What Happens to Forbes, Now That Has Been Sold

Earlier this month, I wrote a column for CommProBiz called "What the Selling of Forbes Tells Us about the State of Business Media" that raised some key points about the health of business media, namely:

• Establishing a strong brand is important for readers and advertisers but can be difficult to truly monetize.

• Standalone magazine companies are at a disadvantage to conglomerates that can spread costs and profits across a family of magazines. 

• The value shoring up Forbes is not its free popular website or its steady level of subscribers — but its conference division. 

• Forbes is very creative in finding revenue but not all ways of charging access -- like paywalls (which Forbes does not have) or separate digital subscriptions (which it does) -- are reader friendly. 

Soon afterwards, on July 18, Forbes, which had put itself up for auction in the fall of 2013, announced that it had sold itself for more than $300 million to Integrated Whale Media Investments, a Hong Kong investor group. The asking price had been above $400 million, and the Wall St. Journal had said some "traditional media companies" had offered bids of $200 million but were rebuffed by Forbes. The valuation of Forbes Media is at $475 million, roughly what the family had been asking for.

As part of the sale, Elevation Partners is selling its entire stake. According to the Wall St. Journal, Elevation Partners, which had invested $264 million in 2006, "would recoup substantially all of its investment." Which is to say: Elevation did not make money on owning a portion of Forbes. 

Additionally, "The Forbes family will take some cash out as well, although the precise amount isn't known." Which means the Forbes family has limited its potential liabilities without making much money on the deal.

Meanwhile, here are a few key facts about the business of Forbes from the sale include:

• Forbes's print circulation increased in 2014 to 6.1 million, a record for the magazine and much higher than competitor Fortune (at 3.6 million, down from 3.8 million a year earlier). However, Forbes offered heavily discounted subscription fees that shored up its print circulation.

• Print advertising has continued to drop, declining 11% to 650 pages compared with 2013. (Fortune's ad sales declined 4.7% to 665 pages over the same period.

• Traffic to Forbes's websites increased 17% to 27.7 million unique desktop and mobile visitors last month in the U.S., which makes Forbes the third-largest business and financial news provider online behind Yahoo and Dow Jones.

In my next blog post, I'll address the editorial implications of the sale of Forbes.

Top 7 Things to Understand about Magazines' Lists

If the age of social media and native advertising has taught us anything, it's that people love lists: 

• "15 ways to waste more time on the Internet."
• "10 useless facts that will bore your friends at cocktail parties."
• "10 secrets to reduce procrastination." 

Those aren't real lists but they aren't so far off from native advertising articles (my favorite native ad headline of the day: "Warren Buffett Tells You How to Turn $40 Into $10 Million." Native ads are so prevalent, that The Onion recently launched a spinoff site called Clickhole that serves up faux native ad-like headlines and stories. The main problem is that the blurred line between Clickhole stories and real, unironic native ads.)

No business publication "gets" the importance of lists than Forbes, which researches, compiles and publishes dozens of lists each year, beyond the iconic Forbes 400 of the wealthiest Americans (by which Forbes tends to mean U.S. citizens or residents).

Here's our own list based on Forbes' range of lists.

1. You can never have too many different flavors of lists. In addition to the Forbes 400, Forbes also publishes the Worlds Richest Billionaires issue; "Richest Families in the U.S."; as well as the "Best & Worst Cities for Jobs," "The Best Cities for Business"; "The World's Most Powerful Celebrities" and "The Top Earning Actors" and "The Highest Paid Athletes" and don't forget: "Superheroes of the Celeb 100" and the "Richest Fictional Characters." (Seriously -- Mr. Monopoly ranked #13.) Several lists seem like variations of another list; the most powerful celebs includes top earning actors and athletes.
2. Publishing lists as a slideshow can be great because each click improves the traffic counts on your website. Instead of printing the top 10 of a list on one page, which generates only one click, slides of the top 10 whatevers generates 10 clicks.
3. Lists work best when they are quantifiable, which is why Forbes allocates resources to compile these lists. But there is a lot that can be hard to pin down, even when it comes to net worth. A lot of other lists are subjective, even as they try to apply some framework to the list. For example, Forbes ranks author John Green at 79 on the Most Powerful List, with JK Rowling at 84 -- really? Perhaps it's a nuance of power, but I would think Rowling still has more "power" to get published and movies made than John Green (not to take away from Green) but perhaps Forbes has a different definition of "power."
4. Realize that most rankings are designed to generate a barroom discussion and are not scientific. Most rankings should be taken with a grain of salt. What stars earn each year can be variable, with payouts dependent on sponsorships and multi-album deals. Same for CEOs and stock options.  
5. Even if Forbes provides some quantifiable numbers, there's a lot of guesswork and sometimes those numbers don't really matter. On the "Most Powerful Celebrities" list, which looks at earnings, money rank, press rank and social rank, LeBron James is ranked number 2 (after Beyonce). But King James' scored 19 on the money rank and 22 on the social rank; his highest ranking was the press rank at 9 -- so how can Forbes justify his top-two ranking? Well Forbes adds a "cultural figure," which is not clearly defined.
6. There are always questionable selections. Some of the stars on the Most Powerful list certainly deserve to be there -- Beyonce, LeBron, Dr. Dre, Oprah, Ellen, Jay Z, people known by their first names. But some of the rankings are questionable: Does Floyd Mayweather belong at #7? Roger Federer at #16, the Eagles at #36, One Direction at #28, Justin Bieber at #33? That doesn't include some folks I haven't heard of (because that may say more about me than them). Then there are celebs who don't seem particularly powerful like Avicci (#47), Kate Upton (#94), Kaley Cuoco (#99) and therefore don't belong on the list at all.
7. The teams that compile these lists do not always read the rest of the magazine -- and vice versa. On the very next page of the printed edition, Forbes reported that Michael Jordan is now a billionaire.  Here's the news blurb in its entirety from Forbes' "Scorecard" column: "Jordan never retired. Still earning $90 million a year selling shoes, he ups his stake in the NBA Charlotte Hornets and becomes the first NBA star worth a billion." If I were compiling a list of "Most Powerful Celebrities," I would have included Michael Jordan.

