Ziff Davis Media Inc.

views updated May 14 2018

Ziff Davis Media Inc.

28 East 28th Street
New York, New York 10016-7930
U.S.A.
Telephone: (212) 503-3500
Fax: (212) 503-5661
Web site: http://www.ziffdavis.com

Private Company
Incorporated: 2000
Employees: 3,397
Sales: $598.3 million (1999)
NAIC: 511120 Periodical Publishers; 514191 Online Information Services

Ziff Davis Media Inc. is the leading U.S. publisher of technology and Internet magazines and also ranks as the sixth largest U.S. magazine publisher. Among the company’s key publications are the consumer-oriented PC Magazine, Ziff Davis SMART BUSINESS for the New Economy, Yahoo! Internet Life, FamilyPC, Expedia Travels, and eshopper; the business-focused eWEEK, Inter@ctive Week, Sm@rt Partner, and The Net Economy; and in the gaming world, Electronic Gaming Monthly, Official U.S. PlayStation Magazine, Computer Gaming World, and Expert Gamer. One other U.S. title, Macworld, is produced through a joint venture with International Data Group. The company licenses its content and brands to licensees who produce some 50 additional titles in 30 international markets. The company also publishes four magazines in China through joint ventures.

The history of Ziff Davis Media is unusually complex, high-lighted by three major events—a huge asset sale (1985) and two breakups of the company into several separate pieces (1994 and 2000). The company also evolved significantly over the years. It started out publishing specialty consumer magazines and then branched out into business niche publications, before refocusing on the computer magazine niche following the 1985 divestments. It then branched out again, into such related areas as trade shows and exhibitions, database and CD-ROM publishing, and online publishing. Following the 1994 breakup, it focused on its technology publications and the ZDNet online content site. The company soon regained a presence in the trade show field and launched a cable television channel, ZDTV. But then in 2000, the company was broken apart yet again, with the technology publications gaining independence within Ziff Davis Media Inc., and the other Ziff units going their separate ways.

Niche Magazine Pioneer

The ultimate predecessor of the company was effectively formed in 1927—initially as Popular Aviation Company, be-coming Ziff-Davis Publishing Company shortly thereafter. Founded by majority partner William B. Ziff, World War I flyer, author, and lecturer, and minority partner Bernard Davis, the company launched a line of hobby and leisure magazines with Popular Aviation (still published today as Aviation). During the early years, the company grew at a tremendous rate (expanding to 32 times its initial size in its first ten years), publishing a combination of reference, trade, and juvenile books; “pulp” magazines such as Amazing Stories, Air Adventures, Mammoth Detective, Mammoth Mystery, and Mammoth Western; and specialty consumer magazines such as Modern Bride, Popular Aviation, Popular Electronics, and Radio News. Although the company was successful with most of its various publishing ventures, William Ziff never devoted his full attention to the business, preferring to focus on his writing, flying, and other interests, so Davis effectively handled day-to-day operations. By the early 1950s, the company was losing money.

When Ziff died of a heart attack in 1953, his share in the company passed to his son, William B. Ziff, Jr., then 24 and a student of philosophy. He surprised his family by deciding to give up his promising academic career to run Ziff-Davis. Unlike his father, he immediately immersed himself in the business, buying out Davis in 1956. He concentrated on expanding the company’s specialty consumer line by aggressively acquiring additional niche magazines. His timing was perfect in that the arrival of television as the medium for mass communication spelled the downturn for general interest magazines such as Life and the Saturday Evening Post. Ziff’s response to television was to focus on publications that were tightly focused on narrow topics, giving readers specialized information they could obtain nowhere else and providing advertisers an audience tailored for their products. Over the next 30 years, Ziff-Davis acquired such titles as Car and Driver, Popular Mechanics, Psychology Today, and Stereo Review, identifying each as the market leader in its particular field or one that Ziff-Davis could move into that position.

Meanwhile Ziff recognized another lucrative area for growth through the acquisition of what Newsweek called “obscure but highly profitable trade publications.” Similar to Ziffs consumer titles, these business journals were each targeted at a narrow audience, primarily people in the travel and aviation industries for whom the titles became “must” reading. The titles included Business & Commercial Aviation, Hotel & Travel Index, Travel Weekly, World Aviation Directory, and the flagship of the group, Meetings & Conventions, which by 1983 generated $12 million in annual revenues.

In 1969 Ziff formed the Ziff Communications Company and made Ziff-Davis one of its divisions. At this time, he transferred ownership through trust funds to his three sons, who held a 90 percent interest, and three nephews, who held the remaining ten percent. Ziff himself remained in firm control of the company throughout this period as chairman, with a hands-on management style criticized by some insiders and outside observers as autocratic but difficult to question given the company’s continued profitability.

Besides innovation in developing special interest magazines, Ziff Communications also pioneered in its approaches to market research and advertising. Through heavy expenditures on market research, the company gathered detailed profiles of who was reading each magazine, the content they sought, and the advertising to which they might respond. This data helped each editor tailor his or her magazine to the readership and enabled the advertising salespeople to precisely target potential clients. The market research data was also shared with the advertisers them-selves to design campaigns in what was known as “consultative selling.” Another advertising innovation was offering clients discounts for placing the same ad in a group of related magazines. By 1984, these strategies had fueled the company’s continuing growth, with the group of Ziff consumer magazines alone posting estimated annual revenues of $140 million.

Early 1980s: Expanding into Computer Magazines and Databases

According to many observers, Ziff had become bored with the business and with his success when in the early 1980s he began to take Ziff Communications into new territory. In 1979 he spent $89 million to purchase Rust Craft Greeting Cards Incorporated for its six television stations, but within a few years he sold them for $100 million, saying that television was not the “turn-on” he had hoped for. A longer-lasting and eventually more successful foray was into a new area of specialty publishing: computer magazines. The initial titles in this line, such as PCjr, were developed in-house beginning in 1981, but Ziff Communications soon returned to its acquisition strategy, most notably through the purchase of PC Magazine in 1982. The beginning years for these magazines were difficult, however, as the boom in the computer industry spawned a boom in the publication of specialty computer magazines. Although most of these titles were losing money in the early 1980s, the losses eventually represented an investment that was recouped many times over. Similarly, another new Ziff venture at this time was the 1980 acquisition of Information Access Company (IAC), a pioneer in electronic publishing and one of the first companies to produce databases on CD-ROM, including Magazine Index, National Newspaper Index, and Trade and Industry Index. IAC designed its InfoTrac workstations that accessed these databases to be user-friendly and offered full text on some of them, providing a competitive advantage over other indexes that offered only article abstracts.

