Over the weekend, a surprise announcement in GigaOm.com provided a great example of what we've been talking about. The VON conference and it parent sponsor, Pulver Media (publisher of VON magazine) got the financial rug pulled out from under it as the conference was going on. The investors seized all the accounts and assets after the founder, Jeff Pulver, admitted earlier that the revenue forecasts for his venture were not good at all.
Let's break this down. When Pulver says revenue, that means sponsorship for the publication and conference, which had quickly become the leading conversation point for the Voice over Network/Voice over IP industry.
Think about it. VON/VOIP is supposed to be one of the killer apps of the internet. It's not just about making international phone calls. It also includes video, conference calling, virtual trade shows and seminars. And it didn't pull enough sponsorship to make the effort to report on this industry a profitable exercise.
We're not only seeing the death of B2B media for lack of sponsors, but trade shows as well. Lots of people are reading the publications, and lots of people are still going to trade shows and conferences, but the industry that benefits from this market conversation are not supporting it. Why is that?
I think its because our companies no longer believe in the benefit of free competition. If small and medium businesses have a level playing field to work from, then Big Business has a significant barrier to success in the short term. Even if other companies can take single-digit market share from them, it's a problem to the bottom line.
In past years, Big Business player had three choices in dealing with this pressure. First, make better products and services and obsolete even your technology (this is the path Intel has traditionally chosen). Second, you undersell your smaller competitors and drive them out, which hurts short-term numbers. Third, you buy your competitors out and either bury their technology or replace internal offerings.
But in the last 10 years, Big Business discovered something. They realized that they were the primary source of revenue for the media. When they cut back on the external marketing expenditure, print, broadcast and internet publications cut back editorial staff. Publications got smaller. Editors, columnists and analysts still had the same amount of information to disseminate but not time and resources to publish it. The internet became a place where poorly written news releases were published as the primary form of marketing. That's where we are today. Medium and small business followed the leaders over the past decade and now we have whole publishing companies going under, not just staff reductions.
This is hurting the marketing efforts of large companies, so they are starting to increase external marketing budgets, right? Nope. They are starting a new trend of building up internal marketing with private conferences and publications that they can control… and keep their competitors in their place.
The result is exactly what Big Business wants. Small and medium business competitors are being driven out of business and often taking much lower buy-out evaluations.
But something else has occurred that Big Business didn't anticipate. Whole industries are being devalued in the market because the market is not longer freely discussing or evaluating the product and services. Whole industries are being ignored by the press because, well, no one seems to have anything valuable to say. Plus they aren't advertising.
Industry is in a consolidation phase because they have taken actions that have significantly shrunk the market. Innovation comes from small business. Innovation keeps interest in industries alive. Big business benefits from small business innovation when they can acquire innovation without funding it in total, and by being in vibrant industries that are discussed in the marketplace of ideas… media. By cutting advertising budgets, Big Business has curtailed the innovation engine that keeps their market growing. Companies focusing on their in-house publications and events only talk to people on their own mailing lists; lists that grow ever shorter as their own customers consolidate and lay off staff.
Should Big Business change their practices? I'd rather they didn't. I'd rather they stay in the current state of blissful ignorance while the rest of us get busy changing the playing field. I'd rather an open market revolt against Big Business.
Startups and small business are more fun because they have new ideas. The media actually like talking to innovators, even if they aren't real leaders. But small business has lived off the marketing largess of Big Business far too long. I'm of the opinion that small business needs to replace big business as the support of the media. Small business can't afford large media buys, nor can they afford to put on their own large-scale events, but increasing marketing budgets by a narrow percentage would be enough enough to make a huge unfair competitive advantage over Big Business.
For example, there are approximately 250 EDA companies below the $50 million annual revenue line. If each company bought one page of advertising a year, publications would be able to add around another 250 pages of editorial copy. Spread that around EDN, Electronic Design and EE Times and you have a pretty compelling reason for those publications to increase coverage of the industry. And there is no way that the market leaders in that industry could compete against that kind of coverage.
But that's just one example. Next, we're going to get really radical.