I don't mean to pick on Forbes or that particular list. I like lists as much as the next person but at some point, most are subjective, and that's okay. Cases in point: People's "Most Beautiful" and "Sexiest Man Alive" lists, various magazine's Best (and Worst) Dressed lists, and hundreds more. I think it is helpful to understand how the lists are compiled and why publications rely on them as long as readers take most of them with a grain of salt.

What the Selling of Forbes Tells Us about the State of Business Media (Part I)

According to the New York Times media columnist David Carr, Forbes will be sold to an international company sometime in the next few months. You can read his article, "Foreign Buyers Eying Forbes Magazine, a Chronicler of the World’s Wealthiest." 

But here are some lessons learned, gleaned from the article and our experience:

• Standalone magazine companies are at a disadvantage to conglomerates that can spread costs and profits across a family of magazines, according to Carr. For the most part Carr is right -- but Forbes actually publishes several other titles -- ForbesLife, Forbes Europe, Forbes Asia as well as 29 international editions. (It's probably not a good time to purchase advertising in Forbes Russia, Forbes Ukraine.) Forbes also runs a very popular website (more on that below) and RealClearPolitics.com family of website. Our point is: it's not just publishing a range of publications -- it's publishing magazines that reach a range of readers. After all, if you put all your eggs in one high-value Birken bag, when advertisers pull back on your demographic, you could get hit 29 times.
• Sometimes selling isn't a matter of making money but in preventing additional losses. The estimated price that Forbes may sell is $250 million (though some say that estimate is low). But Elevation Partners paid $264 million for a minority stake -- so their portion is certainly underwater. Carr says the Forbes family is unlikely to make money from the sale. The question becomes: why sell? Seems clear that the reason is that it continues to be tough for media companies to build value.
• The value shoring up Forbes is not its popular website -- but its conference division. The publication is probably generating tons of revenue from its growing number of conferences, including luxury cruises offering insights and access to top stock pickers. Conferences have re-emerged for Forbes and other publishers as a profit generation tool. Conferences may have been a difference in the valuation of BusinessWeek for $5 million (and the assumption of debt) when it was acquired by Bloomberg. The same for Newsweek, which had no conferences and was sold for $1 and the assumption of debt. The bottom line lesson: perhaps leverage a successful conference series and turn that into a multimedia property (which is what TED is doing). 
• Forbes could generate more money by establishing a paywall around its content. Carr makes the point that Carr makes the point that others -- including the Times and Wall St. Journal -- have successfully boosted revenue by establishing paywalls around their content. Yet Forbes.com aggressively promotes the website in a bid to generate views that can translate into higher revenue. It has been very successful in developing a community of columnists (many of them people trying to position themselves as thought leaders). The bottom line here: there's still no single, accepted way to generate sustainable revenue online -- neither free access (and higher revenue from advertisers) or paywalls (and subscription fees from access) are really replacing print advertising revenue that will never return to pre-mobile/digital levels.
• Circulation is holding steady but it may not generate steady revenue. Last year, Forbes was offering print subscriptions for $10 -- that's a steep discount from prior years. Keeping circulation high is important to advertisers (and the amounts you can charge them) but discounting clearly hurts profits.
• Forbes is very creative in finding revenue. It's been a leader in pushing advertorials. It can sometimes feel like a 1/5th of the magazine is devoted to advertorials. But more significantly, Forbes is a pioneer in native advertising (though I don't think that's the term they use) through its BrandVoice section on the website and in the magazine. Here's how Forbes describes it: "Forbes BrandVoice™ is an integrated and by-invitation content-sharing platform ...(that) is an innovative approach to integrating marketers’ content with Forbes’ editorial and users’ content — allowing marketers to demonstrate their thought leadership on the Forbes platform using the same tools as content creators." What does it take to receive an invitation to be a Forbes BrandVoice partner? We've heard estimates of $800,000 in annual advertising just to get to the point of discussing BrandVoice. (In other words, BrandVoice spending is on top of a company's annual advertising buy.)
• Not all ways of charging access are reader friendly. While Forbes doesn't charge to access its website, it does charge to access its content via your iPad. If you're already a subscriber to the print edition, Forbes charges $9.95 for an annual iPad subscription.  When you consider Forbes' $10 print subscriptions price, charging $9.95 to access the iPad version is like a 100% tax increase.