Meanwhile, Ziffs consumer and business publications were reaching their peak of success. By 1984, many of these magazines were the circulation and/or revenue leaders in their respective markets. Car & Driver outpaced Road & Track, Popular Photography was the top choice for photographers, and Cycle led Cycle World for motorcyclists. Annual revenue for the most part was increasing. For example, Car & Driver posted $33 million in revenue in 1983, a gain of 18.6 percent over the previous year. The business publications were in similarly strong positions as market leaders—with $12 million in 1983 revenue for Meetings & Conventions, an increase of 20.5 percent—and enjoyed particularly high margins. Many in the industry were surprised, then, by the October 1984 announcement that Ziff was placing 24 magazines up for sale, 12 in its consumer group and 12 in its business group. Rumors soon began to circulate that William Ziff, Jr., was becoming progressively more ill with prostate cancer and wished to simplify his estate and protect his family’s future. His three sons were 14, 18, and 20.

Mid-1980s Through Early 1990s: Focusing on Computer Magazines, Expanding into Trade Shows, Internet

After much speculation about possible purchasers, receipt of a variety of bids (for the whole lot, for one group or the other, and for individual magazines), and estimates that Ziff would receive between $300 million and $750 million for all 24 titles, CBS Inc. announced on November 20,1984, that it had reached an agreement with Ziff to purchase the complete consumer group for $362.5 million, thought to be a record at the time for the sale of a group of magazines. The very next day, Rupert Murdoch announced that he had bought the entire business group for $350 million. Following these sales, Ziff Communications was essentially reduced to its computer magazines and IAC—none of which were offered in the auction, in part be-cause their financial situations were less robust.

Company Perspectives

Ziff Davis Media Inc. is the leading information authority for buying, using and experiencing technology and the Internet.

William Ziff, Jr., reduced his role in the operation of Ziff Communications for the next few years as he successfully battled against cancer. How closely the fortunes of the company were tied to his involvement is evident from the company’s struggles during these years: 1985 saw the company post a loss of $10 million on $100 million in revenue. With his cancer in remission, he returned to full-time leadership of the company in 1987 and oversaw a second application of the Ziff formula for special interest publishing, this time fueling a growth spurt through the computer magazines left out of the 1984 sale. Like the business niche publications so recently sold, the computing publications developed and acquired by Ziff targeted a specific audience needing help with their purchase decisions—buyers of personal computers in the business world. Such magazines as PC Magazine and MacUser thus focused tightly on product specifications, evaluations, and recommendations from the editors. Using similar market research and advertising techniques honed through the company’s decades of innovative magazine publishing, Ziff’s line of computer magazines soon began to dominate the industry. By 1991, PC Magazine boasted a circulation of more than 800,000, more than $160 million in advertising revenue, and a ranking as the tenth largest U.S. magazine.

There were some failures along the way as well. Contributing to them was the development of significant competitors in the computer magazine industry, notably International Data Group (IDG), publisher of InfoWorld and PC World, and CMP Publications, publisher of VAR Business and Windows Magazine. Ziff had acquired Government Computer News in 1986 and invested heavily in it, but finally surrendered to IDG and its competitive title when it sold the magazine to Cahners Publishing. Among Ziff’s start-ups that failed were PCjr —one of the first Ziff computer magazines—and Corporate Computing. The latter was launched with great fanfare early in 1992 and positioned as the one magazine for executives needing to make computer purchases. To meet its objective, it had to cover all bases from personal computers to networks to mainframes. At the time, however, the business market was shifting toward personal computers and thus right back to the strength of Ziff’s other magazines. Feeling that Corporate Computing was beginning to compete with the flagship PC Magazine, as well as PC Week, the company folded the title just over one year after launch, having invested $10 million in it.

With increasing competition leading to slowing growth in advertising revenue, Ziff Communications reacted with three strategies. First, to lessen reliance on the U.S. market, Ziff launched an ambitious line of European computer magazines early in 1991. The second response was to move beyond the corporate computing world, said by some observers to be ma-turing, into home computing, which was viewed as the next big growth area. In another combination of organic and acquired growth, the company purchased Computer Gaming World and launched two new titles in 1994—Computer Life and FamilyPC, the latter in a joint venture with Walt Disney Company. The third area was a recommitment to electronic publishing through I AC and the development of online systems.

From the mid-1980s IAC had continued to expand, and by 1992 the company was the leader in full text with more than two million articles culled from more than 1,000 sources. The sheer amount of information offered through the products spun out of its databases began about this time to run up against the limits of CD-ROM technology. One option—almost a stopgap measure—offered to large libraries having large enough mainframes was to mount the database directly on it for patrons to access via the terminals used to access the library’s catalog. The longer-term solution that IAC began to implement in 1993 was dubbed InfoTrac Central 2000 and allowed libraries to have their patrons access the IAC databases directly via the Internet.

Key Dates

1927:: William B. Ziff and Bernard Davis found Popular Aviation Company, publisher of Popular Aviation magazine; the company is soon renamed Ziff-Davis Publishing Company.
1953:: Ziff dies and is succeeded by his son, William B. Ziff, Jr.
1956:: Ziff, Jr., buys out Davis.
1969:: Ziff Communications Company is formed, with Ziff-Davis becoming one of its divisions.
1980:: Database publisher Information Access Company (IAC) is acquired.
1981:: Ziff completes its first foray into computer magazines, with launch of PCjr.
1982:: Company acquires PC Magazine.
1984:: Company sells consumer and business magazines to focus on computer magazines and IAC.
1991:: Line of European computer magazines is launched.
1993:: Ziff, Jr., retires; Eric Hippeau takes over as chairman.
1994:: First consumer computing magazines debut, including FamilyPC. Ziff family places the company up for sale; Ziff-Davis Publishing is sold to Forstmann Little & Co., I AC is sold to The Thomson Corporation, and Ziff-Davis Exhibitors is sold to Softbank Corporation; Ziff-Davis Publishing launches online news service ZDNet.
1996:: Ziff-Davis Publishing is sold to Softbank.
1998:: Softbank takes company public as Ziff-Davis Inc.; ZDTV cable channel is launched.
2000:: Ziff-Davis sells its publishing arm to private investors, who rename the unit Ziff Davis Media Inc.

IAC, whose strength had traditionally rested in the library market, now sought ways to achieve a longstanding goal of lessening the company’s dependence on its main market. It formed a new consumer/educational division to target the home market, and it increased its presence in the corporate market through acquisitions. In 1991 it acquired Predicasts Inc., whose databases included PROMT —a competitor of IAC’s Trade and Industry Index. In 1994 IAC acquired Sandpoint, which had developed a software application called Hoover designed to run on Lotus Notes, a groupware application that was becoming increasing popular with corporations. Hoover was an interface like InfoTrac, but a much more powerful one since it allowed a user to access information from many different types of plat-forms, from CD-ROMs to online systems to broadcast news sources (the name was derived from its being like a vacuum cleaner for information). Users of Hoover would also find a system more flexible in the different ways it allowed users to access information. By 1994, there were 16,000 users of Hoover at 70 companies.

