Blackstone – the private equity firm which last year paid $1.3bn (12 x EBITDA, 1.3 x revenue) for the International Data Group (IDG) – is starting to make the moves that may lead to an IPO in 2023.
IDG Inc yesterday (Thursday) announced that its media division will now be known as Foundry, instead of IDG Communications which has long confused customers and staff. The research-insights division will continue to be known as IDC. The announcement is more than a mere name change because it (and the strategic conversation around the company) effectively squashes the rumour that the magazine-turned-digital brands would be sold-off – and enable Blackstone to concentrate just on monetising the high-rated IDC. It had, after all, looked a bit like a fire sale.
It still seems likely that IDG will eventually sell-off at least its TechHive smart homes site and possibly also its other B2C brands PCWorld and MacWorld, in favour of the B2B strategy. But most of the media brands of the 58-year-old technology-focused group will play their part in accelerating the growth of Foundry’s subscriptions-funded, “intent-driven” sales leads.
The IDG Inc parent company can be summarised as:
- $1bn revenue/ $105m EBITDA (2020)
- 10 major digital brands
- 50% of revenue from US, next Europe (esp Germany), with APAC growing fast. Foundry is more international
- Some 50% of revenue from subscriptions
- <25% of revenue from B2C brands including TechHive, MacWorld and PCWorld
- 3,300 people (two-thirds IDC, one-third Foundry)
- Targeted growth in digital and live events (1,500 so far)
Recent US divestment of subscriptions data businesses will have appetised the new IDG owners. Last week, Informa sold its Pharma Intelligence to private equity for 37 x EBITDA. Although some of Informa’s other data business has been sold for “only” 16 x EBITDA, the UK-based company might have been prompted to cash-in the assets after Rouse Services, in the US, acquired online construction equipment auctioneer Ritchie Bros for $275m – 30 x EBITDA. Data subscriptions are hot.
When Blackrock acquired IDG from its Chinese owners, it was assumed to have targeted the IDC research and data operations (competing with the $4bn-revenue Gartner). But Foundry is now said to be “very profitable”, to have grown its SaaS and platform business by 51% last year, and to get only 10% of its revenue from online display ads. About 55% of revenue is said to be from outside the US. Slight health warning on sketchy stats, but so far so good.
More than that, the pe firm bought into the IDG management’s vision of a company which could use its long-established tech brands, audiences and marketing relationships to build a subscription business from companies hungry for ‘intent data’. It’s the 21st century version of ‘hot’ sales leads that might once have come from direct response advertising or list rental.
Companies now want to feed the top of their sales funnel with ‘hands up’ enquiries but also to build relationships with prospective customers warmed by their level of interest, track record, and online activity. The ultimate aim is to identify those whose purchasing plans are imminent. This is where the close relationships enjoyed by readers of branded web sites can come into their own. The journalism must be tailored to appeal to people who are “intent” on a purchase – and to help them along the journey. But you can see the potential power in the process of legendary brands that have informed and educated three generations of executives in any given industry or company.
That is what Foundry is seeking to capitalise on as IDG prepares to celebrate the 55th anniversary of its first publication, Computerworld.
The onetime weekly newspaper had actually come three years after founder Patrick McGovern – fresh from his studies of neurophysiology at MIT – launched IDC with a database of all 10,000 mainframe computers then in use across the US. He got the data free from manufacturers to whom he sold subscriptions so they could learn more about their emerging market. He charged subscribers $30k after one manufacturer laughed-off his plan to charge $15k: “Charge $30k and you’ll be professional” he was told and never looked back. Eventually the annual census amassed 125,000 subscribers.
McGovern created Computerworld in 1967 alongside a conference for an industry that was bursting into life. It was the start of the International Data Group (IDG) and what, at its peak, became a portfolio of 300 B2B and B2C print magazines (including PCWorld, Macworld, InfoWorld, CIO, GamePro, and NetworkWorld), hundreds of web sites and exhibitions in 100 countries.
IDG’s The Industry Standard once dominated B2B publishing in the US as the biggest ad page generator with a record 7,000+ ad pages. In 2000, the company said its ad pages grew by 49%, claimed to be more than double that of the market and its nearest competitor. It not only outpaced other tech media companies but – with 13,872 ad pages during the first half of that year – IDG’s magazines had more tech ad pages than Forbes, Fortune, Business Week, and The Wall Street Journal combined.
McGovern’s company was, arguably, the world’s most successful IT publisher (although it was in a continuous tussle with Ziff-Davis). When IBM launched its first “home computer” in 1983, both companies had been ready with magazines aimed at users of the revolutionary new machines.
At its peak, the IDG Group was a $4bn multinational communications business with more than 13,000 employees. The IDC research division had more than 1,000 analysts following trends in 100 countries. Its IDG Ventures grew into a pioneering VC and was an early backer of the Chinese tech firms Baidu and Tencent. Along the way, IDG also created the bestselling For Dummies series of books which offered simple guidance on everything from economics, football and probability theory to Jane Austin and job interviews. It was sold to Wiley for $180m in 2001.
