Trade Shows Aren’t Going Anywhere, But Should Niche Down

Trade shows are the holy grail of events for operators. The revenue is unbelievable and at that scale, the profit margins can push into the 40s. Having everyone in your industry descend on your convention center with exhibitors buying space by the square foot is a great feeling.

But there’s a question about whether they are in the best interest of the attendee. And while there is a ton of demand for events right now, there are questions to be answered regarding whether the future of events really is trade shows or if we can expect events to start going smaller.

I am particularly intrigued about this because the inaugural AMO Summit is next week. There will only be 130 people there and four sponsors. Is this conference format more likely to win going forward compared to large scale trade shows?

It’s a question many are pondering. Brian Morrissey over at The Rebooting wrote in a recent edition of his newsletter:

One B2B media exec predicted a shift from larger events with thin value to smaller and more valuable gatherings. I couldn’t agree more, since I think most of the media business will move in this direction.

And then Julius Solaris, who had just returned from the 12,000-person strong IMEX, wrote in his newsletter:

This is a big show. With 12K+ attendees, you do feel overwhelmed. You want to embrace all the opportunities of having everyone in one room, but it is too much work.

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…but there is an underground network of side events happening all over, and they capture a lot of attention. Some executives just come to attend those and do not even show up for the main show.

I tend to come down on the side of Morrissey and Solaris on this one. Anytime I’ve gone to a trade show, I am not sure what I’m supposed to do. There are so many people, so much content, so many booths that I sort of walk around a little like a zombie. It’s overwhelming. I bet I’m not alone in this feeling.

Compare that to a smaller, single track event. It’s clear what you’re supposed to be doing at all times because the agenda is the same for everyone. The organizer is in much more control when it comes to guiding the audience through the story that they’ve architected. The content should, theoretically, flow while also leaving ample opportunity for more structured, scheduled networking.

And so, with all of this in mind, the future of events must be smaller gatherings, right? Not entirely. The reality is, the trade show provides a good opportunity to accomplish a lot in a short period of time. For example, if you are a buyer on the market for new software, the best way to have multiple conversations with prospective vendors is to find where the majority of them are and attend that show.

Being the largest show gives you an advantage because it becomes a flywheel. More people are going to be there, so more exhibitors come, so more people come and the wheel spins faster. And so, if you can become the show, people will be forgiving of the overwhelming feeling.

But being number two is rough. I spoke with one operator who has the #2 show in his industry. And he said that the business has been flat for years while the #1 show continues to see double digit growth annually. He’s making good profit, but he’s not seeing the growth that he would hope.

He has two choices. He can try to overcome the #1 show in his industry, which likely gets harder each year because the other show continues to build its brand. So, if not that, he can try and pivot the event and niche down. And this is where I think operators can provide a better audience experience while still seeing the margins that they’d hope for from a trade show.

Think about the retail industry. The largest show on the planet is NRF’s annual Big Show. It has 40,000 people in attendance. There are over 1,000 companies that are exhibiting. It’s a behemoth of an event. Then if you shrink, you’ll find yourself at Shoptalk, which has over 10,000 people. This event has a focus tied to retail technology and innovation. It’s still large, but there’s an obvious focus. You can shrink once again to The Lead Innovation Summit. This, too, is technology focused, but exclusively for DTC companies.

All three of these are trade shows. They all have a lot of exhibitors. But while Big Show is the clear dominant player in retail holistically, other players have found their niches. And in the case of The Lead, it has a niche within a niche. And this is where I think the real opportunity exists for operators. Rather than trying to become the umbrella of the entire industry, instead find an angle within it.

Everyone wins here, by the way. The audience knows that if they are attending your event, they are going to get an abundance of information about a more focused topic. The sponsors and exhibitors know that the people in attendance are far more likely to be interested in what they have to offer. This means that the sponsor dollars go further toward reaching the right, prospective buyers.

And to be clear, this is what prospective M&A buyers are looking for as well. According to Collingwood Advisory’s recent M&A report:

Overlaying this with respondent feedback on deals they participated in over the last 12 months, the theme was a flight to quality, with those outside of the ‘market leader’ category often not transacting at all. Most respondents are gradually increasing budget, or are hoping to increase budget over the coming period.

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Double digit multiples are achievable for a scaled business ($3m+ ebitda) trading for 10-11x.

This means two things. First, buyers want you to be the top in your respective industry. And second, you’ve got to have scale. If you can find your angle—DTC technology and innovation, for example—and also make enough money ($3m+ EBITDA), you become the best type of asset for buyers to acquire.

And this is, ultimately, why trade shows aren’t going anywhere as products. Lazy or uninformed operators will try and build generalist industry trade shows, comfortable with being #2 or #3 in their industry. But those that find the most success will niche down as much as they have to. Looking at how the retail industry works is a smart way to play.

So, while I agree with Morrissey that smaller gatherings certainly have their place, we’re never going to get away from that trade show feel. It just works too well for the operator.

Thanks for reading today’s AMO. If you have thoughts, hit reply or join the AMO Slack. For those of you coming to the Summit next week, I am very excited to finally meet! Have a great weekend.