Tuesday, January 17, 2012

Tablet publishing will not be immune from hucksters; the low cost of digital publishing will be attractive to 'profile' publishers looking to avoid printing their magazines at all

My first job in the B2B publishing industry was with The McGraw-Hill Companies, known to me as a major publisher of such magazines as Business Week (now owned by Bloomberg) and Engineering News-Record. I always saw them as a giant in the industry, though once I got there I realized that their heart was in the financial services area.

As the publisher of the local building trades newspaper and information service, I quickly learned that the previous publisher had made his revenue numbers mostly by producing special sections called profile issues. The formula was simple: the publisher called a major builder and said that our publication wanted to do a special section just about them. The whole 16 to 32 pages would be dedicated to their company, with stories about their building projects, their personnel, and with a major feature on their chief executive. The catch was that they needed to support the project in three ways: buy the back page ad, agree to buy some reprints of the section, and supply us with a list of their major suppliers and subcontractors.

We would turn around and sell ads to those on the list the company gave us – that was how we would make our numbers.

The whole thing seemed like a scam to me, like blackmail. After all, the sales pitch to the suppliers was that they did business with XYZ Company, and they really should support that company by buying an ad. It was blackmail, wasn't it?
Worse, the previous publisher had used a shady outside contractor to do much of the advertising – someone with a reputation for twisting arms.

My boss at McGraw-Hill thought it would be a good idea to get rid of the outside contractor if only to avoid future trouble. But he, my boss, still thought doing the profiles was a good idea.

At first I was against continuing the profiles but soon both my staff and some customers convinced me that we should continue them. These sections, it turned out, were well-written, and well-received by both the readers and the advertisers. It wasn't really blackmail, it turned out, if we truly were printing up the sections (we were), distributing them to all our readers (we were), and if they had the name of McGraw-Hill behind them (we did). Further, our advertisers felt that they were a good way to advertise since they could show them to other builders, sort of proof that they were well regarded suppliers or contractors.

So we continued the practice, though we eventually started to do other sections that were more general in nature, and less about one company only.

It didn't completely surprise me, years later, to learn that there were other companies doing similar kinds of things, but on a much bigger scale. These companies had built an entire business model around the technique of selling ads from lists supplied by the companies they would write about. These companies employed large phone rooms filled with staffers that called both the companies that would be profiled and the advertisers that would be solicited from the lists.

The sales people who called the big companies would often be called editorial researchers, but they were simply sales people – trained to sell the company on the article idea, and to sell them on the idea that they should hand over lists of the companies they do business with.

You'd think that companies would shy away from handing over those lists, but such is the lure of positive press that many were more than willing to have their partners and clients be bombarded with the calls from the ad sales people.

Sometimes the model would be a bit different in that the editorial itself would be sold, in which case it might be hard to tell the difference between what one would call custom publishing and something else more nefarious.

But what would separate out the legitimate publishers from the scammers was usually whether these magazines would be printed in large numbers and were audited. Very few publishers ever bothered to have an audit firm check their numbers. Further, no matter how many copies the publisher claimed they printed of their titles, usually one a small number (if any) ever made it into print – usually printed outside the U.S. (U.S. printers generally want to get paid within 60 days).

But these magazines also had one other thing in common: they were gorgeous. Well-designed, printed on good paper stock, these magazines were often quite impressive both in looks and size – with folios often well over 200 page, sometimes over 400. It was only by closely reading the magazines did you come to realize that the articles were simply press release material, and that the ads were not from companies you might expect to advertise, like major brands, but from small firms looking to butter up the subjects of the editorial pieces.

A decade ago, when the economy was in better shape, one publisher I am aware of routinely produced monthly issues that exceeded $500,000 in ad revenue, and then turned around and printed and mailed about 5,000 copies of the actual printed magazine. Whether any of these issues were sent to "readers" was hard to tell, but the companies profiled got copies, as did the advertisers, as did future prospects.

For the most part, advertisers didn't complain much, though some resented the strong arm tactics used. There were also lots of ads that never were paid for as, it turns out, many were not authorized. But with so much money coming in the publisher could just chalk up those lost ads to the price of doing business.

You'd think that these publishers would be considered pirayas to the publishing industry and would be outcasts. But industry trade magazine Folio: profiled one of these companies on the cover of an issue and a NYC PE firm had no trouble backing this same company to the tune of millions of dollars. To the PE firms, apparently, one publishing company is no different than another.

Today, the lure of digital publishing has led to at least one of these publishers simply producing digital flipbooks instead of printed copies. It was only a matter of time until we'd start seeing magazines using the profile model producing their own iPad editions.

Guerrero Howe LLC has launched iPad editions for six titles: Green Building & Design, American Builders Quarterly, Hispanic Executive, Advantage Magazine, Canadian Builders Quarterly, and New American Luxury.

Each of these apps are free to download and can be found inside Newsstand. The iPad editions offer portrait layouts, with some articles employing scrolling within stories.

Guerrero Howe LLC calls itself a custom publisher, but the model is pretty much as discussed above: the magazines are unaudited (in fact, the media kits make no mention of circulation levels at all), and complaints about the company are consistent with similar publishers.

But what is missing from the tablet editions currently are the ads. Guerrero Howe, according to their media kits, wants to sell these ads separately for $4500 per page (yep, you read that right), despite that fact that the apps were just released in January.

For other publishers the lure of the iPad will probably mean they might consider launching replica editions (and possibly eliminate print altogether). Since readership is irrelevant in this model, the prestige of being available in the App Store, and inside Newsstand, will convey to potential advertisers a sense of legitimacy that even an audit might not convey.

This option will become more attractive when publisher employing the profile model know that the executives at the center of these articles – and the ad decision makers, as well – will be able to see these magazines on their own tablets. For now, most publishers still need to produce tearsheets and to send out printed magazines to their customers to insure they pay their bills. Eliminating print completely may make this type of business even more profitable, no matter what the stigma attached to it may be.