J.D. Power: The Next Standard & Poor's?

While one could easily dismiss McGraw-Hill's acquisition of J.D. Power as a financial transaction given the seeming lack of fit with the various McGraw-Hill businesses, I'd suggest that this acquisition is a brilliant move, possibly in league with the 1966 acquisition of Standard & Poor's. Indeed, the two companies are similar in that both are strong and trusted brands that deliver needed, objective guidance in large and important markets.

And it exploits a trend we've been harping on for some time: the greatest need of both business and consumer buyers, all of whom are overloaded with information and starved for time, is objective third-party guidance in consistent, standardized form. We call it the "new 3R’s," -- ratings, rankings and recommendations, and J.D. Power is the embodiment of this type of high value information. McGraw-Hill has picked up one of the biggest names in one of the hottest segments of the information business, so the deal is already looking smart at this level.

Is it fair to call J.D. Power an information company? I think so. After all, its business is to gather, database and publish consumer opinions on a wide variety of products. If you call the gathering process "research," then you would regard J.D. Power as an awkward fit with McGraw-Hill. If you call this gathering process "compilation," then J.D. Power looks more like a database information company, and McGraw-Hill has a strong track record with that type of business. Admittedly the line is blurry, but I'd argue that the owner of the company can push it into one camp or the other.

So how does J.D. Power, a ratings database company fit with the existing McGraw-Hill empire? Think of how the Aviation Week Group could amplify its market dominance as the new source of data on passenger airline satisfaction, which it could extend worldwide. Think of how the Construction Group could leverage its position as the preeminent provider of residential and commercial builder and landlord satisfaction data. Think of the endless stream of valuable "best of" content for BusinessWeek. And perhaps the greatest opportunities of all could come from leveraging qualitative data from J.D. Power with quantitative data from Standard and Poor's that could lead to breathtaking new opportunities powered by two of the best-known and most trusted brands around. And none of these even addresses the possibilities inherent in the custom side of the J.D. Power business, where it helps businesses measure the satisfaction of their own customers.

What's the downside to this deal? Figuring out how to sort through and prioritize the endless array of new opportunities this acquisition offers. J.D. Power is a huge brand backed by a powerful data collection platform churning out some of the most sought-after content anywhere. In my opinion, J.D. Power has loaded the bases, and now McGraw-Hill is at bat. Watch out!

Quality Clicks In

A major article in Wednesday's Wall Street Journal is suggesting that advertisers are beginning to balk at the rapidly escalating costs for keywords. The article cites examples such as "mortgage," which now goes for $7-11 per click, and "mesothelioma," a form of cancer caused by asbestos, which goes for $49. It also notes that eBay, one of the largest purchasers of keywords, is publicly complaining about high price levels. The article suggests that high prices, combined with growing awareness of click fraud, and the presence of middlemen, could cause a backlash that would curb the rapid growth of paid search revenue.

As Executive Editor Staci Kramer of PaidContent.org astutely notes, "The real lesson here: nascent also equals unpredictable, and overreaction in any direction can -- and will -- do damage." But marketing sloppiness exhibited by many keyword marketers is taking its toll as well. Increasingly in a product search, I'll find an eBay ad saying it's got what I'm looking for. When I click through to eBay, I frequently get the message "no items found matching your search term." Perhaps eBay thinks it is clever marketing to have dragged me to its site. My reaction, however, is that eBay just wasted my time, and I am sure to be less receptive to its keyword come-ons in the future.

It's not just eBay; a large number of online retailers seem to be buying keywords for products they don't sell, and brands they don't carry. The marketing objective appears to be to get me to their sites, even if under false pretenses. This game of traffic for traffic's sake turns the Web from a precision marketing tool into a mass medium. Run enough eyeballs past your site, and some of them will buy.

The paid search industry is beginning to realize just how crudely marketers are applying its very refined technology, undermining their real value proposition in the process. That's why they are starting to educate customers and give them tools to use keyword marketing correctly and productively. Credit FindWhat for helping lead the way by offering technology that shows how well clicks on ads convert to sales. FindWhat CEO Craig Pisaris-Henderson, who will be a keynote speaker at InfoCommerce 2005, believes better understanding of returns will ultimately encourage more spending on searches, but in a less speculative fashion. In a bold move to improve not only click analytics, but the overall quality of clicks, FindWhat removed a large number of marginal Web sites from its network a few months ago, making a big bet that as keyword marketers get smarter, the marketplace will reward those who can deliver higher quality clicks.

Step back a bit, and it's not hard to see that paid search marketing is going through an initial growth phase, complete with a gold rush mentality, lots of misinformation, and lots of money being wasted. But there are now signs that this phase is coming to an end, to be replaced by a new phase where savvier, more educated marketers will start using the technology in a much more sophisticated way. This will present new challenges for the big search engines, and create lots of lucrative opportunities for online publishers.

Data Pricing: What A Difference Fours Years Make

As I write this, we're putting the final touches on a new research report called Database Subscription Pricing Benchmarks, based on InfoCommerce Group's Subscription Price Index database. The SPI database allows us to examine how the marketplace has changed between 2000 and 2004, and that change is fascinating.

What's particularly noteworthy is the shift in attitudes in just four years. In 2000, publishers were being relentlessly pressured by a marketplace that honestly believed it could find anything it needed on the Web for free. With so many ill-fated Web start-ups, along with a lot of established publishers, indeed offering their content for free, the move toward a world of free content seemed inexorable. Needless to say, it wasn't a happy time for subscription-based publishers.

