In the Move From Free to Fee, Where Lies B2B?

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In the wild and woolly days of the dot-com boom, almost all Web-based content business models were built on advertising. As free-flowing venture capital or profits from print publications provided fuel for publishers, online properties organized for growth and assumed profits would inevitably follow at a later date. However, most advertising-based online business suffered dramatically with the dot-com bust. Industry pundits began to assume content sites had to (gasp!) charge for content. In recent years, consumer sites have introduced fee-based content and many others began operating with successful mixed-revenue models. Typically with B2C, much of the fresh content is free and includes ads, but readers are charged for archived data. Recently, The New York Times Digital announced not only major traffic increases, but also a healthy profit for the division. Even Slate showed a profit in the first quarter of 2003. Okay that's all well and good for B2C, but what about business-to-business publishers and their online properties?

Brief History of B2B Web Sites
"In 1996, when we did a review of B2B Web sites, about 20% of our members had sites and about zero had revenue," says Gordon Hughes, president and CEO of American Business Media, the industry association for B2B information providers. "Starting in 1997, there were some companies making money with their Web sites and in 1999, we began to represent more Web sites than magazines. By 2000, there was about $2 billion in ad revenue from B2B sites."

Today, American Business Media's 226 members own over 1,200 print publications and 1,350 B2B Web sites. Hughes explains that 80% of members have controlled circulation models with their print publications. However, on the Web, there tends to be a mixed-model for B2B sites including advertising, sponsorship, newsletters, and fee-based revenue sources. "This year, we expect 20% growth in B2B Web site revenues. But we're just scratching the surface of the potential for Internet delivery of B2B content. Future years will bring more, but it's a ways off," Hughes says.

There's no doubt that B2B information is valuable for readers. In a research study for American Business Media prepared by Yankelovich Partners and Harris Interactive, executives deemed B2B magazines and Web sites the best means to obtain the information that allows them to do their job better. Among executives interviewed in the past month, 83% have read at least one B2B magazine and 68% have visited at least one B2B Web site. Average B2B Web site visitors spend nearly three hours visiting sites each week and visit over five sites per month.

So Who's Making Money And How?
"Publishers were hit hard with free sites, which left them wondering about business models for the future," explains Janet Cleary, director and lead analyst for Outsell, a research and advisory firm that focuses on the information content industry. She describes B2B publishers grappling with multiple revenue streams such as print, online syndication, and advertising-supported Web sites. "Trade publishers have traditionally gone through the aggregators online. Now we're seeing that they want to go directly to their users including integration with large organizations' corporate portals."

Outside of specialized Scientific, Technical, and Medical (STM) fields where paid content has always been the norm, a consistent theme emerges with B2B publishers as they experiment with different models. When an audience is well-defined, free sites supported by advertising (including banners and buttons) and sponsorships (of a particular section on a site) works for B2B.

"We're operating at profitability with an advertising model," says Mike Azzara, director of content development for the business technology group of CMP. Azzara is responsible for the TechWeb network including InformationWeek.com, NetworkComputing. com, and others. "Our business organizes content in a way more conducive to how the audience uses the Web rather than how people use them in print. We've had some tough years like everyone, but this year things are going well. The advertising model is working very well for us, but we also have partnerships and sponsorships with good secondary revenue streams."

The availability of free, advertising- and sponsor-supported content on B2B sites clearly continues to be the most common approach today. Mitch Rouda, president of Hanley-Wood Interactive, the online division of the leading B2B media company serving the housing and construction industry says: "I think there's a demonstrable trend for B2B sites not to be fee-based. The primary model in B2B print publications is controlled circulation. That's the same online."

Jim Louderback, vice president and editor-in-chief for Internet at Ziff Davis Media, a special interest media company focused on the technology and game markets, agrees that B2B sites are likely to remain free. "B2B has a lot of controlled circulation publications that are worth a lot for advertisers. It's the same online: our sites appeal to advertisers because we have a really valuable audience that advertisers want to support. We also have a bunch of email newsletters, but almost all are free. For example, the eWeek newsletters are used by a lot of people to quickly decide what stories are important and then link back to the site."

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