When It Pays to License Data

I have long advocated for something I modestly call "Perkins' Law." It holds that "No company outside the information industry will voluntarily build and maintain a database if there is a viable alternative to doing so." Over the years, I have found this posit to hold up pretty well. Indeed, when I find an industry where multiple companies are collecting largely the same information themselves, there is usually a data opportunity. This dynamic drives off an even more fundamental truth: building and maintaining a quality database is hard and expensive work.

So when companies start bragging about building databases when their primary business and expertise is elsewhere, watch out. Back in the early 1990s, a very successful software company decided it wanted to take on media information company SRDS. Their software was impressive. The company had keyed all the necessary listings data. I saw a demo of the new product on a giant screen in a huge conference room. The software folks prattled on about their cutting edge code. The marketing folks described endless features. I have to say, I was impressed. Then I asked about what type of editorial group they had put in place to maintain the data. The room got very quiet. Apparently, the content had been viewed as a one-off activity. The product was quietly scuttled a year or so later.

This, and many other related experiences over the years came flashing back to me this week when I read that high-flying Internet darling Airbnb was busy building its own global city guides that will assess such factors as nightlife, quality and quantity of restaurants, etc. Yes, pretty much the same information you can get 100 different places online. And if you have any remaining doubt that Airbnb is in over its head, note that to build its database, it found a need to fly "neighborhood experts" in from all over to world to help build its database. Further proof: it's working on printed guides as well.

An isolated case? Maybe not. Consider the well-publicized debacle of Apple launching its own map product with its own business and points of interest database. Apparently Apple, having read too many of its own press clippings and deciding it could do no wrong, went out and promptly did wrong.

When companies not in the data business decide they need data, the smart answer is to license whenever possible. Data is hard. Some companies build databases out of ignorance of options; some build them out of hubris. But you should stay alert to both such situations, because whether educating a company or bailing it out, Perkins' Law can be a dependable source of attractive new revenue for you.