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The Internet casualties continue to mount. The Net marketing frenzy that plumped up New Economy publications, such as Business 2.0, The Industry Standard, Red Herring, and Upside into meaty tomes, has fizzled in the past year. Now, much like the market they cover, it's time for a shake out.
The first in line appears to be Business 2.0. The 2-year-old magazine's publisher, Imagine Media, is negotiating to sell the publication to AOL Time Warner, according to three sources close to the proposed deal. The acquisition could be inked as early as next week, BusinessWeek Online has learned, but it's unlikely AOL will meet Imagine's asking price in the neighborhood of $50 million, say the sources.
If the deal happens, Business 2.0 would likely be merged with Fortune spinoff eCompanyNow, with the combined entity taking the Business 2.0 moniker, say the sources. Officials at AOL Time Warner declined to comment on the possible deal.
INCREDIBLE SHRINKING ADS. Imagine, a wholly owned subsidiary of UK-based The Future Network, isn't alone in seeking a buyer for its New Economy title. In recent months, Red Herring Communications has shopped its namesake to Ziff Davis Media Inc., while Upside Media Inc. has discussed selling Upside to CMP Media Inc., say sources close to both negotiations. Both potential deals have cooled off, according to the sources, leaving the future directions of the publications uncertain. The frenzy of acquisition talks comes on the heels of Gruner+Jahr USA's December acquisition of Mortimer Zuckerman's Fast Company, which sold for $342 million.
Why the sudden hankering to sell? An advertising slowdown has thinned magazines across the board, including general business titles like BusinessWeek and Forbes. New Economy publications, however, have been hit especially hard. Ad pages at Business 2.0, The Industry Standard, Red Herring, and Upside, for instance, have dwindled between 45% and 65% so far this year, according to researcher Adscope Inc. "The overnight success of these publications was as anomalous as the Internet bubble itself," says Sam Whitmore, editor of media-analysis company MediaSurvey.com.
The magazines' struggles, however, run deeper than the relationship between media and the particular market they cover. Sure, most of these New Economy publications relied heavily on dot-coms, whose advertising budgets withered in the past year. But many of these publications exacerbated their woes with key mistakes, such as failing to build up systems and processes for a tougher selling environment.
FISH OUT OF WATER. According to a source close to Red Herring, for instance, the magazine didn't put into place a sophisticated sales-forecasting system during its 2000 boom year, when monthly issues regularly topped 400 pages. "Salespeople were making $300,000 a year, sitting at their desks and taking orders," says the source. "They didn't know how to get out and sell when things got tough."
Now, these publications are staffing down as quickly as they staffed up in 2000. On May 17, Red Herring laid off 20% of its staff, or 54 employees. The Industry Standard and Upside have also trimmed their staffs significantly in recent months.
Even with the cost-cutting, it's unlikely all of these publications will survive. "By the end of the year, Upside and Business 2.0 will be gone...and Red Herring will be a walking dead thing," predicts MediaSurvey's Whitmore. As for the survivors, they may have to temper their ambitions. "They'll have to reconcile themselves with being niche publications vs. broad business publications," says Bill Howard, senior VP of global sales and marketing at CMP Media. Certainly, it's a far cry from the meaty Internet tomes of yesteryear.
By Ben Elgin in San Mateo, Calif., with Tom Lowry in New York Edited by Douglas Harbrecht
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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