How Ascential is changing shape of B2B media

Eighteen months ago, Michael Kassan, the owner of US advertising consultancy MediaLink, was interviewing WPP’s Martin Sorrell at Advertising Week in New York, during which he predicted that advertising agencies would become “more like advisers”. Gossip suggested Kassan was brazenly proposing WPP should buy his own advisory firm. MediaLink had become known for its celebrity-filled parties, dinners and deal-making at international trade shows like the Consumer Electronics Show (CES), Advertising Week, DMEXCO, Mobile World Congress, and the Cannes Lions advertising festival. Kassan’s see-and-be-seen parties had proved to be good business for the event organisers – and for MediaLink’s role at the centre of media-tech and “host” of its most important gatherings.

It’s a brilliant act, so a WPP-MediaLink combination was not a whacky idea. Sorrell’s $30bn “communications services group” has become the world leader in advertising, PR, branding and market research. It has also invested in Vice Media, Refinery29, and everything from content marketing and e-commerce to management consulting and TV production. It was even once thought to be interested in acquiring tech media-to-consulting group IDG and world-leading exhibitions organiser Reed.

Kassan describes MediaLink as operating at “the intersection of media, marketing, advertising, entertainment and technology, delivering companies the advice, partners and opportunities they need to enable change and drive actionable solutions… <we> help companies execute in the core areas of revenue acceleration, industry marketing, investor strategy, data and technology solutions, and talent.” Phew.

‘A flashy character’

The 14-year-old company is the latest episode in what really has been a ‘colourful’ career for the man who started out as an entertainment industry tax lawyer. He was splattered by a 1996 suspension from the bar in California after one of a string of financial irregularities which dogged him throughout the 1990s. In 1999, his abrupt departure from InterPublic prompted a former colleague to describe him in the UK’s Marketing Week magazine as “a flashy character who people could run out of patience with. He is the sort of person with 18 mobile phones and private jets everywhere. Somewhere, he has overstepped the mark. This is a hugely political situation, and it looks like Kassan is a casualty, either through his own dealings or not.”

But that all changed in 2003 with MediaLink whose deal-making is characterised by Kassan’s favourite lyrics from the hit Broadway musical Hamilton:

No one really knows how the game is played
The art of the trade
How the sausage gets made
We just assume that it happens
But no one else is in
The room where it happens.

He likes to boast about “being in the room when it happens”, wherever US deals are made in media and advertising. But his company’s reputation is not all so shiny. Two years ago, Recode commented: “Though MediaLink’s services aren’t really much different from firms like McKinsey or Bain, they inspire a sort of brand loyalty among their clients, in part because they pair consulting with a new executive search business. If you’re an executive in their full service, MediaLink hires you, plans your parties, guides your strategy, introduces you to your friends, and then finds you your next job. MediaLink can also fire you. Among media executives, fear of MediaLink is real. Their clients even jokingly call MediaLink the ‘mafia’, and Kassan ‘the Godfather’.”

In the event, Kassan sold his company not to Martin Sorrell but to the UK-based Ascential plc, owner of Cannes Lions where, incidentally, WPP had just been named “the world’s most creative holding company” for the sixth consecutive year. MediaLink has a long-running partnership with Cannes Lions, at which the company takes space in the Ritz Carlton hotel for its clients to meet and do deals.

CES, Advertising Week and Cannes Lions have helped to propel MediaLink profits which, in 2016, reached $14m on revenues of $54m (29% up). Kassan has sold the company for an initial cash payment of $69m and expected $40m-$60m results-linked payouts which could rise to a maximum total price of $207m if the company hits “stretching” targets over the next three years. The founder has committed to stay until 2021.

The deal could be a game changer for Ascential. This rising star of global B2B is a re-engineered former division of the EMAP media starship which crashed to earth a decade ago. In 2008, it had been acquired by APAX private equity and The Guardian newspaper for a dizzy £1.3bn: more than 20x 2007 operating profit and 6x the revenue.

The timing was so awful that, even eight years later, Ascential’s IPO valuation was still 30% adrift. Only now, with a share price 50% above the IPO, has the company finally (almost) reached the 2008 valuation that had so neatly coincided with the cliff-edge for print advertising. Ads had accounted for 28% of those EMAP B2B revenues. But the promise was always elsewhere: almost 50% of revenues came from the exhibitions, festivals and conferences that are now at the heart of Ascential Plc.

Last week, it reported on a first year on the London stock exchange: 2016 pre-tax profits were £65.2m on revenue of £299.6m (22% margin). The EBITDA profit margin was 30%. That profit was a 80% increase on 2015, and revenues were 17% ahead. Some 60% of Ascential revenues now come from Exhibitions & Festivals (profit margin of 41%) and 40% from Information Services (29% margin).

No long tail

The strong performance is burnished by the fact that the company’s top 5 brands contribute 69% of revenue and 81% of EBITDA profit, while the top 10 account for 87% and 93% respectively. This is far from the typical B2B long tail of marginal products and services. After it has disposed of its 13 “heritage” brands (the B2B magazines that were once the core business), Ascential will have just 19 brands. It has also become truly international, with 67% of revenues (and rising) from outside the UK. The US is now its largest market.