Further electronic publishing initiatives in the early 1990s were highlighted by the development of the Interchange Online Network. The company had successfully tested the online services market over several years with Ziffnet, which was an online extension of its computer magazines offered through such services as CompuServe and Prodigy. Interchange was designed as an online service of its own and promised to be the first one to fully implement a graphical-user interface (GUI). True to Ziff tradition, it was designed to be a special interest service as opposed to the existing general-interest services. The first interest area to be developed was, predictably, computers, but plans were made to develop other areas including sports, health, and personal finance. Interchange would offer more than simply electronic text of magazines, adding such features as discussion groups, product information, and reference sources. As the Internet and the “information superhighway” became household names in the early 1990s, Interchange represented Ziff’s claim to its piece of the muitibillion-dollar digital information market.

1994: Breakup of Ziff Communications

Late in 1993, as revenue for Ziff Communications approached $1 billion, William Ziff, Jr., announced that he was retiring as chairman of the company and would have only an advisory role in the future as chairman emeritus. Eric Hippeau, who had already been in charge of all operations except corporate finance as chairman and CEO of Ziff-Davis Publishing, now assumed full control of Ziff Communications as chairman. That an outsider was placed in charge of what had always been a family-run business was telling to some observers who predicted that the company would either be sold or go public, but such rumors were denied for several months, with Ziff pointing out that two of his sons and one nephew were vice-presidents at the company. Nevertheless, within months, in June 1994, the company announced that it had hired Lazard Freres & Company to handle the sale of the company, seeking $2 billion or more. The decision to sell stemmed from William Ziff’s sons’ wishes not to make running the company their career. The two brothers who had been vice-presidents at the company, Dirk and Robert, wished to invest the proceeds from the sale in their investment company, Ziff Brothers Investments. The third brother, Daniel, was a college student at this time (he later joined Ziff Brothers Investments).

At the time of the sale, the company was the unquestioned leader in computer magazine publishing and a leading electronic information provider through I AC. In 1994 the company expected a profit of $160 million on $950 million in revenue. Still, some observers thought that William Ziff was again selling out at a time when the company’s most prized possessions—the computer publications—were past their peak. Others, however, pointed to numbers showing that the business magazine group (all the U.S. computer magazines except those aimed at consumers) alone was expecting revenues of $505 million and $146 million in operating income in 1994. The figures did show that Ziff’s other units were either marginally profitable or losing money, in many cases from heavy investing in new ventures, such as the new consumer magazines and the Interchange system. In the end, these variances in the divisions, perhaps coupled with the enormity of the company, forced the sellers to accept a piecemeal sale rather than a sale of the whole company as they had hoped for. In October 1994 the New York investment firm of Forstmann Little & Co. purchased Ziff-Davis Publishing Co.—the business and consumer computer magazines, the international magazine group, a market research division, and the Ziffnet online service—for $1.4 billion. Ziff-Davis Exhibitors, a unit that managed computer trade shows, was bought by Softbank Corporation of Japan for $202 million, and The Thomson Corporation, a huge Canadian publisher, purchased Information Access Company for $465 million. Finally, in December 1994 AT&T purchased the Interchange Online Network, at the time still undergoing final testing, for $50 million. All told, the sales exceeded $2.1 billion.

1994–96: The Forstmann Little Interregnum

Ziff-Davis Publishing remained largely intact following its purchase by Forstmann Little, with Hippeau continuing as chairman and the editorial contact remaining unaltered. Revenues for 1994 were an estimated $852 million. Ziff-Davis continued to thrive under its new ownership, with the company producing three of the top four publications in high-tech ad dollars in the first nine months of 1995: PC Magazine, PC Week, and Computer Shopper. Operating earnings increased to $190 million in 1995 from the $140 million figure of the previous year. Seeking to benefit from the burgeoning Internet, Ziff-Davis in late 1994 launched ZDNet, a web site featuring online versions of a number of Ziff-Davis publications. ZDNet almost immediately faced stiff competition from a competing online news service, CNET. ZDNet, however, was one of the first web sites to make its content free to all users and rely on advertising as its primary revenue stream; it also was a pioneer in e-commerce through its 1996 launch of a web site spinoff of Computer Shopper magazine, computershopper.com. In 1995 Ziff-Davis entered into a joint venture with Internet portal Yahoo! Inc. to launch the consumer-oriented Yahoo! Internet Life, envisioned as the “TV Guide of the Internet.” This title faced formidable competition as numerous Internet magazines were hitting the newsstands at this time, but by 1996 its advertising rate base had risen to 200,000.

The Forstmann Little era proved short-lived. Softbank, which had purchased Ziff-Davis Exhibitors after having lost out to Forstmann Little in the bidding for Ziff-Davis Publishing, came forward in late 1995 with an offer that was too rich for Forstmann Little to pass up. The purchase price was $2.1 billion, with the deal, which was completed in February 1996, providing Forstmann Little with a hefty profit on a less-than-18-month investment. Softbank was the leading distributor of computer software in Japan and had augmented its computer trade show unit with the purchase earlier in 1995 of Comdex, the industry’s largest. It now also owned the number one U.S. publisher of computer and high-tech magazines.

1996–99: Ownership by Softbank

Under Softbank’s ownership, as well as the continued leadership of Hippeau, Ziff-Davis rapidly expanded its publication line, particularly with new overseas titles in Europe and China. By 1998 the company was publishing 26 titles worldwide by itself or through joint ventures. Ziff-Davis also licensed its name or the name of a publication to other companies for more than 50 additional titles. In April 1998 Softbank took the company public under the name Ziff-Davis Inc., selling 26 percent of the common stock through an IPO that raised nearly $400 million. At the same time, Ziff-Davis restructured its debt, resulting in a reduction in its debt load from $2.5 billion to $1.6 billion. Interest payments had led the company to post net losses during both 1996 and 1997.

A public company for the first time in its long and convoluted history, Ziff-Davis Inc. began with three main operations: magazine publishing; tradeshows and conferences, including the former Ziff-Davis Exhibitors and Comdex, which were combined into ZD Events Inc.; and the Internet activities of ZDNet. A fourth segment was added in May 1998, a 24-hour cable television channel called ZDTV, which was launched despite the failures of previous ventures by the company into cable, two computer TV shows. Although Ziff-Davis helped launch ZDTV, it was initially owned by another subsidiary of Softbank. Ziff-Davis then purchased ZDTV in February 1999.

During 1998 Ziff-Davis’s magazine operations suffered from a combination of factors that cut into ad revenues: fewer new computer product introductions, computer industry consolidation, and the Asian economic crisis which dampened computer sales in that region. Late in the year the company announced that it would cut its workforce by ten percent, or about 350 employees, and shutter three niche technology publications. A $46 million charge was taken in connection with these moves, leading to another net loss for the year.

