Forbes Elevates Itself with High-Flying Investors
Important Details: As publishing revenues flatline, investors are looking for new leadership. Leadership that promises and seems capable of growing revenue and seeing the Internet more as an opportunity than a threat. Leadership that may not come from traditional publishing ranks.
Still, Forbes’ announcement that it was bringing in outside investment stirred many people. The company looked way outside publishing to…Bono, a musical genius with enough star power to get the world’s elected leaders to focus their attention, albeit briefly, on world poverty. His U2 has brought music, principle, and marketing to a new level; witness the U2 branded iPod.
Bono is one of six principals in the private equity group Elevation Partners, and Elevation is being brought into the legendary Forbes fold not just for its money. Listen to the words of company president Steve Forbes, a man not known for his lack of self-esteem: "No one is the master of their own universe. …and Elevation understands technology, media and print. They are not just a source of capital; they are a source of insight.”
Certainly, the sale can be seen simply as a way to resolve, at least for a while, long-standing Forbes family tensions that have grown since the death of patriarch Malcolm Forbes. Still, "source of insight" sticks in your mind.
So, clearly we have something new in the Forbes announcement that Elevation Partners is taking about 40 percent of a new company, Forbes Media, which includes Forbes Magazine, Forbes.com, and smaller publishing properties. Elevation, a two-year-old company that has raised a pool of $1.9 billion for investment, is paying between $250 million and $300 million for the stake.
The announcement makes clear that Elevation was paying for a stake in a growing Web site, a great brand, and strong philosophy, and that it thinks the future is more online than in print. That sense is reinforced by Outsell research. Our News Users study showed that Web sites such as Forbes are readers’ first choice for personal finance information – a key part of Forbes products – with 25 percent. Google, Yahoo!, and MSN sites placed second at 22 percent, and print magazines placed distantly at 10 percent.
The Internet first attacked magazines’ cousins – newspapers – as it ate into classifieds (vulnerable to searchable databases) in the ’90s. Magazine publishers thought they were relatively immune to the Internet’s rough charms then. Now, with the advent of performance-based advertising, challenging traditional cost-per-thousand exposure models, times are changing.
The 2005 ad page numbers have been sobering, and the first half of 2006 hasn’t been much better. Forbes’ ad pages were down 2.9 percent year to date, with other business titles even more challenged, including Business Week at -12.8 percent, Fortune at -9.8 percent, and Fast Company at -19.8 percent. And within the last year, Google began nibbling away directly, brokering print ads in magazines as well, offering itself as a largely unwanted middleman.
With readers now finding a feast of all kinds of content online, subscription and single-copy sales are dropping as well. Increasingly, magazine publishers are having a hard time delivering the rate base circulation they sell to advertisers.
In Outsell’s Opinion: Expect to see more such out-of-the-box leadership and out-of-the-brotherhood funding. The Forbes/Elevation deal is a positive sign of that.
When publishers look in the 2006 mirror, they see deficits – less advertising, fewer readers, and, too often, not enough vision within their own ranks. Vision, the ability to see things differently and to apply models unknown to traditional publishing, is needed as publishers assess their current skill sets and the skills they need to compete tomorrow. There are many ways to get vision. The Forbes deal points to one, but most of all, it points to the need to bring it in-house one way or the other.