While no industry is immune from the economic downturn, the UK's leading customer publishers have performed creditably over the past 12 months. The major publishing agencies have not been spared the spectre of redundancies that has hit the broader media industry, but Marketing's annual league table reflects the continued resilience of the sector.
Julia Hutchison, chief operating officer of the Association of Publishing Agencies (APA), says the industry is weathering the recession better than most because of its commercial model, which encompasses the move to fee-based structures. 'We don't rely as much on third-party advertising and we have research showing the strength of editorial content in building brand loyalty,' she says, adding that the industry has successfully expanded into the digital arena.
The biggest agency in the sector, John Brown, has retained the top spot in the table for the past six years, demonstrating great stability in an often fickle market. Chief executive Andrew Hirsch says that so far, 2009 has not been as bad as expected. 'The end of 2008 was tough for everyone, but there were few closures and the industry remains robust,' he says. Nonetheless, agencies report that many brands have tightened their belts, with budgets being shaved by an average of 10% across the board.
Keith Grainger, chief executive of Redwood, says the group enjoyed another solid year. 'We have experienced an acceleration of growth in digital work for existing clients, as well as picking up new business,' he says. However, budgets have dropped at some of the group's car clients.
The customer publishing industry is worth £904m, according to Mintel. Despite the economic slowdown, its value is expected to reach £1.1bn by 2012.
Martin MacConnol, chief executive of Wardour and chairman of the APA, says the industry has been 'relatively Â protected' from the recession because it has consistently produced a strong ROI.
However, it has not been completely immune. Although few titles have faced the axe, there have been widespread reductions in pagination and frequency. Advertiser-funded titles have also felt the heat as media agencies scale back their schedules to reflect the increasingly lean budgets of recent months.
The big issue for the industry remains its attempts to increase revenues from digital publishing. While customer publishers are pitching against standalone digital agencies, the latter are returning the favour and offering publishing services to brands. A growing number of digital agencies now have editorial-based offerings - although, somewhat predictably, customer publishers claim they lack the necessary skill sets. Additionally, digital media providers, such as MSN, are exploiting their channels directly by creating editorial platforms for leading brands, such as Unilever's Dove. As the recession continues Â to place pressure on the marketing services industry, it is inevitable that this competition will increase.
Some believe the battle for additional revenues has created a situation in which the drive to own the digital medium has led to agencies creating substandard products. Craig Smith, editorial director of Velo, says agencies merely replicating titles online simply isn't good enough. 'These [customer publishing] agencies simply aren't in the same league as digital agencies and the industry still has a long way to go to get up to standard with truly interactive and bespoke solutions' he adds.
Critics say that relationships based on print magazines and the expenditure that comes with them make it challenging for some agencies to provide clients with an integrated solution. MacConnol says there is a gulf between agencies that rely on solutions such as Ceros and those that are truly content agencies across all platforms.
Hirsch claims that creativity in digital as a whole - as opposed to simply within the customer publishing sector - is poor. 'It's a real challenge to get stand-out creativity in digital in the same way a as print or TV ad can stop you in your tracks,' he says.
Additionally, publishers face the challenge of digital products' limited shelf-life. 'Unlike a magazine, which establishes itself over a year, digital products are out of date almost as soon as they go live, as they are inevitably superseded by new and superior technology,' says Hirsch.
However, Grainger believes that customer publishers are succeeding in raising the bar in their digital creative. 'Our approach is delivering relevant content that drives sales, not gimmicks and games,' he says.
As a result of the recession, many in the industry believe that customer publishing is poised to become an even more vital communication channel for Britain's embattled banking institutions. 'The banking crisis has made communicating with bewildered consumers and building trust through an emotional connection with consumers more important than ever,' says MacConnol.
The much-documented shift in the focus of marketing from customer acquisition to retention and loyalty-building is another trend that agencies believe will benefit the industry. This has certainly been the case in the catalogue business, which is booming. 'Retailers which have had expansive plans for new stores may have slowed these down, making focusing on getting existing customers to buy more crucial,' says Hirsch, who cites research from the US showing that 52% of internet sales are driven by catalogues.
