As Morgan Stanley Dean Witter gets down to shopping around Future Network (FNET)'s Business 2.0, at least three magazine publishers - Time (dossier) Inc., Condé Nast Publications (dossier) and Ziff Davis Media (dossier) - have signed nondisclosure agreements to get a peek inside the new-economy title's books. And the numbers they'll find tell a tale of a very profitable, explosively growing business that suddenly hit a wall - hard.
Business 2.0, according to people familiar with the negotiations, saw its revenues jump from $17 million in 1999 to $66 million in 2000. Profits were about $20 million last year, a remarkable figure for a magazine that launched in August 1998. But the burst bubble in the technology (and specifically Internet) sector has led to a precipitous drop-off in advertising revenues. The offering documents' projections for 2001 predict revenue inching up slightly to $67 million, as higher ad rates offset the 29.5 percent decline in ad pages (from last year's 3,349 to a still substantial 2,361). Profits, though, are expected to drop to $16 million.
As in all offering documents, however, those estimates are best-case scenarios. Even with double the number of issues this year - Business 2.0 moved to a more costly biweekly frequency last May - ad pages are off 38.1 percent through March, to 372.73 from 602.43.
Publishers, nonetheless, are still very much intrigued and not just by the mailing list. ''For a global multinational media company like Time or Condé Nast, it buys them a No. 3 position (behind The Industry Standard and Red Herring) which they can leverage into a higher position,'' says Simon Mays-Smith, a media analyst for UBS (UBS) Warburg who covers London-based Future Network. ''You have an established readership base. You're just buying something off the shelf as opposed to building it from scratch.''
If Time Inc. were to end up with Business 2.0, it would likely fold its 350,000 readers into eCompany Now, the Internet Economy magazine the company launched last year after finding the price tags for existing titles such as Red Herring much too high for its liking. With the 375,000 mostly unduplicated circulation eCompany Now has promised advertisers it will reach in June, a combined magazine would have a commanding lead over Red Herring (315,633 in the second half of 2000, according to the Audit Bureau of Circulations) and The Industry Standard (which promises advertisers a 200,000 rate base, about half of which is paid). And don't be surprised if Time Inc. used the Business 2.0 name for the bulked-up magazine.
A purchase of Business 2.0 could also shave a few years off eCompany Now's proverbial ''path to profitability.'' That would dovetail nicely with the ''cash-flow-is-king'' credo at AOL Time Warner (AOL), one that frowns on costly launches and welcomes operating profits even if they come at a hefty cost (which helps explains last year's $475 million deal for Times Mirror (TMC) Magazines).
Condé Nast, meanwhile, would likely keep Business 2.0 whole, providing a bookend for Wired, the original digital culture magazine that is increasingly pushing business stories alongside its more traditional science and cyber-groovy mix. And the publisher is already comfortable owning two similar titles in a category, like shelter magazines House & Garden and Architectural Digest, and food magazines Gourmet and Bon Appétit.
Traditional technology publisher Ziff Davis could use Business 2.0 to bolster its magazine Smart Business for the New Economy (formerly PC Computing). But if the bids reach the $200 million level, which Future Network and its investment banker appear to expect, the auction will be too rich for Ziff Davis' tastes.
Despite any rumblings to the