Decades before the internet created successive generations of youthful tech billionaires, Pat McGovern amassed a reported $5bn fortune by embracing globalisation and tech growth – always self-funded and resisting the temptation to IPO.
He launched computer magazines in Japan in 1972 and did the same in China nine years later. IDG’s hands-off licensing model and its focus on business rather than politics, helped give it an early foothold in China and to steer clear of press restrictions. It also made IDG the perfect partner for companies like Hearst, News Corp, and National Geographic which wanted to publish in the world’s fastest-growing economy. McGovern therefore, became a JV publisher of all kinds of Chinese magazines including local editions of Cosmopolitan, Esquire and Harper’s Bazaar.
To thousands of employees, IDG was always much more than a highly successful media-tech company. They are lyrical about Pat McGovern, who personally handed out $500 Christmas cheques to his employees, many of whom (in all kinds of remote places) were amazed that he not only knew their names and faces but also their work. He did his homework but really cared. Former executives are misty-eyed about the culture of the company whose founder “was an inspirational leader that made you feel you could accomplish anything. Demanding but fair. He loved IDG and the people. It was an honor to work for him.”
They say IDG:
- Had a real sense of “family” – yet like any family, the sibling business units could sometime fight each other more fiercely than their marketplace competitors
- Was always customer and employee first. That is what made the place special. Sometimes too rigid in structure: there was a deep, unshakable belief in decentralization that took a long time eventually to change when the internet came along and shook the foundations of the media industry.
- Business units enjoyed a high level of autonomy, even providing all their own “back end” services. This intrapreneurial approach meant that everything about the management, staffing, costs, services, strategies – and culture – of, say, MacWorld could not have been more different to those of PCWorld which was only one floor away in the same building.
By the early 2000s, the world was changing fast, moving from analogue to digital. Scale was becoming more critical. For the heavily decentralised publisher, the required changes became most contentious with the launch of IDG Connect. It was the first time the IDG databases has been centralized – with the aim of driving a separate lead generation business. Such an approach went against McGovern’s whole philosophy.
While each of the business units had fledgling data and lead gen businesses, they operated at small-scale. IDG Connect changed everything and, ultimately, was able to build one of the most extensive databases of IT Professionals both in the US and Europe. It became IDG’s most profitable business unit but was still only part of a large publishing group hooked on advertising.
One former IDG director remembers: “The move to digital was initially hard for McGovern who was unsure of the rise of the Internet (despite launching a successful VC fund in the US). The first dotcom collapse in 2000 was some vindication but, unfortunately, slowed the IDG transition from analogue to digital when the internet took off again. In the early 2000s, the challenges to print were obvious. Many of us pushed hard for a digital strategy but it was an uphill struggle. Pat McGovern came round and, subsequently, enthusiastically adopted a “digital first” strategy. IDG did become one of the first tech publishers, for example, to switch an IT enterprise print brand (Infoworld) to online. But the challenge was that the staff were still print people at heart, so the transition to ‘digital first’ was initially very slow.”
Like so many founder-led businesses, IDG had become a conglomerate of separate activities, some more successful than others, which in combination struggled to co-exist without its leader. The secret sauce was venture capital, especially in China, from which most of the profit once came. That has since been sold-off. The IDC research cash cow has continued to do well but hasn’t been able to keep pace with the powering growth of Gartner. The company’s lead gen operations compete with digitally-born B2B sales companies like Bombora, Demandbase and TechTarget. That’s now the real story.
This month’s acquisition of Selling Simplified – its fourth marketing tech deal in 18 months (after Triblio, KickFire and LeadSift) – underlines the potential value of content in building first party data. The latest acquisition is said to make Foundry “the largest global provider of B2B tech leads”.
The new chair Steve Singh said recently: “It’s a new era in IDG’s 57-year history…As the world has changed, so has IDG. Today, it’s a technology and intelligence company that blends its proprietary datasets of 2bn market-points with a one-of-a-kind network of 350m technology buyers to drive performance for the world’s leading B2B brands. It’s a remarkable company that has reinvented itself multiple times over the last six decades, and always in the right direction.”
The recent acquisitions emphasise IDG’s view that its longtime media brands give it a significant advantage in growing a lead gen business to complement its IDC research arm – and compete with companies like TechTarget. The battle has begun and, perhaps, IDG will be as ready for IPO next year as the CEO has said. The timetable may depend on the growth of subscriptions. The transformation of a media portfolio from advertising, sponsorship and content marketing into subs will bring its own rewards.
But the longer-term gain in the IDG strategy will be to build large-scale customer relationships that span both the research-data of IDC (where the customer may be business development or research executives) and the increasingly rich third party data of Foundry (where the customer may be the marketing director). That might be the comprehensive research, marketing and sales resource with which even the mighty Gartner (currently valued at 20 x EBITA, in case Blackstone hadn’t noticed) cannot compete. Perhaps.
IDG has always been a special kind of media business. That’s the McGovern legacy and this new strategy is as ambitious as anything else in its half-century. The challengers include a clutch of digital pureplays, and some tough rivals in the research space. Foundry is still spread quite thinly across a fiercely competitive world. It is media and journalism but not as we have known it. Just watch.
IDG Inc
