| |||||||
 | |||||||
|
10 Predictions for the Year #1. Content will come from new sources If you thought the internet has nearly all the information anyone could ever want, consider this: it’s about to start adding high-value content that previously was not online, or that was undiscoverable because it was behind a “pay wall.” Several initiatives are particularly noteworthy. Google Scholar, launched in 2004, is making premium content from some of the most important academic and scholarly sources discoverable via its search engine. While users will still need to pay for the content once they find it (at terms set by each content provider), the discoverability of such content enhances the value of the internet enormously, and could increase the number of customers for premium content. At the same time, universities and research institutions are becoming publishers by implementing institutional repositories that make articles from their researchers available online directly as a complement to aggregators. These types of initiatives will alter the value proposition of intermediaries, such as aggregators, as search engines take over the content discovery role that such intermediaries have provided heretofore. Another Google initiative is even more ambitious. It will begin digitizing the physical collections of five top libraries: Stanford, Harvard, Oxford, University of Michigan, and the New York Public Library. The project eventually will allow an internet user to search inside millions of volumes, seeing the pages exactly as they appear in the original works, including illustrations, charts and photos. While this project won’t bring much content online this year, eventually it will add rare content to the internet and expand the frontiers of information available online.#2. Discover first, pay later: a new model will drive content commerce To achieve much broader penetration, the information industry needs to change the process by which people find and buy the information they need. Two conditions are necessary and both will start to take hold in earnest this year. First, premium content will become discoverable though the major search engines. In seeking information, users often do not know the likely sources and therefore rely on search engines. While search engines are relatively effective in finding relevant content on the free web, they have as yet little content indexed from premium collections. As a result, search engines currently do not find relevant articles from The New York Times archive, Thomson’s Investext library of Wall Street research reports, Hoover’s company reports, or reports from market research firms, among other premium sources. An important example of change, however, is Google’s plan to index content from hundreds of academic journal publishers (with their permission). This move will enable users to discover content that previously was not visible to search engines. The second condition for broadening content sales is the packaging of information for pay-per-view purchasing as an alternative to subscriptions, so that users can purchase content once they find it. Pay-per-view packaging is not new. A variety of publishers and distributors, ranging from The New York Times to Factiva to Forrester Research, have been selling content “by the drink” as a complement to subscriptions. Now, however, the combination of discovery and pay-per-view packaging will set the stage for a much larger content market.#3. Segmentation will become critical Customers will increase their spending on information services this year -- but mostly for specialized services that meet the needs of specific job functions. General news and business information services will be hard pressed to grow. As rule, the closer an information service tailors its content and applications to the needs of a specific type of user, the more successful it will be. Facing this reality, aggregators increasingly are packaging content and applications for specific job functions. For example, Alacra, FactSet, and Capital IQ (acquired last year by Standard & Poor’s) have succeeded by selling services designed to help investment bankers and research analysts accomplish specific tasks requiring third-party content. Even traditional aggregators like Factiva and LexisNexis now are building applications attuned to specific types of users, such as purchasing managers and salespeople. While segmentation will be critical, this does not mean that information companies must limit their focus to specific users. Successful information companies will leverage their content across multiple types of users by designing different products for different users. CCC Information Services, for example, offers a core set of automotive repair data through multiple services aimed specifically at insurance companies, adjusters, and repair shops. Similarly, MicroPatent uses its core database of patent filings to serve attorneys involved in filings and litigation, while it also provides tools for corporate intelligence professionals to mine the patent database for competitive information. Pharmetrics leverages its database of individual patients’ medical histories by providing different sets of analytics for insurance companies and for hospitals. This year’s mantra for successful information companies will be “segment, segment, segment.” #4. Acquisitions will drive transformation, not just scale With the economy recovering, information businesses are focusing again on top line growth, rather than cost-cutting. The recovery is helping executives see whether their businesses can rebound or if they are at the end of their lifecycles and entering a period of slower, or no, growth. For many information companies, technology has eliminated historical competitive advantages by commoditizing information or functionality. Executives no longer can blame lack of growth on economic cycles, and some may conclude that it is time to transition their companies into new lines of business. One dramatic example of diversification is LexisNexis’ acquisition last year of Seisint -- a major investment in the risk management business. Another example is Dow Jones’ just-completed acquisition of MarketWatch, a move designed to increase Dow Jones’ participation in the online advertising marketplace. And Proquest’s recent acquisitions in K-12 education market represent diversification from its traditional business in higher education as well as business information. Acquisitions like these have the potential to transform information companies over the next few years. #5. Content and distribution will converge Content distributors historically have steered clear of owning content, positioning themselves instead as aggregators and providers of value-added distribution services for content providers. But more distributors are now buying content companies as they seek to become less dependent on licensing of third-party content. LexisNexis, for example, recently acquired Gould Publications, a publisher of approximately 100 law enforcement handbooks, CD-ROM courses and other training materials, and homeland security publications. It also acquired the key assets of Rachel Hollingsworth Court Reporting, a civil public records provider. FactSet, a leading distributor of financial databases, has acquired several databases in the last two years, including MergerStat, LionShares, and JCF. What’s not clear yet is whether such content acquisitions will pay off for aggregators or simply divert them from the reality that distribution itself is an increasingly challenging business requiring more value-added applications as content providers gain more distribution options.
