MARKET FOCUS - INTERNET B-TO-B: Find your way to the online b-to-b market - As b-to-c sites lose steam, the focus is shifting to the more viable b-to-b space. Matthew Arnold explores how PR agencies are setting a new course

Back in the heady, halcyon days of the dot-com gold rush, button-down b-to-b sites played second fiddle to their flashier b-to-c cousins.

Back in the heady, halcyon days of the dot-com gold rush, button-down b-to-b sites played second fiddle to their flashier b-to-c cousins.

Back in the heady, halcyon days of the dot-com gold rush, button-down b-to-b sites played second fiddle to their flashier b-to-c cousins.

Then, when the first ominous signs of a correction began to chip away at the Nasdaq's irrational exuberance, b-to-b sites came into their own.

These days, technology stocks are taking a beating all around, and for the many PR tech practices and Internet specialties whose revenues had grown flush on the feast of freshly minted content and consumer sites in boom times, the bust has meant a major realignment.

'Agencies are scrambling,' says Scott Allison, West Coast GM at Connors Communications. 'There's just not the abundance of business there was in late '99 and through the first half of 2000.'

A year ago, agencies could afford to turn up their noses as dot-coms begged for their services, but the tables have turned. 'This time last year, you were hearing companies going weeks before agencies even agreed to talk to them,' says Tony Sapienza, president of Miller/Shandwick Technologies. 'Now agencies are getting a lot more aggressive in terms of business development.'

Much of the remaining dot-com business falls into the b-to-b sector, and those accounts require different skills and approaches than do b-to-c and content-driven sites.

'A lot of agencies thought that just because they started taking on Internet companies, they could leverage consumer expertise as a strategy for getting into technology,' says Bill Ryan, chairman of Niehaus Ryan Wong. 'But the Internet is just an infrastructure distribution strategy that you still have to adopt traditional strategies to. These b-to-b companies want to know that you really understand what's beneath the hood.'

Larger and more established tech practices have made the transition from b-to-c to b-to-b with ease, having the name recognition and technical expertise to lure clients. However, smaller independents have suffered.



When the going gets tough ...

Bogen PR, a six-person tech firm in New York, has seen its roster shrink from 10 clients a year ago to only two today, and its monthly billings have dropped from dollars 140,000 to dollars 25,000.

'We were then, and still are, focused on the technology and Internet sector,' says CEO Edmund Bogen. 'I'm staying with this industry because I believe in it.' His firm has stayed on its feet through staff cuts and a profitable conference business that he started on the side to promote his PR clients.

GDB & Partners, another small firm, based in Miami, has traded in its dot-coms for infrastructure clients such as application service providers, connectivity interests and Web development companies.

'Anybody who's in a service business has to know where the customers are,' says GDB managing partner Seth Gordon. 'Many of the customers who were available to us two years ago no longer exist.'

In order to talk with the analysts and business reporters that make up the front line of b-to-b PR, agency staff must bone up on the technology involved in each account. 'It's much more technical than if you're doing a Pets.com,' says Allison. 'You have to get your staff up to speed on new types of technology.'

For more established tech shops, specialization has long been a mantra.

'We look to broaden our focus beyond traditional technology and into other areas where we see technology intersecting with other markets - consumer technology, medical technology and so on,' Sapienza says.

But Internet specialists and those that have taken a more generalist approach must move fast to capitalize on b-to-b opportunities by hiring tech-savvy talent while retraining their existing staff.

'There's a lot of explaining that you have to do to press some of the intricacies of the technologies,' says Margit Wennmacher, co-founder of Outcast Communications. 'The way we deal with it is we have a very extensive training program. We bring in lots of outside speakers.'

Because Outcast handles a mix of b-to-b and b-to-c clients, Wennmacher is looking more for a willingness to learn than for technical expertise when evaluating prospective hires.

'We look at how smart they are, how flexible they are, how interested they are in learning,' says Wennmacher, who adds that juggling a variety of accounts keeps her staff nimble and engaged.



Discovering a new world

Many of the newer entries to the online b-to-b sector are brick-and-mortar companies with grudging new economy aspirations.

'Wells Fargo used to run wagons with big guys with guns on them,' says Information Week editor-in-chief Bob Evans. 'Now it does Web hosting for its small businesses.'

Where the dot-com divas of yesteryear were primarily concerned with making a name for themselves, their successors are minding the bottom line.

'The days of building a brand at any cost are behind us,' says Ryan Donovan, VP and GM for Text 100's San Francisco office. 'In terms of new business, we spend a lot less time talking to companies that pooh-pooh a business plan or any kind of revenue model.'

Donovan says current market conditions have brought about a serious change in mind-set. 'During the go-go days, a lot of companies didn't care about the business fundamentals and just wanted to throw money at it,' he says.

'Because of economic realities, the companies around today are a lot more button-down, and that's a relief.'

That's not to say that branding doesn't matter to the suit set. Cone Interactive stresses the importance of forming a company language. 'Many times, b-to-b companies don't think of themselves as a brand,' says Susan Pechman, EVP/GM at Cone. 'They think of themselves as just a fulfillment center, just a logistics corporation. They don't recognize that they have customers with whom they need to form an identity.'

How should a company go about this? 'It's very important for them to have a positioning that states who they are, what their standing is and what benefits they offer the customer,' Pechman says. 'The b-to-b space is getting cluttered, so they need to establish a unique selling proposition to break through the clutter.'

For young b-to-b sites taking their first unsteady steps into a crowded market, establishing credibility poses a crucial problem. 'There's been such a tremendous influx into the space, even with the shakeout,' says PepperCom managing partner Steve Cody. 'It's all about differentiating the company and making sure that it has a good selling proposition. Establishing partnerships is absolutely essential to that.'

'We spend a lot of time with b-to-bs in positioning,' says Donna Gibbs, EVP for Weber Group's Western region. 'How do you come to market with a solid, differentiated position that can be backed up with real customers? A lot of what we do there is trade relations and analyst relations, but we're also connecting clients with other clients, especially when we look at emerging b-to-bs.'



The winds of change

Whatever hiccups the market suffers, the Internet is here to stay, and with hungover venture capitalists guarding their wallets, b-to-b is likely to remain its bread and butter.

'I think what we're going to see in 2001 is a return to real tech,' says Gibbs. 'It has to have a real impact, not just a clever concept and a business plan.'

In fact, PR's cost-effectiveness may help it weather the bearish technology market. While advertising firms have seen their revenues shrink from the loss of dot-com dollars, PR firms have been called on to take up the slack.

'Most of these b-to-b companies rely very heavily on PR, whereas b-to-c companies also relied heavily on expensive ad campaigns,' says Gibbs.

'PR and direct marketing tend to be more resistant to recession. For many, PR is the lion's share or the only part of their marketing mission, so it's a crucial way for them to build visibility for their company.'

Another upside is that the survivors have a lot more business savvy than their flash-in-the-pan predecessors, and they are more likely to be in it for the long haul.

'There's less capital around, there are fewer opportunities but many of the surviving companies are much more viable,' says Alan Ampolsk, who directs Fleishman-Hillard's global technology practice. 'Technology and the Internet are not going away.'



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