League Table: Customer publishing leagues

As an industry on the rise, and under a resurgent APA, customer publishers must tackle the problem of undervaluation.

The rude health of the customer publishing sector can be gauged by the latest ABC circulation figures. Of the top 10 magazines published in the UK, six were customer titles. With the AA set to launch a publication for its 6m members, six will soon become seven.

The AA is not the only new advertiser showing interest in custom publishing.

Recent launches include titles for a diverse range of clients, among them PC World, Vision Express, Prudential and lastminute.com. No longer the poor relation of news-stand publishing, customer magazines are evolving into a fully fledged marketing medium in their own right.

This impression was confirmed by a Mintel report released earlier this year that valued the sector at £344m in 2004, up from £220m just five years earlier. The growth has continued into 2005. 'The past six months have been one of the most active new business periods I have seen,' says Mike Potter, co-founder of Redwood and now chairman of Seven Publishing, publisher of news-stand title Delicious. To make the most of this upturn, this year his firm purchased Sainsbury's Magazine publisher New Crane, which is soon to be rebranded Seven.

Significantly, the Mintel report concluded that the sector's growth is more than a short-term phenomenon, estimating that it will be worth £531m in 2009, a rise of 36% when the effects of inflation are discounted. Alex Finer, creative director of The Publishing Agency, points out that about 50 companies in the FTSE 100 have launched a magazine. 'That means 50 have not, so the sector is still relatively underdeveloped.'

It is surprising, therefore, that Interpublic Group this year withdrew from customer publishing. The Publishing Agency was formed in July when a management team bought out Interpublic-owned Just Customer Communications in the UK and two US publishers.

The deal effectively ended Interpublic's involvement in customer titles.

Integration breakdown

Grahame Lake, former managing director of Just and now a director at PSP Communications, believes Interpublic's decision reflects a failure to integrate publishing into its other activities. It is a failing he believes is shared by rival marketing groups that have bought publishing arms. 'They have had years to integrate publishing into their marketing services offering, but there is no evidence that it has happened,' he argues. 'The networks lose patience and focus their business elsewhere.'

His views are shared by Toby Smeeton, former client services director of Just and co-founder of new agency Sunday. 'The big networks are working toward multimedia delivery, but in the UK that is not sustainable,' he says. 'Marketing managers here buy expertise in each discipline, not generic ability.'

Naturally, this is an argument that customer publishing divisions owned by other marketing services groups do not accept. Ian Sewell, commercial director at Redwood, points out that his agency works closely with Omnicom sibling BBDO on some pitches. However, he accepts that integration has not been easy. 'It is a cultural thing - it takes time for people to work together,' he says. 'We are all run as separate businesses, but we are getting there.'

Industry action

Interpublic's decision notwithstanding, customer publishing agencies from all backgrounds enjoyed strong growth last year. Driving this uptake over the long term is marketers' willingness to experiment with other media as traditional channels fragment. In the past 12 months, this has been helped by a concerted effort by the Association of Publishing Agencies (APA) to make a strong business case for customer magazines.

'The big story this year has been the resurgence of the APA,' says Mick Hurrell, planning and business development director at Wardour. 'It has been transformed from a publishers' club into a very active organisation. It has really changed the dynamics of the industry.'

The centrepiece of the APA's activity this year has been the 'Advantage Study'. Unveiled in March, this was 'the most important thing the industry has seen in the past 10 years', according to Patrick Fuller, managing director of Haymarket Network, part of Marketing's publisher, Haymarket.

The report, conducted by Millward Brown, set out to prove the effectiveness of the medium as a marketing tool. It tracked magazines from a number of categories and found consumers read customer titles for an average of 25 minutes, dispelling the myth that freely distributed magazines are simply ignored. It also demonstrated an average 8% sales increase as a result of a customer magazine, and a 32% jump in brand loyalty.

The 'Advantage Study' is not intended as a quick fix. It is an ongoing project that will deliver new results every six months to chip away at marketers who have previously ignored the medium. It is already bearing fruit, according to Jason Frost, managing director of Publicis Blueprint and chairman of the APA. 'The study has given us a huge fillip,' he says.

'There are now 20 world-famous brands that did not have a magazine before talking to us.'

Broadened horizons

As it grows in confidence, the industry is expanding its client base - retailers, financial firms, car marques and charities now routinely use the medium. One area growing rapidly is the public sector, and the past year saw the creation of the COI's first customer publishing roster; 15 shops made the cut.

