For Position Only: Printing Dot-Coms Find Themselves in a Jam

CreativePro Staff

The big-name and glam Web sites may be grabbing the headlines — Salon.com lays off staff members, Pets.com acquires Petstore.com, Toysmart.com closes down — but the highly touted B2B (business-to-business) sector has also been feeling the recent squeeze in the dot-conomy, and the impact is reaching the print industry. Last month Noosh and Impresse, two B2B service providers for the print industry, withdrew planned IPOs due to unfavorable market conditions.

The CFOs at Noosh and Impresse must have been watching the ticker and cringing at what’s been happening with some already-public online print service providers: Stock prices for ImageX.com (the B2B service provider that owns creativepro.com) have tumbled from a 52-week high of $45 a share to just $7, and at iPrint.com they’ve tumbled from $29 to $5 a share. Both ImageX and iPrint.com (a portal for purchasing print services) recorded phenomenal revenue growth in the first quarter of 2000 — up more than 1,100 percent from the same period a year ago and 960 percent for iPrint — but both companies still incurred significant losses.

These IPO delays and falling stock prices don’t portend doomsday for online print service providers, but they do signal a change of course for this young industry. Driven by economic realities, an era of F. Scott Fitzgerald-like extravagance is nearing its end, and a period of fiscal belt-tightening and industry consolidation seems near.

No Big Surprise
The suits at Noosh, Impresse, and the other online print service companies may or may not be losing sleep over the red ink in their books, but their financial situations were predictable. E-commerce firms serving the print industry have sprouted like wildflowers after a rainy California winter. At last count there were about two dozen dot-coms offering a wide range of print-centric services, from equipment and supplies procurement (PrintNation.com), to auction sites where print buyers can solicit bids for projects (PrintBid.com), to sites that let buyers order templated print materials online (iPrint.com), to sites that let you preflight files online (creativepro.com). But perhaps the largest category is application service providers (ASPs), which streamline the job production, management, and administration process between printers and their clients. Print-centric ASPs, which make money via transaction or subscription fees, include Noosh.com, Impresse.com, Collabria, and several others.

That’s a pretty crowded playing field — for any industry. Then consider the fact that by all accounts, fewer than 5 percent of all print transactions go through any of these online services, and you don’t need an MBA to recognize there are too many cooks in the kitchen. iPrint, for one, doesn’t even expect to make money before 2002, and I’m sure other companies have similar long-range expectations. But iPrint and the others have significant business hurdles to overcome if they’re going to be successful, including obtaining substantial numbers of new customers, increasing sales to existing customers, and increasing gross margins. And they must accomplish these goals while paying much closer attention to spending — namely, to advertising and marketing, which are always the first budgets to be cut in hard times.

In addition to these textbook hurdles, there’s also the less-tangible challenge of courting printers, who are notoriously reticent about adopting new technology and sharing their hard-earned revenues with third-party “brokers.” Not to mention the fact that the printers themselves are perfectly capable of developing and offering their own online systems. Witness Quad/Graphics’ own Smart Tools B2B site, and the recent initiative between Quad, R.R. Donnelley, Quebecor World, and Banta to create supply-chain efficiencies by establishing standards and enabling technologies for job planning, administration, and procurement. (R.R. Donnelley has also invested several million dollars in Noosh.)

On the Bright Side
The good news is that despite postponed IPOs and financial losses, most of these B2B print service providers are still plowing ahead with spring-fever fervor. They’re forging alliances, developing technologies, even securing additional venture-capital funding (Printable.com) and hosting well-attended user conferences (printCafe.com). In the long run, every one of these advances will pay off by giving printers and print buyers more choices and tools when managing their print processes online — because ultimately online is where all the action will be. The million dollar question is, Which companies will remain standing and will still be offering such services this time next year, or the year after? I don’t think even Regis knows the final answer.

Read more by Anita Dennis