Those that continued to charge for their content were certainly in no position to seek premiums for their Web offerings, and the trend at the time was towards "parity pricing," with print and Web versions priced identically. Indeed, many publishers were having such difficulty with their sales that the idea of the bundled offering -- buy the print version, get the Web version for free -- became a marketing staple. This bundled offering neatly sums up the thinking at the time: I can't charge for my Web content, but I can give it away in order to spur sales of my print version, which is tangible and still has value.

But look at where we are now. By the end of 2004, the situation had flipped: publishers still market the bundled offering, but now it is buy the online version and get the print version for free. No difference in economics, but a huge difference in perception. Publishers have realized that the market is moving to the Web, so they are increasingly putting the emphasis on their online products. Even more importantly, people are increasingly willing to pay for Web-based information.

This change has reflected itself in pricing. Publishers are moving away from parity pricing to charging significantly more for their Web products, reflecting their inherently higher value. With solid evidence now that users both want Web products and are willing to pay for them, we're seeing more and more publishers starting to invest in their Web products, adding new features, functionality and content, which allows them to charge even more. It's a new virtuous circle: users are willing to pay more for higher quality Web products, spurring publishers to keep rolling out ever more sophisticated and powerful products. But while we stand at the threshold of a new golden age in database publishing, many would say it's been a long four years.

Aggregation or Aggravation?

The New York Times this week noted a raft of new start-ups with names like Indeed.com, SimplyHired.com and WorkZoo.com, each offering job listings aggregated from the big job boards like Monster.com, CareerBuilder.com and HotJobs.com, as well as hundreds of smaller job sites. By now, the idea of aggregating other people's content is a fairly tired one, but in this area, it actually makes sense. It also portends real trouble.

Meta-search engines were perhaps among the first aggregators, and they flourished in the early days of the Web because at the time, all the major search engines were largely solo acts, and none even began to approach comprehensiveness. In that environment, a consolidated search of multiple search engines provided real benefits. Today, however, with the major search engines all providing much better coverage, and with many of them actually licensing their indexes to each other, the results are far more homogenous. Consequently, a meta-search engine such as DogPile.com doesn't yield you much more than you would get using Google directly. And with the major search engines working tirelessly to improve relevance of search results while also rolling out new features, meta-search simply feels far less compelling.

In the area of business content, the list of quality content suppliers is limited, and most were smart enough not to enter into exclusive deals with any one aggregator. As a result, the big business content aggregators began to look very similar in terms of content offered. That left them to compete on price, an unattractive way to do business, which is why they've largely shifted their strategy to focus on value-added tools.

But aggregation does actually make business sense in the area of job boards. This remains a balkanized market with lots of players of all shapes and sizes. Given the costs involved, it's a rare company that would place a job listing on more than one of the big job boards at a time. Relatively high costs have therefore allowed specialty and regional job boards to thrive, offering the benefits of more targeted markets and lower prices. Since job listings are scattered over a large number of both well-known and obscure job sites, this is a market ripe for aggregation, especially since the recent boom in online advertising provides a source of quick and easy revenue for these aggregators. Users of these aggregation sites get both comprehensiveness and convenience.

At the moment, the major job boards are regarding these aggregators as just added distribution for their listings. But, as other information providers have learned, as these aggregators grow and develop their own brands, the brands of the job boards will very likely get diminished as job hunters increasing tell employers they saw the job listing on, say, SimplyHired rather than Monster. And if history is any guide, as these aggregators grow more successful, there will be enormous pressure for at least a few of them to try to sell job listings directly. And if they've got the traffic, what's to stop them?

So, if I ran a major job board, I'd be far less sanguine about this new crop of companies. Because over time, aggregators become a source of aggravation for information providers. They get a free ride off our content, allowing them to build front-ends to original sources of information, and siphon off traffic from our own sites, with the potential to become competitors should they choose. That's why I suggest you keep your eyes peeled for aggregation activity in your market, especially if your content is involved. These free riders can put a real dent in your business.

Mis-Fortune Cookies

A new study out from Jupiter Research suggests that as many as 39% of Internet users delete cookies from their machines at least once a month, and 58% of Internet users have deleted their cookies within the past year. This has significant consequences for online publishers, the majority of whom use cookies to generate some of the key metrics for their Web sites, including unique visitor counts, and number of returning visitors.

Cookies, for those of you not familiar with Web browser minutiae, are small computer files that Web sites can be programmed to download to the computer of everyone who visits them. These files usually contain a unique random number of some sort. The Web site can also check every visitor's computer to see if it has previously downloaded a cookie, and that's how it is determined if a visitor should be counted as unique, and if a visitor has visited previously. More sophisticated Web sites track how a visitor moves through the site by checking and recording the cookie for every Web page that is requested. In a one-to-one relationship between one user and one Web site, cookies are anonymous, harmless and useful.

Where cookies got a bad reputation is that some of the online ad networks figured out that they could plant their own cookies on user's computers, and then check for that cookie at every site in their network, allowing them to build a profile of a specific user's interests and surfing habits. The user might still be anonymous, but the ad network now has powerful information on what ads to target to that user. There's a fierce ongoing debate as to whether this is harmless, or some low-grade version of spyware, and with the growing awareness and concern over spyware, more users than ever are deleting cookies -- just to be safe.

Right on the heels of this study is a press report that Yahoo may be teaming with a company called Almond Net, an online ad network that allegedly is striking secret deals with ISP's to capture information on the Web searches performed by users, to better target advertising to them. Lycos has already inked a deal with Almond Net.

I see this as one more example of search engine hubris, because sensitivity over privacy -- even if misplaced, has killed more than a few promising Web start-ups. Yet in the mad rush to cash in on the online advertising boom, these companies risk getting caught with their hands in the cookie jar and paying a significant penalty for it in the marketplace. The lesson for all of us is that playing fast and loose with one's users, even if it's all technically aboveboard, is simply too dangerous in the current environment.