Three of those top 5 brands are events, while two (including the largest earner of all) are information services. The significance of the MediaLink acquisition is the expectation that it will be among the company’s top 5 revenue earners which, in 2016, were as follows:

1. WGSN (formerly the Worth Global Style Network) is the leading provider of market intelligence, inspirational images, information, and trend forecasts to the fashion industry and design-led industries from household goods and consumer products to cars. Its data-rich content includes daily trend intelligence, retail analytics, consumer insights and bespoke consultancy services.  It has some 6,000 subscriber companies in 86 countries where its total 70,000 users include designers (probably half the customer base), CEOs, visual merchandisers, buyers, and marketers in major retailers and brands alike. They subscribe in order to “Know what’s next”. In the 12 years since it was acquired by the former EMAP for £140m, WGSN’s revenues have increased more than four-times to £67.2m. It grew by 6% in 2016.
2. Cannes Lions (formally known as the International Festival of Creativity) claims to be the world’s largest advertising, digital and creative event.  Founded in 1954 and acquired for £52.2m in 2004, it takes place every June in Cannes, where over 40,000 entries are showcased and judged. Winners receive the Lion trophies. This event is in itself a big winner with revenue last year of £55.5m which was 18% up on 2015 and almost double that of 2012. In 2016, over 10,000 paying delegates came from 94 countries to an annual event that has been expanded to cover “creativity” more broadly, including Health, Innovation and Entertainment. These changes create substantial scope for future growth across tech-driven sectors and, presumably, potential competition for Informa’s Mobile World Congress and Reed’s Cannes-based Midem and Mipcom events in music and media.
3. Money 20/20 has, for six years, claimed to be “the world’s biggest, boldest and best event covering payments and financial services innovation for connected commerce at the intersection of mobile, retail, marketing services, data and technology.” The company was acquired by Ascential some 15 months ago for an eventual price thought to be up to £100m. The Las Vegas event was attended by 11,000 people from 85 countries in 2016, the year of its European launch in Copenhagen. Next year, it is launching in AsiaPacific (Singapore). The 2016 revenue of £34.7m was an increase of no less than 60%, reflecting the success of its diversification.
4. International Spring Fair with its sister Autumn Fair have long been the UK’s largest trade exhibitions with more than 3,000 exhibitors primarily targeting independent giftware and home retailers. These are the UK versions of exhibitions that, across many geographies, are highly successful, long-term events. Even after 20 years of selling-out all the space at Birmingham’s National Exhibition Centre, the 65-year-old Spring Fair and the Autumn Fair last year managed to increase revenues by 3% to £34.3m.
5. Groundsure is a leading UK provider of environmental risk data.  It is an authority on land contamination, flooding and ground stability. The company uses its environmental land-use database and in-house consultancy to advise customers on property development. Groundsure was acquired in 2007 for some £40m. Last year’s revenue of £15.3m was 8% up on 2015.

Although four of Ascential’s five most profitable brands pre-date the arrival of CEO Duncan Painter, this really has become a new-style B2B company, away from the traditions of advertising and magazines that were once the hallmark of B2B media.

Painter is a non-graduate who was a better rugby player than student and studied law in evening classes during his early days as a systems manager at the Dixons electronics retailer. He became steeped in the mantra ‘retail is detail’. That was a life-lesson in the vital role of technology and customer service. His next job at Hitachi gave him the opportunity to move from IT to sales and into management. He gained his first insights into the importance of data and became convinced of the need for the integration of sales, marketing and IT. It was lift-off.

The nerd-turned-sales-director next joined a database start-up which, in 1999, became the ClarityBlue management buy-out. He sold it seven years later to Experian, the UK-based global credit services group. In his thirties, Painter pocketed some £15m from the £85m sale and became a senior executive of Experian which morphed into a joint venture with Sky TV. He became managing director of the customer intelligence unit Sky IQ, which powered the growth of the pay TV’s 10m+ audience and built an ancillary business with external energy and financial customers. It was great prep for the job at Ascential, which he took on in 2011, when the company was still known as EMAP.

Rich in data

Painter has brought a cool discipline and laser-strategy to the company he fleetingly branded as the Top Right Group. A self-confessed workaholic who starts his day at 4am, he is strongly self-disciplined, focused on the detail and on holding his people to account. He works hard on strategy, delegates easily and is more supportive than people expect. He inspires loyalty among a highly-motivated team who can rely on him to deliver what he says.

It is notable that only two of the six people in Ascential’s top team come from a media background. It reflects Painter’s belief that publishing companies are wrong-headedly obsessed with delivery rather than developing must-have content which meets the needs of its audience: “If you can work out what is the critical information your audience needs, when and where they need it, then the delivery question will answer itself.”

