The exhibitions industry – which has spent two decades watching fellow media companies being pulled, pushed and pummelled by the internet – is now challenged and unsure about its own future. The utterings of industry leaders (and sometimes their silences too) betray uncertainty – to say the least – about the business model, ownership, and the medium-term prospects of trade shows. Everything.
That should not be too surprising. Although we are now starting to glimpse the future of, say the news industry, it has taken 20 years to get to this point. Which is another way of saying we should be wary of the confident voices of those who have seen the future of B2B exhibitions and know exactly how to get there. It is important to understand the extent of the challenge. The worldwide web was but the spark for the global disruption of traditional print media, many of whose customer relationships had been corrupted by a longterm advertising boom that had sidelined readers. The pandemic has played a similar role in disrupting trade shows many of whose customers were already dissatisfied with the way things were.
Even the consensus view emphasises the challenges of predicting the future business model of trade shows. Many say similar things about the need for organisers to be part of a “365-day relationship” with the buyers and sellers which have flocked to exhibitions. But does that vision challenge the very way that trade shows have generated high-margin profits and extraordinary cashflow from focusing mostly on events with very little ‘relationship building’ in between? Even companies building ‘new’ models for their biggest trade shows will have done so while not knowing how the ‘base line’ revenues have moved while they’ve been away. Perhaps only in 2022 or 2023 – when many trade shows are operating again, in whatever economic circumstances the world finds itself – will we know how quickly the exhibitions industry can afford to change and who will be investing in it.
But those questions are the reason why there is no time to lose in experimenting: nobody actually knows the future. That’s why we must closely watch what happens in the United States. It’s not just the world’s largest economy but also the largest trade show market (9,400 shows generating $14bn revenue). In 2019, the world’s two leading trade show organisers – Informa and Reed – respectively derived 36% and 20% of their revenues from the US. The market fragmentation is further underlined by the fact that the three largest organisers comprise only 10% of the US market. Some two-thirds of the country’s top 250 trade shows (and 9 of the 10 largest) are owned individually by trade associations, many of whose activities are funded year-round by the events. You can almost hear the cries for help and the M&A opportunity. But that’s for another day.
For all the rapid growth of the AsiaPacific, the sheer scale and diversity of the US exhibitions market will provide many future clues as the economy continues its strong recovery.
That is why we should be interested in Emerald, the largest US-owned exhibitions organiser. In 2013, it was carved-out of Nielsen by the Canada-based private equity pioneer Onex Corp which still retains a 85% stake in the listed company. Since then, it has made at least 20 acquisitions totalling $716m. Almost half that investment was spent on GLM, the former George Little Management (the legendary operator of giftware etc trade shows, owned a decade ago by the UK’s Daily Mail Group). Emerald’s current value is the equivalent of what it paid for GLM (and 20% of its $2bn touted value in 2017) and the private equity owner is still there after nine years. This is the story of a company whose problems pre-date the pandemic:
|Year end 31 Dec. $m||2019||2018||2017||2016|
Revenue is expected to bounce back (with the help of $100m+ insurance payouts) to $290m this year and $250m next. But the pre-2019 numbers show how Emerald has been unable to achieve consistent growth (even with large-scale acquisitions) in a growing market – but was still getting 35%+ EBITDA margins. Not very good prep for the losses that have followed in 2020 and 2021 but, perhaps, a perfect case study.
Enter Hervé Sedky, a former senior executive of Reed Exhibitions and American Express, who became President / CEO of Emerald in January this year. The company operates in the design, retail, security and tech markets with:
- 150 events annually
- 22 digital services
- 13 B2B publications
- 500 people
Sedky has committed to “365-day customer engagement”. Of course. But the keys to his revival strategy are:
- Digital remote access to operate alongside all in-person events
- Acquisition of PlumRiver, operator of the Elastic Suite B2B e-commerce platform
- Acquisition of the online education platform Sue Bryce
- Planned launch of 6-8 new trade shows every year
Although this sounds like the manifesto of every other exhibitions CEO, it may be a more ambitious plan to operate integrated event-digital-publishing-commerce services, especially in the design-building etc markets which account for 60% of Emerald’s revenue. There’s nothing much yet with which to evaluate Sedky’s strategy but his 2021 slate of 63 trade shows starts soon, with one-third taking place next month. So that will be the opportunity to assess the base-line performance of a company which has “enjoyed” 10 years of upheaval.
At this stage, the challenges for Emerald – in common with its peers – are how to maximise the revenues of its resumed shows while concurrently building those digital services. Major Investment will be difficult until the profits start flowing again. But the unspoken task may be to streamline a portfolio that was bought and built in different times. There is the sheer difficulty of establishing those 365-day digital relationships while also trying to make sure that customers still want to attend the in-person events that may continue to generate most of the profit for years to come. Even the idea of creating e-commerce networks (to replicate the buyer-seller connections once made only at trade shows) might further disrupt the business model and demand new investment.
The twin issues of portfolio management and digital investment may go together. Is the future really all about merging and/or divesting large numbers of trade shows (not just the 10% that many organisers openly discuss) and creating a relatively small number of “super shows” offering a whole suite of digital and e-commerce opportunities? Will the successful exhibition organisers of the future be smaller but more complex companies?
The first steps might be to separate or de-merge those large-scale prospects from the long tail of events which clutter the business of Emerald and most other multi-market trade show companies. This would enable organisers to maximise earnings from the smaller events – to help them fund the investment needed at the top of the portfolio. But you can sense the risk to the morale of companies whose web sites traditionally emphasise market diversity and portfolio scale. That’s how it used to be also for the B2B publishers and information companies. The bruising blandishments of the internet taught publishers about the potential of specialisation and globalisation that digital services could also confer on trade shows.
It all helps to emphasise the need for exhibitions companies to recognise the fundamental nature of the disruption. If you regard this 2-3 year hiatus as, merely, a recession-like interruption to normal business, you might just be in a hurry to get back to where you were. You might warm to the consistent forecasts that 2019 revenues will return in 2022 or 2023. If, however, you see 2020-21 as causing the type of systemic disruption that has shaken up most industries and wrecked many previously sound companies, you should be changing a lot more than the marketing.
Companies must recognise that systemic change necessitates fundamental shifts in how they manage exhibitions – and how many events they choose to keep. Investing in more sophisticated market relationships calls for much greater focus than in the days when the future was only about trade shows.
Emerald, for one, is talking a good game and investing in potentially interesting digital services. Recent share movements imply investor support for Hervé Sedky, and the company is well capitalised. But – so far – it is just another organiser taking its pre-existing portfolio and wrapping it in a shiny new strategy. You can debate the definitions of what is a market sector, but the best value in exhibitions – as in so much else – will come from relatively fewer operations that are ‘narrower but deeper’. Just watch.
Additional research by Alex DeGroote, and AMR International