to-b magazine spending growth is expected to slow to 2.6 percent to $10.98 billion in 2006. Total magazine expenditures are projected to grow at a CAGR of 2.9 percent to $12.36 billion from 2005 to 2010, after posting a -4.3 percent CAGR from 2000 to 2005. Advertising spending is forecasted to rebound from its 2000 to 2005 slide, with a 3.8 percent CAGR from 2005 to 2010.

B-to-b media overall
Overall b-to-b media spending completed its third consecutive year of growth, increasing 6.6 percent in 2005 to $22.29 billion, compared with a 5.2 percent increase in 2004.
B-to-b spending is expected to top nominal GDP growth for the second year, with an increase of 6.3 percent to $23.69 billion in 2006. While growth and GDP expansion are forecasted to remain in line, growth will be slower than in past recovery and expansion periods due to the industry’s transition to online search and increased competition from alternative media.

To order a copy of the forecast, call (800) 935-4990 or visit www.vss.com.

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