The government's publications include a title for Visit London through John Brown Citrus Publishing (JBCP) and The Sharp End, a magazine for the police published by Square One. Several other titles are in the pipeline.

According to COI director of publications Andrew Prince, government departments are turning to magazines to deliver complex messages. As a result, roster agencies can expect plenty of pitches in the future. 'Magazines are a growing niche for the COI,' he says. 'There is greater interest within government, as it is seen as a positive communications channel. Customer publishing is gaining momentum as people increasingly understand what it can and cannot do.'

In contrast, the FMCG sector has not grown as quickly as expected. A year ago, when Procter & Gamble launched Mustard, a lifestyle title promoting its brands, there was much talk of FMCG being the next major growth area for the medium. But Mustard never made it past the first issue, and there has been little, if any, activity from other consumer goods firms.

'An FMCG magazine won't work unless people know who the brands belong to,' says Andrew Hirsch, chief executive of Mustard's publisher, JBCP, who believes that the magazine failed because P&G refused to talk about itself. 'Mustard didn't work because it didn't say where it had come from. The brands in it were very strong, but there was no message from P&G itself. People thought that it was just a supplement of the Daily Express (in which it was distributed).'

Despite the failure of Mustard, many agencies feel that FMCG still has great potential, especially now they are armed with the results of the 'Advantage Study'. 'Suppliers are concerned that retailers have their own media,' says Publicis' Frost. 'They want their own ways to build loyalty. Magazines are something they will look at more in the future.'

As well as attracting new clients, agencies have succeeded in expanding existing contracts. This often involves extra publications, but a growing trend is for publishing agencies to supply content for other channels, principally online.

Publishers have a chequered history when it comes to the internet. Several had their fingers burned during the initial dotcom boom, investing heavily in digital content, but finding that clients turned to online specialists to build their websites.

Redwood, for example, set up a dedicated web division, which it subsequently had to close.

Now, however, there is a feeling that clients have their online presence in place, and are looking to publishers to provide imaginative content.

One example is provided by Haymarket Network's recent four-year deal with Manchester United. The publisher already produced the club's match-day programme, but has now taken over United magazine and, significantly, its website, too. 'Anyone can build a website, but you have to fill it with good content,' says Haymarket's Fuller. 'More and more solutions are a combination of online and offline.'

Not everyone is convinced. JBCP's Hirsch believes the margins in internet work are still too thin for it to be a major growth area. Digital content, he believes, will remain an add-on to existing relationships. He believes the real opportunity lies in the blurring of lines between customer publishing and direct mail. JBCP now publishes an insert that accompanies Orange phone bills, a publication that serves as a piece of direct mail. 'Direct mail spend is 10 times the size of customer publishing spend,' he says.

'If just 10% of that DM spend moved to customer publishing, our industry would double.'

Specialist Publications has adopted a similar strategy by developing a 'mini-mag' format, which is cheaper to produce than a full-blown magazine but more compelling than a mailshot. It is already used by Kwik-Fit, and will be the format for the AA's magazine. AA retention communications manager Sam Day sees the publication as a 'sophisticated piece of direct mail'. It is a marked change from the organisation's previous publication, a glossy lifestyle title which relied on selling ads.

One potentially exacerbating problem for the industry is pricing. There is a feeling that clients are squeezing margins, putting smaller agencies at risk. 'The industry needs to shape up in terms of pricing, or a lot of agencies will go to the wall,' says Brian Grant, chief executive of Redactive. 'We are a competitive business, but you have to have a decent margin.'

His sentiments are echoed by Haymarket's Fuller. 'The next challenge is to recognise that we are not an industry in which creativity is irrelevant,' he argues. 'Creativity and success go hand in hand, and it comes at a price.'

There are steps afoot to tackle the issue. An APA working party chaired by Richard Proctor, co-owner of 21 Carrot, is exploring ways to showcase the industry's creativity, and has toyed with the idea of a dedicated creative awards.

According to Proctor, the industry needs to focus on more than return on investment. 'We would like to find a measure that relates to brand meaning.'

Publishers are not the first to find themselves having to prove the value of creativity. But doing so may be crucial if the APA's ambitious targets are to be met. Its goal is to expand the industry so that it commands 7% of total marketing spend by 2010 - double its current share. There are certainly challenges ahead, but if the momentum of the past 12 months can be maintained, it would be foolish to bet against it doing so.