While revenue was declining in the publishing sector, ZDNet’s sales were on the rise, increasing from $32.2 million in 1997 to $56.1 million in 1998. Like most early Internet ventures, ZDNet was in the red, but its net loss narrowed in 1998 to $7.8 million, compared to $21.2 million the previous year. In April 1999 Ziff-Davis created a tracking stock for ZDNet and sold 16 percent of the unit to the public through an IPO. In the topsy-turvy world of what might be considered the 1999 Internet stock bubble, by mid-1999 ZDNet had a market capitalization greater than that of Ziff-Davis, despite Ziff-Davis’s 84 percent stake in ZDNet. Also by this time, Softbank had invested heavily in Internet companies, including such stalwarts as Yahoo! and E*Trade, gaining billions in the process. With Softbank wishing to shift its focus completely to the Internet, Ziff-Davis announced in July 1999 that it was exploring strategic options, including a possible sale of the company.

Turn of the Millennium: Breakup of Ziff-Davis, with Ziff Davis Media Emerging

Eventually, Softbank settled on a plan to retain only ZDNet, and began selling off the other parts of Ziff-Davis piecemeal. In January 2000 ZDTV was sold to Vulcan Ventures, Inc. In April 2000 the magazine unit was sold for $780 million to Willis Stein & Partners, L.P. and James D. Dunning, Jr., a U.S. magazine industry veteran. The ZD Events unit was to be spun off to shareholders as a new company called Key3Media Group, Inc. Then ZDNet would emerge as a stand-alone publicly traded company, in which Softbank would hold about a 45 percent stake. But in July 2000 Ziff-Davis—which in essence at that point consisted only of ZDNet—agreed to be purchased by ZDNet’s arch-rival, CNET Networks Inc., for $1.6 billion in stock.

As a result of this maze of transactions it was the publishing unit that emerged as the most direct successor to the publishing company founded more than 70 years earlier by a Ziff and a Davis. Fittingly, the unit’s new owners—who were granted the exclusive use of the Ziff-Davis name—created a holding company called Ziff Davis Media Inc., with its main subsidiary called Ziff Davis Publishing Inc. Dunning was named chairman, president, and CEO of both Ziff Davis Media and Ziff Davis Publishing. The sale of the publishing unit—which did not include Computer Shopper, retained by ZDNet because of its related e-commerce web site—included a licensing agreement with ZDNet, whereby Ziff Davis Media would not be allowed to use the content of its existing magazines on the Internet for a three-year period and would then have to share the content with ZDNet for another two years. In return, Ziff Davis Media would receive a royalty of up to five percent of ZDNet’s revenues during the first three years.

Under Dunning’s leadership, a more aggressive and savvier strategy quickly became evident at Ziff Davis Media. Titles were revamped and renamed to reflect the increasing importance of the Internet and the so-called New Economy—PC Computing be-came Ziff Davis SMART BUSINESS for the New Economy and PC Week was redubbed eWeek —as well as to deemphasize the some-what passe term “PC.” In June 2000 the company began publication of The Net Economy magazine, which was aimed at business and technical managers, Internet service providers, telecommunications firms, cable and wireless service providers, and other companies that provided network-based services. Ziff Davis also began developing new titles in areas outside of technology but with a focus on what was assumed to be the Internet-centered economy of the 21st century. With e-commerce revolutionizing shopping, the company launched eShopper. Similarly, Ziff Davis saw the need for a new travel magazine that would inform consumers about how to use the Internet to enhance their travel planning and experiences. The company joined with Expedia, Inc., operator of a leading online travel service, to launch Expedia Travels in the fall of 2000, with an initial circulation of 200,000. This title in some ways brought the company full circle, returning it to its travel magazine roots. In addition, Ziff Davis Media had plans for still more launches, having concluded that in the Netcentric world of the 21st century it could develop a new title in nearly every magazine category. Meantime, in July 2000 Ziff Davis Media agreed to sell its publishing subsidiaries in the United Kingdom, France, and Germany, along with the ten titles they produced, to VNU, a Dutch publishing group. The move meant that Ziff Davis Media would directly own only U.S. publications. All international titles, with the exception of those in China, would be produced through licensing arrangements with third parties; the company continued to publish four magazines in China through joint ventures.

Principal Subsidiaries

Ziff Davis Publishing Inc.; Ziff Davis Internet Inc.; Ziff Davis Development Inc.

Principal Competitors

Freedom Technology Media Group; Imagine Media, Inc.; International Data Group; United News & Media plc; Upside Media Inc.

Ziff Davis Media Inc.

views updated May 17 2018

Ziff Davis Media Inc.

28 East 28th Street
New York, New York 10016-7930
U.S.A.
Telephone: (212) 503-3500
Fax: (212) 503-5696
Web site: http://www.ziffdavis.com

Wholly Owned Subsidiary of Ziff Davis Holdings Inc.
Founded: 1927 as Popular Aviation Company
Employees: 525
Sales: $204.5 million (2004)
NAIC: 511120 Periodical Publishers; 516110 Internet Publishing and Broadcasting

Ziff Davis Media Inc. is one of the largest publishers of technology and video game magazines in the United States. Among the company's key publications are the consumeroriented PC Magazine, Sync, and ExtremeTech; the business-focused eWEEK, CIO Insight, and Baseline; and in the gaming world, Electronic Gaming Monthly, Computer Gaming World, and Official U.S. PlayStation Magazine. These titles garner a collective 20 percent of the advertising pages in the U.S. technology magazine industry. Their combined circulation is 2.5 million, led by the flagship PC Magazine, which boasts a paid circulation of 700,000, and the titles are estimated to reach more than 22 million people per month. The company also licenses its content and brands to licensees who produce titles in some 40 international markets, in 20 languages, and Ziff Davis Media also manages a number of Internet web sites, both magazine companion sites and independent sites for technology and video game enthusiasts. About 64 percent of Ziff Davis's revenue is derived from advertising, while subscription and newsstand sales accounts for about 17 percent. The remaining 19 percent comes from other revenue sources, including mailing list rentals, custom conferences and events, and eNewsletters.

The history of Ziff Davis Media is unusually complex, highlighted by three major events—a huge asset sale (1985) and two breakups of the company into several separate pieces (1994 and 2000). The company also evolved significantly over the years. It started out publishing specialty consumer magazines and then branched out into business niche publications, before refocusing on the computer magazine niche following the 1985 divestments. It then branched out again, into such related areas as trade shows and exhibitions, database and CD-ROM publishing, and online publishing. Following the 1994 breakup, it focused on its technology publications and the ZDNet online content site. The company soon regained a presence in the trade show field and launched a cable television channel, ZDTV (later TechTV). But then in 2000, the company was broken apart yet again, with the technology publications gaining independence within Ziff Davis Media Inc., and the other Ziff units going their separate ways. Since 2000 Ziff Davis Media has been wholly owned by Ziff Davis Holdings Inc., a publicly traded holding company majority owned and controlled by Willis Stein & Partners, L.P., a private equity investment firm.

