Building Derivative Information Products

News that Twitter is now selling selected streams of tweets for analytical purposes illustrates one of the most intriguing aspects of information businesses: Their ability to find new uses for content originally created for very different purposes. Like Rumpelstiltskin spinning straw into gold, these new applications are often as valuable as the original applications, and they often strengthen competitive differentiation. Here are a few other examples:

  • ShopperTrak, the leading provider of people-counting technology for retail stores and malls, has started aggregating the data from its customers and deriving competitive benchmarks, market shares, and analytics that it now sells back to customers as a separate product (anonymously, of course).
  • TyMetrix, a major vendor of web-based electronic billing applications linking corporations to their outside law firms, has partnered with the Corporate Executive Board to create the “Real Rate Report,” which analyzes billing data from more than 4,000 law firms covering $4 billion in billings to corporate clients. These analyses help corporate counsel understand billing trends, benchmark themselves, and optimize their spending on legal services.
  • CrimeDex is a derivative product from 3VR, a video surveillance vendor serving banks, hotels, airports, retailers, and industrial companies. With CrimeDex customers can share videos and details of suspected crimes on their premises via a searchable online database, thereby increasing the possibility of catching the criminals. CrimeDex has over 1,500 users circulating information to over 600,000 investigators and law enforcement professionals from over 1,000 private and public entities nationwide.

Derivative opportunities like these typically rely on aggregating data or linking users such a way that the sum is much greater than its parts. Executing on such opportunities requires an underlying product that is compelling enough to gain a critical mass of market coverage on which to build derivative products. It can take years for these pieces to fall into place, so having capital and patience is critical for success

About Lee Greenhouse

Longtime strategy consultant focused on the business of information content, applications, and services.
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