Wednesday, January 30, 2013

3) Evaluating media properties: New Media pros look at legacy titles as starting points for new digital publications

The client list may seem the same as "the database" and it is, of course, related. But it is also different because the client list is a very small subset of the database of prospects.

I find that many publishers do a poor job of understanding what their own current list of advertisers says about their magazine and how the readers look at the title.

A New Media pro that can look at the current list of advertising clients and understand what is going on has a leg on if they end up acquiring the property or its assets. Let me explain:

Take two seemingly identical magazines, with seemingly identical readerships. In one magazine the ads are dominated by one kind of client, while the other has a completely set of advertisers. This happens more often than you might think and is generally caused by the way each publisher is looking at their markets. One might be positioned as a design book, while the other is a construction book – both are reaching the designers, but where one targets software and services, the other is targeting the products that the designer specs into their designs.

Looking a magazine (or website) and seeing a pattern can be helpful in evaluating the potential growth of a property once it becomes digital only. Sometimes a publishers concludes that their market is shrinking and getting out now is a good idea. THEY MAY BE RIGHT (which is something digital folk sometimes have a hard time accepting). But they may also be looking at the market wrong. Matching up that client with the advertising database may be helpful here.

There are many other area where a prospective buyers might want to evaluate a property, but the existing staff is surely an important one. Most shuttered properties have laid off their staffs or moved them to other properties. The availability of talent needs to be assessed and the publisher can always decide to start from scratch. But collective knowledge of a market is a fundamental principal of good B2B publishing.

Yet how many B2B titles, once shuttered, have fallen into the hands of new publishers who think they know their industries, but start their ventures with no one on staff who has either worked directly in the industry or on the trade magazine title in the past.

Before they exited the B2B market in the U.S., RBI uses to recruit editors with a standard recruitment ad. At no point in the ad did the copy mention the industry the B2B magazine was in, or whether experience in the industry they were going to cover mattered. Many B2B editors are moved from book to book, only learning anything about their industries when they attend trade shows. Is this the state of the property on the market? You need to know up front.

It won't surprise many to learn, though, that I care more about the condition of the ad staff. As I used to say, a lot, no problem can not be overcome with a new full page ad. More revenue has a healing effect. It is often the case that when a property is shuttered the editors are let go and the ad staff reassigned. But many times the rep is just as tied to their books as the editors. Even if an ad salesperson is repping multiple books, it is sometimes the case that the shuttered property represented the majority of their revenue. That person may be very open to joining your new digital venture.

Finally, as I told that reader who asked for my advise, I can not overestimate the importance of proper due diligence. The M&A industry depends on buyers doing bad due diligence – don't be a victim. After an initial agreement to buy a property or its assets, set aside enough time before the deal is closed to property evaluate the property further.

Of course, the best due diligence is that which takes place before the offer is extended. But if you don't allow yourself an escape if things are not as they first appeared, then you will be taken to the cleaners.

The best first step is to create a new P&L for your property. What are you really looking at in the next 12 months. The creation of this first P&L will force you to address new issues that may not have come up in the excitement of the purchasing process. I have been lucky enough to have been involved in a number of new acquisitions. But it was the acquisitions we didn't make that were always the best moves. Staring a new P&L for a property that will bleed red ink has prevented many a bad acquisition. Even if the New Media pro is only buying the reader list of a shuttered property, knowing what they really are getting might save them a lot of money, or drive down the ultimate sales price.