Niche Magazine Pioneer

The ultimate predecessor of the company was effectively formed in 1927—initially as Popular Aviation Company, becoming Ziff-Davis Publishing Company shortly thereafter. Founded by majority partner William B. Ziff, World War I flyer, author, and lecturer, and minority partner Bernard Davis, the company launched a line of hobby and leisure magazines with Popular Aviation (still published today as Aviation ). During the early years, the company grew at a tremendous rate (expanding to 32 times its initial size in its first ten years), publishing a combination of reference, trade, and juvenile books; "pulp" magazines such as Amazing Stories, Air Adventures, Mammoth Detective, Mammoth Mystery, and Mammoth Western; and specialty consumer magazines such as Modern Bride, Popular Aviation, Popular Electronics, and Radio News. Although the company was successful with most of its various publishing ventures, William Ziff never devoted his full attention to the business, preferring to focus on his writing, flying, and other interests, so Davis effectively handled day-to-day operations. By the early 1950s, the company was losing money.

When Ziff died of a heart attack in 1953, his share in the company passed to his son, William B. Ziff, Jr., then 24 and a student of philosophy. He surprised his family by deciding to give up his promising academic career to run Ziff-Davis. Unlike his father, he immediately immersed himself in the business, buying out Davis in 1956. He concentrated on expanding the company's specialty consumer line by aggressively acquiring additional niche magazines. His timing was perfect in that the arrival of television as the medium for mass communication spelled the downturn for general-interest magazines such as Life and the Saturday Evening Post. Ziff's response to television was to focus on publications that were tightly focused on narrow topics, giving readers specialized information they could obtain nowhere else and providing advertisers an audience tailored for their products. Over the next 30 years, Ziff-Davis acquired such titles as Car & Driver, Popular Mechanics, Psychology Today, and Stereo Review, identifying each as the market leader in its particular field or one that Ziff-Davis could move into that position.

Meanwhile Ziff recognized another lucrative area for growth through the acquisition of what Newsweek called "obscure but highly profitable trade publications." Similar to Ziff's consumer titles, these business journals were each targeted at a narrow audience, primarily people in the travel and aviation industries for whom the titles became "must" reading. The titles included Business & Commercial Aviation, Hotel & Travel Index, Travel Weekly, World Aviation Directory, and the flagship of the group, Meetings & Conventions, which by 1983 generated $12 million in annual revenues.

In 1969 Ziff Communications Company was formed and Ziff-Davis became one of its divisions. At this time, Ziff, Jr., transferred ownership through trust funds to his three sons, who held a 90 percent interest, and three nephews, who held the remaining 10 percent. Ziff himself remained in firm control of the company throughout this period as chairman, with a handson management style criticized by some as autocratic but difficult to question given the company's continued profitability.

Besides innovation in developing special interest magazines, Ziff Communications also pioneered in its approaches to market research and advertising. Through heavy expenditures on market research, the company gathered detailed profiles of who was reading each magazine, the content they sought, and the advertising to which they might respond. This data helped each editor tailor his or her magazine to the readership and enabled the advertising salespeople to precisely target potential clients. The market research data was also shared with the advertisers themselves to design campaigns in what was known as "consultative selling." Another advertising innovation was offering clients discounts for placing the same ad in a group of related magazines. By 1984, these strategies had fueled the company's continuing growth, with the group of Ziff consumer magazines alone posting estimated annual revenues of $140 million.

Early 1980s: Expanding into Computer Magazines and Databases

According to many observers, Ziff had become bored with the business and with his success when in the early 1980s he began to take Ziff Communications into new territory. In 1979 he spent $89 million to purchase Rust Craft Greeting Cards Incorporated for its six television stations, but within a few years he sold them for $100 million, saying that television was not the "turn-on" he had hoped for. A longer-lasting and eventually more successful foray was into a new area of specialty publishing: computer magazines. The initial titles in this line, such as PCjr, were developed in-house beginning in 1981, but Ziff Communications soon returned to its acquisition strategy, most notably through the purchase of PC Magazine in 1982. The beginning years for these magazines were difficult, however, as the boom in the computer industry spawned a boom in the publication of specialty computer magazines. Although most of these titles were losing money in the early 1980s, the losses eventually represented an investment that was recouped many times over. Similarly, another new Ziff venture at this time was the 1980 acquisition of Information Access Company (IAC), a pioneer in electronic publishing and one of the first companies to produce databases on CD-ROM, including Magazine Index, National Newspaper Index, and Trade and Industry Index. IAC designed its InfoTrac workstations that accessed these databases to be user-friendly and offered full text on some of them, providing a competitive advantage over other indexes that offered only article abstracts.

Company Perspectives:

We distinguish ourselves as the premier technology authority at work, home and play through comprehensive labs-based evaluations, trusted buying advice, recognized industry experts, and thought-provoking news, reviews, opinions and insights. Reaching more than 22 million passionate readers and event attendees, Ziff Davis Media provides total market coverage, from corporate technology buyers and users to consumer enthusiasts and gamers, through our portfolio of award-winning brands.

We provide our readers, who are well-educated, influential buyers of technology and other products and decisionmakers in their professional fields and households, with the information they need to make important purchasing decisions.

To our advertising and marketing customers, we deliver access to the content environment and community necessary to reach their most important audience, and, most importantly, help them drive sales growth for their companies.

This passion, focus and commitment have made us a leader within our industry.

Meanwhile, Ziff's consumer and business publications were reaching their peak of success. By 1984, many of these magazines were the circulation and/or revenue leaders in their respective markets. Car & Driver outpaced Road & Track, Popular Photography was the top choice for photographers, and Cycle led Cycle World for motorcyclists. Annual revenue for the most part was increasing. For example, Car & Driver posted $33 million in revenue in 1983, a gain of 18.6 percent over the previous year. The business publications were in similarly strong positions as market leaders—with $12 million in 1983 revenue for Meetings & Conventions, an increase of 20.5 percent—and enjoyed particularly high margins. Many in the industry were surprised, then, by the October 1984 announcement that Ziff was placing 24 magazines up for sale, 12 in its consumer group and 12 in its business group. Rumors soon began to circulate that William Ziff, Jr., was becoming progressively more ill with prostate cancer and wished to simplify his estate and protect his family's future. His three sons were 14, 18, and 20.

Mid-1980s Through Early 1990s: Focusing on Computer Magazines, Expanding into Trade Shows, Internet

After much speculation about possible purchasers, receipt of a variety of bids (for the whole lot, for one group or the other, and for individual magazines), and estimates that Ziff would receive between $300 million and $750 million for all 24 titles, CBS Inc. announced on November 20, 1984, that it had reached an agreement with Ziff to purchase the complete consumer group for $362.5 million, thought to be a record at the time for the sale of a group of magazines. The very next day, Rupert Murdoch announced that he had bought the entire business group for $350 million. Following these sales, Ziff Communications was essentially reduced to its computer magazines and IAC—none of which were offered in the auction, in part because their financial situations were less robust.