However, it is not all good news. One of the biggest stories of the year was online fashion brand ASOS.com's decision to move the publication of its women's magazine in-house. The publication, which was previously produced by Seven Squared, is the brand's only above-the-line marketing activity. The shift mirrors a move by pay-TV giant Sky, whose magazine was previously published by John Brown.
While not on the same scale, retailers including Dorothy Perkins and Next have chosen to employ former consumer-magazine journalists to head their editorial strategy, as opposed to simply employing an agency. However, Toby Smeeton, managing director of Sunday Publishing, warns that this approach has its drawbacks. 'One of the benefits of an agency is the multiplicity of voices and tones and editorial backgrounds of the team. The danger with what appears to be a cheaper way of doing things is that you are going to get a single tone of voice.'
This view is echoed by Paul Keers, editorial director of Axon Publishing, who says that many of its contributors would not want to work in-house. 'You need the agency as a third party - to provide the bridge between the readers and the brand - or it is all to easy for it all to simply become PR,' he says.
Hirsch believes the trend may soon reverse, however. 'At the end of the day, you need to stick to what you're good at,' he says. 'Sky is a great broadcaster and ASOS is a fantastic retailer, but they aren't publishers.'
There is no doubt that the advertising market is tough, and for less-established titles, the competition is fiercer than ever. In the industry as a whole, customer publishing has reduced its reliance on the advertising-funded model. However, in an environment in which marketing directors are increasingly risk-averse and want more for less, some brands still expect not to have to invest heavily in their title.
Even the biggest retailing brands are finding that they cannot rely on their suppliers to advertise in their titles. As a result, several have gone out of business. Many in the industry believe that, while the downturn has made marketers place a greater focus on cost, the pressure on ad revenues has hastened the decline of unsustainable ad-funded models.
Mark Lonergan, managing director of August Media, says many publishers are reducing their exposure to ad-funded Â titles. 'There are still some clients who expect something for nothing, but the downturn will only speed up the closure of some ad-funded titles.'
This view is echoed by Andrew Taplin, acting managing director of Haymarket Network. 'Clients need to understand that customer publishing is a part of their marketing armoury that is worth investing in, but it is not a cheap option,' he says.
In short, marketers who approach their magazine from a revenue-generating perspective and focus on potential advertisers, as opposed to their consumers, may well face failure and could damage their brand image in the process.
However, Anthony Leyens, chief executive of Absolute Publishing, says more brands have been seeking ad-funded options for their titles over the past 18 months. 'Unfortunately, this pressure means that, as publishers, we have to be selective about what we invest in and share the risk with brands,' he adds.
Some agencies, such as Seven Squared, which publishes Sainsbury's Magazine, are still succeeding with ad-funded models. 'The advertising market is tough, but we have thrived through helping brands become media owners in their own right, and then enabling them to monetise their media platforms,' says Seven Squared chief executive Sean King.
The UK customer publishing market is a mature one and several leading players have been expanding their footprint into new territories (see case studies, page 30). It is a testament to the UK's market-leading status that agencies are pitching against and winning business from local agencies.
Haymarket Network, for example, has had considerable success in the Middle East, particularly in the motorsports sector. It has also continued to extend its reach through offices in New York, Australia and Dubai.
Despite the increased focus on international markets, many agencies believe the cloud of the recession is finally lifting and expect to see solid growth in the UK. Smeeton says that confidence has been returning to the market this year and there is a belief that the worst is over.
Mark Jones, editorial director at Cedar, believes that the real story in customer publishing is not the growth of digital, but the continued resilience of print. 'The next 12 months are all about bringing back the entrepreneurial spirit to the industry by taking a non-traditional approach and really challenging the medium,' he says.
While customer publishers have proved their worth against newsstand titles, now is the time to ditch the copycat celebrity covers and create bespoke titles that will not only deliver on marketing objectives, but also offer something memorable to the consumer.