TOP CUSTOMER PUBLISHING AGENCIES Agency Net t'over Net turnover % 2004 2003 chg (pounds) (pounds) 1 John Brown Citrus Publishing 48,700,000 50,100,000 -3 2 Redactive Media Group 25,200,000 23,500,000 7 3 Haymarket Network 19,100,000 20,500,000 -7 4 Publicis Blueprint 11,984,000 7,796,000 54 5 New Crane n/a 9,222,000 n/a 6 River Publishing 8,510,000 7,575,000 12 7 Ink Publishing 7,121,939 4,689,560 52 8 Square One Group 4,912,404 2,756,267 78 9 Newsdesk Media Group 4,359,875 n/a n/a 10 The Publishing Agency* 4,000,000 n/a n/a 11 The Illustrated London News Group 3,793,000 3,210,000 18 12 The Big Agency 3,400,000 2,800,000 21 13 Wardour Communications 2,880,187 2,523,959 14 14 Rare Publishing 2,572,000 2,514,000 2 15 Axon Publishing 1,953,625 1,315,611 48 16 Think Publishing 1,761,608 1,055,549 67 17 Atom Publishing 1,730,000 1,160,000 49 18 Redhouse Lane 1,596,446 1,381,682 16 19 Zone 1,588,000 1,434,000 11 20 Origin Publishing 1,554,000 1,488,000 4 21 PSP Communications 1,323,435 1,171,111 13 22 Northstar 1,171,000 823,000 42 23 Brooklands Group 813,000 708,000 15 24 Crimson Impact 669,785 587,983 14 25 21 Carrot 595,000 668,000 -11 26 Wrap 430,000 336,000 28 27 Alchemy Worx 391,000 315,000 24 Agency Int'l t'over Int'l t'over % Print/ Staff 2004 2003 chg online (pounds) (pounds) (%) 1 John Brown Citrus Publishing n/a n/a n/a 95/5 200 2 Redactive Media Group n/a n/a n/a 100/0 107 3 Haymarket Network 10,200,000 7,500,000 36 93/7 98 4 Publicis Blueprint n/a n/a n/a 96/4 125 5 New Crane n/a n/a n/a 100/0 74 6 River Publishing n/a n/a n/a 100/0 68 7 Ink Publishing n/a n/a n/a 96/4 70 8 Square One Group n/a n/a n/a 100/0 40 9 Newsdesk Media Group n/a n/a n/a 98/2 50 10 The Publishing Agency* 2,000,000 n/a n/a 80/20 50 11 The Illustrated London News Group 200,000 205,000 -2 90/10 47 12 The Big Agency n/a n/a n/a 95/5 43 13 Wardour Communications 127,416 127,416 0 85/15 38 14 Rare Publishing n/a n/a n/a 75/25 32 15 Axon Publishing n/a n/a n/a 100/0 15 16 Think Publishing n/a n/a n/a 95/5 25 17 Atom Publishing n/a n/a n/a 100/0 10 18 Redhouse Lane n/a n/a n/a 95/5 60 19 Zone n/a n/a n/a 40/60 20 20 Origin Publishing 200,000 250,000 -20 100/0 170 21 PSP Communications n/a n/a n/a 96/4 8 22 Northstar n/a n/a n/a 100/0 12 23 Brooklands Group n/a n/a n/a 100/0 91 24 Crimson Impact n/a n/a n/a 90/10 6 25 21 Carrot 625,000 590,000 6 100/0 5 26 Wrap n/a n/a n/a 100/0 7 27 Alchemy Worx 10,000 60,000 -83 0/100 10 Agency 1 John Brown Citrus Publishing Founded 2002. Privately owned. Chairman David Gilbertson; CEO Andrew Hirsch. Consumer (90%), B2B (5%), internal (5%). Clients include BSkyB, Orange, Waitrose. Member APA. www.jbcp.co.uk. 2 Redactive Media Group Founded 1981. Privately owned. CEO Brian Grant. Consumer (40%), B2B (60%). Clients include Chartered Institute of Personnel & Development, Chartered Institute of Purchasing & Supply, Royal British Legion. Member APA. www.redactive.co.uk 3 Haymarket Network Founded 1997. Privately owned. Chairmen Kevin Costello, Tony Schulp; managing director Patrick Fuller. Consumer (81%), B2B (17%), internal (2%). Clients include Toyota, Manchester United, British Army. Member APA. www.haycustpub.com 4 Publicis Blueprint Founded 1999. Subsidiary Publicis Groupe. Chairman John Wisbey; managing director Jason Frost. Consumer (90%), B2B (10%). Clients include Asda, Debenhams, Prudential. Member APA. www.publicis-blueprint.co.uk 5 New Crane Founded 1993. Subsidiary Seven Publishing. Chairman Mike Potter; managing director Seamus Geoghegan. Consumer (100%). Clients include Sainsbury's. Member APA. www.newcrane.com 6 River Publishing Founded 1994. Subsidiary River Group. Chairman Michael Williams; managing director Nicola Murphy. Consumer (100%). Clients