William Ziff, Jr., reduced his role in the operation of Ziff Communications for the next few years as he successfully battled against cancer. How closely the fortunes of the company were tied to his involvement is evident from the company's struggles during these years: 1985 saw the company post a loss of $10 million on $100 million in revenue. With his cancer in remission, he returned to full-time leadership of the company in 1987 and oversaw a second application of the Ziff formula for special interest publishing, this time fueling a growth spurt through the computer magazines left out of the 1984 sale. Like the business niche publications so recently sold, the computing publications developed and acquired by Ziff targeted a specific audience needing help with their purchase decisions—buyers of personal computers in the business world. Such magazines as PC Magazine and MacUser thus focused tightly on product specifications, evaluations, and recommendations from the editors. Using similar market research and advertising techniques honed through the company's decades of innovative magazine publishing, Ziff's line of computer magazines soon began to dominate the industry. By 1991, PC Magazine boasted a circulation of more than 800,000, more than $160 million in advertising revenue, and a ranking as the tenth-largest U.S. magazine.

There were some failures along the way as well. Contributing to them was the development of significant competitors in the computer magazine industry, notably International Data Group, Inc. (IDG), publisher of InfoWorld and PC World, and CMP Publications, publisher of VAR Business and Windows Magazine. Ziff had acquired Government Computer News in 1986 and invested heavily in it, but finally surrendered to IDG and its competitive title when it sold the magazine to Cahners Publishing. Among Ziff's start-ups that failed were PCjr —one of the first Ziff computer magazines—and Corporate Computing. The latter was launched with great fanfare early in 1992 and positioned as the one magazine for executives needing to make computer purchases. To meet its objective, it had to cover all bases from personal computers to networks to mainframes. At the time, however, the business market was shifting toward personal computers and thus right back to the strength of Ziff's other magazines. Feeling that Corporate Computing was beginning to compete with the flagship PC Magazine, as well as PC Week, the company folded the title just over one year after launch, having invested $10 million in it.

With increasing competition leading to slowing growth in advertising revenue, Ziff Communications reacted with three strategies. First, to lessen reliance on the U.S. market, Ziff launched an ambitious line of European computer magazines early in 1991. The second response was to move beyond the corporate computing world, said by some observers to be maturing, into home computing, which was viewed as the next big growth area. In another combination of organic and acquired growth, the company purchased Computer Gaming World and launched two new titles in 1994—Computer Life and FamilyPC, the latter in a joint venture with Walt Disney Company. The third area was a recommitment to electronic publishing through IAC and the development of online systems.

Key Dates:

1927:: William B. Ziff and Bernard Davis found Popular Aviation Company, publisher of Popular Aviation magazine; the company is soon renamed Ziff-Davis Publishing Company.
1953:: Ziff dies and is succeeded by his son, William B. Ziff, Jr.
1956:: Ziff, Jr., buys out Davis.
1969:: Ziff Communications Company is formed, with Ziff-Davis becoming one of its divisions.
1980:: Database publisher Information Access Company (IAC) is acquired.
1981:: Ziff completes its first foray into computer magazines, with launch of PCjr.
1982:: Company acquires PC Magazine.
1984:: Company sells consumer and business magazines to focus on computer magazines and IAC.
1993:: Ziff, Jr., retires; Eric Hippeau takes over as chairman.
1994:: First consumer computing magazines debut; Ziff-Davis Publishing is sold to Forstmann Little & Co.; IAC is sold to The Thomson Corporation; and Ziff-Davis Exhibitors is sold to Softbank Corporation; Ziff-Davis Publishing launches online news service ZDNet.
1996:: Ziff-Davis Publishing is sold to Softbank.
1998:: Softbank takes company public as Ziff-Davis Inc.
2000:: Ziff-Davis sells its publishing arm to private investors, who rename the unit Ziff Davis Media Inc.
2002:: Buffeted by the tech ad recession and verging on bankruptcy, company completes a sweeping financial reorganization.

From the mid-1980s IAC had continued to expand, and by 1992 the company was the leader in full text with more than two million articles culled from more than 1,000 sources. The sheer amount of information offered through the products spun out of its databases began about this time to run up against the limits of CD-ROM technology. One option—almost a stopgap measure—offered to large libraries having large enough mainframes was to mount the database directly on it for patrons to access via the same terminals used for searching the library's catalog. The longer-term solution that IAC began to implement in 1993 was dubbed InfoTrac Central 2000 and allowed libraries to have their patrons access the IAC databases directly via the Internet.

IAC, whose strength had traditionally rested in the library market, now sought ways to achieve a longstanding goal of lessening the company's dependence on its main market. It formed a new consumer/educational division to target the home market, and it increased its presence in the corporate market through acquisitions. In 1991 it acquired Predicasts Inc., whose databases included PROMT, a competitor of IAC's Trade and Industry Index. In 1994 IAC acquired Sandpoint, which had developed a software application called Hoover designed to run on Lotus Notes, a groupware application that was becoming increasing popular with corporations. Hoover was an interface similar to InfoTrac, but a much more powerful one because it allowed a user to access information from many different types of platforms, from CD-ROMs to online systems to broadcast news sources (the name was derived from its being like a vacuum cleaner for information). Users of Hoover would also find a system more flexible in the different ways it allowed users to access information. By 1994, there were 16,000 users of Hoover at 70 companies.

Further electronic publishing initiatives in the early 1990s were highlighted by the development of the Interchange Online Network. The company had successfully tested the online services market over several years with Ziffnet, which was an online extension of its computer magazines offered through such services as CompuServe and Prodigy. Interchange was designed as an online service of its own and promised to be the first one to fully implement a graphical-user interface (GUI). True to Ziff tradition, it was designed to be a special interest service as opposed to the existing general-interest services. The first interest area to be developed was, predictably, computers, but plans were made to develop other areas including sports, health, and personal finance. Interchange would offer more than simply electronic text of magazines, adding such features as discussion groups, product information, and reference sources. As the Internet and the "information superhighway" became household names in the early 1990s, Interchange represented Ziff's claim to its piece of the multibillion-dollar digital information market.

