IDG Reinvents Itself Online Last week, The New York Times wrote about International Data Group’s (IDG) successful transition from a print to an online model. I was intrgued to read about IDG Chairman Patrick McGovern’s enthusiasm for the economics of new media. Having gotten to know McGovern a bit during my 15-year career at IDG, I asked him to appear on the weekly MediaBlather podcast that I co-host with David Strom. He immediately agreed. That's the kind of person McGovern is. With all of the weighty issues that he must deal with every day, he is never too busy to chat with a colleague, whether current or past. In fact, McGovern still visits every IDG operation in the U.S. each December to distribute bonuses individually to every employee.

Our interview was about the business issues of IDG’s transition from a print powerhouse to an online specialty publisher. McGovern’s perspective is be inspiring. While the print industry collectively moans about the pain of transitioning from print to online, IDG has quietly taken its medicine and reinvented itself. Today, the company derives less than half its revenue from print titles, and McGovern expects online business to make up 70% of sales by 2012.

At InfoWorld, which was spotlighted in the Times article, the closure of the print edition and shift to a wholly online model actually increased margins from a small net loss to a 37% net profit. “Not only is there survival after going online, but it’s a much better environment,” McGovern told us.

IDG’s strategy is now to launch all new titles online first, build an audience and then take the business to print if the market demands it. “That way, we already have the audience and we can show the advertisers who’s asking for [the print title] and who’s going to read it,” McGovern said. “It takes away the risk.”

What works in the U.S. doesn’t work the same way globally, of course. Scandinavia and Korea are among the regions of the world that are innovating most successfully in online publishing, McGovern told us. In contrast, India is still a healthy print market but with a budding cell phone culture that may make it the first major economy to jump from paper to mobile devices without an intermediate PC stage.

There are some other gems in this interview. One is about IDG’s flirtation with a public offering through its books division a decade ago. McGovern, who has always taken a dim view of the public markets, relates how the experience distracted the group from its traditional market into ancillary businesses where it had no expertise. “If they had stayed private, I think they’d be a larger and more successful company today,” he commented.

We also talked about IDG’s phenomenal success in China, where it publishes a host of consumer titles in addition to its big technology brands. IDG’s venture capital arm now makes more money for the company from investing in Chinese businesses than the rest of the company does from publishing.

If you want to hear an optimistic perspective on the future of media from someone who is leading the charge, listen to this podcast (right click and choose “Save As…” to download to your computer). I think you’ll find it to be 25 minutes well spent.

Labels: computerworld, hina, IDG, infoworld, newmedia, publishing, technologypublishing, venturecapital

  ¶ 5:08 AM 0 Comments Links to this post

  Nantucket Conference Day One: How can New England jump-start innovation?

The topic was entrepreneurship at a luncheon breakout on Friday, but much of the discussion focused on why California has done a better job of nurturing innovative tech startups for the last 30 years, despite New England’s abundance of fine colleges and universities.

One reason noted was that California is the only state that doesn’t enforce non-compete contracts. That makes is possible for the best people to move around at will and quickly disseminate good ideas. There was some discussion of starting a campaign to strike down non-compete laws in Massachusetts, but no one could come up with a candidate to spearhead such a campaign.

A lot of it comes down to culture, people said. The attitude in New England – and many other parts of the country – is that failure in business is something to be ashamed of, whereas in California it’s considered part of the learning process. There’s also just an inherent optimism in the west coast culture. “In California, people refuse to believe that things won’t turn out well, and that becomes a self-fulfilling prophecy,” said one attendee, crystallizing the issue particularly well.

There is clearly some anxiety about the flight of venture capital to the west coast. Firms like Greylock Partners and Carlyle Group have moved more people and even headquarters westward, said one participant. This is an alarming sign that they don’t see the opportunity in New England that they used to.

Google was cited as a source of increasing concern. One attendee said he’d heard Google was offering top MIT graduates nearly $200,000 to join the company (I have no idea if this is true) and another told of how Google had stamped out a promising investment he’d made by introducing the same feature for free. Do I hear antitrust rumblings?

The mood was lifted, though, by one successful and respected entrepreneur who closed the session with a “darkest just before the dawn” remark. He noted that new businesses often experience their strongest growth in challenging economies. “Historically, New England always lands on its feet,” he said. “The bad times are a great time to get things done. The bad times are, in fact, the good times.”

Note: The Nantucket Conference is a not-for-attribution event.

Labels: nantucketconference, venturecapital

  ¶ 7:42 AM 1 Comments Links to this post

  Nantucket Conference Day 0: A new investment model

The state of venture capital is changing, with federated groups of angel investors emerging as an alternative to big VC firms to fund smaller startups. That’s according to James Geshwiler, managing director of Common Angels, which is one of a new breed of VC firms. Geshwiler spoke at the opening session of Nantucket Conference on Thursday.

Common Angels is one of approximately 120 such groups in the U.S. representing about 4,500 investors, Geshwiler said. The groups are forming to fill a void at the low end of the market left by the big venture capitalists, which have seen the average size of their funds double to $200 million in the last five years.

Basically, he said, VC firms won’t consider funding rounds of less than $5 million. They’re going for the big score. But plenty of viable companies need a couple of million to get going and can yield nice returns in an IPO or buyout. Big VCs can’t be bothered with such small returns.

I was interested by the compelling cost benefits of this approach. Common Angels outsources most of its office space, technology and administrative expenses to its individual members. This federated model takes advantage of the efficiency of sole practitioners and small businesses by leveraging collaborative technology to communicate and make decisions without requiring big investments in real estate and other overhead. I think we’ll see a lot more companies emerging in all sorts of industries to take advantage of the power of this model.

Labels: nantucketconference, venturecapital

  ¶ 7:36 AM 0 Comments Links to this post