TheBudapest Business Journal has a simple editorial philosophy.
We seek to peel back the abstractions which, in most business publications, pile up more quickly than blankets on a cold winter evening. We try to remember that an economy is not a mound of numbers, but an assembly of human decisions;
that a business is not a concrete structure, but a fabric woven of human relationships. Our reporters push to strip every story back to its human core.
Henry Copeland Editor The Budapest Business Journal (BBJ) was founded in 1992 in Hungary by Mike Stone, an American who had been an editor for several regional business journals, including the Orange County Business Journal in Cali-fornia. Stone originally came to Hungary to work for the Budapest Post, an English-language newspaper that provided general local news for expa-triates. After working there for a month he determined that there was a market for an English-language paper in Budapest that had a business fo-cus. Based on this premise, the Budapest Business Journalwas created. By October of 1993, Stone, an entrepreneur at heart, decided to move on to greener pastures. (Stone went on to start theMexico City Business Journal right after the peso devaluation in 1994 and, as of 1995, was planning to start up a business journal in Vietnam.) The company was purchased by three young Americans with the backing of a group of primarily US investors. The two controlling partners were Steve O’Connor and Thom Barnhardt, with a smaller interest held by Douglas Wheeler. Both O’Connor and Wheeler had been employees of Stone and were responsible for much of the modest success that had occurred up to the point of purchase. Barnhardt, who received an MBA from the University of Virginia’s Darden Graduate School of Business in 1992, first joined the paper, in the summer of 1994 as a consultant for one of the Journal’s special publications,Taking Stock: An Investor’s Guide to the Budapest Stock Exchange.
The partners’ vision for the company was to replicate the success of the American City Business Journals. The founders of the American City Business Journals held that a market existed for business news that was locally focused. This idea spawned a string of successful business journals throughout the United States (these journals had the city or area name first,
followed by the words “Business Journal,” for example, Charlotte Business Journal). O’Connor, Barnhardt, and Wheeler saw an opportunity for devel-oping a similar series of papers throughout Eastern Europe. These papers would emphasize business news, as the American City Business Journals did, and would be published weekly. The new approach was that these East European journals would be written in English, rather than in the language of the country in which they were located.
The decision to publish the business journals in English meant that the product would be necessarily targeted at a relatively narrow segment of the population. However, the partners viewed this a positive factor and made it one of the cornerstones of their corporate strategy. They saw that the rapid influx of English-speaking foreign managers after the collapse of Communism in 1989 had created a demand for a publication that provided insights into conducting business in the rapidly changing environment. Furthermore, in a part of the world where government had customarily maintained a tight rein over the content of published information, there was a great demand for local news that was unbiased and independent of the state-run news organizations.
Finally, the partners felt that there was a large enough segment of the local population that was either fluent in English or wanted to be fluent in English that would purchase the paper, and that the segment would grow.
After establishing a strong base in Hungary with theBudapest Business Journal, the partners aspired to expand into other major cities across the former East bloc. This strategy called for rapid growth.
When the three partners acquired the Budapest Business Journal in 1993, there were three or four other English-language newspapers in Bu-dapest. However, all but one failed, missing the mark in fulfilling consumer needs in this market. The one English-language publication that did succeed was theBudapest Sun, a newspaper whose editorial content emphasized gen-eral local news and that was targeted mainly toward tourists and foreigners living in Budapest. The only English-language competitor that provided business news was Business Central Europe, which was published by the Economist and addressed issues germane to all of Eastern and Central Eu-rope. While this monthly magazine did provide English-speaking executives with comprehensive regional news coverage, it did not report and elucidate day-to-day business happenings within Hungary.
TheBBJ was a unique selling proposition to those fluent in English but not in Hungarian; however, Budapest also had a more comprehensive busi-ness newspaper, titled HVG, that was published in Hungarian. Since HVG had a loyal Hungarian customer base, and was considerably less expensive than the BBJ, it was viewed by those at the BBJ as a potential stumbling block in acquiring a strong Hungarian national readership.
The key driving forces for profitability in the Journal revolved around advertising sales and paid subscriptions. These two components had a sym-biotic relationship; as the number of paid subscribers increased, advertising revenues also increased. As advertising revenues increased, the Journal was able to afford a larger quantity of editorial content. With the increase in edi-torial content, new subscribers were acquired. TheJournal had to somehow establish itself in this circle of events.
The partners’ original focal point had been on increasing the subscriber base through the use of direct sales. This focus stemmed from O’Connor’s previous strength as sales manager for the paper under Stone. As O’Connor pursued direct sales, he was also educating the local market on what exactly a business journal was. This strategy was initially effective and established the name of theBudapest Business Journal in the expatriate community, but the partners decided that direct sales were too slow and inefficient for their growth plans. They rapidly shifted emphasis from a direct-sales method to a direct-mailing system. This new marketing effort was headed by a young Canadian, Eric Presley.
