Disruption without Destruction

In 2013, I wrote about a fascinating new app called Vivino that used image recognition technology in place of the traditional database search interface. Snap a picture of a wine label using the app, and Vivino would search its database to return information on the wine, including ratings and price.

Lest you think this was a specialized, one-off application of image recognition technology, we now learn that Vivino has licensed its technology to a new app company called Magnus that wants to apply the same concept to the world of art. Step up to any painting or other piece of flat artwork (it reports over 8 million pieces of art in its database already), snap a picture, and the app will match it to a database record that will tell you the artist, the year it was created, the medium, and most significantly, the price most recently commanded at auction or the price being asked by the gallery where the art is currently being offered for sale.

Content comes from auction data results. To crack the gallery market, Magnus turns to crowdsourcing, but with a demanding quality control process behind the scenes.

The app is currently free, and this has a double benefit to Magnus. First, it builds the size of its audience some of whom will start to supply price data as well. Second, if Magnus gets to a critical mass of users, art galleries will feel compelled to supply price data to stay competitive, and that would really change the art market, which remains inordinately fond of supplying prices only “on request.”

And that’s truly what is most fascinating about Magnus: it is technically a disruptive data play in the art market, yet it’s not meant to displace galleries. The simple objective of Magnus is to get galleries to be more open about their pricing in the belief that this will make buying art less intimidating to the average consumer and grow art sales overall. There’s no evidence that Magnus is anything but sincere in its desire to help change gallery practices for the good of the galleries.

To date, disrupting a market has typically meant re-ordering an existing market to make a place for the disruptor, typically at the expense of some or all existing players in that market. Here, Magnus is simply trying to disrupt a single, hidebound industry practice for the greater benefit of the industry. Magnus creates a place for itself, but at nobody’s expense. This notion of “additive disruption” is intriguing, and worth further discussion. If there are opportunities to re-arrange or re-invigorate existing markets rather than blowing them up, the number of potential opportunities out there increases dramatically – a pretty picture indeed!

Where Disruptors Fear to Tread

A recent article in the New York Times paints a stunning and detailed picture of the lengths some lead generation businesses (in this case offering locksmith services) will go in pursuit of top search results listings and even more importantly, the perception of a local presence.

The article details business practices that are pretty rough. The idea is that when people are locked out of their homes or cars, they want the fastest possible service, but at some reasonable price. These lead generation services, which are centrally located, and sometimes overseas, promise both to callers. They then sell the lead to unsavory local locksmiths who show up and demand a much higher price – in cash – from the distraught victim. So how does a lead generation shop based in a foreign country look like its offices are right around the corner?

The secret sauce of these lead generation firms are two Google programs: Google Business and Map Maker. Both depend on user-generated content, hence the opportunity to manipulate Google. If you’re willing to be sleazy, it’s easy to create a fake business in Google Business. And it’s not much harder to create a fake entry for your business in Map Maker either. Indeed, as the New York Times article details with actual screen captures, one lead generation company turned an empty lot into a shopping center with its phony storefront in the prime corner location!

What makes the corruption of Map Maker possible is that Google relies on volunteers to monitor additions and changes. Yes, one of the most valuable corporations in the world doesn’t see fit to spend the money to do the job itself. A quote from the article sums up the mentality nicely: “Fighting spam is boring. The employees who cared didn’t have the political clout in the company.”

That’s an important point and one every data publisher should take to heart. Many of the companies that are trying to disrupt the business of existing data providers are, first and foremost, programming shops. They are interested in the app. The content, not so much. That’s why so many of these disruptive startups gravitate to public domain datasets. To them, it’s plug-and-play content that they don’t have to worry about or maintain. The idea of creating content from scratch is anathema to these companies. If they can’t get it for free, they’ll license it. If they can’t license it, they’ll try to crowdsource it. And even the crowdsourcing effort reflects this software bias: the goal is to build a front-end to make it easy to enter relatively clean data. Beyond that, the programmers lose interest.

If there is something that gives a data provider an edge these days, it is the willingness to roll up the sleeves and source data, aggregate it, clean it and normalize it. This is simply a place where today’s disrupters really don’t want to go.

Looks Matter

You’ve probably heard of a company called Square: it manufactures a doo-dad that attached to your mobile phone or tablet that allows small merchants to accept credit cards. Well, Square went public yesterday, and the stock popped nicely, earning the six year old company a market valuation of $2.9 billion. That’s an exciting story in and of itself, but what really jumped out at me was a comment made yesterday by Jack Dorsey, Square’s founder. He said, “We’re not going out there to say we’re getting rid of the banks or card networks. We’ve just put a much cleaner face on that infrastructure.”

Yes, this young company with the multi-billion dollar valuation sees itself, in effect, as a user interface company. Square isn’t trying to disrupt the existing payments networks. It is simply trying to make them more easily accessible.

Certainly, most data publishers are well aware of the importance of the user interface and the overall user experience. But here’s a stunning example of a company that has built its entire business on providing a simpler, easier customer experience.

Thinking about Square this way made me realize it is not an isolated case. Another company that caught my eye recently, called HoneyInsured, seeks to take on an even bigger challenge. HoneyInsured is a front-end to the healthcare.gov site where consumers seek to select insurance plans under the Affordable Care Act. Think back to all the horror stories around the launch of healthcare.gov and then consider HoneyInsured’s claim: it can identify the best health plan for you if you answer just four simple questions. A complex process becomes simplicity itself.