Carr makes the point that it's ironic that a magazine with a strong heritage of America-first is now being sold to an international company. I agree -- but I also think that the sale (likely to an Asian company) makes sense because Forbes is more likely to be seen as a trophy property for companies based in Asia than anywhere else in the world.

What Carr doesn't discuss or speculate is how an international owner will change Forbes. For that, stay tuned! You can check out a subsequent look at the selling of Forbes here. 

Wall St. Journal & Boston Globe Validate Biotech Bubble Trend

The validation is coming in fast and furious regarding our biotech bubble prediction. We said:

Stock market and the biotech bubble. 2014 will be marked by concerns about the health of the stock market. Of the different sectors, rising biotech shares will generate growing concern of a biotech bubble. That concern will affect all parts of the industry, especially startups as VCs start getting nervous about their portfolios. Implications: There’s not much publicly held companies can do – except, as a Forbes reporter once told us, have you company “do better…and boost its share price.” We just think it’s important to understand how editors allocate their resources (reporters’ time and the outlets’ news hole).

The Wall St. Journal validated that with an article, "Hot New Biotech Knows Roller-Coaster Feeling" and the Boston Globe validated it with "After boom, 2014 repeat for biotech is uncertain."

We know that talking about bubbles can take on a certain air on inevitability, becoming a self-fulfilling prophecy. We hope we're wrong in this case.

More Validation from NY Times about Privacy and Security

"Stop Asking Me for My Email Address" and "Tech Security Upstarts Enter Fray" by Nicole Perlroth (@nicoleperlroth) at the New York Times are just two more examples of coverage that validate our predictions about ongoing interest in privacy and online security. 

Apparently the security market for software itself will generate $67 billion.

These are two themes that will continue to generate coverage over the rest of the decade. As self-driving cars (SDC) get ready for prime time (is it time to retire that phrase? -- probably), expect privacy and security to focus on new issues related to cars, like in this recent Times article: "The Next Data Privacy Battle May Be Waged Inside Your Car." There will be privacy reporters concerned about the ability to track other people's cars -- whether you're joining them at an event and want to know where it is or when they're getting their or if you're stalking them -- and security reporters concerned about the ability to hack and take over someone else's car. 

Was This the CES that CES Needed to Be?

In our annual forecast of marketing trends, we said this about CES:

The Consumer Electronics Show (CES) has been eclipsed by South By Southwest (SXSW) but both need a breakout show in 2014. Last year’s CES and SXSW were not as successful in generating buzz as in prior years. The problem with the last two years of CES has been its focus on the latest TVs – at a time when people are more likely watching TV on their tablets than on a “TV set.” (Also Apple does not participate in CES.)

Based on articles like Nick Bilton's in the New York Times: "Disruptions: At CES, a Big Stage for Big Dreams but Fewer Surprises," that CES 2014 did not quite deliver on the excitement and buzz. Here's Bilton's recap of CES 2014:

But in some ways, this year’s show was a far cry from the shows of old. CES has been around since 1967 (it was held in Manhattan until the late 1970s), and over the years it has been the place to spot some real innovations. In 1970, the videocassette recorder was introduced at CES. In 1981, the compact disc player had its debut there. High-definition TV was unveiled in 1998, the Microsoft Xbox in 2001.

This year’s crop of products seemed a bit underwhelming by comparison.

Ouch if you're CES.

For companies considering CES 2015 to launch new products, you may want to think of a different strategy. This is at least the second consecutive boring CES (which we predicted last year, too). For the news programs that are thinking about sending their weathercasters to the show next year, you might encounter turbulence because highlighting cool, must-have tech is apparently getting harder. 

The one exception that could help next year's CES (as it did this year's): wearable tech and devices that are part of the Internet of Things. (I know we sound self-aggrandizing here but we are trying to track which predictions we got right or wrong, but we predicted wearable tech and the Internet of Things to be big in 2014. Our usual tone is not so self-congratulatory.)

Bonus Prediction for 2014: Olympic Coverage

We left out one topic in our list of general news stories in 2014. It's the 2014 Sochi Olympics, which run from Feb. 6th through Feb. 23rd.

There will, of course, be a lot of coverage building up to the Olympics, including stories about somewhat obscure sports like curling (see "Curling: How Hard Can It Be?" in the Wall St. Journal). There will also be a lot of ads featuring Olympic athletes (including from employers showing how great they are to work for -- especially if you're an Olympic athlete) or Olympic-themed story lines. After all, the Olympics aren't just about world-class athletics and peaceful competition among countries. The games are also a world-class marketing opportunity.

We can also expect a lot of coverage of Russia, including its anti-gay laws, the security protecting the Olympic village, and the state of Russia today, its economy, its freedoms, and more about Vladimir Putin.

We probably have no excuse for omitting the Olympics -- except that we expect coverage to end on Feb. 24th.

Let us know if you think we missed anything else.