1994: Breakup of Ziff Communications

Late in 1993, as revenue for Ziff Communications approached $1 billion, William Ziff, Jr., announced that he was retiring as chairman of the company and would have only an advisory role in the future as chairman emeritus. Eric Hippeau, who had already been in charge of all operations except corporate finance as chairman and CEO of Ziff-Davis Publishing, now assumed full control of Ziff Communications as chairman. That an outsider was placed in charge of what had always been a family-run business was telling to some observers who predicted that the company would either be sold or go public, but such rumors were denied for several months, with Ziff pointing out that two of his sons and one nephew were vice-presidents at the company. Nevertheless, in June 1994, the company announced that it had hired Lazard Freres & Company to handle the sale of the company, seeking $2 billion or more. The decision to sell stemmed from William Ziff's sons' wishes not to make running the company their career. The two brothers who had been vice-presidents at the company, Dirk and Robert, wished to invest the proceeds from the sale in their investment company, Ziff Brothers Investments. The third brother, Daniel, was a college student at this time (he later joined Ziff Brothers Investments).

At the time of the sale, the company was the unquestioned leader in computer magazine publishing and a leading electronic information provider through IAC. In 1994 the company expected a profit of $160 million on $950 million in revenue. Still, some observers thought that William Ziff was again selling out at a time when the company's most prized possessions—the computer publications—were past their peak. Others, however, pointed to numbers showing that the business magazine group (all the U.S. computer magazines except those aimed at consumers) alone was expecting revenues of $505 million and operating income of $146 million in 1994. The figures did show that Ziff's other units were either marginally profitable or losing money, in many cases from heavy investing in new ventures, such as the new consumer magazines and the Interchange system. In the end, these variances in the divisions, perhaps coupled with the enormity of the company, forced the sellers to accept a piecemeal sale rather than a sale of the whole company as they had hoped for. In October 1994 the New York investment firm of Forstmann Little & Co. purchased Ziff-Davis Publishing Co.—the business and consumer computer magazines, the international magazine group, a market research division, and the Ziffnet online service—for $1.4 billion. Ziff-Davis Exhibitors, a unit that managed computer trade shows, was bought by Softbank Corporation of Japan for $202 million, and The Thomson Corporation, a huge Canadian publisher, purchased Information Access Company for $465 million. Finally, in December 1994 AT&T purchased the Interchange Online Network, at the time still undergoing final testing, for $50 million. All told, the sales exceeded $2.1 billion.

1994–96: The Forstmann Little Interregnum

Ziff-Davis Publishing remained largely intact following its purchase by Forstmann Little, with Hippeau continuing as chairman and the editorial contact remaining unaltered. Revenues for 1994 were an estimated $852 million. Ziff-Davis continued to thrive under its new ownership, with the company producing three of the top four publications in high-tech ad dollars in the first nine months of 1995: PC Magazine, PC Week, and Computer Shopper. Operating earnings increased to $190 million in 1995 from the $140 million figure of the previous year. Seeking to benefit from the burgeoning Internet, Ziff-Davis in late 1994 launched ZDNet, a web site featuring online versions of a number of Ziff-Davis publications. ZDNet almost immediately faced stiff competition from a competing online news service, CNET. ZDNet, however, was one of the first web sites to make its content free to all users and rely on advertising as its primary revenue stream; it also was a pioneer in e-commerce through its 1996 launch of a web site spinoff of Computer Shopper magazine, computershopper.com. In 1995 Ziff-Davis entered into a joint venture with Internet portal Yahoo! Inc. to launch the consumer-oriented Yahoo! Internet Life, envisioned as the "TV Guide of the Internet." This title faced formidable competition as numerous Internet magazines were hitting the newsstands at this time, but by 1996 its advertising rate base had risen to 200,000.

The Forstmann Little era proved short-lived. Softbank, which had purchased Ziff-Davis Exhibitors after having lost out to Forstmann Little in the bidding for Ziff-Davis Publishing, came forward in late 1995 with an offer that was too rich for Forstmann Little to pass up. The purchase price was $2.1 billion, with the deal, completed in February 1996, providing Forstmann Little with a hefty profit on a less than 18-month investment. Softbank was the leading distributor of computer software in Japan and had augmented its computer trade show unit with the purchase earlier in 1995 of Comdex, the industry's largest trade show. It now also owned the number one U.S. publisher of computer and high-tech magazines.

1996–99: Ownership by Softbank

Under Softbank's ownership, as well as the continued leadership of Hippeau, Ziff-Davis rapidly expanded its publication line, particularly with new overseas titles in Europe and China. By 1998 the company was publishing 26 titles worldwide by itself or through joint ventures. Ziff-Davis also licensed its name or the name of a publication to other companies for more than 50 additional titles. On the domestic front, the video game title Official U.S. PlayStation Magazine debuted in 1997. In April of the following year, Softbank took the company public under the name Ziff-Davis Inc., selling 26 percent of the common stock through an initial public offering (IPO) that raised nearly $400 million. At the same time, Ziff-Davis restructured its debt, resulting in a reduction in its debt load from $2.5 billion to $1.6 billion. Interest payments had led the company to post net losses during both 1996 and 1997.

During 1998 Ziff-Davis's magazine operations suffered from a combination of factors that cut into ad revenues: fewer new computer product introductions, computer industry consolidation, and the Asian economic crisis, which dampened computer sales in that region. Late in the year the company announced that it would cut its workforce by 10 percent, or about 350 employees, and shutter three niche technology publications. A $46 million charge was taken in connection with these moves, leading to another net loss for the year.

While revenue was declining in the publishing sector, ZDNet's sales were on the rise, increasing from $32.2 million in 1997 to $56.1 million in 1998. Like most early Internet ventures, ZDNet was in the red, but its net loss narrowed in 1998 to $7.8 million, compared to $21.2 million the previous year. In April 1999 Ziff-Davis created a tracking stock for ZDNet and sold 16 percent of the unit to the public through an initial public offering (IPO). In the topsy-turvy world of the late 1990s Internet stock bubble, ZDNet by mid-1999 had a market capitalization greater than that of Ziff-Davis, despite Ziff-Davis's 84 percent stake in ZDNet. Also by this time, Softbank had invested heavily in Internet companies, including such stalwarts as Yahoo! and E*Trade, gaining billions in the process. With Softbank wishing to shift its focus completely to the Internet, Ziff-Davis announced in July 1999 that it was exploring strategic options, including a possible sale of the company.

Turn of the Millennium: Breakup of Ziff-Davis, with Ziff Davis Media Emerging

Eventually, Softbank settled on a plan to retain only ZDNet, and began selling off the other parts of Ziff-Davis piecemeal. In January 2000 ZDTV was sold to Vulcan Ventures, Inc. (and soon renamed TechTV). In April 2000 the magazine unit was sold for $780 million to Willis Stein & Partners, L.P. and James D. Dunning, Jr., a U.S. magazine industry veteran. The ZD Events unit was to be spun off to shareholders as a new company called Key3Media Group, Inc. Then, in the original plan, ZDNet was slated to emerge as a standalone publicly traded company, in which Softbank would hold about a 45 percent stake. But in July 2000 Ziff-Davis, which in essence at that point consisted only of ZDNet, agreed to be purchased by ZDNet's arch-rival, CNET Networks Inc., for $1.6 billion in stock.