include Holland & Barrett, News International, Superdrug. Member APA. www.riverltd.co.uk 7 Ink Publishing Founded 1994. Privately owned. Chairman Sebastian James; managing director Jeffrey O'Rourke. Consumer (100%). Clients include CNN International, easyJet, Virgin Express. Member APA. www.ink-publishing.com 8 Square One Group Founded 1992. Privately owned. Director Simon Chappell; commercial director Sean King. Consumer (78%), B2B (20%), internal (2%). Clients include Waterstone's, Direct Line Insurance, Home Office. Member APA. www.squareonegroup.co.uk 9 Newsdesk Media Group Founded 1997. Privately owned. Chairman Anthony Hilton; CEO Alan Spence. Consumer (7%), B2B (93%). Clients include Airbus, Holmes Place Health Clubs, Export Credits Guarantee Department. www.newsdeskcomms.com 10 The Publishing Agency* Founded 2005. Privately owned. Chairman Kirk Cheyfitz; CEO Simon Kelly. Consumer (60%), B2B (30%), internal (10%). Clients include Lexus, Home Office, Bluewater. Member APA. www.thepublishingagency.com 11 The Illustrated London News Group Founded 1985. Subsidiary Sea Containers. Managing director Lisa Barnard; commercial director Fay Delavault. Consumer (87%), B2B (12%), internal (1%). Clients include Orient-Express Hotels, VisitBritain, South West Trains. Member APA. www.ilng.co.uk 12 The Big Agency Founded 1997. Privately owned. Chairman Peter Gould; managing director Ned Dean. Consumer (100%). Clients include Motability, Department for Transport, London Borough of Hammersmith & Fulham. www.big-agency.com 13 Wardour Communications Founded 1996. Privately owned. Chairman Nick Mayhew-Smith; CEO Martin MacConnol. Consumer (15%), B2B (50%), internal (35%). Clients include Camelot, UBS, RSA. Member APA. www.wardour.co.uk 14 Rare Publishing Founded 1986. Subsidiary Chime Communications. Managing director Kim Conchie; client services director Carolyn Tree. Consumer (70%), B2B (30%). Clients include Somerfield, Teacher Training Agency, BMI. Member APA. www.rarepublishing.co.uk 15 Axon Publishing Founded 1994. Privately owned. Editorial director Paul Keers; publishing director Ellen Brush. Consumer (80%), B2B (20%). Clients include Conran, Marks & Spencer, University of Luton. Member APA. www.axonpublish.com 16 Think Publishing Founded 1999. Privately owned. Managing director Tilly Boulter; publishing director Ian McAuliffe. Consumer (80%), B2B (15%), internal (5%). Clients include Ramblers' Association, Royal Parks, CPRE. Member APA. www.thinkpublishing.co.uk 17 Atom Publishing Founded 1996. Privately owned. Chairman Maria Round; managing director Stephen Quirke. Consumer (30%), B2B (70%). Clients include Norwich Union, Royal Institute of Chartered Surveyors, Open University. Member APA. www.atompublishing.co.uk 18 Redhouse Lane Founded 1988. Privately owned. Managing director Jeremy Redhouse; client services director Fiona Corey. Internal (100%). Clients include BAA, Royal Bank of Scotland, EDF Energy. www.redhouselane.com 19 Zone Founded 2000. Privately owned. Chairman Lord Tom Chandos; CEO James Freedman. Consumer (74%), B2B (26%). Clients include Channel 4, lastminute.com, Fremantle International. Member APA. www.zonecontent.com 20 Origin Publishing Founded 1997. Subsidiary BBC Magazines. CEO Kevin Cox; managing director Andy Marshall. Consumer (90%), B2B (5%), internal (5%). Clients include HMV, UGC Cinemas, Waterstone's. Member APA. www.originpublishing.co.uk 21 PSP Communications Founded 2002. Privately owned. Managing director Peter Moore; client services director Grahame Lake. Consumer (99%), internal (1%). Clients include Kia Motors UK, British Heart Foundation, Great Ormond Street Hospital. Member APA. www.pspcom.com 22 Northstar Founded 2003. Privately