Presley was given the task of substantially expanding circulation. Many of his efforts concentrated on direct-mail promotions targeted at English-speaking business executives. This was a challenge since good mailing lists were not readily available in Hungary in 1993 and 1994. Therefore, consider-able time was spent on prospecting for lists and checking them for accuracy.
Finding good mailing lists required some level of creativity as well. For in-stance, obtaining a list of leads from a foreign embassy often required trading a subscription to the Journal for a one-time use of the list.
Another facet of Presley’s marketing efforts was geared toward market-ing to business travelers in Hungary. This involved forgmarket-ing alliances with a variety of businesses. For example, Presley built relationships with managers at upscale hotels who would purchaseBBJsubscriptions to offer free copies of the Journal at the front desk or in hotel rooms. Similarly, several major airlines agreed to purchase subscriptions for passengers on flights into and out of Budapest.
Early in 1995, the marketing department established a telemarketing unit to make sales calls to potential subscribers and existing ones whose subscriptions were lapsing. These calls were primarily follow-up calls to direct-mail solicitations. A major obstacle to this effort was finding reliable lists of leads with accurate telephone numbers. Telemarketing time had to be allocated beyond making sales calls to check the lists for accuracy. Gradually the telemarketing unit contributed to sales, in addition to slowly compiling a more reliable internal list of leads.
The one segment that was initially neglected as a primary recipient of the BBJ’s marketing efforts was the potentially lucrative English-speaking
Hungarian management population. While this group was generally more price sensitive than expatriates working for wealthy multinationals, it was obviously less transient than the primary target market, and therefore pos-sessed more potential as a long-term loyal customer base. As increasing numbers of Hungarian managers began subscribing to the BBJ, it became apparent that they should be targeted more aggressively. To reach this audience, Presley mailed special-price promotions to lists of subscribers to HVG, and conducted more local promotions, such as a special deal for stock-brokers to celebrate the fifth anniversary of the Budapest Stock Exchange.
By 1995 the Budapest Business Journal had established a moderate level of brand awareness among Hungarian managers as a high-quality business publication, and boasted that Hungarian managers comprised 40% of their circulation.
By the fall of 1994, the partners began looking to expand into a second market in Eastern Europe. Although uncertain about the success of BBJ, they felt that the relative risk of expansion was outweighed by the need to grow rapidly. Prague and Warsaw were regarded as the best options mainly because of their rapid growth and their efficacy in attracting foreign investment. Since Poland seemed to possess a larger market and lacked direct competition from the other newspapers, it was selected as the location for New World Publishing’s second major publication, the Warsaw Business Journal. Another advantage to launching a product in Poland was that the country was just beginning to hit its stride in economic growth and the partners felt that they could gain an early advantage in this market. The Czech Republic had already reached a much higher level of development, and a business journal might be perceived as a latecomer rather than a novelty.
The first step the partners took to enter the Warsaw market in December 1994 was to find a Polish-American who was familiar with the local business environment. He owned a business in Warsaw and seemed to possess the initiative and market acumen to help them establish their new enterprise.
They entered into a management agreement with him that stated that during the initial three months he would find office space, hire a staff, establish a circulation system, and produce a pilot issue. For this work, he would be issued a 5% ownership interest in the company. To cement this alliance, the BBJ would get 10% of his original company.
Soon after beginning to perform some of the agreed-upon tasks, the Pol-ish partner demanded that he receive 50% of the entire company. Refusing to comply, the partners paid him a termination fee, and he signed a non-competition agreement. He immediately set up a competing paper, using the partnership’s mailing list, format, and early advertising base. Polish law was not yet developed enough to protect against the contractual breach.
In December 1995, the company opened its third publication, thePrague Business Journal. Although the partners had earlier passed over the Czech Republic for a new product launch, in late 1995 they felt that industry con-ditions were now opportune for a New World Publishing business journal and that their East European business journal concept was well honed to compete in Pargue’s developed market. In addition to launching a third business journal, by February 1996 New World Publishing had purchased a share in EPS, a software company, and was preparing to make its publica-tions available on-line. Meanwhile, the partners continued to search for new markets.
The partners attribute their success in these early years to three factors:
• Editorial Content: The principal strategic business focus throughout New World Publishing’s history has been on developing editorial quality and integrity and delivering it in creative ways. This focus allowed the company to position its publications as premium products and to develop a positive image reflecting the quality and integrity of the product.
• Well-targeted Marketing: The company used its positive image among consumers to market its products not only to foreign expatriates, but to the respective country’s nationals as well. The success in this effort was reflected in reader surveys that revealed that 40% of the readers in both Budapest and Warsaw were local national.
• Strong Advertising Sales Force: Advertising sales was an area of weak-ness of many local competitors. The partners recognized that they could excel in this area; by committing resources to advertising sales early on, theBBJ was able to develop a strong advertising base. When expand-ing into new markets, the solid relationships built up with advertisers, combined with the editorial quality displayed in each new paper, allowed the company to offer regional deals to advertisers. One regional adver-tising contract in 1996 was with Scala International, a company that sell accounting systems.