As a result of this maze of transactions it was the publishing unit that emerged as the most direct successor to the publishing company founded more than 70 years earlier by a Ziff and a Davis. Fittingly, the unit's new owners, who were granted the exclusive use of the Ziff-Davis name, created a holding company called Ziff Davis Media Inc., with its main subsidiary called Ziff Davis Publishing Inc. Ziff Davis Media in turn was wholly owned by a publicly traded holding company called Ziff Davis Holdings Inc., which was controlled by the Willis Stein-led partners. Dunning was named chairman, president, and CEO of both Ziff Davis Media and Ziff Davis Publishing. The sale of the publishing unit, which did not include Computer Shopper, retained by ZDNet because of its related e-commerce web site, included a licensing agreement with ZDNet, whereby Ziff Davis Media would not be allowed to use the content of its existing magazines on the Internet for a three-year period and would then have to share the content with ZDNet for another two years. In return, Ziff Davis Media would receive a royalty of up to 5 percent of ZDNet's revenues during the first three years.

Under Dunning's leadership, a more aggressive and savvier strategy quickly became evident at Ziff Davis Media. Titles were revamped and renamed to reflect the increasing importance of the Internet and the so-called New Economy—PC Computing became Ziff Davis SMART BUSINESS for the New Economy and PC Week was redubbed eWeek —as well as to deemphasize the somewhat passé term "PC." In September 2000 the company began publication of The Net Economy magazine, which was aimed at business and technical managers, Internet service providers, telecommunications firms, cable and wireless service providers, and other companies that provided network-based services. Ziff Davis also began developing new titles in areas outside of technology but with a focus on what was assumed to be the Internet-centered economy of the 21st century. With e-commerce revolutionizing shopping, the company launched eShopper. Similarly, Ziff Davis saw the need for a new travel magazine that would inform consumers about how to use the Internet to enhance their travel planning and experiences. The company joined with Expedia, Inc., operator of a leading online travel service, to launch Expedia Travels in the fall of 2000, with an initial circulation of 200,000. This title in some ways brought the company full circle, returning it to its travel magazine roots. Meantime, in August 2000 Ziff Davis Media sold its publishing subsidiaries in the United Kingdom, France, and Germany, along with the ten titles they produced, to VNU N.V., a Dutch publishing group. The move meant that Ziff Davis Media would directly own only U.S. publications. All international titles, with the exception of those in China, would be produced through licensing arrangements with third parties. The company continued to publish four magazines in China through joint ventures.

Early 2000s: Surviving the Severe Post-Bubble Downturn

Despite the bursting of the technology stock bubble in early 2000 and the resulting precipitous decline in tech advertising spending that began late that year, Ziff Davis Media plowed ahead with new magazine launches in 2001. These included another video game title, Xbox Nation, as well as two businessoriented titles that, like eWeek, were of the controlled-circulation variety (that is, distributed directly to qualified professionals at no charge, with revenue mainly generated through the sale of advertising). Both were aimed at senior-level information technology decision makers, but CIO Insight, with a controlled circulation of 50,000, included more general coverage of strategies, management techniques, and technology perspectives related to information technology, whereas the 125,000-circulation Baseline was more of a guide to selecting and managing the implementation of leading-edge information systems. Ziff also reached an important agreement with CNET in 2001, whereby the content licensing agreement between the two companies was trimmed from five years to two, giving Ziff the sole rights to the web addresses and content of its magazines by March 1, 2002.

The deep downturn, which affected both ad spending and circulation figures, claimed its first Ziff Davis victim in July 2001 when Family PC was shut down. The second victim was a more surprising one—Dunning himself, who was ousted in August 2001. The falling out between Dunning and Willis Stein & Partners resulted in much acrimony coupled with suits and countersuits. For Ziff Davis, Dunning's ouster brought an end to the executive's plan to sell Expedia Travels, Yahoo! Internet Life, and four gaming titles to American Media, Inc. for between $100 million and $150 million. His replacement, Robert F. Callahan, a former president of Walt Disney Company's ABC Broadcasting Group who came onboard as chairman and CEO in October 2001, took a different approach. He shut down the short-lived Expedia Travels and Sm@rt Partner (the latter having been launched in 1999 as Sm@rt Reseller ) and merged Interactive Week into eWeek. Needing to severely cut costs, more than 500 staff members lost their jobs, salaries for senior employees were frozen, facilities were consolidated, and capital spending was cut. Restructuring and asset-impairment charges of $277.4 million, mainly related to the magazine closures, contributed to a net loss of $415.4 million on revenues of $215.9 million for the nine-month transition period ending in December 2001.

As the ad recession continued in 2002, so too did Callahan's restructuring. Between May and July, three of the company's remaining 11 magazine titles ceased publication: Ziff Davis Smart Business, the Net Economy, and Yahoo! Internet Life, all of which resided in the troubled new economy category. Overall, from September 2001 to July 2002, the Ziff workforce was reduced from 1,150 to 450. Callahan's moves were insufficient to turn the company's fortunes around, however, because of the heavy load of debt Ziff had been saddled with since the Willis Stein buyout. By July 2002 the firm verged on the edge of bankruptcy. What saved Ziff Davis was a sweeping financial reorganization implemented in August following approval by all of the company's bank lenders and nearly all of its bondholders. The restructuring reduced its bond debt from $250 million to $102.6 million, resulting in a reduction in annual debt service from about $50 million to $15 million.

Over the next couple of years, Ziff Davis improved its financial performance considerably, while nonetheless remaining in the red. On firmer ground, the company moved cautiously forward with expansion plans. Late in 2003 Ziff reentered the conference business through the acquisition of TM Media, which formed the basis for the newly created Ziff Davis Event Marketing Group. The following October, this unit held its first DigitalLife consumer electronics "event" at the Jacob K. Javits Conference Center in New York City. This was followed in 2005 by the debut of DigitalLife magazine, a newsstand-only title published twice a year, for the summer and holiday seasons. In June 2004 the company launched its first new nongaming consumer magazine since 2000. Sync, which started with an advertising rate base of 200,000, was positioned as a "consumer lifestyle" magazine aimed at men aged 25 to 44. Filled with humor, it focused on the latest digital gadgets—camera phones, high-definition TVs, iPods, and the like. Also launched in 2004 was ExtremeTech, a newsstand-only magazine aimed at the hardcore technology do-it-yourselfer. Finally, in October 2004, Ziff Davis Media acquired Connexus Media Inc. (CMI), a business-to-business online publishing company based in Topsfield, Massachusetts. Among CMI's holdings were 25 business-to-business, vertical, and technology specific web sites; ten weekly e-newsletters; and 25 list rental databases and ancillary paid content programs. Further launches and acquisitions were likely as Ziff Davis Media continued to recover from its near-death experience.