owned. Managing director Mark Beazleigh, editorial director Mark Walton. Consumer (100%). Clients include Mazda Motors UK, Fat Face, Mappin & Webb. www.northstarpublishing.com 23 Brooklands Group Founded 1992. Privately owned. Managing director Darren Styles; client services director Matthew Jenns. Consumer (100%). Clients include Renault, Channel 4, Nissan. Member APA. www.brooklandsgroup.com 24 Crimson Impact Founded 2001. Privately owned. Managing director David Lester; publisher Sean Collins. Consumer (22%), B2B (77%), internal (1%). Clients include KPMG, IBM, Department of Trade & Industry. www.crimsonimpact.com 25 21 Carrot Founded 2000. Privately owned. Principal directors Richard Proctor, Clare Weatherall. Consumer (100%). No clients given. Member APA. www.21carrot.com 26 Wrap Founded 1999. Privately owned. Chairman Bernard Johnson; managing director Roger Wilsher. Consumer (20%), B2B (80%). Clients include Telewest, Workspace Group, Institute of Revenues Rating & Valuation. Member APA. www.wrapcom.com 27 Alchemy Worx Founded 1999. Privately owned. CEO Dela Quist; client services director Andy Gray. Consumer (70%), B2B (30%). Clients include NTL, Sainsbury's Bank, Carphone Warehouse. www.alchemyworx.com * 2004 figures refer to Just Customer Communication SARBANES-OXLEY-AFFECTED AGENCIES Agency Turnover Turnover % Staff 2004(pounds) 2003(pounds) chng Cedar Communications 18,819,540 17,579,842 7 90 Forward 13,557,588 14,170,452 -4 100 Redwood Publishing 41,022,354 55,520,278 -26 187 Specialist Publications 1,925,481 2,143,858 -10 25 AGENCY CEDAR COMMUNICATIONS Founded 1992. Subsidiary Omnicom. MD Clare Broadbent. Cons (90%), B2B (10%). Clients incl Tesco, BMW. Member APA. www.cedarcom.co.uk FORWARD Founded 1985. Subsidiary WPP. CEO Sarah Wyse. No work breakdown given. Clients incl Tesco, Ford. Member APA. www.theforwardgroup.com REDWOOD PUBLISHING Founded 1984. Subsidiary AMV BBDO. CEO Keith Grainger. Cons (86%), B2B (14%). Clients incl Boots. Member APA. www.redwoodgroup.net SPECIALIST PUBLICATIONS Founded 1969. Subsidiary Omnicom. MD Niki Webb. Cons (60%), B2B (30%), int (10%). Clients incl Peugeot. Member APA. www.specialistuk.com Source: Companies House data provided by Willott Kingston Smith TOP 5 FOR GROWTH - BIG AGENCIES Agency Net turnover Net turnover Change 2004 (pounds) 2003 (pounds) (%) 1 Square One Group 4,912,404 2,756,267 78 2 Publicis Blueprint 11,984,000 7,796,000 54 3 Ink Publishing 7,121,939 4,689,560 52 4 The Big Agency 3,400,000 2,800,000 21 5 The ILN Group 3,793,000 3,210,000 18 Note: does not include agencies affected by Sarbanes-Oxley Act TOP 5 FOR GROWTH - SMALL AGENCIES Agency Net turnover Net turnover Change 2004 (pounds) 2003 (pounds) (%) 1 Think Publishing 1,761,608 1,055,549 67 2 Atom Publishing 1,730,000 1,160,000 49 3 Axon Publishing 1,953,625 1,315,611 48 4 Northstar 1,171,000 823,000 42 5 Wrap 430,000 336,000 28 Note: does not include agencies affected by Sarbanes-Oxley Act

THE SARBANES-OXLEY EFFECT

For companies affected by the US Sarbanes-Oxley Act, which restricts the financial information firms are allowed to make public, we have used Companies House data provided by Willott Kingston Smith. Unlike other Marketing league tables, these agencies have not been listed within the main table. This is because customer publishing agencies are ranked by net turnover, which excludes print and distribution costs passed on to the client without mark-up. This information is not available at Companies House.

As no fair comparison with the rest of the agencies is available, the four Sarbanes-Oxley-affected agencies are listed alphabetically in the table presented opposite.

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