#6. Different business models will play together Don’t expect to see a winner this year among various business models, such as subscriptions, pay-per-view, and advertising. All have proven to be viable, and most are complementary. Different models will cater to the emerging behaviors of different users. High-volume users may be best served by subscription models, while infrequent users will prefer to purchase information as needed on a per-report basis. The challenge for information providers will be to set their pricing so that the two types of services can co-exist and optimize revenues. (For an extended discussion, download a free copy of our Pricing Framework). Advertising has proven to be compatible with fee-based models. Companies like Morningstar and Dow Jones successfully employ a combination of models, using advertising to fund free sites containing limited information, while simultaneously featuring ads within subscription-based services. Users are increasingly comfortable seeing ads on pages of premium content, just as in conventional print magazines. One caveat: publishers should tread carefully to maintain clear distinctions between advertisements and bona fide content. #7. Searching will improve because of smarter content Search engine technology will improve this year, but only in marginal ways. More immediate impact will come as search extends beyond the web to encompass internal corporate content, institutional repositories, and users’ hard drives. Google, Yahoo, and Microsoft have all announced PC search tools, while Google has released a cheaper version of its intranet search utility. Meanwhile, LexisNexis and Factiva have packaged their taxonomies as products that customers can use to index internal content. These types of tools and facilities will unify searching so that a single query will result in finding information regardless of where it resides. Another development will improve search as well: the enrichment of content through metadata. Metadata helps search engines understand what a document is about beyond the words that lie on its pages. While creating metadata is often expensive and labor-intensive, automation of the process is picking up steam thanks to companies like nStein and ClearForest, which can extract concepts from unstructured text. Coincidentally, national security needs are one of the key drivers of such tools, which are yielding large benefits in the commercial, consumer, and academic realms. More publishers will decide to invest in enriching their content so that it can be more easily found – and monetized. #8. Public libraries will emerge as content sales channels One hundred years ago, Andrew Carnegie used some of his vast fortune to build public libraries across America, and many small towns still use their “Carnegie libraries.” Despite budget cutbacks, public libraries continue to attract people of all ages and walks of life and have managed to bring electronic resources to their communities. For example, through arrangements with NetLibrary, Questia, and OverDrive, libraries arguably are now the most effective outlet for eBooks. More significant, though, is the role of public libraries in bringing premium databases to their communities. With more people working outside of large companies and with people in those companies generally getting less support from a formal information resource center, public libraries may become a key link between information services and end users. A number of major city libraries and state library consortia have cut deals to allow their patrons free access to premium databases from such providers as Thomson and EBSCO, among others. Importantly, these deals allow library patrons to access the databases from outside the walls of the libraries -- via the internet, with a library card number. So far, public access to such databases seems to remain a well-kept secret. Sooner or later, though, savvy politicians will try to take credit for it and the word certainly will get out.
#9. Corporate libraries will wither Corporate libraries will shrink in both number and size; in some industries, corporate libraries will disappear altogether. With that trend, some information companies will need to navigate a new set of buyers and users, while for others the absence of a central purchasing group actually will make it easier to go directly to their end users and buyers. The market for pay-per-view content will benefit as end users become more familiar with fending for themselves and buying content as they need it. Content purchasing will become more of a departmental decision and in some cases an individual decision. No longer supported by centralized libraries, individuals increasingly will make purchase decisions on an as-needed basis, using their credit cards and billing back purchases to their employers. This scenario is one of the drivers behind HighBeam Research, an aggregator founded by former Hoover’s CEO Patrick Spain. Such an approach is promising, given both the demise of centralized information centers within large companies and the likely proliferation of pay-per-view purchase options. #10. All predictions will be wrong -- including these It’s only a question of how wrong we will be. We would be delighted to discuss these topics further, and welcome your thoughts. |  | |||
| ||||