This CEO’s data background has equipped him well to re-think B2B media. For companies like Ascential, the word ‘data’ means two things: the high-value information and business-critical insights they sell to customers; and also the behavioural stuff that helps the information providers themselves understand their customers’ needs. The virtuous circle is completed by data enriched with that of these same customers. For new-world media companies, real-time data on customer behaviour is the antithesis of old-style, hit-and-miss advertising-marketing. This is why print-centric brands – even when they remain soundly profitable – can sometimes distract and weigh-down a company whose future lies elsewhere.

That ‘opportunity cost’ of print is one very good reason why Painter is cashing in the company’s profitable (but low-growth) legacy magazine brands like Architects’ Journal, Nursing Times, Local Government Chronicle, and Middle East Economic Digest. In doing so, Painter is freeing Ascential from the last vestiges of the advertising-dependence that once inflated profits but effectively also took publications everywhere away from their readers. Investing instead in companies that have traditionally been beyond the reach of B2B media, this hard-driving Brit has torn up the rule-book.

Time was when B2B media was divided broadly between data-driven specialists and magazine-led companies that variously spawned trade shows and other events. Then, the post-digital global growth of exhibitions encouraged their increasing separation from publishing in larger companies like Reed and UBM. The technology also opened up the whole world of business services previously provided only by accountants, consultants and market researchers.

MediaLink challenge

We may expect Ascential to be more determined than most other exhibition organisers to underpin its events with data and e-commerce. But the big tests come now with the push into US consultancy.

First, there was the acquisition of e-commerce analytics specialist OneClickRetail for an initial $44m in cash plus earn-out payments that could take the total to $225m. Founded and managed by a former Amazon and Walmart executive, the four-year-old OneClick generated $3.4m profit from revenues of just $4.9m in 2015. Its revenue is generated predominantly through annual subscriptions to the company’s Dashboard product, which helps companies like Procter & Gamble, Unilever, Nestle and Panasonic to measure their online performance. The increasingly international company is strongest in the US and Western Europe but says: “If Amazon is there, we are”.

Second is MediaLink whose acquisition has been marked by corporate statements that may just come back to haunt Duncan Painter who has hailed its “great business model”. Some have joked that, since the “business model” is actually Michael Kassan, this is nothing more than praise for his newly-enriched colleague. But there are more serious issues. The fact that MediaLink is neither a subscriptions information nor events business poses obvious questions about how it fits into Ascential’s strategy.

It feeds fears that, perhaps, the so-steady CEO’s head has been turned by theglamour of Kassan’s world. Campaign recently reported on the MediaLink founder’s first meeting with Painter who was introduced as “the guy who owns Cannes Lions”, prompting Kassan’s friends at the party to joke to the MediaLink boss: “Jeez, I thought you owned the Cannes Lions”, because he had long been such a visible presence at the festival. The questions keep coming: Is the plan to globalise MediaLink even viable? Has Ascential persuaded itself to splash out on a business (more or less) because it has done so much to help the growth of Cannes Lions? Can they manage the high-flying Michael Kassan? What will happen when he retires in 2021?

Beyond the scuttle-butt, the deal seems to signal Painter’s search for synergies and organic development across Ascential’s much-vaunted autonomous businesses. “MediaLink serves about 200-plus companies around the world. We serve 24,000, so we want to get MediaLink in with their business model through all the applicable businesses and clients that we work with and expand them globally so they have a great footprint in all the countries that we operate in today…We can see great opportunity for MediaLink’s growth worldwide.”

The international push will not, of course, be easy. Advisory services are dominated by large global specialists. MediaLink’s rising (almost exclusively US) profits are based strongly on Kassan’s relationships rather than on the ‘owned’ information and subscriptions revenue which Ascential has hitherto seen as the guarantee of its long-term success. And, although Cannes Lions’ growth has been undeniably impressive, the rise of an increasingly competitive series of events like Advertising Week (now taking place in New York, London, Tokyo and Mexico) will be a test of loyalty for MediaLink – which supports and profits from them all.

Ascential has a lot to play for. For all the virtue of its concentration on a clutch of high-growth ‘marquee’ brands, it needs to find more of them: the tight concentration of profitable operations is, to say the least, a mixed blessing. But the most pressing challenges are three-fold: executing the ambitious strategy alongside several high-stakes, earn-out deals with single-minded founders; ensuring profitable cross-fertilisation and synergies between relatively autonomous companies; and achieving global competitive scale across its whole portfolio.

Those challenges apply also to the new US acquisition that is forecast to be Ascential’s fourth largest revenue earner in 2017. That’s why we are all watching MediaLink.♦

UPDATE: 20 April 2017 (Advertising Age)

MediaLink’s recent sale to Cannes Lions parent company Ascential is quickly paying off for the media consultancy. MediaLink plans to open its first U.K. office in London next month under the leadership of Vice Chair Wenda Harris Millard, who will retain her current title, will relocate from New York to London.

The new office will open mid-May: “We have so many different opportunities to help major brands, publishers, including heritage brands and emerging content companies, and ad tech, martech and sheer technology companies,” said Millard. “Now we just need to identify them [in London].” www.adage.com

June 1 2017 UPDATE: Ascential offloads “heritage” magazine brands

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