While all of this is very cool and cutting edge, it’s really not all that new. Think of the number of services (e.g., EDGAR Online) that sprung up to put user-friendly interfaces on the SEC EDGAR database – while EDGAR was completely free to use, these services proved that lots of people would pay for smarter, simpler and easier access.

As the data market evolves, we are increasingly seeing that the interface and the overall user experience matter almost as much as the data itself. The rapid shift to mobile devices has forced data providers to simplify and often dumb down their products to provide an adequate experience on these small screens. And the larger trend of users not having the inclination to read (either your user manual or the content itself) is also forcing content companies to simplify their interfaces. And that’s no small challenge when users are simultaneously screaming for both simplicity and more powerful analytics.

The bottom line is that data presentation matters … a lot. Your user interface can become a prime sales benefit, or a critical competitive weakness. We’ve certainly seen examples of market incumbents being challenged by upstart competitors with largely the same data but much better and fresher presentation and ease of use.

Having great data is now a minimum requirement. Putting tools and analytics around your data is the current battleground. But we’re quickly seeing that the next one will be the presentation layer – the “last mile” problem of translating your data and tools into something users can engage with easily and immediately, and make sense of just as easily. Are you giving your user interface the attention it deserves?

Behavioral Leads Plus Deep Data Equal Sales Nirvana

Commercial data products have long been successfully used for sales prospecting purposes. Indeed, this is the single most common use of commercial data. At the same time, we’ve seen a rapid rise in the availability and popularity of behavioral sales leads.

A behavioral sales lead is created when an individual takes one or more actions that are associated with pre-purchase research. If I look at information about three different types of fork lifts in a 30-day timeframe, I think we’d all agree that I am very likely in the market for a fork lift very soon. This creates a very timely and thus very valuable sales lead. It is increasingly easy to set yourself up to track who is looking at what types of content on your website and how often. These high torque sales leads have proven to be a very lucrative business for lots of B2B websites.

But do these powerful sales leads render commercial databases less valuable or perhaps even irrelevant as sales prospecting tools? After all, a commercial database generally will only tell you that a business exists, not if it is actively in the market for a specific product. My view is that we will increasingly see a blending of behavioral sales leads and databases. The main reason for this is that databases need to be more actionable, and sales leads need more context.

The most progressive companies involved with sales leads are already moving in this direction. It’s great that they can tell an advertiser that Joe Smith of Acme Group may be a good prospect for a fork lift. But that information in turn generates a host of additional questions – the context needed to fully evaluate and properly respond to the sales lead. For example, is Acme Group big enough to afford one of my new fork lifts? Does Acme Group already own fork lifts, and if so, what brands? What business is Acme Group in? Who are other executives at Acme Group who may be involved in the purchase decision? That’s why these progressive website owners are increasingly licensing commercial data products to overlay some of this information on their sales leads.

But commercial data providers have not been standing still. Consider EDA, a Randall Reilly company. It knows virtually every company that owns a fork lift, along with lots of deep detail about those fork lifts -- right down to their serial numbers. Even more importantly, EDA knows when those fork lifts were acquired, and thus can estimate when companies will want to replace them. This is extremely valuable sales intelligence.

You can see where I am going. Take the individual-level intelligence of the sales lead, and merge it with the company-level intelligence of the data provider, and you create sales magic. You can now identify companies that ought to be in the market based on objective knowledge and confirm this with behavioral activity of people who work at those companies. You not only get two-level confirmation as to the strength of the sales opportunity, you have the needed context (deep company information) to make an intelligent sales approach. Even better, you can see if multiple people at the same company are doing pre-purchase research on fork lifts – a way to surface and target the hitherto invisible influencers who play a role in larger B2B purchase decisions. And of course you yield the absolute gold standard in sales lead quality, because you have multiple independent signals telling you this company is ready to buy.

The Great e-Book Conspiracy

It’s a standard plotline for a whole category of potboiler novels: a shadowy, global group of evil corporations conspire to bend the marketplace in such a way that it delivers them massive profits (and sometimes global domination as well).

Imagine my surprise then in reading a recent article that suggests that not only is such a conspiracy real and operating as we speak, but it is operating in the world of book publishing. Yes, the people who publish conspiracy novels are engaged in a conspiracy themselves!

Here’s the diabolical plan: newly freed to set the price of e-books, publishers are pricing them purposely high to discourage their sale. This in turn will push consumers to reject the e-book format. With nobody buying e-books, the e-book sellers will go out of business, and the publishers will have achieved their objective. And what might this objective be, you ask? Well, to force consumers to buy books in print again! According to this article, print books have better economics than e-books, so by destroying e-books, the glory days of book publishing will return.

Now there are more than a few prominent blogs read by publishing professionals that are relentless in promoting the belief that a resurgence in print books and magazines is right around the corner. There are no shortage of people in the publishing industry that want to believe. The fact that these blogs derive their advertising support largely from printing companies is itself telling. But to take it to the level of a plan where the major book publishers are collaborating on a plan to crush digital distribution in favor of print is odd, worrisome and not just a little sad.

And that’s just one more reason, by the way, that the data business is such a good business. There’s no longing for print among data publishers because the print format always constrained data. Remember the days of the print giants such as Sweet’s and Thomas Register? Even publishing their 30-volume print products with tens of thousands of pages, these publishers were only scratching the surface of what they might have published. Even the advent of CD-ROM did little for these publishers, who were forced to publish in inconvenient multi-disc sets. Online is the natural home for data. When you’re online, your economics improve, size doesn’t matter and you can update your content faster and more efficiently than ever before.

Best of all, there’s no need to create print-centric global conspiracies, though there’s probably a great novel in there somewhere…